Stamp Tax on Building Land (Verba 28 TGIS) – CAAD Arbitration 253/2016-T

ARBITRAL DECISION

I – REPORT

A - PARTIES

A…, LDA., NIF…, with registered office at…, lot…, … D, hereinafter designated as Claimant or taxpayer,

THE TAX AND CUSTOMS AUTHORITY (which succeeded the General Tax Authority) hereinafter designated as Respondent or AT.

The petition for constitution of the arbitral tribunal was accepted by the President of the CAAD, and the Arbitral Tribunal was regularly constituted, on 14-07-2016, to examine and decide on the subject matter of the present proceeding, and automatically notified the Tax and Customs Authority on 14-07-2016, as appears from the respective minutes.

The Claimant did not proceed with the appointment of an arbitrator, whereby, under the provisions of Article 6.º, paragraph 1 and Article 11.º, paragraph 1, subparagraph b) of Decree-Law No. 10/2011, of 20 January, as amended by Article 228.º of Law No. 66-B/2012, of 31 December, the Ethics Council appointed Paulo Ferreira Alves as arbitrator, and the appointment was accepted in accordance with the legal provisions.

On 29-06-2016 the parties were duly notified of such designation, and did not manifest any intention to refuse the appointment of the arbitrators, in accordance with Article 11.º, paragraph 1, subparagraphs a) and b), of the RJAT and Articles 6.º and 7º of the Code of Ethics.

The Tax and Customs Authority responded to the claimant's petition, contending that the petition for arbitral pronouncement should be judged unfounded.

Both parties agreed with the waiver of the meeting provided for in Article 18.º of the RJAT.

Both parties submitted written arguments.

The arbitral tribunal is regularly constituted. It is materially competent, in accordance with Articles 2.º, paragraph 1, subparagraph a), and 30.º, paragraph 1, of Decree-Law No. 10/2011, of 20 January.

The parties possess legal personality and capacity, are entitled and are legally represented (Articles 4.º and 10.º, paragraph 2, of the same decree and Article 1.º of Order No. 112-A/2011, of 22 March).

The proceeding does not suffer from defects that would render it invalid.

B – PETITION

1. The Claimant now seeks the declaration of illegality of the tax assessment acts for Stamp Duty, No. 2013…, 2013… and 2013…, which set a tax payable of €19,114.70.

C – GROUNDS FOR THE CLAIM

1. To support its petition for arbitral pronouncement, the Claimant alleged, with a view to the declaration of illegality of the tax assessment acts for Stamp Duty, No. 2013…, 2013… and 2013…, in summary, the following:

• The Claimant is the owner and legitimate proprietor of the urban property corresponding to land for construction registered under article No. … of the urban property matrix of the parish of….

• The Claimant, as owner of the aforementioned property, was notified of the collection notices numbered 2013…, 2013… and 2013… in the total amount of €19,114.70 (nineteen thousand one hundred and fourteen euros and seventy cents), which correspond to assessment No. 2012…, relating to the tax year 2012.

• The Claimant filed a gracious complaint and a hierarchical appeal of the assessment notices.

• The Claimant alleges that the situations specified in item 28.1 are subject only to properties with residential use.

• The Claimant alleges that land for construction is an urban property, insofar as it meets the requirements that comprise the concept of property - physical reality, patrimonial nature and economic value - and, whatever the use or designation it may have, in the case of expectant land, is expressly excluded from the concept of rural property.

• The Claimant contends that the relevant criterion for distinguishing between rural and urban properties rests, in particular, on its effective use or, in the absence thereof, on its normal destination, and that land for construction is expressly excluded from the concept of rural properties, constituting an autonomous category of urban properties.

• The concept of land for construction is thus based on objectively and subjectively determined premises, since, regardless of whether they are located within or outside an urban agglomeration, all land for which building license or authorization, subdivision authorization, or prior communication, or favorable prior information has been granted or issued, or regarding which such operations have been permitted, are considered land for construction.

• The Claimant argues that in the definition of the scope of taxation of property to which item 28 of the TGIS refers, the legislator considers, as a relevant element of taxable capacity, high-value properties in the segment relating to taxpayers resident in Portuguese territory held for residential purposes.

• And by making such taxation applicable to urban properties with residential use, the legislator of stamp duty has not established any specific concept of what should, for this purpose, be understood as such, instead referring to the rules of the CIMI.

