Summary
Full Decision
ARBITRAL DECISION
Claimants: A… LDA
Respondent: AT - PORTUGUESE TAX AND CUSTOMS AUTHORITY
I – REPORT
Request
A… LDA, taxpayer no. …, with registered office at Rua … no. …, … …-… …, submitted on 28-04-2016, pursuant to article 2(1)(a) and article 10 of Decree-Law no. 10/2011, of 20 January, which approves the Legal Regime for Arbitration in Tax Matters (RJAT), a request for arbitral decision, against the AT - PORTUGUESE TAX AND CUSTOMS AUTHORITY, with a view to:
¾ The declaration of illegality and annulment of the tax assessment act for Stamp Tax no. 2011 … of 07-11-2012, in the amount of 1,394.12 euros, issued under item 28.1 of the General Table of Stamp Tax (TGIS), affecting urban property (land for construction) registered in the urban property matrix under article …, parish of …, municipality of Leiria.
The Claimant alleges, in essence and with relevance for the decision of the case, the following:
¾ The Claimant was notified of a stamp tax collection notice with no. 2012…, without the Claimant having been previously notified either of the draft assessment, in order to exercise the right to prior hearing in accordance with article 60 of the LGT, or of the final assessment;
¾ The urban property registered in the urban property matrix under article …, parish of …, municipality of Leiria is land for construction whose valuation was carried out on the assumption that the construction to be erected would be designated for residential purposes;
¾ However, the said areas and designation are not based on any construction project or building permit, inasmuch as no construction project was submitted or any construction licence issued by the competent entity (Municipal Council of …);
¾ Thus, no construction was initiated or completed on the parcel of land in question, works were not requested and/or licensed, and consequently no occupation licence was issued;
¾ Since no occupation licence was issued, one cannot speak of any designation or intended use, whereby the parcel of land is excluded from the scope of item 28.1 of the General Table of Stamp Tax (TGIS);
¾ The amendment to the wording of item 28.1 of the TGIS does not have an interpretative character and only entered into force on 1 January 2014;
¾ In the previous wording of the norm in question, the objective scope of the tax was on urban properties with residential designation, an expression that presupposes actual use and not mere possibility;
¾ The Claimant further submits that the disputed assessment is illegal for taxing the same legal fact already taxed under Municipal Property Tax, and that both the subjective scope and the objective scope are identical in both taxes. There is thus double taxation, which renders the assessment illegal by violation of the principle prohibiting double taxation;
¾ The law also raises doubts of constitutionality regarding its retroactive effect insofar as it seeks to impose the occurrence of a legal fact in 2012, which in reality does not occur as it involves taxing real rights over immovable property, regardless of the date of their constitution, through a law published on 29 October and effective in the following year;
¾ Which is to say that, in reality, the law applies retroactively to real rights previously acquired, although the new law is from the end of 2012, and thus applies to legal situations constituted before its entry into force.
¾ There is furthermore a constitutional violation of taxation as it targets only properties for residential purposes, infringing the principle of tax equality. For example, owners of properties designated for residential purposes that are leased, and whose rents were fixed before the entry into force of the RAU or NRAU, are taxed, but owners of business centres or offices and bank headquarters, and even of public and private entities, institutes and foundations, however valuable they may be, are left untouched because they are not designated for residential purposes.
Response of the Respondent
In its Response, the Respondent alleges, in summary, the following:
¾ The tax due under item 28.1 of the TGIS has a periodic character and its assessment is made ex officio by the AT, based on elements predetermined in the property matrix;
¾ Article 38(4) of the CPPT provides that notifications relating to assessments of periodic taxes made within the time limits provided by law are effected by simple postal means;
¾ As Jorge Lopes de Sousa states, regarding notifications of periodic taxes mentioned in article 38(4) of the CPPT, "although the designation of 'notifications' is assigned, these are not acts with the nature of the notifications provided for in article 36 of the CPPT, as they do not have underlying any procedural decision of the Tax Administration, any tax matter, rather they are issued mechanically by the services" (in Tax Procedure and Process Code, Áreas Editora, 6th edition, Vol. I, p. 376);
¾ Stamp tax assessments, item 28, issued under the transitional regime of article 6 of Law 55-A/2012, of 29 October, such as the one under consideration, gave rise to a massified procedure for issuing collection documents;
¾ The notification sent to the Claimant is nothing more than the respective collection document, effected in accordance with article 6 of Law no. 55-A/2012 of 29 October, article 119(1) of the CIMI, through the mechanism provided in article 38(4) CPPT;
¾ On this point, the Supreme Administrative Court pronounced itself in Decision no. 1089/09, of 20-10-2010, which reads: "(...) the assessment of CA and IMI, effected within the normal time limit, 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 CIMI being sufficient to make the debt due; This notification of the assessment act is only required when an assessment "outside the normal time limit" or when it concerns an "additional assessment" is involved.
