Summary
Full Decision
ARBITRAL DECISION
CLAIMANT: A... ASSET MANAGEMENT – REAL ESTATE INVESTMENT FUND MANAGEMENT COMPANY, S.A.
RESPONDENT: Tax and Customs Authority
Arbitral Decision[1]
I REPORT
A) The Parties and Constitution of the Arbitral Tribunal
A... ASSET MANAGEMENT – REAL ESTATE INVESTMENT FUND MANAGEMENT COMPANY, S.A., with registered office in …, in Lisbon, legal entity number …, in its capacity as managing company of the OPEN REAL ESTATE INVESTMENT FUND B…, autonomous patrimony with Tax Identification Number 720 001 200, hereinafter designated as "Claimant", submitted a request for constitution of a singular Arbitral Tribunal, pursuant to the provisions of subsection a) of article 2, nº 1, subsections a) and b) of article 5, nº 2, and subsection a) of article 10, nº 1, all of the Legal Framework for Tax Arbitration, approved by Decree-Law nº 10/2011, of 20 January, hereinafter designated as "LFTA", and articles 1 and 2 of Ordinance nº 112-A/2011, of 22 March, to examine the dispute opposing it to the Tax and Customs Authority, hereinafter designated as "Respondent" or "TA", with a view to the annulment, on grounds of illegality, of the stamp duty assessment acts, referring to the year 2012, as per collection documents numbers 2013…, 2013… and 2013…, in the total amount of €14,626.50, relating to the urban property in full ownership without floors or divisions susceptible to independent use registered in the urban property matrix of … under article … of the Parish … – Union of Parishes … and …, Municipality of …, District of Lisbon and described in the Property Registration Office of … under registration number …, as per document nº 1 attached to the records in annex to the Arbitral Request, which is hereby fully reproduced herein.
The request for constitution of the Arbitral Tribunal, presented on 25 March 2014, was accepted by the Honorable President of CAAD and automatically notified to the Tax and Customs Authority on 26 March 2014. The Claimant chose not to appoint an arbitrator, whereby, pursuant to the provisions of nº 1 of article 6 of the LFTA, the undersigned was appointed by the Deontological Council of the Administrative Arbitration Center as arbitrator of the singular Arbitral Tribunal. The appointment was accepted and the parties, notified of the acceptance, on 14 May 2014, did not refuse the designation, in accordance with the terms provided in subsections a) and b) of nº 1 of article 11 of the LFTA, in conjunction with the provisions of articles 6 and 7 of the Deontological Code.
Accordingly, in conformity with the provisions of subsection c) of nº 1 of article 11 of Decree-Law nº 10/2011, of 20 January, as amended by article 228 of Law nº 66-B/2012, of 31 December, the singular Arbitral Tribunal was constituted on 29 May 2014.
On 30 May 2014, the Respondent "TA" was notified to present a reply within the legal deadline, in accordance with the provisions of nºs 1 and 2 of article 17 of the LFTA. On 6 July 2014, the TA submitted its Reply to the records and the attached documents designated as PA (administrative process).
On 7 July 2014, an order was issued for scheduling the meeting provided for in article 18 of the LFTA, to be held on 5 September 2014, at 2 p.m. The TA presented a motion suggesting the waiver of the meeting as there were no factual issues to clarify or exceptions, being solely a matter of law. The Claimant, notified to make submissions, agreed with the waiver of the meeting and submission of arguments. Considering the position assumed by the parties on this matter, an arbitral order was issued on 4 September 2014 waiving the meeting, and a deadline was set for issuing the arbitral decision by 20 November 2014.
B) Procedural Prerequisites
The Arbitral Tribunal is duly constituted and is substantively competent, in accordance with article 2, nº 1, subsection a) of Decree-Law nº 10/2011, of 20 January.
The Parties have legal personality and capacity, are legitimate, and are properly represented.
The proceedings do not suffer from nullities that would invalidate them, and no exceptions were raised that would prevent judgment on the merits of the case, whereby the Tribunal is in a position to issue the arbitral decision.
C) THE CLAIM FORMULATED BY THE CLAIMANT
The Claimant formulates the present arbitral pronouncement request contending for the illegality and consequent annulment of the stamp duty assessment acts referring to the year 2012, in the amount of €14,626.50, as per document nº 1 attached to the records by the Claimant and which is hereby reproduced.
