CAAD 186/2015-T: Stamp Tax on Land for Construction Under Verba 28.1 TGIS Annulled

ARBITRAL DECISION

REPORT

1. On 17 March 2015, A..., Lda, taxpayer no. …, hereinafter referred to as the Claimant, with registered office in Portugal, requested the constitution of an arbitral tribunal and submitted a request for an arbitral decision, in accordance with paragraph a) of article 2(1) and paragraph a) of article 10(1) of Decree-Law No. 10/2011 of 20 January (Legal Regime for Tax Arbitration, hereinafter referred to only as RJAT), in which the Tax and Customs Authority (hereinafter referred to as AT) is named as Respondent.

2. The Claimant is represented in these proceedings by her representative, Dr. … and the Respondent is represented by the jurist, Dr. ….

3. The request for constitution of the arbitral tribunal was accepted by the Honourable President of CAAD and was served on the Respondent on 18 March 2015.

4. By means of the request for constitution of the arbitral tribunal and for an arbitral decision, the Claimant seeks the annulment of the stamp duty assessment act that gave rise to collection note no. 2012 ..., of 07.11.2012, relating to the year 2012, issued under paragraphs a), e) and f) of article 6(1) of Law No. 55-A/2012 of 29 October, in the amount of € 5,449.88 (five thousand, four hundred and forty-nine euros and eighty-eight cents).

5. Having verified the formal regularity of the request submitted, in accordance with paragraph a) of article 6(2) of RJAT and given that the Claimant did not proceed to nominate an arbitrator, the signatory was appointed by the President of the Deontological Council of CAAD.

6. The Arbitrator accepted the appointment made, the arbitral tribunal being constituted on 22 May 2015, at the headquarters of CAAD, located at Avenida Duque de Loulé, No. 72-A, in Lisbon, as per the minutes of constitution of the arbitral tribunal which were drawn up and are attached to these proceedings.

7. The first meeting of the arbitral tribunal did not take place as it was dispensed with, in light of the request submitted by the Respondent on 29 June 2015, and after the Claimant was notified to that effect, it agreed to the same through the request it submitted on 30 June 2015.

8. As no exceptions were raised, there being no need for additional evidence production beyond that which is already incorporated in the file, there being no apparent need for the parties to correct their respective procedural documents, with the process containing all necessary elements for issuing the decision, for reasons of procedural efficiency and expedition, and the prohibition of performing futile acts, given the position expressly manifested by the parties, the Tribunal deemed it appropriate to dispense with the holding of the meeting referred to in article 18 of RJAT, as well as the submission of arguments, with the agreement of the parties.

9. The Tribunal, in compliance with article 18(2) of RJAT, set 30 October 2015 as the date for issuing the arbitral decision, having warned the Claimant that it should proceed with payment of the subsequent arbitration fee, in accordance with article 4(3) of the Regulation of Costs in Tax Arbitration Proceedings, and communicate said payment to CAAD.

II. The Claimant supports its request, in summary, as follows:

The Claimant supports the request for annulment of the stamp duty assessment act to which it was subjected, regarding the building land of which it is the owner, located in the parish of ... and ..., municipality of ... and district of Faro, registered in the respective property register under article ..., as being unlawful and as suffering from the following defects:

a) Error regarding the assumptions of application of item 28.1 of the TGIS, in that, "in the Claimant's understanding, item 28.1 of the TGIS cannot be applied to article ... insofar as this concerns building land and not a property with residential use, as required by the letter of the rule at the date of the assessment now being contested." (…) "the article in question was classified as building land in the year in question and not as an urban property used for residential purposes", such that "in the case of building land, one cannot say that they have, as building land, residential use, insofar as this use must be effective and not merely potential and future, under penalty of taxing future and uncertain realities or even taxing a tax fact that does not exist."

b) Furthermore, it alleges that, "in the specific case being examined here, the material assumption that leads to the application of the incidence rule is the existence of an urban property with effective residential use at the moment the incidence rule is applied, that is, the typical factual situation is materialized in a property which, due to its construction or typology, permits habitation or use for residential purposes by humans, that is, presupposes, in the case of construction of a property intended for habitation, that the works are completed" which is not the case.

c) Concluding to the effect that "by applying item 28.1 of the TGIS to building land before 1 January 2014, when the rule still did not provide for their taxation, implies that the assessment suffers from the defect of error regarding the factual assumptions since a tax fact that did not exist is treated as real, thus suffering from illegality."