• The Claimant contends that, since the legislator has not defined the concept of urban properties with residential use and the law makes a clear distinction between residential urban properties and land for construction, the latter cannot be considered, for purposes of the incidence of Stamp Duty, as urban properties with residential use.

D – RESPONSE OF THE RESPONDENT

1. The Respondent, duly notified for such purpose, timely submitted its response in which, in abbreviated summary, alleged the following:

• The certificate of the content of the urban property and the property registry that form the basis of the present assessment show that the land for construction is assigned to residential use.

• Now, urban properties that are land for construction and to which residential use has been assigned in the context of their respective valuations, with such use being recorded in the respective registries, are subject to Stamp Duty.

• In the absence of a definition in Stamp Duty of what is meant by 'urban property', 'land for construction' and 'residential use', it is necessary to resort subsidiarily to the CIMI to obtain a definition that permits assessment of potential Stamp Duty liability, in accordance with what is provided in Article 67.º, paragraph 2 of the CIS as amended by Law No. 55-A/2012, of 29/10.

• The notion of 'urban property' is found in the section relating to the valuation of real estate, since the purpose of real estate valuation is to incorporate value into it, constituting a determining factor of distinction – coefficient – for valuation purposes.

• We cannot doubt that we are dealing with 'land for construction', more specifically, with a plot of land for urban construction, with the building implantation and construction areas perfectly defined and identified in the urban property registries, as has been described above.

• The Claimant cannot ignore that the property registry is very clear in defining, for the plot of land for construction in question, the respective building implantation and construction area, thus perfectly defined and identified.

• Therefore, residential use of the building is evident.

• Whereby, we must necessarily conclude that the tax acts in question did not violate any legal principle, and should thus be upheld.

E – SUBSTANTIATION OF FACTS

1. Before addressing these questions, it is necessary to present the factual matter relevant to their understanding and decision, which was carried out on the basis of documentary evidence and the unappealed tax administrative proceeding, taking into account the facts alleged.

2. With respect to relevant matters of fact, this tribunal finds as established the following facts:

3. The Claimant is the owner of the urban property corresponding to land for construction, located at …-…, …-… Lisbon, in the District of Lisbon, with registration No. …, with a patrimonial value of €1,911,470.00.

4. The Claimant was notified of the Stamp Duty assessment acts:

• No. 2013…, of 2012, referring to the first installment of stamp duty, on the real estate … … U-…, with a base value of €19,114.70 and a tax payable of €6,371.58.

• 2013…, of 2012, referring to the second installment of stamp duty, on the real estate … … U-…, with a base value of €19,114.70 and a tax payable of €6,371.58.

• 2013…, of 2012, referring to the third installment of stamp duty, on the real estate … … U-…, with a base value of €19,114.70 and a tax payable of €6,371.58.

1. The Claimant filed gracious complaints Nos. …2013…, …2014…, which were denied in their entirety.

2. From such denials, the Claimant filed hierarchical appeals Nos. …2014… and …2014…, which were likewise denied in their entirety.

F – UNPROVEN FACTS

1. Of the facts of interest for the decision of the case, contained in the challenge, those not included in the factuality described above were not proven.

G – ISSUES TO BE DECIDED

1. Given the positions of the parties assumed in the arguments presented, the central issues to be resolved are the following, which it is therefore necessary to examine and decide:

A) As alleged by the Claimant, the declaration of illegality of the tax assessment acts for Stamp Duty of the year 2012, Nos. 2013…, 2013… and 2013…, which set a tax payable of €19,114.70.

H – MATTERS OF LAW

1. Given the positions of the parties assumed in the pleadings submitted, the central question to be resolved by this arbitral tribunal consists in deciding whether the stamp duty assessment act, Nos. 2013…, 2013… and 2013…, which set a tax payable of €19,114.70, relating to the urban property …-…, …-… Lisbon, in the District of Lisbon, with registration No. …, specifically regarding lack of substantiation and violation of law, through erroneous interpretation and application of item 28.1 of the TGIS and Article 6.º, paragraph 1, subparagraph f), i) of the aforementioned Law No. 55-A/2012, of 29 October.

2. The factual matter is fixed and proven, for which reason we shall now determine the law applicable to the disputed facts, giving priority, in compliance with Article 124.º, paragraph 2, subparagraph a) of the CPPT, to defects whose substantiation would determine more stable and effective protection of the Claimant's interests.

