Stamp Tax on Building Land (Verba 28.1 TGIS) – CAAD Arbitration Decision 206/2016-T

ARBITRAL DECISION

The arbitrators, Judge Dr. José Poças Falcão (arbitrator-president), Dr. Nuno de Oliveira Garcia and Dr. Paulino Brilhante Santos, appointed by the Deontological Council of the Administrative Arbitration Centre (CAAD) to constitute the Collective Arbitral Tribunal, constituted on 22 June 2016 (order of the President of the Deontological Council of CAAD of 22 June 2016), agree as follows:

I. REPORT

1. On 1 April 2016, the company 'A... S.A.', with the collective person number…, with registered office at Street…, …-… …(hereinafter briefly identified as the Applicant), in accordance with the provisions of articles 2 and 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter briefly designated as RJAT), submits a request for arbitral pronouncement of the illegality declaration of Stamp Tax assessment acts – item 28.1 of TGIS, relating to the year 2012, carried out by the Tax and Customs Authority (hereinafter briefly identified as the Respondent Authority), concerning collection documents nos. 2013…, 2013… and 2013…, relating to the urban property article … of the parish of …, in the amount of € 11,953.25, collection documents nos. 2013…, 2013… and 2013…, relating to the urban property article … of the parish of …, in the amount of € 19,911.60 and collection documents nos. 2013…, 2013… and 2013…, relating to the urban property article … of the parish of …, in the amount of € 33,348.26.

2. The Applicant did not proceed with the appointment of an arbitrator and therefore, under the provisions of article 6, no. 2, paragraph a) of RJAT, the signatories were appointed by His Excellency the President of the Deontological Council of CAAD to form this Collective Arbitral Tribunal, the appointment having been accepted within the timeframe and other terms legally provided.

3. On 2 June 2016, the parties were duly notified of this appointment and did not express any intention to refuse the appointment of the arbitrators, in accordance with the combined provisions of article 11, no. 1, paragraphs a) and b) of RJAT and articles 6 and 7 of the Deontological Code.

4. Thus, in conformity with what is prescribed in paragraph c) of no. 1 of article 11 of RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the Collective Arbitral Tribunal was constituted on 22 June 2016.

5. In this manner, it is important to note that the Applicant sustained, in summary, its request as follows:

A. On the contested assessment acts and collection documents:

5.1 The Applicant begins by raising a preliminary issue noting that it was notified of the collection documents identified above (Documents 1 to 9 which it attached with the Petition) relating to Stamp Tax – item 28 of TGIS, of the year 2012, but that it was not notified of the Stamp Tax assessments.

5.2 The Applicant states that notifications of tax assessments must be carried out by the Tax Authority in accordance with the provisions of no. 7 of article 23 of the Stamp Tax Code (IS Code), which refers to the Urban Real Estate Tax Code (IMI Code) with regard to assessment (articles 113 to 118).

5.3 The Applicant further states that the tax assessment cannot be confused with collection documents, and that as it is initiated by the Tax Authority, it must be previously notified to the taxpayer so they may exercise the right to be heard, if they so wish, in accordance with article 60 of the General Tax Law (LGT).

5.4 The Applicant alleges that it was not notified of the assessments with the respective factual and legal grounds, nor was it previously notified to comment on them under the right to be heard.

5.5 The Applicant filed a gracious complaint against the Stamp Tax assessment of the year 2012, at which time it had only been notified of the first instalment, to which was assigned the gracious complaint file no. …2013….

5.6 The gracious complaint was rejected and therefore the Applicant filed a hierarchical appeal against the same tax act, to which was assigned no. …2013….

5.7 The Applicant also filed a gracious complaint against the Stamp Tax assessments of 2012, following the collection notes relating to the second and third instalments, to which were assigned nos. …2013… and …2014….