The stamp duty assessment acts relate to the urban property in full ownership without floors or divisions susceptible to independent use, registered in the urban property matrix of … under article … of the Parish … – Union of Parishes … and …, Municipality of … and District of Lisbon, described in the Property Registration Office of … under registration number …. The impugned assessment acts have as their legal basis the provisions of item nº 28.1 of the General Stamp Duty Table (hereinafter GSDT), in the manner in which it was applied by the TA, in the case of the present records.
D) The Position of the Tax Authority
The urban property to which the impugned tax assessments in the present records refer is owned by the Real Estate Fund that is the present Claimant, which is constituted under a regime of full ownership, also designated as vertical. The said property, as appears in the property matrix and as results from the respective property record card, is intended for housing. Its PTM is €1,462,650.00, whereby in light of the provisions of articles 6, nº 1, subsection f), sub-subsection i), the stamp duty item 28.1 of the General Table, in the wording given by article 4 of Law 55-A/2012, of 29 October, at the rate of 1% regarding the year 2012.
Despite the use of the property being, by virtue of a lease contract assigned in favor of an educational establishment "C... – Children's Education Ltd.", this in no way alters its intended use, or rather, its allocation to housing. In fact, despite the building license issued, in which the intended use of the property is referred to as its allocation to "educational equipment", the property does not have, to date, a permit of use for that purpose, whereby for tax purposes, it is allocated to housing, whereby the stamp duty assessment acts of item 28.1 of the GSDT are not illegal because they did not violate the said rule of incidence. (See Article 38 of the TA's Reply)
Accordingly, the TA contends for the legality of the impugned tax acts, for the dismissal of the arbitral request.
II – Factual Matter
With relevance to the examination of the questions raised, the following facts are considered proven:
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The Claimant was notified of collection documents nºs 2013…, 2013… and 2013…, corresponding, respectively, to the first, second, and third installments of stamp duty on the urban property described above in the total amount of €14,626.50;
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It proceeded to the payment of the said assessments on 30 April 2013, 27 July 2013, and 4 December 2013; - See Documents nºs 2 and 3 attached to the IP.
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The urban property in full ownership, without floors or divisions susceptible to independent use, has a taxable property value (TPV) of €1,462,650.00;
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According to the tenor of the property record card and description of the same in the urban property matrix, the property in question in the present records is under a regime of full ownership, without floors or divisions susceptible to independent use, allocated to "housing"; - See Document 1 attached to the IP.
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The Claimant acquired the ownership of the property in question in the records, as per public deed executed on 5 August 2008, contained in document nº 4, attached to the records by the Claimant, in annex to the IP, exhibiting the respective housing permit nº 252, mentioned in the deed attached as document nº 4 in annex to the IP;
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By contract of 15 July 2008, a lease contract of the property in question was executed with the educational establishment "O C..., Children's Education, Ltd.", which underwent subsequent amendments as per document nº 5 attached to the records in annex to the IP, designated as "Amendment to the Investment Contract and the lease contract executed on 15 July 2008";
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From the content of the investment and lease contract aforesaid, it is possible to conclude that "O C..., Children's Education, Ltd." chose the urban property in question in the present records to install the new school therein, "currently used for housing and which will undergo profound remodeling and expansion so as to satisfy all technical and functional needs imposed by the change of use"(clause III);
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Two Building Permits with nºs 164 and 81 were issued in favor of the lessee, issued on 6/09/2011 and 16/03/2010, respectively, in accordance with which "new construction" was authorized with allocation to "educational equipment"; documents nºs 6 and 7 attached to the records in annex to the IP;
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To date, no Occupancy Permit for the buildings for the intended purpose ("educational equipment") has been issued by virtue of litigation between the construction company and the lessee and, by consequence, the owner of the property, now the Claimant.
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In the urban property, reconstructed, the school "O C... – Children's Education Ltd." is in operation.
The conviction as to the facts given as proven was based on the documentary evidence attached to the records by the Claimant (docs. nºs 1 to 8 attached to the initial petition), to which is added the mutual acceptance by the parties of the remainder.
