Stamp Tax on Independent Property Units: CAAD Ruling on Clause 28.1 and Ex Officio Review (242/2016-T)

ARBITRAL DECISION

I – Report

1. On 26.04.2016, A…, LDA, taxpayer number …, with registered office at …, …, …, Lisbon, requested from CAAD the constitution of an arbitral tribunal, in accordance with article 10º of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as "RJAT"), in which the Tax and Customs Authority is the Respondent, for the purpose of reviewing the rejection of the application for ex officio revision of stamp tax assessments (item no. 28.1 of the General Schedule), as well as the five underlying tax assessment acts for stamp duty in the amounts of € 2,084.70, € 2,084.70, € 2,105.60, € 2,126.40 and € 2,126.40 totalling € 10,527.80, effected by the Respondent for the year 2013 and affecting the property located at …, numbers … and …, in Lisbon, currently registered under article … in the urban property matrix of the parish of …, municipality of Lisbon, better identified in the urban property record issued on 26 March 2014 and which corresponded to article U-… of the urban matrix of the (extinct) parish of … .

The Claimant, alleging to have paid the amount of the assessments, further requests the condemnation of the Respondent to refund the amounts paid and to pay him indemnity interest on such amounts.

1. The request for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD and notified to the Tax and Customs Authority.

In accordance with the terms and for the purposes of the provisions in no. 1, article 6º, of RJAT, by decision of the President of the Deontological Council, duly communicated to the parties, within the legally applicable time limits, the undersigned was appointed as arbitrator, who communicated to the Deontological Council and to the Centre for Administrative Arbitration his acceptance of the appointment within the regularly applicable time limit.

The Arbitral Tribunal was constituted on 14-07-2016.

1. The grounds presented by the Claimant, in support of its claim, were, summarily, as follows:

• The Claimant is the owner of the property located at …, numbers … and …, in Lisbon, currently registered under article … in the urban property matrix of the parish …, municipality of Lisbon, better identified in the urban property record issued on 26 March 2014 and which corresponded to article U-… of the urban matrix of the (extinct) parish of … .

• The property is divided into seven floors or units with independent use, all as better described in the respective property registrations, in which five floors that were subject to the contested assessments are recorded with residential use.

• In accordance with the property record, to the aforementioned five floors correspond, respectively, the following taxable property values: € 208,470.00, € 208,470.00, € 210,560.00, € 212,640.00 and € 212,640.00.

• The Claimant made full payment, in the context of tax execution, of all amounts assessed as Stamp Tax above mentioned.

• The Claimant submitted an application for revision of the assessments in question under article 78º of the LGT, received by the Respondent on 28.09.2015, having obtained no response up to the date of submission of this request for constitution of the Arbitral Tribunal.

• Just as petitioned in this process concerning the assessments of the previous year, the Claimant contested those of the previous year before an arbitral tribunal, and these were declared illegal and annulled by a judgment that became final, the Respondent having already refunded the amount wrongfully collected, and declared that the floors in question are not subject to tax.

• The acts in question are based on the same error regarding the factual and legal assumptions of the application of said item 28 of the TGIS that led to the annulment of the previous ones, being tainted by the same vice of violation of law.

• Item no. 28.1 of the TGIS provides that by the ownership of each urban property with residential use whose TPV stated in the matrix, in accordance with CIMI, is equal to or greater than € 1,000,000, stamp duty is levied on its TPV used for IMI purposes.

• In the case of a property such as that in question, which comprises floors or units with independent use, the subjection to stamp duty is determined, not by the TPV of the property, but by the TPV of such floors or units.

• In accordance with CIMI, each floor or part of property susceptible to independent use is considered separately in the property registration (art. 12º no. 3 of CIMI).

• Since the TPV of each of the floors stated in the matrix, in accordance with CIMI, is less than € 1,000,000, stamp duty of item no. 28.1 of TGIS, here contested, does not apply.

• The assessment acts now contested are illegal for violation of the tax incidence rule of item no. 28.1 of TGIS.

• This is what follows from the law and has been reiterated by arbitral tribunals in successive Arbitral Decisions and in the same sense the Supreme Administrative Court concluded, in the judgment of 9 September 2015, rendered in the context of appeal no. 047/15, where it is concluded that:

"II - Where a property is constituted in vertical property ownership, the incidence of IS must be determined, not by the TPV resulting from the sum of the TPV of all units or floors susceptible to independent use (individualized in the property article), but by the TPV attributed to each of such floors or units intended for housing."[1]

• The Claimant further petitions for indemnity interest based on article 43º, no. 1, of the LGT.