d) Defect of violation of the principle of specificity, in that the Claimant understands that the provision of item 28.1 of the TGIS with the wording given by Law No. 55-A/2012 of 29 October only contemplates "urban properties of the type 'building with construction suitable to serve as residential accommodation for persons', [properties] can be subject to the incidence of the rule, that is, only after the submission of Form 1 to communicate the completion of works does the property come to be classified as an urban property used for residential purposes.", so that, "not defining the IMI Code what is 'property with residential use' it seems to the Claimant that the legislator intended to refer to residential properties, in the sense of article 6 of the IMI Code and not to building land"

e) It further adds that, from the wording of item 28.1 of the TGIS given by Law No. 83-C/2013 of 31 December, it appears that "the legislator thus recognizes that the incidence rule did not allow, until 31 December 2013, the taxation of building land under item 28.1 of the TGIS, and alters the rule in order to begin to tax also, from 1 January 2014, 'building land whose construction, authorized or planned, is for residential purposes, in accordance with the provisions of the IMI Code.'"

f) Thus concluding its position to the effect that "it is thus demonstrated that building land does not have residential use, for the purposes of applying item 28.1 of the TGIS, not being, therefore, subject to taxation in Stamp Duty under item 28.1, in the wording in force until 31 December 2013, so that the Stamp Duty assessment now being contested should be annulled as being unlawful and the situation prior to its issuance should be restored."

III. In its Response the Respondent, invoked, in summary, the following:

For its part, AT comes to allege, in its response:

a) Regarding the alleged error regarding the assumptions of the assessments, the Respondent understands that: "the notion of use of the urban property is found in the part relating to the valuation of properties, which is well understood in that the valuation of the property (purpose) incorporates value to the property, constituting a fact of distinctive determination (coefficient) for purposes of valuation. As results from the expression '...value of authorized buildings', contained in article 45(2) of the IMI Code, the legislator opted to determine the application of the valuation methodology of properties in general, to the valuation of building land, and consequently the coefficient of use provided for in article 41 of the IMI Code is applicable to them."

b) The Respondent defends that: "for the purposes of determining the taxable property value of building land, the application of the use coefficient in the context of valuation is clear, so its consideration for the purposes of applying item 28 of the TGIS cannot be ignored."

c) Following this line of reasoning, AT understands that "the concept of 'properties with residential use', for the purposes of item 28 of the TGIS, comprises both built properties and building land, notably by taking into account the literal element of the rule," since "the legislator does not refer to 'properties intended for habitation', having opted for the notion of 'residential use'. An expression different and broader whose meaning is to be found in the need to integrate other realities beyond those identified in article 6(1)(a) of the IMI Code."

d) Moreover, it states that: "the mere constitution of a right of potential construction immediately increases the value of the property in question, hence the rule contained in article 45 of the IMI Code which orders the separation of the two parts of the land. (…) As to the value of the land adjacent to the implantation area, this is determined in the same terms as the value of the free land area and the excess land area are determined for purposes of any urban property."

e) Thus concluding, to the effect that: "(…) well before the actual building of the property, it is possible to ascertain and determine the use of the building land," by the legal regime of urbanization and construction and by the Municipal Master Plans the use of the building land", so that the Claimant's thesis regarding the illegality of the Stamp Duty assessment impugned lacks merit.

f) Regarding the alleged defect of violation of constitutional law the Respondent defends itself by stating that: "the Constitution of the Republic requires that what is necessarily equal be treated equally and what is essentially different be treated differently, not preventing differentiation of treatment, but only arbitrary discriminations, unreasonable ones, that is, distinctions of treatment that do not have sufficient justification and material basis."

g) The Respondent further adds that "item 28.1 of the TGIS applies to the ownership, usufruct or right of superficies of urban properties with residential use, whose taxable property value shown in the property register, in accordance with the IMI Code, is equal to or greater than € 1,000,000.00, that is it applies to the value of the property", being therefore "a general and abstract rule, applicable indiscriminately to all cases in which the facts and legal assumptions are met."

h) Moreover, it states that, "taxation in stamp duty follows the criterion of suitability, being applied indiscriminately to all holders of properties with residential use of value greater than € 1,000,000.00, affecting the wealth embodied and manifested in the value of properties, (…) the measure implemented seeks to achieve maximum effectiveness with respect to the objective to be achieved, with the minimum harm to other interests considered relevant."

i) Thus concluding, to the effect that "the assessment in question constitutes a correct interpretation and application of the law to the facts, not suffering from any defect of violation of law, whether of the CRP or of the CIS".