No other facts with relevance to the arbitral decision were proven.
III – Legal Matter
The allegation framework on which the arbitral pronouncement request is based can be summarized as follows:
According to the TA, for tax purposes the property described in the present records is allocated to housing, since there was no alteration in the urban property matrix by means of which the property would have its purpose altered. Since its TPV is superior to €1,000,000.00, it falls within the scope of incidence of item 28.1 of the Table attached to the Stamp Duty Code.
It was this understanding that led to the stamp duty assessments impugned in the records.
For the Claimant, such understanding is illegal, since the property in question was acquired with the purpose of installing therein the School of which the lessee is the titleholder, as appears from the investment and lease contract attached to the records. Whereby necessary licensing requests were submitted for works intended to construct a new building intended for educational equipment. The new construction was completed (and the original demolished) and therein the School "O C..., children's education Ltd." operates. Despite the new occupancy permit not yet being issued by virtue of the litigation existing with the construction company, the new construction was completed and the property is currently allocated to educational equipment and not to housing, whereby the property in issue does not fall within the object of incidence of the tax rule embodied in article 28.1 of the GSDT.
These are, in summary, the positions defended by the parties in the pleadings attached to the records.
It is incumbent to decide.
The essential question to be decided is whether, with reference to the property in question in the present records, registered in the property matrix as an urban property in full ownership, allocated to housing and with a TPV superior to €1,000,000.00, is subject to taxation under Stamp Duty, even though it is being used for another activity, in this case, the operation of an educational establishment.
The answer to this question requires analysis of the relevant legal rules in order to determine what interpretation conforms to the Law and to the Constitution, with particular care since it is a matter of assessing a tax incidence prerequisite, carefully protected by the principle of tax legality resulting from the provisions of article 103, nº 2 of the CRP.
The subjection to stamp duty of properties with housing allocation resulted from the addition of item 28 of the GSDT, effected by article 4 of Law 55-A/2012, of 29/10, which typified the following tax facts:
"28 – Ownership, usufruct or surface right of urban properties whose taxable property value contained in the matrix, in accordance with the Property Tax Code (CIMI), is equal to or superior to €1,000,000.00 – on the taxable property value for purposes of IMI:
28-1 – For property with housing allocation – 1%
28.2 – For property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance – 7.5%."
This law entered into force the day following its publication, namely, on 30 October 2012. From the transitional provisions contained in its article 6, it results that the tax fact is considered verified on 31 October 2012, and that the taxable property value to be used in the tax assessment corresponds to what results from the rules of the Property Tax Code by reference to the year 2011.
According to, still, the same article 6 of Law nº 55-A/2012, the taxation provided for in item 28 of the GSDT is, in the year 2012, effected at the rate of 0.5% on the taxable property value, provided it is equal to or superior to €1,000,000.00 of urban properties with housing allocation.
Law 55-A/2012 says nothing as to the qualification of the concepts at issue, namely, as to the concept of "property with housing allocation." However, article 67, nº 2 of the Stamp Duty Code, added by the said Law, provides that "to matters not regulated in this code relating to item 28 of the General Table, the CIMI is applied subsidiarily."
The rule of incidence refers, thus, to urban properties, the concept of which is that which results from the provisions of article 2 of the CIMI, with the determination of the TPV obeying the terms provided in article 38 and following of the same code.
Using the criterion that the law itself introduced in article 67, nº 2 of the Stamp Duty Code, "to matters not regulated in this code relating to item 28 of the General Table, the CIMI is applied subsidiarily."
Consulting the CIMI, it is found that its article 6 only indicates the different species of urban properties, among which it mentions residential ones (see subsection a) of nº 1), clarifying in nº 2 of the same article that "residential, commercial, industrial or service buildings or constructions are those licensed for such purpose or, in the absence of a license, that have as their normal purpose each of these uses."
From this we can conclude that, in the legislator's perspective, the juridical-formal rigor of the concrete situation of the property is not important but rather its normal use, the purpose to which the property is intended. What is relevant is the material truth underlying its existence as an urban property and its use.