The ATA – Tax and Customs Administration, called upon to pronounce itself, contested the Claimant's claim, defending itself by exception and by impugnation, in summary, with the following grounds:

BY EXCEPTION:

Expiry of the right to bring action

• The request for constitution of the arbitral tribunal is out of time, as 17.03.2014 was the deadline for payment of the tax, and the period for requesting the constitution of the Arbitral Tribunal, provided for in article 10º, no. 1, para. a), of Decree-Law no. 10/2011, of 20 January, had long since terminated, and this was only exercised on 26.04.2016, and it should be noted that the application submitted by the Claimant is not even that of the revocation of any rejection decision of the application for ex officio revision of the assessment.

• On the other hand, the Arbitral Tribunal cannot consider this request timely, as the legal prerequisites required by article 78º, no. 1, of the LGT are manifestly not met.

• It is evident both that the time limit for the Claimant to have requested the revision of the tax act on its own initiative has expired, and that there is no error attributable to the services in the contested assessments.

Impropriety of the procedural means - incompetence of the arbitral tribunal

d. As can be inferred from the file, the subject of this request for arbitral review is the rejection of the application for ex officio revision relating to the stamp tax assessment of 2013.

e. Having the Claimant been notified of the draft decision that was rendered on the application for ex officio revision submitted, and as this is an act in tax matters, since the legality of the act subject to the application was not reviewed, the proper (judicial) means of challenging it would always be the Special Administrative Action and not this present arbitral means.

f. In these terms, given the grounds of the draft decision rejecting the application, this procedural means ceased to be the proper means, since this constitutes an administrative act in tax matters that does not involve the review of the legality of a tax assessment act.

g. There is therefore an unnamed dilatory exception of incompetence of the arbitral tribunal due to the impropriety of the procedural means used, as article 2º, no. 1 of RJAT excludes from the jurisdiction of arbitral tribunals the review of acts rejecting applications for ex officio revision that do not involve the review of the legality of the acts.

Preliminary issue: the non-verification of all requirements and prerequisites of the application for ex officio revision of the assessment act

h. However, and only by way of mere caution and always while maintaining as well-founded what has just been referred to, the AT comes to emphasize that the Arbitral Tribunal cannot, in any event, fail to review the verification of all requirements and all prerequisites of article 78º of the LGT, under penalty of – which would be absolutely inadmissible -, the claimant being able perhaps to have used the application for ex officio revision of the assessment with the sole purpose of, after all the gracious and contentious periods have elapsed, to achieve procedurally and artificially a new opening of the period for arbitral appeal.

i. Let us note that the deadline for payment of the tax was 30-11-2014, and that the application for ex officio revision of the assessment was submitted on 28-09-2015, that is, after all periods for gracious reclamation, hierarchical appeal and judicial impugnation had expired.

j. Since in its petition the Claimant never refers to the possibility of there having been in the tax assessment act the commission of any serious or notorious injustice, the possibility of the revision of the tax act being able to possibly rely on the situation provided for in nos. 4 and 5 of the rule is from the outset excluded.

k. Similarly, in obedience to the same legal provision, we are not faced with the application of the provisions of no. 2 of article 78º of the LGT, as the present assessments do not relate to self-assessments, situations exclusive to which the rule would be applicable.

l. We thus conclude that the application for ex officio revision could only have been submitted on the basis of no. 1 of article 78º of the LGT.

m. Having arrived here, we have only two possibilities: either the revision of the tax act on the initiative of the taxpayer (1st part of the rule), or on the initiative of the AT (2nd part of the article).

n. But we immediately conclude, in the present situation, that revision of the tax act on the initiative of the AT is impossible, since, as the respective application should be submitted within the period of gracious reclamation, the fact is that the Claimant did not submit it within that period.

o. There would thus remain only one possibility to review, namely whether the application for ex officio revision of the assessments at the request of the taxpayer could, perhaps, be considered an application for revision of the tax act on the initiative of the AT, which would depend on the verification of the respective normative requirements.

p. In this sense, the revision of the tax act on the initiative of the tax administration, in accordance with the provisions of article 78º, no. 1, of the LGT, can be carried out within four years of the assessment, or at any time if the tax has not yet been paid, on the grounds of error attributable to the services.

q. Now, given that the aforementioned period of 4 years had not yet elapsed, we thus arrive at the heart of the issue: the existence, or otherwise, of an error attributable to the Services in the assessment in question, which could eventually justify an ex officio revision on the initiative of the services.

r. Now, not only does the Claimant fail to prove that there was any error attributable to the Services, but undoubtedly there was no error attributable to the AT in the assessment in question.

s. The situation that motivated the assessment being duly explained and justified in the assessments and in the law.

t. Given the above, the Arbitral Tribunal cannot consider this request timely, as the legal prerequisites required by article 78º, no. 1, of the LGT are manifestly not met.

u. It is evident both that the time limit for the Claimant to have requested the revision of the tax act on its own initiative has expired, and that there is no error attributable to the Services in the contested assessments.