IV. Preliminary Issues

The Tribunal is competent and is regularly constituted, in accordance with paragraph a) of article 2(1) and articles 5 and 6, all of RJAT.

The parties have legal personality and capacity, show themselves to be legitimate and are regularly represented.

There are no nullities, exceptions or preliminary issues that prevent consideration of the merits of the request.

V. Statement of Facts

The following facts are found proven as being relevant to the decision:

• The Claimant is the owner of the building land located in the parish of ... and ..., municipality of ..., district of Faro, registered in the respective property register under article ... (former property article ...). (cf. Doc. No. 2 attached with the initial petition);

• The building land was valued as such, with a taxable property value (VPT) being determined, at the time, of € 1,089,976.75 (one million eighty-nine thousand, nine hundred and seventy-six euros and seventy-five cents), while currently the VPT of that land is € 850,780.00 (eight hundred and fifty thousand, seven hundred and eighty euros) (cf. Docs. No. 1 and 2 attached with the initial petition);

• In carrying out that property valuation, AT understood that a use coefficient should be applied, which was, in this case, that of "residential", provided for in article 41 of the IMI Code. (cf. Doc. No. 2 attached with the initial petition);

• The Claimant was notified of the collection note relating to the Stamp Duty assessment act for the year 2012, made under paragraphs f) and i) of article 6(1) of Law No. 55-A/2012 of 29 October, in the amount of € 5,449.88 (five thousand, four hundred and forty-nine euros and eighty-eight cents) (cf. Doc. No. 1 attached with the initial petition);

• The Claimant was served notice of the institution of fiscal enforcement proceedings No. ..., with the Finance Office of Lisbon – …-, for coercive collection of the stamp duty in dispute, having provided, on 4 June 2013, bank guarantee No. ..., in the amount of € 70,500.00 (seventy thousand and five hundred euros), with Banco Espírito Santo, for purposes of suspension of that (and other) fiscal enforcement proceedings. (cf. Doc. No. 3 attached with the initial petition, and by agreement of the parties).

• The Claimant filed an administrative petition against the disputed assessment act, having been assigned the identification number ..., which was the subject of a decision rejecting it. (By agreement of the parties);

• The Claimant filed a hierarchical appeal to which was assigned the identification number ..., which was the subject of a decision rejecting it. (By agreement of the parties).

VI. Reasoning regarding the Statement of Facts

For the conviction of the Arbitral Tribunal, regarding the facts proven, the documents attached to the case file, as well as the administrative process, were relevant, all analyzed and considered in conjunction with the parties' pleadings, from which concordance results regarding the factuality presented by the Claimant in the request for an arbitral decision.

VII. Facts Found as Not Proven

There are no facts found as not proven, because all facts relevant to the consideration of the request were found proven.

VIII. Legal Grounds

In the present case, there are three disputed legal issues:

1. whether, in the transitional regime of the year 2012, provided for in paragraphs a) to f) of article 6(1) of Law No. 55-A/2012 of 29 October, building land is subject to stamp duty, in accordance with what item No. 28 of the TGIS provides;

2. whether the provision in item No. 28 of the TGIS is unconstitutional by violation of the principle of equality, as well as what is provided in article 104(3) of the CRP, by violation of the principle of taxpaying capacity, in the interpretation that AT makes of it;

3. whether, proceeding from the previous issues, the Claimant is entitled to be indemnified for the losses resulting from the bank guarantee it provided to suspend the fiscal enforcement proceedings instituted against it, for coercive collection of the amount of € 5,449.88 relating to the stamp duty in dispute.

Let us examine:

I – Inclusion of Building Land within the Scope of Item 28.1 of the TGIS

1. Law No. 55-A/2012 of 29 October (which hereinafter we shall refer to as Law No. 55-A/2012 of 29.10 or simply Law), amended, among others, various articles of the Stamp Duty Code, more precisely 12 of its articles. We shall not pronounce on all of them, but only on those we consider to have greater relevance for the analysis of the case sub judice.

2. Thus, in the incidence rule provided for in article 1 of the CIS, the legislator determined that, in addition to acts, contracts, documents, titles, papers and other facts provided for in the General Table, including gratuitous transfers of goods, stamp duty would also apply to "legal situations", now also provided for in the TGIS.

3. The new wording of article 2(4) determined that for these "legal situations", the liable parties are those referred to in article 8 of the IMI Code, that is, in most cases, the duty is owed by the owner of the property on 31 December of the year to which the duty relates.