It is further necessary to inquire as to the ratio legis underlying the rule of item 28 of the GSDT, introduced by Law nº 55-A/2012 of 29 October, and in obedience to the provisions of article 9 of the Civil Code, according to which the interpretation of legal rules should not be limited to the letter of the law, but should reconstruct from the texts and other elements of interpretation the legislative thought, taking into account the unity of the legal system, the circumstances in which it was drafted, and the specific conditions of the time in which it is applied.
The legislator, in introducing this legislative innovation, considered as a determining element of taxpaying capacity urban properties with housing allocation of high value (luxury), more precisely, of value equal to or superior to €1,000,000.00, on which a special rate of stamp duty began to apply, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or surface right of luxury urban properties with housing allocation. For this reason, the criterion was for application of the new rate to urban properties with housing allocation, whose TPV is equal to or superior to €1,000,000.00.
This very conclusion is reached from the analysis of the discussion of bill nº 96/XII in the Assembly of the Republic, available for consultation in the Parliamentary Record, I series, nº 9/XII/2, of 11 October 2012.
The justification for the measure designated as "special rate on the highest value residential urban properties" is based on the invocation of the principles of social equity and tax justice, calling to contribute in a more intensive manner the holders of properties of high value intended for housing, applying the new special rate to the "houses of value equal to or superior to 1 million euros."
Clearly the legislator understood that this value, when attributed to a dwelling (house, autonomous fraction or apartment with independent use) translates into taxpaying capacity above average and, as such, susceptible to determining a special contribution to ensure fair distribution of the tax burden.
Thus, material truth is what must be imposed as the determining criterion of taxpaying capacity and not mere juridical-formal reality of the property. – (In this sense see Arbitral Decision nº 50/2013 of 29 October and Arbitral Judgment nº 53/2013 of 2 October)
As stated in Arbitral Judgment nº 53/2014 "the legislator chose to use in the said item 28.1 and in sub-subsections i) and ii) of subsection f) of nº 1 of article 6 of Law nº 55-A/2012, a concept that is not used in any other tax legislation in these precise terms, which is that of 'property with housing allocation.' In truth, the CIMI, which in several rules of the Stamp Duty Code is indicated as a subsidiary application diploma regarding the tax provided for in the said item nº 28, the concept used is not coincident with that."
Thus, if we consider the types of properties referred to under IMI, we find the following concepts with relevance to the matter of the records:
1 – According to article 2 of the CIMI "property is any fraction of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or situated thereon, 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, endowed with economic autonomy in relation to the land where they are situated, although located on a fraction of territory that constitutes an integral part of a diverse patrimony or does not have a patrimonial nature."
2 - For purposes of this tax, "each autonomous fraction, under the system of horizontal property, is deemed to constitute a property.
3 – according to article 4 of the CIMI "all those that should not be classified as rural are considered urban properties (…);"
4 – And according to article 6, urban properties are divided into: a) Residential; b) Commercial, industrial or service; c) Land for construction; d) Others.
5 – Buildings or constructions are considered as residential, commercial, industrial or service buildings or constructions for such purposes licensed or, in the absence of a license, that have as their normal purpose each of these uses.
In the case of the property in question in the present records, it appears necessary to determine its correct qualification, given the facts considered proven and its effective allocation. The question to be decided is solely whether the property should or should not be considered as having housing allocation or service allocation.
We know that the property in question in the records is registered in the urban property matrix as having "housing allocation" and the only occupancy permit that was granted to it confirms its purpose or housing allocation. The current purpose of the newly constructed property, according to the building permits attached to the records, is that of "educational equipment", that is, services. However, still without an occupancy permit for this purpose.
The interpretation of tax rules must obey the principles of interpretation enshrined in article 11 of the General Tax Law, which establishes the essential rules of interpretation of tax laws, as well as the principles set forth in article 9 of the Civil Code.
Article 11 of the GTL provides that:
"1 - In determining the meaning of tax rules and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.
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Whenever terms peculiar to other branches of law are used in tax rules, they should be interpreted in the same sense in which they have there, unless otherwise directly results from the law.
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If doubt persists regarding the meaning of the rules of incidence to be applied, regard should be had to the economic substance of the tax facts.
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Gaps resulting from tax rules covered by the reserve of law of the Assembly of the Republic are not susceptible to analogical integration."