BY IMPUGNATION, and by way of mere caution

v. In compliance with the provisions of article 6º, no. 2 of Law no. 55-A/2012, of 29 October, which added item 28 to the TGIS, with the amendment made by Law no. 83-C/2013 of 31 December and whose respective tax incidence rule refers to urban properties, evaluated in accordance with CIMI, with VP equal to or greater than €1,000,000 and, in accordance with no. 28.1, residential use, the AT carried out the assessments, subject of this request.

w. The concept of property is defined in article 2º, no. 1 of CIMI, and it is provided in no. 4 that in the horizontal property regime, each autonomous fraction constitutes a property.

x. It follows from the analysis of the normative provision that a "property in full ownership with floors or units susceptible to independent use" is, unequivocally, different from a property in the horizontal property regime, constituted by autonomous fractions, that is, several properties.

y. As for the assessment of IMI, in the case of a property in full ownership, the TPV that serves as the basis for its calculation will undoubtedly be the overall value of the property.

z. In compliance with the provisions of article 119º, no. 1 of CIMI, the collection document is sent to the taxpayer with a breakdown of the parts susceptible to independent use, their respective taxable property value and the collection.

aa. And as the assessment is correct and the tax assessed is due, indemnity interest is not due, not least because there is no error attributable to the Services, which merely acted, as they should, in strict compliance with the legal norms.

bb. Since the property is in the full ownership regime, it does not have autonomous fractions, to which tax law attributes the qualification of property, because from the notion of property in article 2º of CIMI, only the autonomous fractions of property in the horizontal property regime are considered properties – no. 4 of the cited article.

cc. Thus, the vice of violation of law due to error regarding the legal assumptions should be judged unfounded, the order of law maintaining the contested assessments as they constitute a correct application of the law to the facts.

dd. Given that the assessment made was based on the applicable law, to which the Administration is bound, the tax administration, in accordance with article 55º of the LGT and following the principle set out in article 266º nos. 1 and 2 of the CRP, pursuing "the public interest, in respect of the rights and legally protected interests of citizens" and its "organs and administrative agents are subordinated to the Constitution and the law..." and must "act, in the exercise of their functions, with respect for the principles of equality, proportionality, justice, impartiality and good faith".

ee. The tax administration being bound by the principle of legality, cannot fail to give full compliance to the normative rules that the ordinary legislator created and which are in force in the legal order and also by virtue of the provisions of article 55º of the LGT.

ff. The right to indemnity interest provided for in no. 1 of article 43º of the LGT, derived from the judicial annulment of a tax assessment act, depends on it being demonstrated in the proceedings that this act is affected by error regarding the factual or legal assumptions attributable to the tax administration.

gg. The error that supports the right to indemnity interest is not any vice or illegality but that which is concretized in defective assessment of relevant factuality or in incorrect application of legal rules.

hh. Since, at the time of the facts, the tax administration made the application of the law in the terms to which, as an executive body, it is constitutionally bound, one cannot speak of error by the services within the meaning of the provisions of article 43º of the LGT.

1. The Claimant replied in writing to the exception raised by the Respondent, in summary, as follows:

• The initial Application, already in article 3, was very clear "The application is timely, as submitted within 90 days following the formation of the tacit rejection of the aforementioned application for revision (articles 10º, no. 1, para. a), of RJAT, and 102º, no. 1, para. d), of CPPT."

• It cannot therefore fail to be unfounded any sort of expiry of the right to bring action referred to any deadline for payment of tax."

• The question of arbitrability of the tacit rejection of applications for revision of tax acts which essentially seems to be being questioned by the Respondent in the situation of this case is resolved, both within the scope of CAAD (by way of example the decision rendered in case no. 20/2016-T), and by the Plenary of the Section of Tax Disputes of the STA (Judgment of 03.06.2015, rendered in case 0793/14)

• Consequently, the alleged exceptions invoked by the Respondent should be judged unfounded.

1. As no situation provided for in article 18º, no. 1, of RJAT was verified that would make necessary the arbitral meeting provided for there, it was dispensed with, on the basis of the prohibition of performing useless acts and also in the principles of celerity, simplification and procedural informality.

The performance of arguments was also dispensed with, in accordance with article 18º, no. 2, of RJAT, "a contrario".

1. The tribunal is regularly constituted in accordance with RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented.

1. It is necessary to resolve the following issues:

a) Whether the exception of expiry of the right to bring action alleged by the Respondent is verified.

b) Whether impropriety of the procedural means occurs leading to the dilatory exception of incompetence of the arbitral tribunal.

c) Whether the assessments are illegal and whether the situation of error attributable to the services is verified in the practice of the contested tax acts and if, consequently, the assessments that are the subject of this process must be annulled.