4. In these "legal situations", the duty constitutes a charge on the liable party provided for in article 2(4) of the CIS, that is, the above-identified owner of the property (general rule), by referral for application of the rule of article 8 of the IMI Code.

5. In these "legal situations", the application of the principle of territoriality means that the duty is owed whenever properties are located in national territory, in accordance with the addition to article 4(6) of the CIS, by Law No. 55-A/2012.

6. As to the birth of the tax obligation, for these new "legal situations" it is considered constituted "... at the moment and in accordance with the rules provided for in the IMI Code, with the necessary adaptations" (See paragraph u) of article 5 of the CIS, added by Law No. 55-A/2012 of 29 October), which refers us to the rules provided for in articles 9 and 10 of the IMI Code.

7. Now, the fundamental alteration, which conditions all the others, is contained in article 4 of Law No. 55–A/2012, which adds to the General Table of Stamp Duty (TGIS), annexed to the Stamp Duty Code (CIS), a new item, No. 28, with the following wording:

"28. Ownership, usufruct or right of superficies of urban properties whose taxable property value shown in the property register, in accordance with the Municipal Property Tax Code (IMI Code), is equal to or greater than (euro) 1,000,000 - on the taxable property value used for purposes of IMI:

28.1 For property with residential use ------------------------------------- 1%

28.2 For property, when the liable parties that are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, shown in the list approved by order of the Minister of Finance --------------------------------------------------------- 7.5%"

1. Thus, in accordance with said item, and in what concerns us here, only subject to Stamp Duty is the ownership, usufruct, right of superficies of:

a) "urban properties,

b) with residential use,

c) and whose taxable property value shown in the property register, in accordance with the Municipal Property Tax Code (IMI Code), is equal to or greater than (euro) 1,000,000;" (emphasis added)

1. In truth, the greatest difficulty that taxpayers have faced, in light of the amendments introduced by Law No. 55-A/2012 of 29.10, with expression in the case sub judice, has manifested itself in the interpretation of the expression "property with residential use".

2. A concept which determines, or not, the applicability of building land to item 28.1 of the TGIS, whose assessment is being impugned here.

3. Now, the obstacle arises from the lack of definition of the concept "property with residential use" in tax legislation, namely in the IMI Code, to which the CIS refers, as subsidiary law, in accordance with its article 67, introduced by Law No. 55-A/2012 of 29.10.

4. In truth, the IMI Code provides, in its articles 2 to 6, regarding: the concept of property (article 2), defines what should be understood by rural properties (article 3), what should be understood by urban properties (article 4); what should be understood by mixed properties (article 5) and enumerates the types of urban properties (article 6), for whose wording we refer.

5. However, none of the legal rules above identified admit the concept of "property with residential use", so that, and in accordance with the essential rules of legal hermeneutics and interpretation of tax laws, we must resort first to the letter of the law, presuming that the legislator expressed himself appropriately, and then to its systematic integration with the rules contained in the IMI Code, without, however, disregarding the intention or spirit of the legislator.

6. Thus, the question arises: what did the legislator intend when drafting item 28.1 of the TGIS, by indicating as a requirement for its application "property with residential use". Did the legislator intend to encompass in this concept building land – the matter which concerns us here –?

7. Did it intend to interpret the expression "property with residential use" in the sense that the Respondent makes, that "the concept of 'properties with residential use', for the purposes of item 28 of the TGIS, comprises both built properties and building land, notably by taking into account the literal element of the rule", in that "the legislator does not refer to 'properties intended for habitation', having opted for the notion of 'residential use'. An expression different and broader whose meaning is to be found in the need to integrate other realities beyond those identified in article 6(1)(a) of the IMI Code."?

8. Or, rather and, as the Claimant states, that "[properties] can be subject to the incidence of the rule, that is, only after the submission of Form 1 to communicate the completion of works does the property come to be classified as an urban property used for residential purposes.", so that, "not defining the IMI Code what is 'property with residential use' it seems to the Claimant that the legislator intended to refer to residential properties, in the sense of article 6 of the IMI Code and not to building land"?