5.8 In the aforementioned gracious complaints, archival decisions were issued, with the following wording: "2. The payments of the said assessments were divided into 3 instalments, 3. Notwithstanding the claimant petitioning for the annulment of the Stamp Tax assessments of the 2nd instalments of 2012, (...), the object of the complaint will not be the collection notes issued, and relating to these instalments, but the assessments underlying them, that is, assessments nos. 2012…, 2012… and 2012…, relating to Stamp Tax – item 28.1 of the TGIC, of 2012, and relating to urban articles nos…, … and…, all of the parish of…, in the municipality of ...; (...) 4. However, and based on the same grounds, already in June 2013 the now claimant filed a gracious complaint against the Stamp Tax assessments of the 1st instalment of 2012, which proceeded under no. …2013…, and within which the aforementioned assessments, with nos. 2012…, 2012… and 2012…, were subject to analysis, the claimant having been notified of the rejection of the complaint. (...) It is thus verified that, in the case, the Tax Administration (AT) ruled, less than 2 years ago, on the request of the same author, now the claimant, with identical object and grounds, for which reason there is no duty of decision on the part of the AT". (Documents 10 and 11 which it attached with the Petition).

5.9 The Applicant on 05/01/2016 was notified of the partial rejection of the hierarchical appeal, filed against the rejection of the gracious complaint no. …2013….

5.10 The Applicant states that the tax acts whose illegality it contests are the Stamp Tax assessment acts, under article 28.1 of TGIS, relating to the year 2012 with nos. 2012…, 2012… and 2012…, not notified to the Applicant, and underlying the collection notes.

5.11 In the said decision it is stated that "... the IS assessment (item 28), relating to the year 2012 and relating to articles … and … (...) is not correctly carried out in the part that assessed IS on the VPT corresponding to the allocation to commerce, and thus, the present hierarchical appeal should be partially granted in this part, maintaining the appealed decision with respect to the IS assessment on the VPT corresponding to the allocation to housing. With respect to article … (...) the appealed decision should be maintained, since the IS assessment was carried out on the VPT allocated to housing" (cited).

5.12 The issue concludes noting that to the present date the Applicant has not been notified of the partial annulment of the IS assessments for the properties articles … and ….

B. On the lack of factual and legal grounds and violation of law in the assessments sub judice:

5.13 The Applicant continues alleging the illegality of the said Stamp Tax assessments carried out under item 28.1 of TGIS, focusing on the right of ownership of urban properties with the registration articles…, … and …, of the parish of …, municipality of ..., with patrimonial values of € 1,195,324.50, € 1,991,159.63 and € 3,334,825.88.

5.14 The Applicant considers that they are illegal because the said urban properties with the registration articles …, … and … are land lots intended for construction.

5.15 At the time when the construction land was evaluated, account was taken of the total area of the land, the percentage of maximum implantation area permitted by the municipal zoning plan for the zone, and on the assumption that a building would be built thereon intended entirely for housing.

5.16 As for the said urban properties, there is no license, authorization or constructive viability or use approval granted by the competent municipal authority, and the allocation for housing has no support or basis in a municipal use license.

5.17 The Applicant further alleges that the VPT incorrectly assumes the existence of a building, with no work having been initiated or completed on the said lands.

5.18 Therefore, the Applicant considers that the land lots for construction (articles U:…, … and …) are excluded from taxation, under item 28.1 of the Stamp Tax Code table.

5.19 The actual and final use or allocation of the lands in question cannot be deemed to be for housing, and the Stamp Tax assessments of the year 2012, collected in 2013 in 3 instalments (April, July and November), are illegal.

5.20 The Applicant further alleges that, even after the legal change that occurred in item 28.1 of TGIS, with Law no. 83-C/2013, of 31 December, there is no fact or legal situation that is covered by this rule.

5.21 The new wording of the said rule has no interpretive character and took effect on 1 January 2014, that is, producing effects for the future.

5.22 The Applicant thus considers that being 2012 the year to which the Stamp Tax relates, the wording prior to Law no. 83-C/2013 should be applied.

5.23 In the previous wording of the rule in question, the objective scope of the tax was on urban properties with housing allocation, without the Stamp Tax Code defining urban property with housing allocation.

5.24 And even by referral to the IMI Code (in accordance with no. 2 of article 67 of the Stamp Tax Code), there is no definition of urban property with housing allocation.

5.25 The Applicant considers that, on the other hand, the expression housing allocation presupposes actual use and not a mere possibility, potentiality or expectation that the property may come to have.

5.26 Therefore, to be covered by the objective scope of the tax, the urban property is only reconductable to the urban property provided for in paragraph a) of no. 1 of article 6 of the IMI Code, and not to construction land.