¾ Therefore, the alleged lack of notification of the stamp tax assessment invoked by the Claimant is groundless.
Regarding the alleged lack of statement of reasons:
¾ The statement of reasons for tax acts aims to enable knowledge of the reasons that determined the agency to act as it did, so as to enable the taxpayer to consciously choose between acceptance of the legality of the act or its contestation. To provide reasons "does not mean an exhaustive description of all the reasons that determine its practice, but implies properly clarifying its recipient of the motives that are at the genesis and the reasons that support its content. (...) This duty of statement of reasons thus aims to enable the recipient of the act to know the cognitive and evaluative path thereof, allowing them to know what the reasons were that led the Administration to its practice (...) an act is properly reasoned whenever the administree, placed in their position as a normal recipient – the bonus pater familia, of which article 487, no. 2 of the Civil Code speaks – is clarified about the reasons that motivated it."
¾ In turn, pursuant to article 77(1) of the LGT "The decision of the procedure is reasoned by means of a brief statement of the facts and reasons of law that motivated it (...), whereas, pursuant to no. 2 of the same article "The statement of reasons for tax acts must contain the applicable legal provisions, the qualification and quantification of tax facts and the operations for determining taxable matter and the tax."
¾ It is considered that the act is properly reasoned whenever its recipient demonstrates that they have grasped its grounds.
¾ In the concrete case, the assessment is properly reasoned, both in fact and in law, particularly since the Claimant filed a petition for reconsideration, filed a hierarchical appeal and a request before the arbitral court, in which it demonstrates that it had no difficulty whatsoever in grasping the reasons that led to the issuance of the assessments.
Regarding the merits:
¾ What is at issue here is an assessment that results from the direct application of the legal norm, and which is translated into objective elements, without any subjective or discretionary appreciation;
¾ Urban properties that are land for construction and to which the residential designation has been attributed within the scope of their respective valuations, with such designation appearing in their respective matrices, are subject to stamp tax;
¾ Stamp tax came to apply also to the ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value appearing in the respective matrix under the terms of the CIMI is equal to or greater than €1,000,000.00;
¾ Since no definition of "urban property," "land for construction" and "residential designation" is established under Stamp Tax, it is necessary to resort subsidiarily to the CIMI to obtain a definition that allows determination of possible liability to Stamp Tax, in accordance with that provided for in article 67(2) of the CIS as amended by Law no. 55-A/2012, of 29/10;
¾ Article 6(1) of the CIMI addresses the types of urban properties that exist, integrating "land for construction" in this concept, «...land situated inside or outside an urban agglomeration, for which a licence or authorization has been granted, prior notification admitted or favorable prior information issued for subdivision or construction operation, and also those that have thus been declared in the acquisition title, excepting land in which the competent entities prohibit any of those operations...»;
¾ The notion of "urban property" finds its basis in the part relating to the valuation of immovable property, since the purpose of valuation of the immovable property is to incorporate value into it, constituting a determining distinction factor – coefficient – for valuation purposes.
¾ The legislator opted to determine the application of the methodology for valuation of properties in general to the valuation of "land for construction," as results from the expression "value of authorized buildings" referred to in article 45(2) of the CIMI and applying to them accordingly the affectation coefficient provided for in article 41 of the CIMI.
¾ In conclusion, in the valuation of land for construction the legislator intended for the methodology of valuation of urban properties in general to be applied, thus all coefficients, above identified, must be taken into consideration, namely the affectation coefficient provided for in article 41 of the CIMI, this legal requirement further resulting from article 45(2) of the CIMI, by referring to the value of authorized or anticipated buildings on the same land for construction;"
¾ Therefore, for the purpose of determining the taxable patrimonial value of land for construction, the application of the affectation coefficient in the context of valuation is clear;
¾ From a tax perspective, the immovable properties are land for construction, in that capacity they were acquired and thus are classified predially, and therefore they are undoubtedly parcels of land for construction, more precisely urban properties with residential vocation;
¾ The Claimant cannot be unaware that the property record is very clear in defining for the parcels of land for construction in question, the respective area of building footprint and construction, thus perfectly defined and identified. The residential affectation of the property is therefore evident;
¾ Note that the legislator does not refer to "properties designated for residential purposes," having opted for the notion "residential affectation," a different and broader expression, whose meaning is to be found in the need to integrate other realities beyond those identified in article 6(1)(a) of the CIMI;
¾ The tax law already considers the value of the building footprint area, which varies between 15% and 45% of the value of authorized or anticipated buildings based on the urbanization and construction project, as an integrating element for purposes of valuation of land for construction;
¾ One cannot ignore that the licence permit for the performance of urban operations must contain, among other elements, the number of plots and the indication of the location area, purpose, building footprint area, construction area, number of storeys and number of housing units of each of the plots, with specification of housing units designated for housing at controlled costs, when anticipated, in accordance with article 77(e) of the RJUE. And that article 77 of the RJUE contains mandatory specifications, first and foremost for permits for subdivision operation or urbanization works, and for construction works;
¾ Well before the actual construction of the property, it is possible to ascertain and determine the affectation of land for construction;
¾ Law no. 55-A/2012 of 29 October (entering into force as of 30 October 2012), amended article 1 of the CIS and added to the TGIS, item 28.