Let us examine:

1. For clarity in exposition, and as to the matter of the concept of "properties with residential use" we recall what was held in the arbitral decision handed down in case No. 53/2013-T, with which we agree, according to which: "The concept closest to the literal tenor of this expression used is manifestly that of 'residential properties', defined in article 6(2) of the IMI Code as including 'buildings or structures' licensed for residential purposes or, in the absence of a license, that have as their normal destination residential purposes. (…) However, the non-coincidence of the terms of the expression used in item No. 28.1 of the TGIS with that which results from article 6(2) of the IMI Code, points to the fact that it was not intended to use the same concept."

2. It furthermore follows, and in this logical sequence, the position taken in the Judgment of the STA, of 14.05.2014, handed down in case No. 0317/14, which we accompany, to the effect that: "'residential use' always appears in the IMI Code referred to 'buildings' or 'structures', existing, authorized or planned, because only these can be inhabited, which is not the case with building land, which do not, in themselves, have conditions for such, not being capable of being used for habitation except if and when a structure authorized and planned for them is built on them (but in that case they would no longer be 'building land' but another type of urban properties – 'residential', 'commercial, industrial or for services' or 'other' – article 6 of the IMI Code)."

3. Thus, following this path, with which we fully agree, it seems that the thesis of the Respondent, regarding the possible connection of the concept of "use for habitation" to a piece of building land, without any structure capable of being inhabited, lacks merit.

4. It is also to be noted that the imprecision of the concept under consideration – "property with residential use" –, was amended by the State Budget for 2014, approved by Law No. 83-C/2013 of 31.12, giving new wording to item 28 of the TGIS, now specifying its scope of application and objective incidence with the use of objective concepts legally defined in article 6 of the IMI Code.

5. In truth, this amendment – to which the legislator does not attribute an interpretive character – reinforces the unambiguous character, going forward, that building land whose construction, authorized or planned, is for residential purposes are included within the scope of item 28 of the TGIS (provided that the respective taxable property value is equal to or greater than € 1,000,000.00), saying nothing or clarifying regarding situations preceding this legislative amendment, namely the one that is sub judice, so that it should be concluded that in the year 2012, building land were not included in the provision of item 28 of the TGIS.

6. Furthermore, the Respondent further invokes, sustaining its position, that "the notion of use of the urban property is found in the part relating to the valuation of properties, which is well understood in that the valuation of the property (purpose) incorporates value to the property, constituting a fact of distinctive determination (coefficient) for purposes of valuation." Notably because "as results from the expression 'value of authorized buildings', contained in article 45(2) of the IMI Code, the legislator opted to determine the application of the valuation methodology of properties in general, to the valuation of building land, and consequently the coefficient of use provided for in article 41 of the IMI Code is applicable to them."

7. Concluding, to the effect that: "(…) for the purposes of determining the taxable property value of building land, the application of the use coefficient in the context of valuation is clear, so its consideration for the purposes of applying item 28 of the TGIS cannot be ignored."

8. Now, the truth is that also in this respect it does not seem to us to be appropriate to consider and accept the legitimacy or legality of the assessment of stamp duty on building land in the terms alleged by the Respondent, in that, and as stated in the arbitral decision handed down in case No. 53/2013-T, to which we fully agree, "With regard to article 45 of the IMI Code, it has no relation whatever to the classification of properties only indicating the factors to be taken into account in the valuation of building land."

9. On this matter, case No. 158/2013-T of CAAD has already pronounced, with which we agree and fully adhere, to the effect that: "It is certain that the IMI Code determines the application, to the valuation of building land, of the valuation methodology applicable to constructed buildings, incorporating for such purpose, in the value of the land, the estimated value of the building to be constructed; and that this value is determined, in turn, by the type of use provided for the properties to be built. Put in simpler terms, the law (IMI Code) says that to determine the taxable property value of building land, one incorporates into this part of the estimated value of the buildings to be constructed; and to estimate the value of the buildings to be constructed, one takes into account the use provided for them. Contrary to what AT sustains, it results precisely from the letter of these provisions the inapplicability of the concept of 'use' to building land. The use that is taken into account, for purposes of valuation, even of building land, is always and only the use of the buildings to be constructed. The use provided for the buildings to be constructed influences the taxable property value of the building land, but nothing more. From the rule relating to the determination of the value of properties which determines that, in the value of building land is incorporated the estimated value of the buildings to be constructed, which is, in turn, influenced by the future use of those buildings, cannot be derived that the use in question is a use of the properties themselves, and this for two reasons: First, because this interpretation would be contrary to the very literality of the provisions which order to be taken into account, in the valuation of building land, the use of the properties to be built; And secondly, because the manner in which the law orders a particular property reality to be valued cannot be determinative of the nature or legal qualification of that same property reality, having in view, above all, the principle of specificity of tax incidence rules. The fact that the law orders the application to one property reality of the same valuation methodology that is applied to another different property reality does not cause the first reality to share the nature of the second. Thus, if it is certain that the value of authorized or planned buildings influences the real value of building land, and for that reason that value should be reflected in the taxable property value of that building land, it does not follow from this that land comes to have residential use by the planned construction, on it, of residential properties, this distinction being extracted in clear manner from the very provisions on valuation of the IMI Code."

