Summary
Full Decision
ARBITRAL DECISION
I. REPORT
1. A…, Lda., collective person no…, with registered office at …, no.…, …, … Lisbon, hereinafter referred to as "Claimant", hereby, pursuant to no. 2 of article 10 of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT"), and articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, requests the constitution of an arbitral tribunal and submits a request for arbitral ruling in which the Tax and Customs Authority is the Respondent (hereinafter "Respondent" or "AT"), which has as its object the stamp duty (Imposto do Selo, hereinafter "IS") assessment acts issued pursuant to Item no. 28 of the General Table of Stamp Duty (hereinafter "TGIS"), relating to the year 2015, with a view to its annulment, on the grounds that the same is affected by illegality.
2. The request for constitution of an arbitral tribunal, corresponding to registration no. 4115, was validated and accepted by His Excellency the President of CAAD on 6 April 2017, and was notified to the Tax and Customs Authority (hereinafter "AT" or "Respondent") on 19 April 2017.
3. The Claimant chose not to appoint an arbitrator, and the Deontological Council, pursuant to no. 1 of article 6 and no. 1 of article 11 of RJAT, appointed as arbitrator of the singular arbitral tribunal the undersigned, who accepted the appointment within the legally stipulated time period.
4. The parties were duly notified of the appointment of the arbitrator on 5 June 2017, and did not manifest any intention to challenge it.
5. The singular arbitral tribunal was thus constituted on 21 June 2017, in accordance with the provisions of subparagraph c) of no. 1 of article 11 of RJAT.
6. On 23 June 2017, the Respondent was notified of the order issued by the arbitral tribunal, pursuant to no. 1 of article 17 of RJAT, to submit a reply, request the production of additional evidence, and send the administrative file.
7. The distinguished representatives of the Respondent submitted the AT's reply to the record on 8 September 2017, in which they argued for the complete dismissal of the request for arbitral ruling. According to them, the IS assessments issued pursuant to item 28.1 of TGIS would represent a correct interpretation and application of law to the facts, not suffering from the vice of violation of law, and consequently, the claim should be judged unfounded and the Respondent absolved of the requests accordingly. They also requested the dispensation of the arbitral meeting provided for in article 18 of RJAT, as well as the production of arguments, considering the principle of free conduct of proceedings by the arbitral tribunal, with the facts upon which the decision is requested being established and only matters of law being in dispute.
8. Following the Respondent's reply, on 11 September 2017, the arbitral tribunal issued an order dispensing with the holding of the first meeting referred to in article 18 of RJAT, considering the autonomy of the arbitral tribunal in the conduct of proceedings, provided for notably in subparagraph c) of article 16 of RJAT, for reasons of procedural efficiency, taking into account the simplicity of the matters at issue. Additionally, in compliance with the principle of contradictory proceedings, it requested notification of the Claimant to pronounce itself, within a period of 10 days, on the Respondent's request for dispensation of the production of written arguments.
9. In response to the above arbitral order, the distinguished representative of the Claimant informed the arbitral tribunal on 15 September 2017 that she had nothing to oppose regarding the dispensation of the production of written arguments.
II. CLAIMS OF THE PARTIES
A. Claim of the Claimant
10. The Claimant claims that the illegality of the stamp duty assessment acts for the year 2015 should be declared, given that none of the floors/divisions capable of independent use of the property registered in the urban property register under article… had a tax patrimonial value of €1,000,000. Consequently, it requests the annulment of the said acts, with all legal consequences, and the refund to the Claimant of the tax paid, in the total amount of €17,466.10, plus indemnifying interest.
B. Claim of the Respondent
11. The Respondent, for its part, argues that, for purposes of item 28.1 of TGIS, the patrimonial value relevant for purposes of the incidence of the tax is the total patrimonial value of the urban property and not the patrimonial value of each of the parts that compose it, even when capable of independent use. Concluding thus that the assessments contested are lawful, the Claimant's claim should be considered unfounded and the Respondent absolved.