¾ With this legislative amendment, Stamp Tax came to encompass in its scope the ownership, usufruct or right of superficies of urban properties whose TVM appearing in the matrix, under the terms of the CIMI, was equal to or greater than 1,000,000€;
¾ Item 28 of the TGIS is a general and abstract norm, applicable in an undifferentiated manner to all cases in which the factual and legal prerequisites are met;
¾ Furthermore, well-founded reasons also having constitutional grounding justified the creation of the contested norm, namely respect for the principles of proportionality and contributive capacity;
¾ The very constitutional principle of equality enshrined in article 13 of the CRP "requires that equal treatment be given to what is necessarily equal and different treatment to what is essentially different, not preventing differentiation of treatment, but only arbitrary, unreasonable discriminations, that is, distinctions of treatment that do not have sufficient material justification and grounds";
¾ Taxation under Stamp Tax follows the criterion of adequacy, to the exact extent that it aims at the taxation of wealth embodied in the ownership of immovable property of high value, arising in a context of economic crisis that cannot at all be overlooked;
¾ In truth, the measure implemented seeks to achieve maximum efficacy with respect to the objective to be attained, with minimum harm to other interests considered relevant;
¾ Thus, the option for this mechanism of obtaining revenue is justified, which would only be subject to criticism, in view of the principle of proportionality, if it resulted manifestly indefensible;
¾ This is not the case since such measure is applicable in an undifferentiated manner to all holders of immovable properties with residential affectation of value greater than € 1,000,000.00, whereby it must necessarily be concluded that the tax acts in question did not violate any legal principle.
3. Subsequent Procedure
By order of 27-10-2016, the Court proposed the waiver of the meeting provided for in article 18 of the RJAT, in view of its unnecessariness, to which both Parties agreed.
By order of 03-11-2016, pursuant to article 18(1)(c) of the Rules of Procedure of the AT, the Court invited the Claimant to perfect the request for arbitral decision.
Having the Claimant remitted the perfected request for arbitral decision on 07-11-2016, the Court granted the Respondent a period of ten days to pronounce itself thereon, which it did on 08-11-2016, without objecting to the perfection nor adding anything to its defense.
By order of 10-11-2016, the Court determined the waiver of the meeting provided for in article 18 of the RJAT.
II – DETERMINATION OF PROPER PROCEDURE
The Arbitral Tribunal was properly constituted on 15-07-2016, with the arbitrator being designated by the Deontological Council of CAAD, the respective legal and regulatory formalities being complied with (articles 11(1)(a) and (b) of the RJAT and articles 6 and 7 of the Deontological Code of CAAD).
The Parties have legal personality and capacity, are entitled to bring the action, and are properly represented, pursuant to articles 4 and 10 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.
No nullities were identified in the proceedings.
III – QUESTIONS TO BE DECIDED
The questions to be decided are:
-
The existence of a defect of lack of notification of the stamp tax assessment act at issue for the purpose of exercising the right to prior hearing; -
The existence of a defect of lack of notification of the final assessment act; -
The existence of a defect of lack of statement of reasons for the stamp tax assessment act at issue; -
The applicability of item 28.1 of the General Table of Stamp Tax, in the original wording, to land for construction; -
The violation of the principle prohibiting double taxation by the provision contained in item 28.1 of the General Table of Stamp Tax; -
The violation of the constitutional principle prohibiting retroactivity of tax laws by Law 55-A/2012 of 29 October; -
The violation of the constitutional principle of tax equality by the provision contained in item 28.1 of the General Table of Stamp Tax;
IV – PROVEN FACTS
The following facts are considered proven and relevant for the decision:
-
The Claimant was, at the date of the tax event, the owner of 2/10 of the urban property (land for construction) registered in the urban property matrix under article …, parish of …, municipality of Leiria; -
The AT - Portuguese Tax and Customs Authority assessed stamp tax on the taxable patrimonial value of the above-mentioned property, under item 28.1 of the General Table of Stamp Tax, with reference to the year "law 54-A/2012"; -
The amount of the assessed tax is 1,394.12 euros; -
On 19-04-2013, the Claimant filed a petition for reconsideration of the assessment act, which received a dismissal decision notified on 12-12-2013; -
From the order dismissing the petition for reconsideration, the Claimant filed a hierarchical appeal on 15-01-2014, which was fully dismissed on 18-12-2015.