10. Thus, what matters for purposes of the application of item No. 28.1 of the TGIS is that the property be urban, that it has a VPT equal to or greater than € 1,000,000.00 and that it be effectively used for habitation, which is not the case with the building land whose assessment is being impugned in the present proceedings.

11. Now, in the case at hand, given that the assessment was made under the transitional regime of Law No. 55-A/2012 of 29.10, provided for in paragraphs a) to f) of article 6(1) of this Law, it becomes relevant to mention some transitional rules, provided for by the legislator, relating to "legal situations", only applicable to the year 2012. Namely:

a) The tax fact occurs on 31 October 2012, and not on 31 December 2012;

b) The liable party for the duty is, among others, the owner of the property on 31 October 2012, and not the owner of the property on 31 December 2012;

c) The VPT to be used in the assessment of this SD is that which results from the rules provided for in the IMI Code, by reference to the year 2011 and not to any other (in the case at hand, "by chance" it was that of 2010);

d) The assessment of the duty relating to "legal situations" is to be made by AT by the end of November 2012, and not in the manner in which it is done, either in Stamp Duty or IMI matters;

e) The duty will be paid, in a single installment, by 20 December 2012, and not in two installments in April and September 2012, as occurred with the IMI of 2011 (See article 120 of the IMI Code) or in three installments, in the months of April, July and November (See paragraph c) of article 120 of the IMI Code, as amended by article 215 of Law No. 66-B/2012 of 31 December, which approved the State Budget for 2013), not considering the remaining payment methods in installments, because they apply to trivial amounts of collection, given that which this SD generates, a minimum of € 5,000.00 (1,000,000.00 x 0.5%);

f) The rates applicable for 2012 are the following:

i) Properties with residential use valued in accordance with the IMI Code: 0.5%, instead of 1%, as is provided for 2013;

ii) Properties with residential use not yet valued in accordance with the IMI Code: 0.8%, instead of 1%, as is provided for 2013;

iii) Urban properties, when the liable parties that are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, shown in the list approved by order of the Minister of Finance: 7.5% (rate equal to the general regime for 2013).

1. With effect, and in this context, it will always be said that, provisionally, in 2012, these rules are different from those of the general regime, having as a counterpart the benefit of the reduction of rates, with the exclusion of properties owned by offshore companies in which for 2013 the rate remains at 7.5%.

2. This is because the legislator remembered that there were in 2012 urban properties already valued, in accordance with the IMI Code and others that had not yet been, establishing, for this reason, a difference of rates, taxing at the rate of 0.8% those which, despite not having been yet valued in those terms, had a supposedly lower VPT, but always greater than 1 million euros.

3. And taxing, only at 0.5%, those which already had an updated VPT, and, therefore, logically higher, which justified the application of a lower rate, but always in any situation, with a VPT above 1 million euros. (Recall that the principle underlying the oscillation of IMI rates, in the property reform, is this: unvalued properties are taxed at a higher rate, while already valued properties, with a higher VPT, are taxed at a lower rate, in order not to worsen the taxation, nor withdraw revenues from the Municipalities, which could lead to an undesirable increase in transfers from the State Budget.

4. Now, considering thus that there is no difference whatever as to the assumptions of the incidence of stamp duty in the general regime – item 28.1 of the TGIS – and in the transitional regime – article 6(1) of Law No. 55-A/2012 of 29 October - it is the understanding of this tribunal that the disputed assessment is illegal, for the reasons set out above.

5. This is what results from the jurisprudence of the arbitral tribunals and of the superior tax courts which have been interpreting item No. 28.1 of the TGIS and its assumptions for application, and with which we fully agree.