III. PRELIMINARY ISSUES
12. The arbitral tribunal is regularly constituted.
13. The Claimant combines claims relating to stamp duty assessments for the year 2015, which, pursuant to article 104 of the Code of Procedure and Tax Process and no. 1 of article 3 of RJAT, is admissible given the identity of the factual circumstances and the application of the same principles and rules of law.
14. The parties have legal personality and capacity, are legitimate, and are legally represented (articles 3, 6, and 15 of the Code of Procedure and Tax Process, ex vi subparagraph a) of no. 1 of article 29 of RJAT).
15. No irregularities are verified, nor have the parties alleged any exceptions or preliminary questions that prevent the knowledge of the merits of the matter.
IV. FACTUAL MATTERS
A. Facts Accepted as Proven
16. With interest for the decision of the case, the following facts are accepted as proven.
a) The Claimant is the owner and legitimate proprietor of the urban property located at Street …, numbers …, … and …, Street … no. … and corner to …, in Lisbon, …, described in the Real Estate Registry Office of Lisbon under number … of the Parish of …, and registered in the urban property register under article …, of the parish of …, municipality and district of Lisbon.
b) The property was registered in the urban property register as a property in full ownership with 14 divisions capable of independent use, with allocation for housing, with a total patrimonial value of €1,746,610.
c) The floors or divisions capable of independent use have a tax patrimonial value of:
| Floor/Division | TPA |
|---|---|
| 1A | €110,410.00 |
| 1B | €151,030.00 |
| 1C | €119,080.00 |
| O/D | €165,550.00 |
| O/E | €106,860.00 |
| O/F | €150,420.00 |
| O/L | €75,820.00 |
| 1M | €73,100.00 |
| 1G | €125,580.00 |
| 1H | €154,850.00 |
| 2/3K | €184,390.00 |
| 2/I | €125,580.00 |
| 2/J | €127,010.00 |
| 2/N | €76,930.00 |
| Total | €1,746,610.00 |
d) On 13 October 2015, the Claimant submitted a Form 1 declaration of IMI (Municipal Tax on Real Estate) to report the completion of reconstruction and total remodeling works of the building.
e) In 2016, the property was submitted to the horizontal ownership regime, by means of public deed of 19 July 2016, and was registered in the urban property register as a property under horizontal ownership in December 2016.
f) On 20 December 2016, the property was subject to stamp duty assessment pursuant to Item 28.1 of TGIS, relating to the year 2015, with the AT issuing 14 payment notices, one for each part or division capable of independent use, considering for this purpose as taxable value the total tax patrimonial value of the property, that is, €1,746,610:
| Floor/Division | TPA | Payment Document | Stamp Duty |
|---|---|---|---|
| 1A | €110,410.00 | 2016… | €1,104.10 |
| 1B | €151,030.00 | 2016… | €1,510.30 |
| 1C | €119,080.00 | 2016… | €1,190.80 |
| O/D | €165,550.00 | 2016… | €1,655.50 |
| O/E | €106,860.00 | 2016… | €1,068.60 |
| O/F | €150,420.00 | 2016… | €1,504.20 |
| O/L | €75,820.00 | 2016… | €758.20 |
| 1M | €73,100.00 | 2016… | €731.00 |
| 1G | €125,580.00 | 2016… | €1,255.80 |
| 1H | €154,850.00 | 2016… | €1,548.50 |
| 2/3K | €184,390.00 | 2016… | €1,843.90 |
| 2/I | €125,580.00 | 2016… | €1,255.80 |
| 2/J | €127,010.00 | 2016… | €1,270.10 |
| 2/N | €76,930.00 | 2016… | €769.30 |
| Total | €1,746,610.00 | | €17,466.10 |
g) The above-mentioned payment notices, relating to the 2015 stamp duty assessments, were paid on 31 March 2017.
h) However, not conforming to the stamp duty assessments, the Claimant filed the present request for constitution of the arbitral tribunal / arbitral ruling.
B. Facts Not Proven
37. There are no other facts with relevance for the decision that have not been accepted as proven.
C. Substantiation of the Factual Matters Proven and Not Proven
38. The tribunal's conviction regarding the facts accepted as proven resulted from the entire examination of the documents joined to the record, as well as from the assessment of the content of the arguments and the administrative file.