The proven facts were so established on the basis of documentary evidence incorporated in the proceedings.
V - STATEMENT OF REASONS
1) The existence of a defect of lack of notification of the stamp tax assessment act at issue for the purpose of exercising the right to prior hearing.
a) The obligation to notify the stamp tax assessment under item 28 of the TGIS
The obligation to notify administrative acts with external effect is enshrined in article 268, no. 3 of the Constitution of the Portuguese Republic (CRP), thus integrating in the framework of the rights and guarantees of administrees.
The same obligation is found in express provision at the level of tax norms, namely in articles 36(1) of the Tax Procedure and Process Code (CPPT) and 45(1) of the General Tax Law (LGT).
Article 36 of the CPPT provides:
1 - Acts in tax matters that affect the rights and legitimate interests of taxpayers only produce effects in relation to these when validly notified to them.
2 - Notifications shall always contain the decision, its grounds and means of defense and time limit to react against the notified act, as well as the indication of the entity that performed it and whether it did so in the use of delegation or subdelegation of competence.
In turn, article 45(1) of the LGT states:
1 - The right to assess taxes lapses if the assessment is not validly notified to the taxpayer within four years, when the law does not set another period.
As to the scope to be attributed to the expression "acts in tax matters that affect the rights and legitimate interests of taxpayers" it should be understood that they are, among others, the tax acts of correction or fixation of taxable matter and of tax assessment (CT, decision no. 130/2002 of 14-03-2002).
On the other hand, article 119 of the Municipal Property Tax Code (CIMI) provides that:
"1 - The services of the Directorate-General of Taxes send to each taxpayer, no later than the end of the month prior to that of payment, the respective collection document, with discrimination of the properties, their parts susceptible of independent use, their respective taxable patrimonial value and the collection allocated to each municipality of the location of the properties."
This provision has a precedent in the field of the Municipal Contribution Code, whose article 22(1) provided that "The central services of the Directorate-General of Contributions and Taxes shall send to each taxpayer, no later than the end of January, a notice for payment, with discrimination, in relation to each municipality, of the properties, their parts susceptible of independent use, their respective taxable value and collection."
Based on these provisions of the Municipal Contribution and the IMI, the Supreme Administrative Court has understood that there is no need for notification of the IMI assessment act when carried out within normal time limits. (STA, decision of 18-11-2015, proc. no. 319/14; STA, decision of 20-10-2010, proc. no. 1089/09; STA, decision of 18-09-2008, proc. no. 300/08; STA, decision of 20-10-2010, proc. no. 1089/09).
With due deference, we cannot fail to point out that this doctrine of the Supreme Administrative Court amounts to admitting that the ordinary legislator can set aside, without apparent good reason, the obligation to notify administrative acts enshrined in article 268, no. 3 of the Constitution of the Portuguese Republic, thus diminishing the guarantees of taxpayers enshrined constitutionally.
We also find it difficult to follow the grounds of this doctrine, expounded in the following terms in the STA decision of 18-09-208, proc. 300/08: "the lack of notification of an assessment may well not contend with the (in)exigibility of the assessed obligation. It may be that the obligation is already due, and therefore is due regardless of the notification of its assessment. In truth, the notification of the assessment is only due when legally required – with notification serving as an interpellation for payment of the assessed obligation, and the taxpayer becoming constituted in default as of such notification. Being certain that, regardless of notification-interpellation, there is default of the debtor, if the obligation has a certain deadline – cf., e.g., article 805, no. 2(a) of the Civil Code. And thus, if that be the legal regime established, the tax debt can become certain, liquid and due without need for its notification, immediately following its assessment."
The Supreme Court equates, in this passage, the function of notification of the tax act to the function that interpellation for payment of a debt whose maturity depends on that same interpellation has.
Now, once more with due deference, we believe that the reason for the obligation to notify enshrined in article 268, no. 3 of the Constitution goes far beyond the aspect of the maturity of the tax debt. It is true that valid notification makes the assessment effective, causing the tax debt to become due. But one of the principal reasons for the obligation to notify tax acts lies in enabling the taxpayer, through notification, the actual exercise of various means of defense against the act, such as, first and foremost, the exercise of prior hearing.
On the reason for the obligation to notify the assessment act and on its importance as a guarantee of taxpayers, it is stated in the decision of the Constitutional Court no. 72/09 of 11-02-2009:
"One may ask why the constitutional legislator enshrined this duty of the Administration, rather than conferring upon it, simply, the power to perform acts (and to execute them) without concerning itself with the knowledge of them by their recipients.