6. It is to be noted, finally, the position of the Supreme Administrative Court, the summary of one of the Judgments referenced here being transcribed and which has been the guidance in the various decisions handed down in that learned Court, as to the illegality of stamp duty under item 28.1 of the TGIS on building land:

"Not having the legislator defined the concept of 'urban properties with residential use', and resulting from article 6 of the Municipal Property Tax Code (with subsidiary application to the Stamp Duty provided for in the new item No. 28 of the General Table) a clear distinction between 'residential urban properties' and 'building land', these cannot be considered, for purposes of the incidence of Stamp Duty (Item 28.1 of the TGIS, in the wording of Law No. 55-A/2012 of 29 October), as urban properties with residential use."

1. Thus, the AT could never subject the Claimant to stamp duty, under paragraphs a) to f) of article 6(1) of Law No. 55-A/2012 of 29 October, of the year 2012, which is now being impugned, and therefore, the same should be annulled, as being illegal.

II - Violation of Constitutional Law

1. The logic of the taxation of wealth and fortune prevails, with greater or lesser intensity, within the framework of Law No. 55-A/2012 of 29.10, a conclusion that results from the general aggravation of the tax burden, in the financial logic, exclusively directed at fiscal situations that would produce immediate revenue.

2. Taxation of capital income is aggravated, the list of manifestations of fortune is expanded, taxation of income obtained in Portugal by entities domiciled in tax havens is aggravated, and finally, to all this is added the taxation of residential properties, of value greater than € 1,000,000.00.

3. And if the legislator includes in this statute properties for habitation, fixing a value above which they would begin to be taxed by another tax, this could only mean that it considered that whoever was the owner of property of such value, this expressed an element indicative of additional means of fortune, which could be called upon to participate in the collective effort of collection of supplementary tax revenues.

4. In truth, the legislator in introducing this legislative innovation, considered as a determining element of taxpaying capacity urban properties, with residential use, of high value (of luxury), more precisely, of value equal to or greater than € 1,000,000.00, on which a special rate of stamp duty would apply, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of superficies of high-value urban properties with residential use. Therefore, the criterion was application of the new rate to urban properties with residential use, whose VPT is equal to or greater than € 1,000,000.00.

5. This same conclusion is drawn from the analysis of the discussion of bill No. 96/XII in the Assembly of the Republic, available for consultation in the Parliamentary Record, I series, No. 9/XII/2, of 11 October 2012.

6. The justification for the measure called "special rate on the highest value residential urban properties" is based on the invocation of the principles of social equity and fiscal justice, calling upon the owners of high-value properties intended for habitation to contribute in a more intense manner, making the new special rate apply to "houses of value equal to or greater than 1 million euros."

7. With effect, the legislator clearly considered that this value, when assigned to a habitation (house, autonomous fraction or apartment with independent use) translated a taxpaying capacity above the average and, as such, capable of determining a special contribution to ensure the fair distribution of the tax burden.

8. Also following these considerations inspirational of the legislative innovation under examination, it must be concluded that the existence of building land cannot be, by itself, an indicator of taxpaying capacity.

9. In truth, building land belonging to a company such as the Claimant does not translate a wealth subject to taxation, in Stamp Duty, given its indexation as an asset, as a commodity or raw material.

10. In light of the foregoing, the assessment of Stamp Duty relating to the year 2012, impugned, in the amount of € 5,449.88 (five thousand, four hundred and forty-nine euros and eighty-eight cents) is null, by violation of the provision in item 28.1 of the TGIS, in the transitional regime, of the principle of taxpaying capacity, of the principle of taxation on wealth and of the principle of specificity.

III – Indemnification for Bank Guarantee Unduly Provided

1. Article 53 of the General Tax Law, under the heading "Indemnification in Case of Undue Payment", provides that:

"1 - The debtor who, to suspend enforcement, offers a bank guarantee or equivalent shall be indemnified in whole or in part for losses resulting from its provision, should the debtor have maintained it for a period longer than three years in proportion to the success in administrative remedy, impugnation or opposition to enforcement that have as their object the debt guaranteed.

2 - The period referred to in the preceding number does not apply when it is verified, in administrative petition or judicial impugnation, that there was error imputable to the services in the assessment of the tax.

3 - The indemnification referred to in No. 1 has as its maximum limit the amount resulting from the application to the guaranteed value of the rate of indemnificatory interest provided for in this law and may be requested in the administrative petition or judicial impugnation proceeding itself, or independently.

4 - Indemnification for provision of an undue guarantee shall be paid by setoff against the receipts of the tax of the year in which payment was made."