V. LEGAL MATTERS
On the Application of Item 28 of the General Table of Stamp Duty to Properties in Full Ownership Regime
Under IS, article 1 of the Code establishes that "stamp duty is levied on all acts, contracts, documents, titles, papers and other facts or legal situations provided for in the General Table, including gratuitous transfers of property".
Thus, for purposes of the rule of incidence, it is necessary to analyze the set of acts, contracts, documents, etc., listed in TGIS, annexed to CIS.
The said TGIS was amended in 2012 by Law no. 55-A/2012, of 29 October, which added a new item with the following wording:
"28 – Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value appearing in the register, pursuant to the Code of Municipal Tax on Real Estate (CIMI), is equal to or greater than €1,000,000 - on the tax patrimonial value used for purposes of IMI:
28.1 – Per property with housing allocation - 1%"
The above wording was in force until the end of 2013, having been amended by the State Budget Law for 2014[1]:
"28 – Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value appearing in the register, pursuant to the Code of Municipal Tax on Real Estate (CIMI), is equal to or greater than €1,000,000 - on the tax patrimonial value used for purposes of IMI:
28.1. Per residential property or land for construction whose building, authorized or foreseen, is for housing, pursuant to the provisions of the Code of IMI – 1%." (emphasis ours).
With respect to item 28, there is a generic reference to CIMI (in no. 2 of article 67) and a specific reference regarding the assessment of the tax (in no. 7 of article 23).
There is not, therefore, a definition in CIS of "property with housing allocation," in the wording in force until the end of 2013, or of "residential property," in the wording in force from 1 January 2014.
Thus, for purposes of interpreting item 28.1 of TGIS, recourse must be had to the rules of CIMI, whose most relevant provisions are listed below.
Article 2 of CIMI contains the definition of property as being "1 – (…) any parcel of land, comprising (…) buildings and constructions of any nature incorporated therein or located thereon, with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, under normal circumstances, has economic value, as well as (…) buildings or constructions, in the above circumstances, endowed with economic autonomy in relation to the land where they are located (…) 4 - For purposes of this tax, each autonomous fraction, in the horizontal ownership regime, is considered as constituting a property".
In turn, the definition of urban properties results from article 4, which indicates that these shall be "(…) all those that should not be classified as rural (…)" and from no. 1 of article 6 of CIMI, which establishes that "(…) urban properties are divided into: a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Others".
Still on this classification, no. 2 of the same article 6 clarifies that "Residential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of a license, that have as their normal destination each of these purposes".
With utility for the decision of the dispute, the following provisions relating to the matricial registration of properties and the collection of IMI are also mentioned.
Thus, no. 3 of article 12 of CIMI, which establishes that "Each floor or part of property capable of independent use is considered separately in the matricial registration, which also discriminates its respective tax patrimonial value".
No. 2 of article 80 of CIMI stipulates that "(…) each property corresponds to a single article in the register," with the exceptions provided for in articles 84 (mixed properties) and 92 (property in horizontal ownership regime) of the same code, which provide that the same property may have more than one matricial registration (mixed properties) or that a building has a single registration in the register, with each of the autonomous fractions described and individualized by the corresponding capital letter (property in horizontal ownership regime).
Regarding the payment document, no. 1 of article 119 of CIMI clarifies that "The services of the Directorate-General of Taxes send to each taxpayer, by the end of the month prior to the payment month, the corresponding payment document, with discrimination of the properties, their parts capable of independent use, respective tax patrimonial value and the collection attributable to each municipality of the location of the properties."
In light of the above, it is necessary to decide on the best interpretation to be given to item 28.1 of TGIS, whether that defended by the Claimant: the property in question, although constituted in full ownership, is composed of autonomous apartments, intended for housing, and as such, relevance should be given to each of these apartments. Or whether, on the contrary, one should follow the interpretation of the Respondent, which argues that, in the case of properties in full ownership, for purposes of IS, the property as a whole is relevant, given that the said divisions capable of independent use are not considered as properties pursuant to CIMI, a fact that is only relevant for properties in horizontal ownership.