5.27 The Applicant concludes by alleging that the housing allocation of the properties is put in question and at the date of the tax fact, item 28.1 of TGIS could not be applied.

C. On the alleged double taxation:

5.28 The Applicant further considers that the assessments sub judice are also illegal because they tax the same fact or legal situation already taxed under the IMI Code, noting that the objective and subjective scope is identical to that of the IMI Code.

5.29 The Applicant considers that there is double taxation, in that the Applicant, as owner of urban properties whose VPT is greater than € 1,000,000.00 and registered in the property registry with the allocation of housing, is a taxpayer of two taxes on the same real property: the IMI Code and the Stamp Tax Code (under item 28.1 of TGIS).

5.30 What makes the Stamp Tax assessments illegal by violation of the principle of prohibition of double taxation.

D. On unconstitutionality by violation of the principle of equality:

5.31 Finally, the Applicant raises the unconstitutionality of the taxation as it is directed only at properties for housing purposes, violating the principle of fiscal equality.

5.32 The Applicant refers by way of example that owners of properties intended for housing that are leased are taxed, and whose rents were or are fixed before the entry into force of the RAU or NRAU, but owners of business centers or offices and bank headquarters, and even of public and/or private entities, institutes and foundations, no matter how valuable, are left unaffected because they are not intended for housing.

5.33 Extracting thus that the justifying argument for the necessity of taxation of luxury real estate is fallacious and discriminatory, as it only covers properties allocated to housing, regardless of whether it is own and permanent housing or housing for leasing, and in that measure being a source of rental income, taxed under IRS/IRC.

5.34 The Applicant alleges that this situation violates elementary principles of justice, non-discrimination and the constitutional requirement of equality in taxation, which is scandalously violated when owners of properties with housing purposes are the only ones to bear the new (and double) taxation of properties in Stamp Tax.

5.35 Concluding by the violation of the principle of equality of taxpayers and the violation of non-discrimination in the tax treatment of identical situations that determine the unconstitutionality and, consequently, determine the inapplicability of Law 55-N2012 to the concrete case.

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

6.1 The Respondent Authority presented its defense by impugning beginning by defending itself regarding the lack of notification and grounds of the tax acts in question.

On the lack of notification

6.2 In matters both of assessment and of the payment period of Stamp Tax (item 28 of TGIS), the Respondent Authority states that the Stamp Tax Code provides for the application, with the necessary adjustments, of the rules contained in the IMI Code.

6.3 From the reading of Law 55-A/2012, of 29 October, it follows that the tax due by item 28.1 of TGIS has a periodic character and its assessment is made ex officio by the AT, based on elements pre-determined in the property registry and no. 4 of article 38 of CPPT provides that notifications relating to assessments of periodic taxes made within the periods provided by law are carried out by simple postal means.

6.4 The Stamp Tax assessments, item 28, issued under the transitional regime of article 6 of Law 55-A/2012, of 29 October, such as the ones now under consideration, gave rise to the issuance of collection documents.

6.5 The Respondent Authority understands that the notification sent to the Applicant is the respective collection document, carried out in accordance with article 6 of Law no. 55-A/2012 of 29 October, of no. 1 of article 119 of the IMI Code, through the mechanism provided for in no. 4 of article 38 CPPT.

6.6 It makes reference to Decision no. 01089/09, of 20-10-2010, of the Supreme Administrative Court where it is stated: "(…) the assessment of CA and IMI, carried out within the normal period, does not require notification to the taxpayer, the sending of the collection document referred to in articles 22 and 23 of the CCA and in articles 119 and 120 of the IMI Code being sufficient to make the debt exigible. This notification of the assessment act is only imposed when a "late period" assessment or an "additional assessment" is involved" (cited).

6.7 Therefore, it is the Respondent Authority's understanding that the alleged lack of notification of the Stamp Tax assessments invoked by the Applicant should be rejected.

On the lack of grounds

6.8 To this end the Respondent Authority declares, among other arguments, that in accordance with what is established in no. 1 of article 77 of the LGT "[t]he decision of the procedure is grounded by means of a brief exposition of the factual and legal reasons that motivated it (…)", and in accordance with no. 2 of the same article "The grounding of tax acts must contain the applicable legal provisions, the characterization and quantification of the tax facts and the operations for determining the taxable matter and the tax" (cited).