II. Preliminary Investigation

1. Expiry of the right to bring action

As (…) writes: The act of tacit rejection, as a presumption of act/fiction of act, is not in itself the object of arbitral action. However, there is no doubt that arbitrability cannot be denied to first-instance acts - those included within the material scope of arbitration because they fall under article 2º - merely because there was a request for administrative review without an express decision, which is moreover confirmed by article 10º, when it permits the filing of a request for arbitral review up to 90 days counted from, e.g., "the end of the period for decision of hierarchical appeal".

However, and because this is an act of tacit rejection, in order for the tribunal to be able to assess whether the request for constitution of the arbitral tribunal was made within the period of expiry of the right to bring action, the arbitral tribunal itself will have to assess whether the application for gracious reclamation, hierarchical appeal or application for ex officio revision meets the prerequisites of admissibility legally required for the merit review of the claim – first of all, whether it was itself submitted within the time limit.

In the case of a gracious reclamation or hierarchical appeal, the issue is particularly simple insofar as these gracious means can be used on the basis of any illegality.

(…).

This theme becomes, however, more sensitive with reference to the particular case of the application for ex officio revision.

Note that article 78º, no. 1, of the LGT permits the revision of tax acts by the entity that practiced them, on the initiative of the taxpayer, within the period of administrative reclamation, on the basis of any illegality. Revision is also admitted on the initiative of the tax administration itself, within four years of the assessment or at any time if the tax has not yet been paid, on the basis of error attributable to the services. For its part, no. 4 of article 78º of the LGT provides that the head of the service may authorize "exceptionally, in the three years following that of the tax act, the revision of the taxable matter assessed on the basis of serious or notorious injustice".

In this way, the application for revision of tax act may have a much longer period than the remaining administrative means, namely, than gracious reclamation and hierarchical appeal. However, as can be seen, nos. 1 and 4 of article 78º of the LGT require prerequisites that are not required either for gracious reclamation or for hierarchical appeal. Thus, the taxpayer will have to prove, as the case may be, error attributable to the services or serious or notorious injustice.

(…)

In sum, the conclusion reached is that, faced with a tacit rejection of gracious reclamation, hierarchical appeal or application for revision of tax act, the taxpayer who intends to resort to the arbitral means should not only allege in his request for arbitral review the (il)legality of the first-instance tax act, but also, and by way of caution, and especially in the application for revision of tax act, should take care to prove the verification of the procedural prerequisites that allow the Tax Administration to review the merit of the claim."[2]

It is the case that, as the Claimant alleges "error attributable to the services" and more than four years have not elapsed since the assessment, the timeliness of the request for revision of the tax act is manifest[3] and consequently of the arbitral action, deduced following the tacit rejection of that application. If the tribunal were to conclude that the existence of error attributable to the services is not verified, the consequence would be the unfoundedness of the application and not the foundedness of the exception of expiry of the right to bring action.[4]

In this connection, the exception of expiry of the right to bring action raised by the Respondent is judged unfounded.

1. Dilatory exception of incompetence of the arbitral tribunal due to impropriety of the procedural means.

As decided in the arbitral decision rendered in case 20/2016-T, which is appended:

"As well argued by the Claimant and better explained by the arbitral decisions of 22-01-2016, rendered by the Arbitral Tribunal constituted in case no. 320/2015-T, and of 20-07-2015, in case no. 793/2014-T, the acts which - albeit tacitly - decide gracious reclamations, hierarchical appeals or, as in this case, applications for revision of tax act, constitute second and third grade acts insofar as they entail the review of legality of first-instance acts, that is, assessment acts. As such, within the competence of arbitral tribunals falls the review of those acts.

As there is a right of impugnation or appeal of the rejection, express or tacit, and total or partial, of reclamations, appeals or applications for revision or reform of the assessment, in accordance with article 95º, no. 2 para. d) of the LGT, the review sought is thus inserted into the request for constitution of the arbitral tribunal in accordance with para. a) of no. 1 of article 10º of RJAT, which is competent to review it, provided that there is a presumption of tacit rejection, in accordance with para. d) of no. 1 of article 102º of CPPT.

Having been no pronouncement by the tax administration within four months on the application for ex officio revision directed to it, this is considered tacitly rejected, in accordance with and for the purposes of nos. 1 and 5 of article 57º LGT. This act of rejection, because it dealt with an application for ex officio revision of tax assessment acts, is thus fully challengeable before a tax arbitral tribunal."

In this connection, and upholding this understanding, as mentioned, the act of tacit rejection in question is challengeable before the arbitral tribunal.

Thus, the exception of incompetence raised is also judged unfounded.

II – The Relevant Factual Matter

1. The following facts are considered proven:

• The Claimant is the owner of the property located at …, numbers … and …, in Lisbon, currently registered under article … in the urban property matrix of the parish of …, municipality of Lisbon, better identified in the urban property record issued on 26 March 2014 and which corresponded to article U-… of the urban matrix of the (extinct) parish of … .