1. It results from this legal rule that the debtor/defendant in enforcement who provides a bank guarantee or equivalent, to suspend the fiscal enforcement proceedings instituted against him, has the right to be indemnified (in whole or in part, depending on whether he has achieved full or partial success in impugnation, administrative remedy or opposition to enforcement, which have as their object the debt guaranteed) for losses resulting from the provision of that guarantee.

2. However, for this indemnification to be realized, it is necessary that:

a) The debtor proves that error imputable to the services occurred, regardless of the period of time during which the guarantee was maintained (in accordance with No. 2 of that rule);

b) In case the annulment of the assessment act whose legality is being questioned does not have as its basis error imputable to the services, indemnification will only be owed if the guarantee was maintained for more than 3 (three) years (see No. 1 of article 53 of the LGT)

1. No. 3 of this provision deals with the request for said indemnification, providing that it may be requested in the administrative petition or judicial impugnation proceeding itself, or independently. However, it does not establish the time limit for filing such a request, or the procedural means to be used for its formulation.

2. This provision is regulated in article 171 of the Tax Procedure and Process Code, according to which:

a) Indemnification in case of a bank guarantee or equivalent unduly provided shall be requested in the proceedings in which the legality of the executable debt is contested.

b) Indemnification should be requested in the petition, impugnation or appeal or in case its basis is supervening within 30 days of its occurrence.

1. It thus establishes that the request for indemnification (for bank guarantee unduly provided) should be presented in the proceedings in which the legality of the debt in question is contested and, in accordance with its No. 2, that the request be made in the petition, impugnation or appeal or, in case its basis is supervening, within 30 days of its occurrence.

2. Now, error imputable to the administration is considered to exist when the error is not imputable to the taxpayer and is based on erroneous factual assumptions that are not the responsibility of the taxpayer, - which is verified in the present case.

3. In the present case, it will be unquestionable that, as a result of the establishment of the illegality of the assessments, there shall be indemnification for provision of an undue guarantee by virtue of the provision of article 53 of the LGT and article 171 of the CPPT, necessarily passing through this the restoration of the "situation that would exist if the tax act that is the subject of the arbitral decision had not been carried out".

4. In the same manner, it is understood that it will be beyond doubt that the illegality of the act is imputable to the Tax Authority, which carried it out autonomously in an illegal manner, so that, being faced with a defect of violation of substantive law, which is embodied in error in the assumptions of law, imputable to the Tax Authority, the Respondent has the right to be indemnified for the provision of the undue guarantee, in accordance with article 53 of the LGT, calculated on the basis of its proportion relative to the totality of the fiscal enforcement proceedings included in the bank guarantee, attached as document No. 5 with the initial petition, estimated at the amount of € 1,034.56 (one thousand and thirty-four euros and fifty-six cents), plus interest calculated on this amount (to be determined in execution of this arbitral decision) from the date on which it was borne until the date on which withdrawal of the guarantee is authorized.

DECISION

In accordance with the foregoing, it is decided:

1. To annul the Stamp Duty assessment act impugned by the Claimant, relating to the year 2012.

2. To condemn the Respondent to pay indemnification, by virtue of the provision of an undue guarantee, by the Claimant, in order to suspend the fiscal enforcement proceedings No. ..., calculated on the basis of its proportion relative to the totality of the fiscal enforcement proceedings included in the bank guarantee No. ..., estimated at the amount of € 1,034.56 (one thousand and thirty-four euros and fifty-six cents), plus interest calculated on this amount (to be determined in execution of this arbitral decision) from the date on which it was borne until the date on which withdrawal of the guarantee is authorized.

Value of the Proceedings

The value of the proceedings is fixed at € 6,484.44 (six thousand, four hundred and eighty-four euros and forty-four cents) in accordance with article 97-A(1)(a) of the CPPT, applicable by virtue of paragraphs a) and b) of article 29(1) of RJAT and No. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

Costs

Costs at the charge of the Respondent in accordance with article 22(2) of RJAT, article 4 of RCPAT, and Table I attached to the latter, which are fixed at the amount of € 612.00.

Let it be served.

Lisbon, 30 October 2015

The Arbitrator

(Jorge Carita)

[1] Judgments of CAAD handed down in cases No. 50/2013-T, No. 132/2013-T, No. 181/2013-T, No. 183/2013-T, No. 185/2013-T, No. 248/2013-T, among others

[2] Judgments of the STA handed down in cases No. 046/14, of 14.05.2014; No. 0271/14, of 14.05.2014; No. 0395/14, of 28.05.2014, 01871/13, of 14.05.2014, 055/14, of 14.05.2014, among others.