The reason for this constitutional option lies in the protection of two different values that are reduced, in essence, to two structuring principles of our legal order: on the one hand, the principle of security (inherent in the idea of Rule of Law), from which derives the necessary cognoscibility, by the recipients of the Administration's acts, of all elements that compose them; on the other hand – but in inseparable form from the first – the principle of effective judicial protection, given that only what is cognoscible will be impugnable.
From this flows the close relationship that is established, on this point, between what is provided in no. 3 and what is provided in no. 4 of article 268 of the CRP. The duty of notification is enshrined in no. 3. This duty has, as has just been seen, a reason for being or an autonomous ground, insofar as it is itself a concretization of a broader idea of security – or the necessary cognoscibility of all acts of power –, which is inscribed in the principle of Rule of Law. But this is a duty that is justified by being, it also, an instrument of realization of the principle of effective judicial protection, enshrined in no. 4 of the same article, since, if the acts of the administration are not cognoscible, if effective judicial protection of the «rights and interests» of administrees can never be ensured."
It seems to us, therefore, that, being faced with a matter of rights and guarantees of administrees before public administration, and lacking a valid ground for setting aside either article 268, no. 3 of the CRP, or article 36, no. 1 of the CPPT, or article 45, no. 1 of the LGT, the notification of the IMI assessment act cannot fail to be considered necessary, which must be effected in accordance with article 38, no. 4 of the CPPT, as it is a periodic tax, provided that it is effected within the time limits set out in the law.
Living in an era in which taxpayer obligations and the requirements for strict compliance therewith increase almost daily, with notable aggravation of punishments for non-compliance, one can scarcely understand how the guarantees of taxpayers enshrined constitutionally can be set aside by ordinary law, by legislative inertia and for the convenience of the tax administration.
Being certain that it does not appear to us that the IMI assessment act lacks any characteristic or element that would cause it to be removed from the type of tax acts which, under article 36, no. 1 of the CPPT, require notification, in particular as regards the requirement of being susceptible of affecting the rights and legitimate interests of taxpayers.
It does not seem to us equally valid the argument based on the massified character of the IMI assessments. Most of the elements necessary for notification are already contained in the collection note that is generated automatically by a computer program. All that the tax administration has to do is alter this program, so as to include in the document sent to the taxpayer the elements that may be lacking so that one is faced with a complete notification in accordance with the law, namely the allusion to granting a time limit for exercise of the right to prior hearing.
Notification is the act by which a fact is brought to the knowledge of a person (or someone is called to court), in accordance with article 35(1) of the CPPT.
In the case of IMI assessments, they are brought to the knowledge of the taxpayer through the "collection document."
Whereby one can say that the "collection document," if sent to the taxpayer, remains a notification. This understanding emanates from the decision of the Supreme Administrative Court of 19-09-12, proc. no. 659/12, which states:
"It is also unequivocal, and on this all procedural participants agree, that the collection document sent to the Taxpayer – which contains the only elements that can be considered as part of the statement of reasons for the assessment now contested that were externalized by the AT – refers to the location of the property, the property register article, the TVM, the date of the assessment, the year to which it relates, the rate applied, the absence of exemption and the amount due, being certain that from the administrative proceedings no others appear.
The issue raised in the proceedings is reduced to knowing whether the elements contained in that note, by which the assessment was notified to the taxpayer, are or are not sufficient to meet the legal requirements of statement of reasons, namely whether the statement of reasons should include the reasons why the TVM was fixed at the amount stated therein."
Now, everything that on this matter is valid for the IMI was equally valid for the taxation imposed under item 28 of stamp tax (until its repeal by Law 42/2016, of 28/12), under article 67(2) of the respective code. Therefore, it is not certain, in our view, that notification of the stamp tax assessment did not occur. That notification was effected through the note or collection document, as the Supreme Administrative Court also considered in the previously cited decision. Whether that notification was effected in compliance with the law is a different question.
b) The obligation to grant a time limit for exercise of the right to prior hearing
As to the right to prior hearing, it is also enshrined in the Portuguese Constitution, in article 267, no. 5, also constituting a guarantee of taxpayers.
At the level of ordinary law, in the tax field, article 60 of the LGT applies, as is known, which in its no. 1 provides: "1 - The participation of taxpayers in the formation of decisions that concern them may be effected, whenever the law does not prescribe otherwise, by any of the following forms: a) Right to hearing before assessment; (...)."
On the other hand, none of the situations provided in nos. 2 and 3 of article 60 of the LGT, of exemption from the right to prior hearing, is verified.