3. Therefore, we shall give preference to errors in the legal prerequisites of the assessment, over possible administrative invalidity, given that such an act, even if invalid, could always be renewed by the Respondent within the tax statute of limitations period.

4. Defects of law due to error regarding the legal prerequisites of assessment, concerning the question of classification of land for construction within the scope of incidence of Article 28.º, paragraph 1 of the TGIS, introduced by the Regime of Law No. 55-A/2012, of 29 October.

5. The change in the regime regarding the subjection to stamp duty of properties with residential use, through the addition of item 28 to the General Table of Stamp Duty, effected by Article 4.º of Law 55-A/2012, of 29/10, came to specify the following tax facts, through the following wording:

"28 – Ownership, usufruct or surface right of urban properties whose patrimonial tax value contained in the registry, in accordance with the Municipal Tax Code on Real Estate (CIMI), is equal to or greater than €1,000,000 – calculated on the patrimonial tax value used for IMI purposes:

28.1 – Per residential property or per land for construction whose building, authorized or planned, is for residential purposes, in accordance with the provisions of the Municipal Real Estate Tax Code;

28.2 – Per 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, listed in a list approved by order of the Minister of Finance – 7.5%."

The provisions of Article 6.º of Law No. 55-A/2012 contain the transitional rules which established the rules pertaining to the assessment of the tax provided in such item:

"1 – In 2012, the following rules must be observed by reference to the assessment of stamp duty provided in item No. 28 of the respective General Table:

The tax event occurs on 31 October 2012;

The taxpayer of the tax is the one mentioned in paragraph 4 of Article 2.º of the Stamp Duty Code on the date referred to in the preceding subparagraph;

The patrimonial tax value to be used in the assessment of the tax corresponds to that resulting from the rules provided in the Municipal Real Estate Tax Code by reference to the year 2011;

The assessment of the tax by the Tax and Customs Authority must be effected by the end of November 2012;

The tax must be paid, in a single installment, by taxpayers by 20 December 2012;

The applicable rates are as follows:

Properties with residential use assessed in accordance with the Municipal Real Estate Tax Code: 0.5%;

ii) Properties with residential use not yet assessed in accordance with the Municipal Real Estate Tax Code: 0.8%;

iii) Urban properties when the taxpayers that are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, listed in a list approved by order of the Minister of Finance: 7.5%.

2 – In 2013, the assessment of stamp duty provided in item No. 28 of the respective General Table must be based on the same patrimonial tax value used for purposes of assessment of municipal real estate tax to be effected in that year.

3 – The non-payment, in whole or in part, of the sums assessed as stamp duty by the stated deadline constitutes a tax infraction, punished in accordance with the law."

1. Regarding the interpretation of this act, judgment 53/2013-T[1] has already pronounced itself, which states: "The term used in item 28.1 and in sub-items i) and ii) of subparagraph f) of paragraph 1 of Article 6.º of Law 55-A/2012 is a concept not used in any other tax legislation in these precise terms, namely that of 'property with residential use'. Specifically in the CIMI, which in various provisions of the CIS introduced by that Law is indicated as the instrument for subsidiary application with respect to the tax provided in the aforementioned item No. 28 [Articles 2.º, paragraph 4, 3.º, paragraph 3, subparagraph u), 5.º, subparagraph u), 23.º, paragraph 7, and 46.º and 67.º of the CIS], such a concept is not used in those terms."

2. Regarding the concept of properties, it is necessary for this purpose to resort to the concepts of properties used in the CIMI, in which the classes of properties are enumerated in Articles 2.º to 6.º, which are transcribed as follows:

Article 2.º

Concept of Property

1 – For purposes of this Code, a property is any parcel of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or erected thereupon, with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above mentioned, endowed with economic autonomy in relation to the land where they are located, even though situated on a parcel of territory that constitutes an integral part of a patrimony other than the one referred to or does not have patrimonial nature.

2 – Buildings or constructions, even though movable by nature, are considered to have a character of permanence when affixed to non-transitory purposes.

3 – The character of permanence is presumed when buildings or constructions have been erected at the same location for a period exceeding one year.

4 – For purposes of this tax, each autonomous fraction, under the horizontal property regime, is considered to constitute a property.