• The property is divided into seven floors or units with independent use, all as better described in the respective property registrations, in which five floors that were subject to the contested assessments are recorded with residential use.

• In accordance with the property record, the aforementioned five floors correspond, respectively, to the following taxable property values: € 208,470.00, € 208,470.00, € 210,560.00, € 212,640.00 and € 212,640.00.

• The Claimant made full payment, in the context of tax execution, of all amounts assessed as Stamp Tax above mentioned.

• The Claimant submitted an application for revision of the assessments in question under article 78º of the LGT, sent by post to the finance service … of Lisbon on 25.09.2015 and received by the Respondent on 28.09.2015, having obtained no response up to the date of submission of this request for constitution of the Arbitral Tribunal.

• From the administrative file attached by the Respondent it follows, in particular, the following:

• Just as petitioned in this process concerning the assessments of the year 2013, the Claimant contested those of the previous year before an arbitral tribunal, and these were declared illegal and annulled by a judgment that became final, the Respondent having already refunded the amount wrongfully collected, and declared that the floors in question are not subject to tax.

1. The tribunal's conviction regarding the decision of the factual matter was based on the documents in the proceedings, as well as on the statements filed and the positions of the parties expressed therein, and it should be noted that there is agreement between the parties regarding the factual matter, the disagreement being confined to the matter of law.

III - The Applicable Law

1. Item 28 of the General Schedule of Stamp Duty provides that stamp duty is levied on the ownership of properties with residential use and taxable property value equal to or greater than €1,000,000, in the following terms:

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

28.1 For residential property or land for construction whose construction, authorized or foreseen, is for housing, in accordance with the provisions of the Municipal Property Tax Code: 1%.

28.2 For property, when the taxpayers that are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance: 7.5%".

1. Article 67º, no. 2 of CIS establishes that "To matters not regulated in this Code concerning item no. 28 of the General Schedule shall apply, subsidiarily, the provisions of CIMI".

Article 2º, no. 4 of the Municipal Property Tax Code (hereinafter CIMI) provides that "For the purposes of this tax, each autonomous fraction, in the horizontal property regime, is considered as constituting a property".

It is further established in article 92º of the same code:

"1 - To each building in the horizontal property regime corresponds only one entry in the matrix.

2 - In the generic description of the building mention must be made of the fact that it is in the horizontal property regime.

3 - Each of the autonomous fractions is described in detail and individualized by the capital letter that corresponds to it according to alphabetical order."

In turn, article 12º, no. 3 of this Code establishes that "Each floor or part of property susceptible to independent use is considered separately in the property registration, which also discriminates its respective taxable property value".[5]

Writing on this rule, J. Silvério Mateus and L. Corvelo de Freitas tell us: "An example that may illustrate this situation is the case of an urban property, not constituted in horizontal property ownership and which is composed of several floors. Legally this property constitutes a single unit (…).

However, as each of these units may be subject to lease or any other use by its respective owner, the matrix must show these units and a taxable property value must be assigned to each of them".[6]

It appears, therefore, that article 12º, no. 3, of CIMI, is applicable to situations of properties that meet the objective requirements for submission to the horizontal property regime, provided for in article 1415º of the Civil Code, but in which the existence of a constitutive deed does not verify.

1. With regard to urban properties that meet the objective requirements for submission to the horizontal property regime, in substance, the economic reality subject to taxation does not cease to be the same by virtue of whether or not the deed constituting horizontal property ownership has occurred. From the perspective of the taxation of these realities, there is no substantive difference in the CIMI treatment of a property based on whether horizontal property ownership has been constituted.

In fact, in the scheme of articles 38º and following of CIMI which regulate the determination of the taxable property value of properties, no substantive differentiation is detected between properties constituted in horizontal property ownership and properties with objective conditions for such, but in which submission to such regime did not occur[7], in particular, such circumstances do not appear in the increasing or decreasing elements provided for in the tables of articles 43º, no. 2 of the code.

1. The essential question to be resolved in this process concerns whether in properties with parts or floors susceptible to independent use, but not subject to the horizontal property regime, the property shall be considered as a unit for the purposes of applying item 28 of TGIS or whether its independent parts shall be considered individually.

In the first case, the value relevant for the purposes of subsumption to item 28 shall be that resulting from the consideration of all its parts and, consistently, only one assessment should be made, only regarding the property, and not as many assessments as parts or floors susceptible to independent use.

In the second case, the value to be considered for the purpose shall be that of each of the parts susceptible to independent use similarly to what occurs with the autonomous fractions of properties subject to the horizontal property regime, and as many assessments should be made as parts susceptible to independent use but, only and exclusively, regarding parts susceptible to independent use whose value is equal to or greater than €1,000,000.