The granting of the possibility of prior hearing to the taxpayer constitutes an essential procedural formality, whose absence, in the cases enshrined in article 60(1) of the LGT, constitutes a procedural defect susceptible of leading to the invalidity of the decision that comes to be made (STA, decision of 14-05-2003, proc. no. 317/2003; TCAS, decision of 27-11-2014, proc. no. 5278/12). The pretermission of the formality that constitutes the fact of not ensuring the exercise of the right to prior hearing can only be considered non-essential if it is demonstrated that, even without it having been complied with, the final decision of the procedure could not be different (STA decision of 16-11-2011, proc. no. 539/11).
As previously mentioned, the procedural norms applicable to item 28 of the TGIS taxation were, until its repeal by Law 42/2016, of 28/12, and by force of article 67(2) of the CIS, those in force for the Municipal Property Tax.
Just as there is no norm that exempts the tax administration from notifying the taxpayer for the exercise of the right to prior hearing in the context of the IMI, there was no exemption from the same obligation with respect to item 28 of the TGIS.
Thus, one can only affirm that the granting of the right to prior hearing to the taxpayer does not constitute an essential procedural formality in a concrete assessment under item 28 of the TGIS if one can conclude that the decision of the assessment procedure could not be other.
Now, this is a conclusion that we can only reach after analyzing the substantive questions alleged to support the illegality of the act.
Thus, we shall leave the conclusion regarding the pretermission of the formality of notification for exercise of the right to prior hearing to that time.
2) The existence of a defect of lack of notification of the final act;
This question was analyzed in the preceding point, having concluded that there was no exemption from notification of the assessment under item 28 of the TGIS but that, however, the note or collection document sent to the taxpayer fulfills that function.
Therefore, the defect of lack of notification of the assessment of the tax is not verified.
3) The existence of a defect of lack of statement of reasons for the stamp tax assessment act at issue
Article 268, no. 3 of the Constitution of the Portuguese Republic provides that administrative acts require express and accessible statement of reasons when they affect rights or legally protected interests. The constitutional enshrining of this duty of express statement of reasons, integrated in the so-called guarantees of administrees, aims to ensure to those affected in their rights or interests the right to know the reasons that will have determined the adoption of the administrative decision that concerns them.
Article 77 of the LGT embraces this same principle, saying that "The decision of the procedure is always reasoned by means of a brief statement of the facts and reasons of law that motivated it".
But the same provision adds in its no. 2: "The statement of reasons for tax acts may be made summarily, and must always contain the applicable legal provisions, the qualification and quantification of tax facts and the operations for determining taxable matter and the tax."
From this it is already gathered that the degree of density required for the statement of reasons of a tax act is variable.
As is stated in the decision of the Supreme Administrative Court of 11.12.2007, proc no. 615/04, "the degree of statement of reasons must be that which is adequate to the concrete type of act and the circumstances in which it was performed".
In turn, in the decision of the TCAS of 18-09-2014, proc. no. 6789/13, it is affirmed: "The requirements of statement of reasons are not inflexible, and may vary according to the type of act and the concrete circumstances in which it was made: the act will be sufficiently reasoned when the administree, placed in the position of a normal recipient – the bonus pater familiae to which article 487, no. 2 of the Civil Code refers – becomes acquainted with the facts and reasons of law underlying it, in a manner so as to enable them to choose, in an enlightened manner, between acceptance of the act or the use of legal means of reaction, and in such a way that, in this case, the court can also exercise effective control of the legality of the act, assessing its correctness in law in view of its contextual statement of reasons."
In the case sub judice we are faced with an act performed in bulk and in which there is no (at the moment the act is performed) any divergence between the tax administration and the taxpayer.
It is to be admitted, therefore, that the statement of reasons may be the summary statement of reasons of which article 77, no. 2 of the LGT speaks.
Jurisprudence and doctrine have enshrined the understanding that an act is sufficiently reasoned when it is possible to extract from it what the cognitive path followed by the agent was for its performance (STA decision of 13-11-2013, proc. no. 1460/13; STA decision of 03-12-2014, proc. no. 370/13).
Admitting, therefore, that in the present case the requirements of statement of reasons were satisfied with the summary statement of reasons to which no. 2 of article 77 of the LGT refers, let us see whether that statement of reasons was verified in the concrete case and whether, from the statement of reasons communicated in the notification communicated to the Claimant, it was possible to extract what the cognitive path followed by the author of the act for its performance was.
Analyzing the notification of the assessment act in question, it is noted that it contains:
¾ the applicable legal provisions;
¾ the qualification (very summary) of the tax fact, with the identification of the property to which the assessment relates, its owner (with the fact of "ownership" being implicit) and the year to which the tax fact relates;
¾ The quantification of the tax fact and the operations for determining taxable matter and the tax;
Compared with this notification, the Claimant filed a petition for reconsideration. Now, from paragraphs 7 to 10 of the petition for reconsideration filed it can be deduced that the Claimant was able to grasp the cognitive path followed by the author of the act: the author of the act considered that one was dealing with an urban property with residential designation, and consequently considered it applicable item 28 of the TGIS.