Article 3.º

Rural Properties

1 – Rural properties are lands situated outside an urban agglomeration that should not be classified as land for construction, in accordance with paragraph 3 of Article 6.º, provided that:

They are affixed to or, in the absence of concrete affixing, have as their normal purpose a use generating agricultural income, such as are considered for purposes of personal income tax (IRS);

Not having the affixing indicated in the preceding subparagraph, they are not built upon or have only buildings or constructions of an accessory character, without economic autonomy and of reduced value.

2 – Also rural properties are lands situated within an urban agglomeration, provided that, by force of a legally approved provision, they cannot have a use generating any income or can only have a use generating agricultural income and are, in fact, having such use.

3 – Also rural properties are:

Buildings and constructions directly affixed to the generation of agricultural income, when situated on the lands referred to in the preceding paragraphs;

Waters and plantations in the situations to which paragraph 1 of Article 2.º refers.

4 – For purposes of this Code, urban agglomerations are considered, in addition to those situated within legally fixed perimeters, nuclei with a minimum of 10 dwellings served by publicly used streets, with their perimeter delimited by points spaced 50 m from the axis of the streets, in the transverse direction, and 20 m from the last building, in the direction of the streets.

Article 4.º

Urban Properties

Urban properties are all those that should not be classified as rural, without prejudice to the provisions of the following article.

Article 5.º

Mixed Properties

1 – Whenever a property has rural and urban parts, it is classified, in its entirety, in accordance with the principal part.

2 – If neither part can be classified as principal, the property is considered mixed.

Article 6.º

Classes of Urban Properties

1 – Urban properties are divided into:

Residential;

Commercial, industrial or for services;

Land for construction;

Other.

2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal purpose each of these ends.

3 – Land for construction is considered to be land situated within or outside an urban agglomeration for which building or subdivision license or authorization has been granted, prior communication has been admitted, or favorable prior information has been issued for subdivision or construction operations, and also such land as has been declared as such in the acquisition deed, with the exception of land where the competent entities prohibit any of such operations, namely land located in green areas, protected areas, or which, in accordance with municipal land planning plans, are affixed to spaces, public infrastructure or equipment. (As amended by Law No. 64-A/08, of 31-12)

4 – Included in the provision of subparagraph d) of paragraph 1 are lands situated within an urban agglomeration that are not land for construction nor are covered by the provision of paragraph 2 of Article 3.º and also buildings and constructions licensed or, in the absence of a license, that have as their normal purpose purposes other than those referred to in paragraph 2, and also those in the exception of paragraph 3.

1. Regarding the interpretation of tax standards, for the case sub judice, Article 11.º of the General Tax Law tells us, which establishes the essential rules for interpretation of tax laws, doing so in the following terms:

Article 11.º

Interpretation

In determining the meaning of tax provisions and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

Whenever tax provisions employ terms characteristic of other branches of law, they must be interpreted in the same sense that they have therein, unless otherwise follows directly from the law.

If doubt persists regarding the meaning of the applicable incidence rules, regard must be had to the economic substance of the tax facts.

Gaps resulting from tax provisions covered by the reservation of law of the Assembly of the Republic are not susceptible to analogical integration.

1. To this provision, it is equally necessary to resort to the general principles of interpretation of laws, to which paragraph 1 of Article 11.º of the LGT refers, which are established in Article 9.º of the Civil Code, which provides as follows:

Article 9.º

Interpretation of Law

The interpretation must not be limited to the letter of the law, but must reconstruct from the texts the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated, and the specific conditions of the time in which it is applied.

However, legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed, cannot be considered by the interpreter.

In fixing the meaning and scope of the law, the interpreter shall presume that the legislator enshrined the most appropriate solutions and knew how to express its thought in adequate terms.

1. Given the legal substantiation already set forth, and considering the articles transcribed and enumerated, the following interpretive hypotheses arise regarding the concept of "property with residential use," both as concerning the Concept of "property with residential use" as referring to residential properties, and as concerning the Concept of "property with residential use" as a concept distinct from "residential properties."

2. Articles 2.º to 6.º CIMI transcribed above do not use, by the legislator in the classification of properties, the concept of "property with residential use." Likewise, this concept, with this terminology, is not found in any other statute.

3. The lack of exact terminological correspondence of the concept of "property with residential use" with any other used in other statutes may give rise to several interpretive hypotheses.

4. The text of the law, being the starting point for the interpretation of the expression "properties with residential use," being that it is on the basis of it that the "legislative thought" must be reconstructed, as imposed by paragraph 1 of Article 9.º of the Civil Code, applicable by force of Article 11.º, paragraph 1, of the LGT, already transcribed.