The AT made as many assessments as parts susceptible to independent use, a procedure which in our opinion does not harmonize with its own thesis that, in these cases, the reality aimed at by Item 28 of TGIS is the property as a whole and not each of its autonomous parts.

1. The issue has already been reviewed in various arbitral decisions whose jurisprudence is very extensive and consistent in considering that the value to be considered for the purpose shall be that of each of the parts susceptible to independent use similarly to what occurs with the autonomous fractions of properties subject to the horizontal property regime[8], a solution which we consider to be correct.[9]

In a first interpretive moment of item 28 of TGIS, the expression "urban properties", in conjunction with article 2º, no. 4 of CIMI, which attributes the quality of urban property to autonomous fractions in the horizontal property regime and, apparently, does not attribute it to parts susceptible to independent use, could point towards the consideration of the property as a whole.

But, even within the scope of the literal element, the item points in a different direction by referring to "residential property", insofar as, in the cases of properties susceptible to independent use, the designation can only be determined fraction by fraction [10] and not globally, insofar as it may happen, and frequently happens with this type of property, that there are parts designated for housing and others designated for other purposes.

Thus, the legislator in referring to "residential property", with respect to properties with floors or parts of property susceptible to independent use, could only have had in mind each of these fractions and not the property as a whole.

1. This reading of the literal element is in complete harmony with the provisions of CIMI aforementioned, as well as with the other interpretive elements, as demonstrated in the various decisions of CAAD on this matter and to whose jurisprudence we adhere without reservation.

As written in the decision rendered in case 50/2013-T:

"the ratio legis underlying the rule of item 28 of TGIS, introduced by Law no. 55-A/2012 of 29 October, and in accordance with the provisions of article 9º of the Civil Code, according to which the interpretation of the legal rule should not be confined to the letter of the law, but reconstruct from the texts and other elements of interpretation the legislative intention, taking into account the unity of the legal system, the circumstances in which it was elaborated and the specific conditions of the time in which it is applied.

The legislator in introducing this legislative innovation considered as a determining element of contributory capacity urban properties, with residential designation, of high value (luxury), more precisely, of value equal to or greater than €1,000,000.00, on which a special rate of stamp duty was imposed, seeking to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of surface of urban properties of luxury with residential designation. Therefore, the criterion was the application of the new rate to urban properties with residential designation, whose TPV is equal to or greater than €1,000,000.00.

This same conclusion is reached from the analysis of the discussion of bill no. 96/XII in the Assembly of the Republic, available for consultation in the Diary of the Assembly of the Republic, I series, no. 9/XII/2, of 11 October 2012.

The justification for the measure designated as "special tax on urban residential properties of higher value" is based on the invocation of the principles of social equity and fiscal justice, calling upon those holding properties of high value intended for housing to contribute in a more intense manner, imposing the new special rate on "houses of value equal to or greater than 1 million euros.

Clearly the legislator understood that this value, when attributed to a residence (house, autonomous fraction or floor with independent use), translates a contributory capacity above the average and, as such, likely to determine a special contribution to ensure fair apportionment of the fiscal burden."

1. For the above reasons, it is considered that in the case of urban properties with parts or floors susceptible to independent use, the value to be considered for purposes of applying item 28 of TGIS is the taxable property value of each of those independent parts, only being subject to this tax the parts susceptible to independent use whose own taxable property value is greater than €1,000,000.

2. In the case at hand, as the taxable property value of each of the parts susceptible to independent use is less than that value, they do not fall under the tax incidence rule of item 28 of TGIS, and thus the assessments in question are affected by the vice of violation of law, having been, unequivocally, made in error attributable to the services, and consequently cannot fail to be annulled.

3. The Claimant has further requested the condemnation of the Respondent to pay the respective indemnity interest on the tax that, as a consequence of these acts, was wrongfully paid.

Let us examine this.

Although article 2º, no. 1, paras. a) and b), of RJAT uses the expression "declaration of illegality" to define the competence of arbitral tribunals that function in CAAD, making no reference to condemnatory decisions, it should be understood that the competences of such tribunals include the powers that in the process of judicial impugnation are attributed to tax tribunals, and this is the interpretation that is in keeping with the sense of the legislative authorization upon which the Government based itself to approve RJAT, in which it proclaims, as a first guideline, that "the arbitral tax process should constitute an alternative procedural means to the process of judicial impugnation and to the action for the recognition of a right or legitimate interest in tax matters".[11]

The process of judicial impugnation, although essentially a process of annulment of tax acts, admits the condemnation of the Tax Administration in the payment of indemnity interest, as is derived from article 43º, no. 1, of the LGT, in which it is established that "indemnity interest is due when it is determined, in gracious reclamation or judicial impugnation, that there was error attributable to the services from which results payment of the tax debt in an amount greater than legally due" and article 61º, no. 4 of CPPT (in the wording given by Law no. 55-A/2010, of 31 December, which corresponds to no. 2 in the initial wording), which "if the decision that recognized the right to indemnity interest is judicial, the payment period counts from the beginning of the period of its spontaneous execution".