6.9 It further adds that regard must be had to what is established in the final part of no. 1 of the same provision, in accordance with which the grounding may "(…) consist of a mere declaration of agreement with the grounds of previous opinions" (cited).

6.10 For the Respondent Authority, an act is considered to be duly grounded whenever its recipient shows that they have grasped its grounds.

6.11 In the concrete case, the Respondent Authority considers that the assessments are duly grounded, both in fact and in law, the Applicant having filed a gracious complaint, hierarchical appeal and petition before the arbitral tribunal, showing that it had no difficulty whatsoever in grasping the reasons that led to the issuance of the assessments.

6.12 Concluding that the assessments in question do not violate any legal or constitutional principle and should thus be maintained.

6.13 The Respondent Authority further alleges that what is at issue are assessments that result from the direct application of the legal rule, and which translate into objective elements, without any subjective or discretionary appreciation.

6.14 The Respondent Authority understands that urban properties that are construction land and to which have been assigned housing allocation within their respective evaluations, appearing such allocation in the respective registries, are subject to Stamp Tax.

6.15 The Respondent Authority further understands that Stamp Tax came to apply also to the ownership, usufruct or surface right of urban properties whose patrimonial value of tax that appears in the respective registry in accordance with the IMI Code is equal to or greater than €1,000,000.00.

6.16 It continues stating that "Not existing under IS any definition of what is meant by 'urban property', 'construction land' and 'housing allocation' it is necessary to resort subsidiarily to the IMI Code to obtain a definition that allows assessment of any subjection to IS, in accordance with what is provided in article 67, no. 2 of the IS Code in the wording given to it by Law no. 55-A/2012, of 29/10" (cited).

6.17 It refers to the provisions of no. 1 of article 2 and no. 1 of article 6, both of the IMI Code and maintains that "the notion of urban property is grounded in the part relating to the evaluation of properties, since the purpose of the evaluation of the property is to incorporate value into it, constituting a fact of distinction determining – coefficient - for purposes of evaluation" (cited).

6.18 The Respondent Authority considers that the legislator opted for determining the application of the methodology of evaluation of properties in general to the evaluation of 'construction land', as results from the expression 'value of authorized buildings' to which refers article 45, no. 2 of the IMI Code and applying to it, accordingly, the coefficient of allocation provided for in article 41 of the IMI Code.

6.19 It further makes reference to Decision no. 04950/11, of 14/12/2012, of the Administrative Court of Appeal – South, concluding that "the consideration for purposes of application of item 28 of TGIS cannot be ignored, in this sense being the following order of considerations:

a) in the application of law to concrete cases it is important to determine the exact sense and scope of the rule, so that the rule contained therein is revealed, an indispensable condition for it to be applied, in accordance with the provisions of article 9 of the Civil Code, by virtue of article 11 of the General Tax Law (LGT);

b) article 67, no. 2, of the IS Code, mandates the subsidiary application of the provisions of the IMI Code;

c) the allocation of the property (aptness or purpose) is a coefficient that contributes to the evaluation of the property, in the determination of the patrimonial value of tax, applicable to construction land;

d) item 28 of TGIS itself refers to the expression 'properties with housing allocation', calling for a classification that overlaps the species provided for in no. 1 of article 6 of the IMI Code"

6.20 Fiscally, properties are construction land as identified in the urban property notebooks, were acquired in that capacity and are thus predially classified, and therefore, the Respondent Authority considers that they are urban properties with housing vocation.

6.21 The property notebooks are very clear in defining for the land lots for construction in question the respective area of implantation of the building and construction, thus the Respondent Authority considers it to be clear that the housing allocation of the buildings is evident.

6.22 On the one hand, the Respondent Authority defends, the legislator (of item 28 of TGIS) "does not refer to 'properties intended for housing', having opted for the notion 'housing allocation'. An expression different and broader whose sense must be found in the need to integrate other realities beyond those identified in article 6, no. 1, paragraph a) of the IMI Code; on the other hand, tax law considers as an element integrating for purposes of evaluation of construction land the value of the implantation area, which varies between 15% and 45% of the value of authorized or planned buildings based on the urbanization and construction project".