5. Regarding the interpretation of the concept of "property with residential use," it is important to cite judgment 53/2013-T, which has already pronounced itself on this matter. Such judgment likewise supports two interpretive hypotheses concerning the concept of "property with residential use," respectively in the same sense as the present decision, regarding the concept of "property with residential use" as referring to residential properties, and regarding the Concept of "property with residential use" as a concept distinct from "residential properties."

6. Judgment 53/2013-T writes, regarding the concept of "property with residential use" as referring to residential properties:

"The concept closest to the literal meaning of this expression used is manifestly that of 'residential properties,' defined in paragraph 2 of Article 6.º of the CIMI as encompassing 'buildings or constructions' licensed for residential purposes or, in the absence of a license, that have as their normal purpose residential ends.

If it is to be understood that the expression 'property with residential use' coincides with 'residential properties,' it is manifest that the assessments will be defective due to error regarding the factual and legal prerequisites, for all properties with respect to which Stamp Duty was assessed under item No. 28.1 are land for construction, without any building or construction, required to fulfill that concept of 'residential properties.'

For this reason, if the interpretation is adopted that 'property with residential use' means 'residential property,' the assessments whose declaration of illegality is sought will be illegal, for there is no building or construction on any of the lands.

However, the lack of coincidence of the terms of the expression used in item No. 28.1 of the TGIS with that which is extracted from paragraph 2 of Article 6.º of the CIMI points in the direction of not having been intended to use the same concept."

1. Regarding the interpretation of the second hypothesis: Concept of "property with residential use" as a concept distinct from "residential properties," reference is again made to judgment 53/2013-T, in which it writes:

"The word 'affixing,' in this context of use of a property, has the meaning of 'action of directing something to a determined use.' ( [2] )

'When, as is the rule, provisions (legislative formulas) bear more than one meaning, then the positive function of the text is reflected in giving stronger support to or suggesting more strongly one of the possible meanings. For, among the possible meanings, some will correspond to the more natural and direct meaning of the expressions used, whereas others will only fit within the verbal framework of the norm in a forced, artificial manner. Now, in the absence of other elements that induce the selection of the less immediate meaning of the text, the interpreter should opt in principle for that meaning which best and most immediately corresponds to the natural meaning of the verbal expressions used, and designedly to their technical-legal meaning, in the supposition (not always exact) that the legislator knew how to express its thought correctly.' ( [3] )

The relevance of the text of the law is especially emphasized in the matter of interpretation of rules of incidence of Stamp Duty, which reduce to an amalgam, under a common denomination, of an incongruous set of taxes of completely distinct natures (on income, on expenditure, on property, on acts, etc.), which leaves no appreciable margin for application of the primary interpretive criterion, which is the unity of the legal system, which requires its global coherence.

The recognized lack of coherence of Stamp Duty is particularly exuberant in the case of this item No. 28.1, hastily included outside the General State Budget, by a tax legislator without perceptible global fiscal orientation, which is successively implementing tax increase norms as the reversals of budget execution require it, the impositions of international institutional creditors (represented by the 'troika') and the scrutiny of the Constitutional Court.

Indeed, although in the 'Explanatory Memorandum' of Draft Law No. 96/XII/2.ª ( [4] ), on which Law No. 55-A/2012 is based, reference is made to the praiseworthy concern of the Government to 'strengthen the principle of social equity in austerity, guaranteeing an effective sharing of the sacrifices necessary to comply with the adjustment program' and its commitment 'to ensuring that the sharing of these sacrifices will be borne by all and not solely by those who live on the income of their work,' it is manifest, on the one hand, that those reasons of equity, certainly existing, did not begin to have value in mid-2012, already existing at the beginning of the year, when the General State Budget came into force, and, on the other hand, that the scope of item No. 28.1, in taxing additionally properties with residential use and not also properties that do not have such use, allows it to be perceived that the concerns of social equity and the proclaimed intention of sharing of sacrifices by all, affects much more some than properly all.

In this context, in the absence of sure interpretive elements that permit detection of legislative coherence in the solution adopted in the aforementioned item No. 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretive effects in view of paragraph 3 of Article 9.º of the Civil Code), the content of the legal text must be the primordial element of interpretation, in conformity with the presumption, imposed by that same paragraph 3 of Article 9.º, that the legislator knew how to express its thought in adequate terms.