It is thus considered that the notification of the act satisfies at the limit the requirements of no. 2 of article 77 of the LGT, with no defect of lack of statement of reasons being verified.
4) The applicability of item 28.1 of the General Table of Stamp Tax, in the original wording, to land for construction
In accordance with article 1(1) of the Stamp Tax Code (CIS), this tax applies "to all acts, contracts, documents, titles, papers and other facts or legal situations provided for in the General Table." Therefore, the scope of Stamp Tax (IS) is determined by the combination of the provision cited with the various items or headings of the General Table of Stamp Tax (TGIS), which specify the acts, contracts, documents, papers and other facts or legal situations to which the tax applies.
Item 28 of the TGIS, in the wording in force until 31 December 2013, defined as the tax fact the "ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value appearing in the matrix, under the terms of the Municipal Property Tax Code (CIMI), is equal to or greater than 1,000,000 euros and determines that the tax shall apply to the taxable patrimonial value used for IMI purposes."
The tax did not apply to any urban property with the referred taxable patrimonial value, but only to two categories of urban properties, provided for in items 28.1 and 28.2. As to the first – the only one relevant to the case at hand – there it was determined that urban properties with residential designation were subject to the tax.
Thus, among other situations, the IS would apply to (the ownership, usufruct or right of superficies over) properties that cumulatively were urban, had residential designation and whose taxable patrimonial value appearing in the matrix under the terms of the CIMI was equal to or greater than 1,000,000 euros.
The question of whether land for construction, such as that to which the Stamp Tax assessment here contested was applied, fell within the provision of the scope norm contained in item 28.1 of the TGIS (in the wording it had until 31 December 2013) has been appreciated by the Supreme Administrative Court on various occasions.
In all decisions, the Court considered that the concept of "property with residential designation," contained in item 28.1 of the TGIS, does not encompass land for construction, of any type.
In a decision of 9 April 2014, (case no. 1870/13), the STA pronounced itself on the question in the following terms:
"The concept of "property (urban) with residential designation" was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the IMI Code, to which no. 2 of article 67 of the Stamp Tax Code (also introduced by that Law) refers on a subsidiary basis. And it is a concept that, probably due to its imprecision – a fact all the more serious as it is in view of it that the scope of the objective scope of the new taxation is determined -, had a short life, as it was abandoned when Law no. 83-C/2013, of 31 December, which is the State Budget Law for 2014, came into force, which gave new wording to that item no. 28 of the General Table, and which now determines its objective scope by use of concepts that are legally defined in article 6 of the IMI Code.
This amendment - to which the legislator did not attribute an interpretative character, nor does it appear to us that it did –, only makes it unequivocal for the future that land for construction whose authorized or anticipated construction is for residential purposes is encompassed within the scope of item 28.1 of the General Table of Stamp Tax (provided that its taxable patrimonial value is equal to or greater than 1 million euros), explaining nothing whatsoever, however, as to past situations (assessments of 2012 and 2013), such as the one at issue in the present proceedings.
Now, as to these, it does not seem possible to adopt the interpretation of the appellant, as it does not result unequivocally either from the letter or from the spirit of the law that its intention was, ab initio, to encompass in its objective scope land for construction for which authorization or anticipation of construction of residential buildings had been given, as results today unequivocally from item 28.1 of the General Table of Stamp Tax.
From the letter of the law nothing unequivocal results, moreover, as it itself by using a concept it did not define and which was also not defined in the instrument to which it referred on a subsidiary basis lent itself, unnecessarily, to equivocation, on a matter – of tax scope - in which certainty and legal security must also be concerns paramount to the legislator.
And from its "spirit," ascertainable in the statement of reasons of the bill that is at the origin of Law no. 55-A/2012 (Draft Law no. 96/XII – 2nd, Diary of the Assembly of the Republic, series A, no. 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing more follows save the concern to raise new tax revenue from sources of wealth "spared" in the past from the voracity of the Inland Revenue that are earned income, in particular capital income, capital gains and property, reasons which make no relevant contribution to the clarification of the concept of "properties (urban) with residential designation," since they take it for granted, without any concern to clarify it. This clarification will, however, have arisen - as reported in the Arbitral Decision issued on 12 December 2013, in case no. 144/2013-T, available in the CAAD database -, at the time of presentation and discussion in the Assembly of the Republic of that bill, in the words of the Secretary of State for Tax Affairs, who will have stated expressly, as is taken from the Diary of the Assembly of the Republic (DAR I Series no. 9/XII – 2, of 11 October, p. 32) that: «The Government proposes the creation of a special rate on high-value residential urban properties. It is the first time in Portugal that special taxation has been created on high-value properties designated for residential purposes. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses valued at equal to or greater than 1 million euros" (underlining ours), from which it is gathered that the reality to be taxed had in mind is, after all, and notwithstanding the terminological imprecision of the law, "the (urban) residential properties," in common language "the houses," and not other realities.