On the other hand, no. 5 of article 24º of RJAT, in establishing that "payment of interest, regardless of its nature, is due in accordance with the provisions of the general tax law and the Tax Procedure and Process Code" should be understood as permitting the recognition of the right to indemnity interest in the arbitral process, this claim being assessed in the light of article 43º of the General Tax Law [applicable by virtue of the provisions of para. a) of no. 1 of article 29º of RJAT].

No. 1 of that article provides that "Indemnity interest is due when it is determined, in gracious reclamation or judicial impugnation, that there was error attributable to the services from which results payment of the tax debt in an amount greater than legally due".

In the case "sub judice", as already noted, it is beyond doubt that there was error attributable to the services in the practice of the contested tax acts, and therefore the application for condemnation of the Respondent regarding indemnity interest cannot but succeed.

Indemnity interest is due from the date of payment until the date of processing of the credit note, in which they are included (article 61º, no. 5, of CPPT).

IV - Decision

Thus, the Arbitral Tribunal decides, judging the request for arbitral review to be wholly founded:

a) To decree the annulment of the assessments that are the subject of this process.

b) To condemn the Respondent to pay indemnity interest at the legal rate on the amounts paid relating to the annulled assessments, calculated from the date of payment until the date of processing of the credit notes.

Value of the action: € 10,527.80 (Ten thousand five hundred and twenty-seven euros and eighty cents), in accordance with the provisions of article 306º, no. 2, of CPC and 97º-A, no. 1, para. a), of CPPT and 3º, no. 2, of the Regulation of Costs in Arbitration Proceedings.

Costs by the Respondent in the amount of € 918.00 (nine hundred and eighteen euros) in accordance with no. 4 of article 22º of RJAT.

Notification shall be given.

Lisbon, CAAD, 29.12.2016

The Arbitrator

Marcolino Pisão Pedreiro

[1] http://www.dgsi.pt/jsta.nsf/35fbbbf22e1bb1e680256f8e003ea931/40d21892478214c080257ec000461c65?OpenDocument&ExpandSection=1&Highlight=0,047%2F15#_Section1

[2] Legal Framework for Arbitration in Tax Matters Annotated, Almedina, 2016, pages 72-75.

[3] It should be noted that in the information contained in the administrative file attached by the respondent it states that:

Even noting that the same information received a favorable opinion from the Head of Team.

[4] Which would occur if the Claimant did not invoke "error attributable to the services", but rather illegality of another type.

[5] Also in the sense of the separate consideration of these parts susceptible to independent use, article 119º, no. 1 of CIMI provides that the tax collection document shall contain the "breakdown of properties, their parts susceptible to independent use, respective taxable property value".

Also pointing in the same direction, article 15º-O of Decree-Law no. 287/2003, of 20 November, added by Law 60-A/2011 of 30/11, referring to the collection of IMI for the purposes of the safeguard regime, mentions "property or part of urban property subject to general valuation".

[6] TAXES ON REAL ESTATE PROPERTY, STAMP DUTY, Annotated and Commented, Engifisco, 1st Edition, 2005, pages 159-160.

[7] Already so under the Code of Land Contribution and Tax on Industrial and Agricultural Activity and the Code of Municipal Contribution.

The Circulars nos. 40012, of 23.12.1999 and 40.025, of 11.08.2000 (which can be consulted in MUNICIPAL PROPERTY TAX CODE, Commented and Annotated, by Martins Alfaro, Áreas Editora, 2004, pages 589-592 and in the aforementioned work by Silvério Mateus and Corvelo de Freitas, pages 294-295 and 259-261, and the second can still today be consulted on the website http://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/legislacao/instrucoes_administrativas/oficios_circulados_contribuicao_autarquica.htm) explicitly clarified the understanding that except in cases of reconstruction, modification or improvement of the property that entails some variation of the taxable value, the transition to the horizontal property regime does not give rise to a new valuation.