In view of those meanings of the words 'affixing' and 'to affix,' which are 'to direct' or 'to apply,' the formula used in that item No. 28.1 of the TGIS manifestly encompasses properties that are already applied to residential purposes, whereby it is important to ascertain whether it will also encompass properties that, despite not yet being applied to residential purposes, are destined to such purposes, and those whose purpose is unknown.

In view of the literal content of item No. 28.1, it is to be excluded from the scope of incidence of Stamp Duty provided therein land for construction of some claimants that do not yet have any type of use defined, for they are not yet applied nor destined to residential purposes. That is, land for construction that do not have defined use cannot be considered properties with residential use, for they do not yet have any affixing nor any purpose other than construction of unknown type. An interpretation in the sense that item No. 28.1 refers to properties whose use is unknown does not have the minimum of verbal correspondence in the letter of that provision, whereby a hypothetical legislative thought of that kind cannot be considered by the interpreter of the law, in view of the prohibition contained in paragraph 2 of Article 9.º of the Civil Code.

But this is not enough to clarify the situation of those plots for construction that, not yet being applied to residential purposes, already have a determined purpose, namely, in the subdivision license, which is the case of the properties referred to in subparagraphs z) to dd) of the factual matter established.

For this reason, it will be necessary to clarify when it can be understood that a property is affixed to a residential purpose, namely, if it is when such purpose is fixed for it in a licensing act or similar, or solely when the actual assignment of such purpose is concretized.

From the outset, the comparison of item No. 28.1 of the TGIS with paragraph 2 of Article 6.º of the CIMI, which defines the concept of residential properties, manifestly points in the direction of being necessary an actual affixing.

Indeed, a building or construction licensed for residence or, even without a license, but which has residence as its normal purpose, is, in view of paragraph 2 of that Article 6.º, a residential property.

For this reason, in the presumption that the legislator of Law No. 55-A/2012 knew how to express its thought in adequate terms (as imposed by Article 9.º, paragraph 3, of the Civil Code, that it be presumed), if it intended to refer to those properties already licensed for residence or that have residence as their normal purpose, it would certainly have used the concept of 'residential properties,' which would express perfectly and clearly its thought, in view of the definition given by that paragraph 2 of Article 6.º of the CIMI.

Consequently, it must be presumed that the use of a different expression is aimed at a different reality, whereby, in good hermeneutics, 'property with residential use' cannot be a property merely licensed for residence or destined to such purpose (that is, it will not suffice that it be a 'residential property'), being necessarily a property that already has actual affixing to that purpose.

That this is the meaning of the expression 'affixing,' in the same context of classification of properties made by the CIMI, is confirmed by Article 3.º in which, regarding rural properties, reference is made to those that 'are affixed to or, in the absence of concrete affixing, have as their normal purpose a use generating agricultural income,' which evidences that affixing is concrete, actual. Indeed, as is seen from the final part of this text, a property may have as its purpose a determined use and be or not be affixed to it, which evidences that affixing is, at the level of the connection of a property to a determined use, something more intense than mere purpose and that may or may not occur, downstream of this and not upstream of it. ( [5] )

Moreover, the text of the law by adopting the formula 'property with residential use,' instead of 'urban properties of residential use,' which appears in the aforementioned 'Explanatory Memorandum,' points strongly in the direction that it is required that residential use already be concretized, for only thus will the property be with that use.

As regards Article 45.º of the CIMI, it has no relation to the classification of properties, merely indicating the factors to be considered in the valuation of land for construction. What is considered there, in making reference to the 'building to be constructed,' is the consideration of the purpose of the land, which, as has been seen, is something that, in the context of the CIMI, does not imply affixing and occurs before it.

The correctness of this interpretation in the sense that only properties that are actually affixed to residence fall within the scope of incidence of item No. 28.1 of the TGIS is also confirmed by the perceivable ratio legis of the restriction of the scope of application of the norm to properties with residential use, in the context of the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied,' which Article 9.º, paragraph 1, of the Civil Code also establishes as interpretive elements. ( [6] ).

From the outset, the limitation of Stamp Duty taxation to 'properties with residential use' allows it to be perceived that it was not intended to encompass within the scope of incidence of the tax properties with use for services, industry or commerce, that is, properties affixed to economic activity, which is understood in a context in which, as is notorious, the economy is in a recessionary spiral, publicly proclaimed at the highest level, with unemployment rates reaching maximum historical levels, with an avalanche of business closures deriving from economic unsustainability.