The fact that one can consider that in determining the taxable patrimonial value of urban properties classified as land for construction one must take into account the designation that the building will have for which authorization or anticipation has been made for determination of the respective value of the building footprint area (cf. nos. 1 and 2 of article 45 of the CIMI), does not determine that land for construction can be classified as "property with residential designation," as "residential designation" always appears in the IMI Code referred to "buildings" or "construction," existing, authorized or anticipated, since only these can be inhabited, which does not occur in the case of land for construction, which do not, in themselves, have the conditions for such, not being susceptible of being used for residential purposes unless and when the construction authorized and anticipated for them is built on them (but in that case they will no longer be "land for construction" but another species of urban properties – "residential," "commercial, industrial or for services" or "others" – article 6 of the CIMI).
It would be strange, moreover, that the determination of the scope of the tax scope norm of item no. 28 of the General Table of Stamp Tax were found, in the final analysis, in the norms of determination of the taxable patrimonial value of the IMI Code, and that the terminological imprecision of the legislator in the wording of that rule were, after all, clarified and finally made clear by way of an indirect and equivocal reference to the affectation coefficient established by the legislator in relation to built-up properties (article 41 of the IMI Code).
Thus, given that land for construction – whatever the type and purpose of the building that will be or may be erected on it – does not, by itself, satisfy any condition for such to be licensed or for it to be possible to define residential purposes as its normal destination, and the tax scope norm for stamp tax referring to urban properties with "residential designation," without any specific concept being established for the purpose, cannot extract therefrom that it contains a future potentiality, inherent to a distinct property that may possibly be built on the land."
Following this jurisprudence, with which we agree without reservation, it must be concluded that the land for construction on whose ownership the IS assessed to the Claimant was imposed does not fall within the provision of item 28.1 of the TGIS, in the wording in force on 31 December 2013.
Consequently, the assessment contested by the Claimant is illegal insofar as it violates the scope norm contained in item 28.1 of the TGIS, configuring error as to the legal prerequisites, which makes it voidable in accordance with article 163(1) of the Administrative Procedure Code.
5) The violation of the principle prohibiting double taxation by the provision contained in item 28.1 of the General Table of Stamp Tax, when applied to land for construction
Having concluded that item 28 of the TGIS, in its original wording, was not applicable to land for construction, the question of possible violation, by the scope norm of item 28 of the TGIS, of a hypothetical prohibition of double taxation becomes irrelevant for the decision of the concrete case, whereby the question should not be analyzed.
6) The violation of the constitutional principle prohibiting retroactivity of tax laws by Law 55-A/2012 of 29 October.
Having concluded that item 28 of the TGIS, in its original wording, was not applicable to land for construction, the question of possible violation, by the scope norm of item 28 of the TGIS, of the principle prohibiting retroactivity of tax scope laws becomes irrelevant for the decision of the concrete case, whereby the question should not be analyzed.
7) The violation of the constitutional principle of tax equality by the provision contained in item 28.1 of the General Table of Stamp Tax, when applied to land for construction
Having concluded that item 28 of the TGIS, in its original wording, was not applicable to land for construction, the question of possible violation, by the scope norm of item 28 of the TGIS, of the constitutional principle of tax equality becomes irrelevant for the decision of the concrete case, whereby the question should not be analyzed.
8) Question of the obligation to notify for the exercise of the right to prior hearing
Having concluded that item 28 of the TGIS, in its original wording, did not admit the interpretation and application that the tax administration made of it through the disputed assessment act, one cannot affirm that the granting of the right to prior hearing to the taxpayer was not an essential procedural formality in the disputed assessment.
Thus being, it is concluded that the disputed assessment act does suffer effectively from a defect of form by pretermission of essential formality, which makes it invalid.
VI - DECISION
Having regard to everything set out above, it is decided to declare the illegality and annul the stamp tax assessment act no. 2011 … of 07-11-2012, in the amount of 1,394.12 euros, issued under item 28.1 of the General Table of Stamp Tax (TGIS), affecting urban property (land for construction) registered in the urban property matrix under article …, parish of …, municipality of Leiria.
Value of economic benefit of the case:
The value of the economic benefit of the case is fixed at 1,394.12 euros (one thousand three hundred and ninety-four euros and twelve cents).
Costs:
Pursuant to article 22(4) of the RJAT, the amount of costs is fixed at 306.00 euros, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.
Let this arbitral decision be recorded and notified to the Parties.
Lisbon, Administrative Arbitration Centre, 5 April 2017
The Arbitrator
(Nina Aguiar)
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