[8] See Cases nos. 50/2013-T, 95/2013-T, 132/2013-T, 181/2013-T, 182/2013-T, 183/2013-T, 185/2013-T, 240/2013-T, 248/2013-T, 268/2013-T, 269/2013-T, 272/2013-T, 277/2013-T, 280/2013-T, 281/2013-T, 291/2013-T, 14/2014-T, 26/2014-T, 29/2014-T, 30/2014-T, 31/2014-T, 33/2014-T, 35/2014-T, 88/2014-T, 159/2014-T, 177/2014-T, 193/2014-T, 194/2014-T, 195/2014-T, 199/2014-T, 203/2014-T, 204/2014-T, 206/2014-T, 238/2014-T, 243/2014-T, 245/2014-T, 254/2014-T, 281/2014-T, 287/2014-T, 295/2014-T, 304/2014-T, 311/2014-T, 313/2014-T, 328/2014-T, 347/2014-T, 351/2014-T, 368/2014-T, 380/2014-T, 387/2014-T, 396/2014-T, 405/2014-T, 421/2014-T, 422/2014-T, 427/2914-T, 430/2014-T, 433/2014-T, 445/2014-T, 451/2014-T, 457/2014-T, 461/2014-T, 464/2014-T, 465/2014-T, 466/2014-T, 467/2014-T, 469/2014-T, 471/2014-T, 472/2014-T, 476/2014-T, 479/2014-T, 480/2014-T, 482/2014-T, 484/2014-T, 486/2014-T, 491/2014-T, 493/2014-T, 494/2014-T, 496/2014-T, 498/2014-T, 505/2014-T, 512/2014-T, 518/2014-T, 520/2014-T, 524/2014-T, 528/2014-T, 537/2014-T, 538/2014-T, 539/2014-T, 541/2014-T, 547/2014-T, 551/2014-T, 558/2014-T, 560/2014-T, 565/2014-T, 568/2014-T, 572/2014-T, 573/2014-T, 574/2014-T, 575/2014-T, 576/2014-T, 578/2014-T, 582/2014-T, 590/2014-T, 591/2014-T, 594/2014-T, 598/2014-T, 605/2014-T, 606/2014-T, 617/2014-T, 619/2014-T, 634/2014-T, 638/2014-T, 639/2014-T, 661/2014-T, 666/2014-T, 674/2014-T, 676/2014-T, 681/2014-T, 682/2014-T, 683/2014-T, 695/2014-T, 696/2014-T, 705/2014-T, 710/2014-T, 712/2014-T, 713/2014-T, 722/2014-T, 724/2014-T, 745/2014-T, 748/2014-T, 749/2014-T, 752/2014-T, 754/2014-T, 781/2014-T, 808/2014-T, 812/2014-T, 815/2014-T, 818/2014-T, 822/2014-T, 824/2014-T, 833/2014-T, 849/2014-T, 19/2015-T, 41/2015-T, 65/2015-T, 70/2015-T, 73/2015-T, 101/2015-T, 102/2015-T, 104/2015-T, 110/2015-T, 139/2015-T, 151/2015-T, 152/2015-T, 153/2015-T, 170/2015-T, 174/2015-T, 177/2015-T, 179/2015-T, 187/2015-T, 207/2015-T, 236/2015-T, 237/2015-T, 238/2015-T, 249/2015-T, 250/2015-T, 253/2015-T, 263/2015-T, 273/2015-T, 280/2015-T, 282/2015-T, 291/2015-T, 297/2015-T, 300/23015-T, 302/2015-T, 305/2015-T, 306/2015-T, 311/2015-T, 319/2015-T, 320/2015-T, 323/2015-T, 329/2015-T, 340/2015-T, 345/2015-T, 349/2015-T, 351/2015-T, 366/2015-T, 378/2015-T, 399/2015-T, 407/2015-T, 411/2015-T, 413/2015-T, 414/2015-T, 417/2015-T, 419/2015-T, 420/2015-T, 430/2015-T, 432/2015-T, 440/2015-T, 448/2015-T, 449/2015-T, 455/2015-T, 456/2015-T, 457/2015-T, 461/2015-T, 463/2015-T, 474/2015-T, 478/2015-T, 479/2015-T, 484/2015-T, 487/2015-T, 492/2015-T, 496/2015-T, 501/2015-T, 518/2015-T, 519/2015-T, 530/2015-T, 544/2015-T, 552/2015-T, 554/2015-T, 560/2015-T, 562/2015-T, 573/2015-T, 576/2015-T, 581/2015-T, 589/2015-T, 597/2015-T, 606/2015-T, 632/2015-T, 643/2015-T, 644/2015-T, 651/2015-T, 659/2015-T, 681/2015-T, 10-2016-T and no. 20/2016-T.

[9] And in the same sense concluded the Supreme Administrative Court, in the judgment of 9 September 2015, rendered in the context of appeal 047/15 where it was decided that:

"II - Where a property is constituted in vertical property ownership, the incidence of IS must be determined, not by the TPV resulting from the sum of the TPV of all units or floors susceptible to independent use (individualized in the property article), but by the TPV attributed to each of such floors or units intended for housing."

[10] We use the expression here in the sense of part or floor susceptible to independent use.

[11] On this matter see Jorge Lopes de Sousa, Commentary on the Legal Framework for Arbitration in Tax Matters, in GUIDE TO TAX ARBITRATION, Coord. Nuno Villa-Lobos and Mónica Brito Vieira, 2013, Almedina, pages 110-116).