6.23 It further considers that in accordance with the RJUE the license permit for the carrying out of urban operations should contain, among other elements, the number of plots and the indication of the location area, purpose, implantation area, building area, number of floors of number of housing units of each of the plots, with specification of housing units intended for low-cost housing.

6.24 Long before the actual building of the property, it is possible to determine and ascertain the allocation of the construction land.

6.25 The Respondent Authority further maintains that "in an interpretation very narrowly tied to the letter of the law, one could extract from the text the sense that the Applicant seeks to give it, but as our jurisprudence has declared, this is not the best interpretation of the law, being that in the hermeneutic task, the literal element, constituting the starting point and limit for extracting the sense of the rule, does not constitute the decisive element, nor even the most important one, a role that is reserved for the 'unity of the system', in accordance with no. 2 of article 9 of the CC" (cited);

6.26 "In truth, in the interpretation of law, beyond the aforesaid grammatical element, there is also the need to consider the logical element, demanding this, in particular, that the end sought by the legislator in drawing up the rule be considered (teleological element), in particular in order to ascertain its nature and its temporal scope of relevance, and to consider the place that the interpreted rule occupies therein (systematic element), and only from the combination of all these interpretive elements will the true sense of that rule emerge" - cf. Baptista Machado, Introduction to the Legitimating Discourse, Almedina 1983, pages 182 and 189.

On the violation of the principle of equality

6.27 With respect to the alleged violation of the principle of equality, the Respondent Authority begins by stating that Law 55-A/2012 of 29 October (in force as of 30 October 2012), altered article 1 of the Stamp Tax Code and added to TGIS, item 28, coming to cover in its scope the ownership, usufruct or surface right of urban properties whose VPT appearing in the registry, in accordance with the IMI Code, was equal to or greater than 1,000,000€.

6.28 Item 28 of TGIS is a general and abstract rule, applicable indistinctly in all cases in which the factual and legal prerequisites are met.

6.29 For the Respondent Authority "the taxation under IS obeys the criterion of adequacy, in the exact measure in which it aims at the taxation of wealth consubstantiated in the ownership of high-value properties, arising in a context of economic crisis that cannot at all be ignored" (cited), seeking to obtain maximum efficiency, as to the objective to be achieved, with minimum harm to other interests considered relevant.

6.30 Thus, the Respondent Authority understands that it is legitimated in the option for this mechanism of obtaining revenue, such measure being applicable indistinctly to all holders of properties with housing allocation of value greater than € 1,000,000.00.

6.31 Therefore, it concludes that the tax acts in question do not violate any legal principle and should thus be maintained.

1. By order of 2 November 2016, the meeting provided for in article 18 of RJAT was dispensed with, having been given an opportunity to the parties to produce, if they so wished, final written allegations.

2. Neither party submitted allegations.

II. SANATION

1. The Arbitral Tribunal is competent and is regularly constituted, in accordance with articles 2, no. 1, paragraph a), and 30, no. 1, all of RJAT.

2. The Parties have legal personality and capacity, are legitimate and are represented, in accordance with articles 4 and 10 of RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

3. There are no nullities and preliminary issues that affect the entire process, and therefore, it is now necessary to address the merits of the claim.

III. QUESTIONS TO BE DECIDED

1. Various questions are placed before the Arbitral Tribunal to be decided in accordance with the terms described above, including preliminary issues.

2. Strictly speaking, the issues invoked as preliminary matters relate to procedural defects.

3. Now, as is jurisprudence, most notably in arbitral matters, this Tribunal does not need to pronounce on all the issues invoked by the parties.

4. This is precisely the case in casu, first and foremost before the procedural defects invoked, since this Arbitral Tribunal will address the substantive issue – and, as will be seen, in a sense favorable to the Applicant, in line, moreover, with the jurisprudence of the STA and CAAD – it being, moreover, known the possibility of the AT being able to remedy formal defects or issue new acts (revoking those previously issued in contravention of formalities).