Having in mind this situation and it being well known and public that the reanimation of economic activity and the increase of exports are the doors out of the crisis, it is understood that legislative measures were not taken that would hinder economic activity, namely the increase of the tax burden that hinders it and affects competitiveness in international terms.

For this reason, it is to be concluded that the interpretive elements available, including the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied,' point clearly in the direction of not having been intended to encompass within the scope of incidence of item No. 28.1 situations of properties that are not yet affixed to residence, namely land for construction held by companies. ( [7] )"

1. From the foregoing, there results the applicability of the tax regime in question to the situation of the Claimant, regarding the urban property corresponding to land for construction, with a subdivision license that titles it and authorizes thereupon the construction of a building with twelve stories, with two basements for parking and the ground floor and upper floors for residential use with 62 units, thus being covered by Item 28.1 of the TGIS.

2. Before the foregoing, in the present case, the land for construction is covered by Stamp Duty provided in item 28.1 of the TGIS.

3. In this manner, the assessment sub judice, whose declaration of illegality is sought, does not suffer from the defect of violation of item No. 28.1, by error regarding the legal prerequisites.

4. In these terms the assessments are legal.

J - CONCERNING INDEMNITARY INTEREST.

1. The Claimant further petitions for the payment of indemnitary interest.

2. Seeing that the assessments are legal, there is no place for the payment of indemnitary interest.

3. The Claimant's petition is denied.

J – DECISION

Wherefore, having regard to all the foregoing, the present Arbitral Tribunal decides:

To judge unfounded the petition for declaration of illegality of the tax assessment acts for Stamp Duty, Nos. 2013…, 2013… and 2013…, which set a tax payable of €19,114.70.

The value of the proceeding is set at €19,114.70 of the assessment amount, considering the economic value of the proceeding assessed by the value of the stamp duty assessments under challenge, and in accordance therewith the costs are set at the respective amount of €1,224.00 (one thousand two hundred and twenty-four euros), to be borne by the claimant in accordance with Article 12.º, paragraph 2 of the Tax Arbitration Regime, Article 4.º of the RCPAT and Table I attached thereto. – paragraph 10 of Article 35.º, and paragraphs 1, 4 and 5 of Article 43.º of the LGT, Articles 5.º, paragraph 1, subparagraph a) of the RCPT, 97.º-A, paragraph 1, subparagraph a) of the CPPT and 559.º of the CPC).

Notify.

Lisbon, 4 November 2016.

The Arbitrator

Paulo Renato Ferreira Alves

[1] On this matter the Arbitral Tribunal judgments of the CAAD, Nos. 42/2013-T, 48/2013-T, 49/2013-T, have already decided.

[2] Dictionary of Contemporary Portuguese Language of the Academy of Sciences of Lisbon, Volume I, page 102.

[3] BAPTISTA MACHADO, Introduction to Law and Legitimating Discourse, page 182.

[4] Draft Law No. 99/XII/2.ª is available at http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=37245

[5] Other provisions of the CIMI make it clear that the term 'affixing' is used to reference situations already existing and not merely future, even if foreseeable, as 'purpose' is. This is the case of Article 9.º of the CIMI, which, after establishing that 'the tax is due from' 'the 4th year following, inclusive, that in which land for construction came to be listed in the inventory of a company that has as its object the construction of buildings for sale' or 'the 3rd year following, inclusive, that in which a property came to be listed in the inventory of a company that has as its object its sale' [subparagraphs d) and e) of paragraph 1], provides that 'for purposes of the provisions of subparagraphs d) and e) of paragraph 1, taxpayers must notify the tax office of the area where the properties are located, within a period of 60 days from the occurrence of the fact determining its application, of the affixing of the properties to those purposes.' The 'affixing of properties to those purposes,' in the context of this Article 9.º, reduces to the concrete assignment to properties of the purpose 'for sale,' materialized by its listing in the inventory, not being sufficient that they have been built or acquired with a view to their sale.

[6] Not in mind in this approach are the special cases provided in item No. 28.2, of ownership of properties by legal persons resident in a country, territory or region subject to a clearly more favorable tax regime, listed in a list approved by order of the Minister of Finance to which, as in other provisions, strong tax penalty is attributed, because such situations are normally associated with tax evasion.

[7] Outside the special cases provided in item No. 28.2.