For this purpose, it should be recalled that item 28.1 of TGIS provides that IS will be levied on:
i) Ownership, usufruct or right of superficies;
ii) Of (residential) property;
iii) With tax patrimonial value equal to or greater than €1,000,000.00.
On the concept of residential property relevant for purposes of item 28.1 of TGIS, the Supreme Court of Administrative Justice (STA) Decision no. 01870/13[2] summarizes in this way the doubts resulting from the initial wording of item 28.1 in question and the subsequent clarification provided by the State Budget Law for 2014[3]: "The concept of '(urban) property with housing allocation' was not defined by the legislature. (…). And it is a concept which, probably due to its imprecision – a fact all the more serious given that it is on the basis of it that the scope of objective incidence of the new taxation is delimited – had a short life, as it was abandoned upon the entry into force of the State Budget Law for 2014 (Law no. 83-C/2013, of 31 December), which gave new wording to item no. 28 of the General Table, and which now delimits its scope of objective incidence through the use of concepts that are legally defined in article 6 of the Code of IMI.".
Thus, for purposes of the incidence of item 28.1 of TGIS, there must be a residential property, that is, a property licensed for housing or, in the absence of a license, a property whose normal destination is housing.
In the case at hand, we are dealing with a property in full ownership regime, albeit with divisions or floors capable of independent use, which are intended for housing, as is evident from its respective matricial certificate.
It remains to determine which TPA will be relevant for purposes of the rule of incidence, whether the total patrimonial value of the property, which is greater than €1,000,000, or the patrimonial value of each floor, capable of independent use, given that no division or part capable of independent use has a TPA greater than €1,000,000.
In this regard, see, above all, the arbitral decision issued within the scope of Process no. 724/2014-T, cited by STA Decision 047/2015 of 9 September 2015, which we support: "Consulting CIMI, it is verified that its article 6 only indicates the different species of urban properties, among which it mentions residential ones (…) From this we can conclude that, in the view of the legislature, it does not matter the juridical-formal rigor of the concrete situation of the property but rather its normal use, the purpose to which the property is intended. We also conclude that for the legislature the situation of the property in vertical or in horizontal ownership did not matter, as no reference or distinction is made between them. What matters is the material truth underlying its existence as an urban property and its use."[4][5]
The argument of the Respondent that, for purposes of item 28.1 of TGIS, contrary to the rules of CIMI applicable to IS and more specifically to this item by reference from article 67 of CIMI, the property as a whole would be relevant, regardless of the existence of divisions or parts capable of independent use, given the existence of a property in full ownership and not a property in horizontal ownership regime, is therefore untenable.
As mentioned above, this distinction is not relevant for purposes of IMI and should not be relevant for purposes of IS, under penalty of violating the principle of tax legality established constitutionally.
Indeed, pursuant to no. 3 of article 12 of CIMI, each floor or part capable of independent use is considered separately in the matricial registration, which discriminates its respective tax patrimonial value, and, pursuant to no. 1 of article 119 of CIMI, the payment document is sent with discrimination of the properties, their parts capable of independent use, and respective tax patrimonial value.
Thus, the Respondent cannot give relevance to divisions or parts capable of independent use in the case of a property in full ownership for purposes of issuing the stamp duty payment notice, but consider that it is a single property for verification of the other requirements of the rule of incidence, namely the relevant TPA.
Returning to the above-cited decision to conclude: "(…) Now, article 12, no. 3 of the Code of IMI establishes that 'each floor or part of property capable of independent use is considered separately in the matricial registration, which also discriminates its respective tax patrimonial value.' (…) It is noted that the AT itself appears to agree with the criterion presented, which is why the assessments that it itself issues are very clear in their essential elements, from which it results that the value of incidence is that corresponding to the TPA of each one of the floors and the assessments are individualized. Therefore, if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, it clearly established the criterion, which must be unique and unambiguous, for the definition of the rule of incidence of the new tax. Thus, IS incidence would only occur (within the scope of Item no. 28 of TGIS) if any of the parts, floors or divisions with independent use presented a TPA greater than €1,000,000.00. The AT cannot consider as the value of reference for the incidence of the new tax the total value of the property, when the legislature itself established a different rule under IMI (and, as previously mentioned, this is the code applicable to matters not regulated with respect to Item no. 28 of TGIS). In conclusion, the current legal regime does not impose the obligation of establishing horizontal ownership, so the action of the AT amounts to arbitrary and illegal discrimination. In fact, the AT cannot distinguish where the legislature itself chose not to, under penalty of violating the coherence of the tax system, as well as the principle of tax legality provided for in article 103 of the Constitution of the Portuguese Republic, and also the principles of tax justice, equality and proportionality." (emphasis ours)[6].