5. This is also the case with respect to the issues raised regarding the alleged unconstitutionalities, since these are invoked, necessarily, in a subsidiary manner to the vice of error (on the prerequisites) of fact.[1]

IV. FACTUAL MATTERS

1. To prove the alleged facts, the Applicant presented the following documentary evidence:

17.1 Collection documents of the 1st, 2nd and 3rd instalments (April, July and November 2013), documents nos. 2013…, 2013… and 2013…, relating to the urban property article … of the parish of … (Docs. 1 to 3);

17.2 Collection documents of the 1st, 2nd and 3rd instalments (April, July and November 2013), documents nos. 2013…, 2013… and 2013…, relating to the urban property article … of the parish of … (Docs. 4 to 6);

17.3 Collection documents of the 1st, 2nd and 3rd instalments (April, July and November 2013), documents nos. 2013…, 2013… and 2013…, relating to the urban property article … of the parish of…(Docs 7 to 9);

17.4 Notification of archival of the Gracious Complaint no. …2013… (Doc. 10);

17.5 Notification of archival of the Gracious Complaint no. …2014… (Doc. 11).

17.6 Notification of the decision of partial granting of the Hierarchical Appeal no. …2013… relating to the gracious complaint no. …2013… (Doc. 12).

1. The Respondent Authority attached the administrative file.

2. The following facts with relevance for the Arbitral Decision to be delivered are considered proven, based on the documentary evidence attached to the case file:

19.1 The Applicant was notified of the collection documents of the 1st, 2nd and 3rd instalments (April, July and November 2013), with nos. 2013…, 2013… and 2013…, relating to Stamp Tax of the year 2012 of the urban property article … of the parish of …, in the total amount of € 11,953.25 (Documents 1 to 3);

19.2 The Applicant was notified of the collection documents of the 1st, 2nd and 3rd instalments (April, July and November 2013), with nos. 2013…, 2013… and 2013…, relating to Stamp Tax of the year 2012 of the urban property article … of the parish of …, in the total amount of € 19,911.60 (Documents 4 to 6);

19.3 The Applicant was notified of the collection documents of the 1st, 2nd and 3rd instalments (April, July and November 2013), with nos. 2013…, 2013… and 2013…, relating to Stamp Tax of the urban property article … of the parish of …, in the total amount of € 33,348.26 (Documents 7 to 9);

19.4 The Applicant filed a gracious complaint against the Stamp Tax assessment of the year 2012, to which was assigned the gracious complaint file no. …2013… (Document no. 12);

19.5 Upon rejection of the gracious complaint, the Applicant filed a hierarchical appeal against the same tax act, to which was assigned no. …2013… (Document no. 12);

19.6 The Applicant filed a gracious complaint against the Stamp Tax assessments of 2012, to which were assigned nos. …2013… and …2014… Documents 10 and 11);

19.7 The Applicant was notified of the archival of the Gracious Complaint no. …2013… (Doc. 10);

19.8 The Applicant was notified of the archival of the Gracious Complaint no. …2014… (Doc. 11);

19.9 The Applicant was notified of the decision of partial granting of the Hierarchical Appeal no. …2013… relating to the gracious complaint no. …2013… (Doc. 12).

1. There are no unproven facts with relevance for the Arbitral Decision to be delivered.

V. APPLICABLE LAW

As established above, this Arbitral Tribunal will address and decide with respect to the invoked vice of error (on the prerequisites) of fact and of law of the application of item 28.1 of TGIS, as was carried out by the Stamp Tax assessments in question. This issue thus concerns the test of subsumption of properties qualified as construction land to the original wording of item 28.1 of TGIS, a test that has already been subject to extensive jurisprudential treatment, both in the tax courts and, especially, in arbitral proceedings, it should be noted. In the present process, therefore, the definition of the scope of objective incidence of item no. 28.l. of TGIS is at issue, in the wording given by Law no. 55-A/2012, of 29 October. More specifically, it is important to determine whether construction land can be subsumed in the concept of urban properties "with housing allocation" (cited).

Since, as noted, this is a recurrent theme in arbitral proceedings, always with similar or even analogous factual and legal contours, the understanding upheld in Decisions 49/2013-T of 18 September 2013, 53/2013-T of 2 October, 231/2013-T of 3/2/2014, Case no. 7/2014-T, of 3 July, 56/2014-T of 31 July, 210/2014-T of 30 July, Case no. 125/2015-T, of 12 October, all of CAAD, as well as the Decision of the STA of 9 April 2014 in Case no. 1870/2013, which have been followed by several others, all of similar substance and available at http://www.dgsi.pt/jsta.