In the same sense, see, above all, the most recent STA decision[7]: "The question, in these terms raised, is entirely identical, even in the factual assumptions, to that which was the subject of a decision of this Section on Tax Disputes of the STA, handed down on 09/09/2015 in process no. 047/15, which was followed by many others in the same sense, namely the Decisions of 02.03.2016, appeal 1354/15, of 04.05.2016, appeal 166/14, of 30.11.2016, appeal 1097/16, of 01.02.2017, appeal 711/16, of 15.02.2017, appeal 1447/16, in addition to the decision of the Plenary of the Section on Tax Disputes cited by the Illustrious Prosecutor-General Deputy, jurisprudence which we fully endorse and which we will also follow here and in which it was decided that, in the case of a property constituted in vertical ownership, the incidence of IS (Item 28.1 of TGIS, in the wording of Law no. 55-A/2012, of 29 October), must be determined, not by the TPA resulting from the sum of the TPA of all divisions or floors capable of independent use (individualized in the matricial article), but by the TPA attributed to each one of those floors or divisions intended for housing." (emphasis ours).
It should be added that the arbitral decision cited by the Respondent is one of the few decisions that followed doctrine different from that followed by the majority of decisions of the superior courts and the arbitral decisions issued in CAAD. The large majority of arbitral decisions, including those cited by the Claimant and the most recent arbitral decisions referred to below[8], support the thesis that, for purposes of the incidence of item 28.1 of TGIS on properties in full ownership, the TPA to be considered is that of each division or floor capable of independent use and not the TPA resulting from the sum of the parts.
On the other hand, it should be noted that the position of the AT transcribed in the reply of the Respondent, issued in connection with a binding information request, with a favorable order from the Legal Substitute of the Director-General of the Tax and Customs Authority, dated 11.02.2013, only binds the AT to the taxpayer who requested it, pursuant to article 68 of LGT.
Thus, in the case at hand, the property in question was, at the relevant date of the facts, constituted in full ownership, but had parts, floors or divisions with independent use intended for housing.
None of those parts, floor or division with independent use and affected to housing possessed a patrimonial value equal to or greater than €1,000,000.00 in 2015, as is confirmed above.
Therefore, we conclude that one of the assumptions of the rule of incidence provided for in item 28.1 of TGIS is not met, whereby the 2015 IS assessments should be declared illegal.
In that measure, given that the requirements of the rule of incidence contained in item 28.1 of TGIS are not met, the contested assessments are affected by the vice of violation of law, due to error in the legal assumptions regarding item 28.1 of TGIS, which implies the declaration of their illegality and consequent annulment.
On the Right to Indemnifying Interest
With respect to the request formulated by the Claimant for indemnifying interest, note the provisions of article 43 of the General Tax Law ("LGT"):
"1 – Indemnifying interest is due when it is determined, in administrative reclamation or judicial challenge, that there was an error imputable to the services from which resulted payment of the tax debt in an amount greater than that legally due."
Indeed, pursuant to article 100 of LGT: "The tax administration is obliged, in the case of total or partial merit of administrative reclamations or appeals, or of judicial proceedings in favor of the taxpayer, to the immediate and full reconstitution of the situation that would have existed if the illegality had not been committed, comprising the payment of indemnifying interest, under the terms and conditions provided for in law".
Article 61 of CPPT adds that:
"(…) 2 - In the event of judicial annulment of the tax act, it falls to the entity executing the judicial decision from which this right results to determine the payment of indemnifying interest to which there is occasion.
3 - Indemnifying interest shall be assessed and paid within 90 days counted from the decision that recognized the respective right or from the day following the end of the legal time period for official refund of the tax.