It is thus important to establish that, as is defended by jurisprudence, the legislator having not defined the concept of (urban) properties with housing allocation, and in conformity with article 67 of the Stamp Tax Code, the interpretation of this concept should subsequently be sought in the IMI Code. Resulting from article 6 of the IMI Code the clear distinction between residential urban properties and construction land, the latter cannot be considered, for purposes of incidence of IS (i.e., item 28.1 of TGIS, in its original wording) as urban properties with housing allocation.

Effectively, in accordance with the IMI Code (to which article 67 of the Stamp Tax Code refers), urban properties are divided into categories, such as (a) residential, (b) commercial, (c) industrial or for services, (d) construction land and (d) others. Now, residential, commercial, industrial or for services properties are buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal purpose each of these ends (cf. article 6, no. 2 of the IMI Code). In turn, construction land are lands located within or outside an urban cluster, for which a license or authorization of a construction or subdivision operation has been granted, admitted prior notification or issued favorable prior information, and also those which have been thus declared in the acquisition title (cf. article 6, no. 2 of the IMI Code). The IMI Code offers, unequivocally, a definition of residential properties and construction land as two different species of urban properties…[2]

With effect, and despite the IMI Code not being explicit as to the concept of "urban property with housing allocation", the truth is that such expression – allocation – presupposes that the property has an actual use for housing purposes, which necessarily implies that one is not dealing with mere construction land. As sustained in the Arbitral Decision, delivered in Case no. 42/2013-T on 18 October 2013, which is accompanied here:

"we cannot confuse a 'housing allocation' which implies an effective allocation of an urban property to that end, with the expectation, or potentiality, of an urban property being able to come to have a 'housing allocation'. Construction land, not being built, does not in itself satisfy any condition to be considered as properties with housing allocation, since, on one hand, they do not possess a use license for housing, and, on the other hand, they are not habitable (because quite simply they are not built). Therefore, it does not appear to us to be sufficient for it to be framed in the rule of objective incidence in question that there exists the expectation of an urban property to come to have a housing allocation, or the potentiality of coming to have a housing allocation" (cited, italic ours).

Moreover, and if any doubt remains, one should seek the sense of the expression "properties with housing allocation", beginning, naturally, with the ratio legis of Law 55/2012, of 29 October. In this regard, and as is evident from the discussion, in general, of Draft Law no. 96/XII (Diary of the Assembly of the Republic, I series, no. 9/XII/2, of 11 October 2012, the creation of special taxation on high-value properties intended for housing, which is at the basis of the approval of the item of Stamp Tax under consideration, integrates a set of measures whose declared objective was linked to the creation of a more just and equitable tax system, in which taxpayers would be called upon to contribute in accordance with their actual tax-paying capacity. With this objective, a special rate was thus proposed, the Secretary of State for Fiscal Affairs having stated in the discussion:

"First, the Government proposes the creation of this special additional rate to tax residential urban properties of higher value. It is the first time in Portugal that special taxation on high-value properties intended for housing is created. This rate which will be 0.5 to 0.8 in 2012, and 1% in 2013, will apply to houses valued at equal to or greater than 1 million euros. With the creation of this additional rate, the tax effort required of these owners will be significantly increased in 2012 and in 2013" (cited, italics ours).

In this way, what was proposed to the deputies and these approved was the creation of taxation of high-value real estate property. In sum, it aimed at the broadening of the tax base through the creation of a special rate on high-value properties intended for housing, understood as "houses valued at equal to or greater than 1 million euros", that is, it is concluded that the reality that it sought to tax are houses (that is, properties where one lives), and not other realities such as construction land. For this reason, it is not controversial to state that the concept closest to the ratio legis and to the very literal tenor of the expression 'property with housing allocation' is manifestly the concept of 'residential properties' as defined in no. 2 of article 6 of the IMI Code, covering buildings and constructions licensed for housing purposes or, in the absence of a license, that have as their normal purpose housing purposes.

Moreover, such concept introduced by Law 55-A/2012, of 29 October, would be replaced with the entry into force of Law no. 83-C/2013, of 31 December (State Budget Law for 2014) which altered the wording of no. 28.1 of TGIS coming to refer, as to objective incidence, to concepts that are legally defined in article 6 of the IMI Code.