4 - If the decision that recognized the right to indemnifying interest is judicial, the payment time period is counted from the beginning of the time period of its spontaneous execution.
5 - Interest is counted from the date of undue payment of the tax until the date of processing of the respective credit note, in which it is included. (…)"
In turn, pursuant to no. 5 of article 24 of RJAT, it is stated that "Payment of interest, regardless of its nature, is due, pursuant to the terms provided for in the General Tax Law and in the Code of Procedure and Tax Process", thus establishing the recognition of the right to indemnifying interest in the arbitral process.
Therefore, the Claimant will be entitled to indemnifying interest, pursuant to the above-cited rules, calculated on the amount paid unduly, at the rate of legal interest[9] provided for in article 559 of the Civil Code (no. 10 of article 35 ex vi no. 4 of article 43, both of LGT).
Indemnifying interest will be due from the date of undue payment of the IS assessments until the execution of the present arbitral decision.
Thus, in addition to the refund of the total amount of the stamp duty assessments, the Respondent must assess indemnifying interest to the Claimant.
VI. DECISION
Therefore, this arbitral tribunal decides:
1. To annul the 2015 IS assessments, for the vice of violation of law with respect to the rule contained in item 28.1 of TGIS, due to error regarding the legal assumptions, and consequent refund by the Respondent to the Claimant of the stamp duty paid relating to the tax acts that are the object of the present record;
2. To judge as founded, by proof, the claim for payment of indemnifying interest by the Respondent to the Claimant, in accordance with the provisions of article 43 of LGT and article 61 of CPPT.
3. To condemn the Respondent to pay procedural costs.
VII. VALUE OF THE CASE
In accordance with the provisions of no. 1 and no. 2 of article 306 of CPC and subparagraph a) of no. 1 and no. 2 of article 97-A of CPPT, applicable by virtue of subparagraphs a) and b) of no. 1 of article 29 of RJAT and no. 2 of article 3 of the Regulation on Costs in Tax Arbitration Proceedings (RCPTA), the value of the case is set at €17,466.10 (seventeen thousand four hundred and sixty-six euros and ten cents).
VIII. COSTS
Pursuant to no. 2 of article 12 and no. 4 of article 22, both of RJAT, and no. 4 of article 4 of the aforementioned Regulation, the value of the arbitration fee is set at €1,224.00 (one thousand two hundred and twenty-four euros), pursuant to Table I of RCPTA, charged to the Respondent, given the merit of the request for annulment of the tax acts that are the object of the record.
Let this arbitral decision be notified to the parties.
Lisbon, 27 November 2017
The Singular Arbitrator,
(Vera Figueiredo)
Text prepared by computer, pursuant to no. 5 of article 131 of the Code of Civil Procedure, applicable by reference of subparagraph e) of no. 1 of article 29 of RJAT, drawn up according to the spelling of the Orthographic Agreement of the Portuguese Language, approved by Resolution of the Assembly of the Republic no. 26/91 and ratified by Decree of the President of the Republic no. 43/91, both of 23 August.
[1] Law no. 83-C/2013, of 31 December, which entered into force on 1 January 2014.
[2] STA Decision no. 01870/13, 9 April 2014.
[3] See note above.
[4] STA Decision in process no. 047/2015, of 9 September 2015, published in www.dgsi.pt.
[5] CAAD Decision in process no. 724/2014, of 29 April 2015, published at https://caad.org.pt/tributario/decisoes/
[6] See note 4 above.
[7] STA Decision in process no. 0826/17, of 18 October 2017, published in www.dgsi.pt.
[8] CAAD Decisions in processes no. 77/2017-T, of 8 September 2017, no. 82/2017-T, of 17 July 2017, no. 93/2017-T, of 26 June 2017, no. 123/2017-T, of 24 July 2017, no. 124/2017-T, of 9 October 2017, no. 147/2017-T, of 14 July 2017, no. 164/2017-T, of 21 September 2017, no. 315/2017-T, of 12 October 2017, published at https://caad.org.pt/tributario/decisoes/
[9] Rate of legal interest currently provided for in Ordinance no. 291/2003, of 8 April.
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