This understanding, in accordance with which construction land cannot be considered, for purposes of incidence of Stamp Tax provided for in Item 28.1 (in the original wording), as urban properties with housing allocation, was also upheld by the tax courts, which have in their majority understood that:

"[C]onsidering that construction land – whatever the type and purpose of the building that will be or may be erected thereon – does not in itself satisfy any condition to be so licensed or to be defined as having housing as its normal purpose, and the rule of incidence of Stamp Tax refers to urban properties with 'housing allocation', without any specific concept being established therefor, the conclusion cannot be drawn that such rule contains a future potentiality, inherent to a different property that might possibly be built on the land. It is thus concluded, in conformity with what was decided in the sentence under appeal that, resulting from article 6 of the IMI Code a clear distinction between 'residential' urban properties and 'construction land', the latter cannot be considered as 'properties with housing allocation' for purposes of what is provided in item no. 28.1 of the General Table of Stamp Tax, in its original wording, as was given to it by Law no. 55-A/2012, of 29 October" – cf. Decisions delivered by the Supreme Administrative Court in cases nos. 1870/13 and 48/14, on 9 April 2014, in cases nos. 270/14, 271/14 and 272/14 on 23 April 2014 and in case no. 046/14, on 14 May 2014, all available at www.dgsi.pt).

Against the foregoing, the understanding of the Respondent Entity that the expression used by the legislator "housing allocation" is broader than the expression "properties intended for housing" cannot even proceed. Effectively, "housing allocation" presupposes that housing is the normal use given to the property given its actual and real characteristics, that is, it implies that the property is effectively intended for housing (which necessarily presupposes that it is a property already built), when in construction land there is the mere expectation, the potentiality, of such allocation. The Respondent Entity attempts to resort to the allusion to a housing vocation, but that vocation is, evidently, merely potential, it being further added that one thing is vocation, quite another is allocation.

In conclusion, concurring that all elements of interpretation of law in the sense that property with housing allocation meant residential property, it is manifest that the assessments now impugned are afflicted with error (on the prerequisites) of fact and of law, since all properties with respect to which Stamp Tax was assessed under item no. 28.1 of TGIS, are construction land, without any building or construction, required to fulfill that concept of residential properties.

In light of the foregoing, it is concluded by the annulment of the assessment acts object of the present arbitral action.

VI. DECISION

a) Accordingly, this Arbitral Tribunal decides to grant the arbitral claim filed and, in consequence, annul the Stamp Tax assessment acts, carried out under article 28.1 of TGIS, relating to the year 2012 (but collected in 2013 in 3 instalments) and to the registration articles …, … and …, of the parish of …, municipality of ....

b) Condemn the Respondent in the costs of the process, in the amount of €2,448.00.

D. Value of the process

The value of the process is set at € 65,213.11, in accordance with article 97-A, no. 1, paragraph a), of CPPT, applicable by force of paragraphs a) and b) of no. 1 of article 29 of RJAT and of no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

E. Costs

The amount of the arbitration fee is set at €2,448.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Respondent, since the claim was totally granted, in accordance with articles 12, no. 2, and 22, no. 4, both of RJAT, and article 4, no. 4, of the cited Regulation.

Notify.

Lisbon, 27 January 2017

The Arbitrator President

(José Poças Falcão)

The Arbitrator Member

(Nuno de Oliveira Garcia)

The Arbitrator Member

(Paulino Brilhante Santos)

[1] Which does not prevent noting that the Constitutional Court has already ruled on the non-unconstitutionality of the rule in question in light of precisely the Principle of Equality, albeit in a situation with factual contours not totally coinciding with those of the present decision. Thus, see decision no. 620/2015, issued by the 2nd Section in case no. 305/15 (Rapporteur: Cons. João Cura Mariano) on 3 December 2015.

[2] Densifying the concept see the following excerpt: "a property is classified as construction land whenever a set of circumstances is verified, generally corresponding to the application of pertinent rules of the legal regime that governs urban buildings or the subdivision of rustic properties, which, in any case, indicate the intention to build thereon, save that, by force of applicable legislation, such intention is not capable of actual implementation" – cf. arbitral decision delivered in Case 49/2013-T, on 18 September 2013, available at www.caad.pt (italic ours).