The general principles of interpretation of laws, to which nº 1 of article 11 of the GTL refers, are established in article 9 of the Civil Code, which establishes the following:
"1. Interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative thought, having especially in mind the unity of the legal system, the circumstances in which the law was drafted, and the specific conditions of the time in which it is applied.
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However, the 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.
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In establishing 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."
The question that must now be decided is what interpretation of the concept of "property with housing allocation" used by the legislator in rule 28.1 of the GSDT. Let us see in this regard the understanding expressed in Arbitral Judgment nº 53/2013 on this same question:
"(…) in the rules of the CIMI transcribed, the concept of 'property with housing allocation' is not used in the classification of properties. Neither is this concept, with this terminology, found in any other statute.
Thus, in the absence of exact terminological correspondence of the concept of 'property with housing allocation' with any other used in other statutes, several interpretative hypotheses can be ventured. The starting point for the interpretation of that expression 'properties with housing allocation' is, naturally, the text of the law, and it is on the basis thereof that the 'legislative thought' must be reconstructed, as required by nº 1 of article 9 of the Civil Code, applicable by virtue of the provisions of article 11, nº 1 of the GTL.
The concept most closely resembling the literal tenor of this expression used is manifestly that of 'residential properties', defined in nº 2 of article 6 of the CIMI as encompassing 'buildings or constructions' licensed for residential purposes or, in the absence of a license, that have residential purposes as their normal purpose."
Now, to understand that the expression 'property with housing allocation' coincides with that of 'residential properties', and that it is understood as such that which is licensed for that purpose, it seems that there is no doubt that the occupancy permit of the property in question is for housing, as it is not yet licensed for another purpose. From the text of the law contained in article 6, nº 2 of the CIMI, the first criterion, binding, therein established is that regard be had to the occupancy permit of the property, and only in its absence to the purpose to which the property is being used.
However, the non-coincidence of the terms of the expression used in item nº 28.1 of the GSDT with that which is extracted from nº 2 of article 6 of the CIMI, points in the sense that it was not intended to use the same concept. It seems that the concept of 'property with housing allocation' will be something different from 'residential properties'
The word 'allocation', in this context of use of a property, has the meaning of 'action of destining something to a particular use'. ( 1 ) 'When, as is usually the case, rules (legislative formulas) have more than one meaning, then the positive function of the text is expressed in giving stronger support to or more strongly suggesting one of the possible meanings. For, among the possible meanings, some will correspond to the most natural and direct meaning of the expressions used, whereas others will only fit into the verbal framework of the rule in a forced, artificial manner. Now, in the absence of other elements that induce the choice of the less immediate meaning of the text, the interpreter should in principle opt for that meaning which best and most immediately corresponds to the natural meaning of the verbal expressions used, and in particular to their juridical-technical meaning, in the assumption (not always exact) that the legislator knew how to correctly express its thought'. ( 2 )
The relevance of the text of the law is especially emphasized in the matter of interpretation of tax incidence rules, which are reduced to an amalgamation, under a common denomination, of an incongruous set of taxes of completely distinct natures (on income, on expenditure, on patrimony, on acts, etc.), which leaves little appreciable margin for application of the paramount interpretative criterion, which is the unity of the legal system, which requires its overall coherence.
The recognized lack of coherence of Stamp Duty is particularly exuberant in the case of this item nº 28.1, hastily included at the margins of the General State Budget, by a tax legislator without perceptible overall fiscal orientation, who is successively implementing rules of tax increases in accordance with the vicissitudes of budget execution, the impositions of international institutional creditors (represented by the 'troika') and the oversight of the Constitutional Court.
In truth, although in the 'Statement of Reasons' of Bill nº 96/XII/2 ( 3 ), on which Law nº 55-A/2012 was based, reference is made to the laudable concern of the Government to 'strengthen the principle of social equity in austerity, ensuring an effective distribution of necessary sacrifices for compliance with the adjustment program' and its commitment 'to ensure that the distribution of those sacrifices will be made by all and not only by those who live off the income of their work', it is manifest, on the one hand, that those reasons for equity, certainly existing, did not begin to count in mid-2012, already existing at the beginning of the year, when the General State Budget entered into force, and on the other hand, that the reach of item nº 28.1, by taxing additionally properties with housing allocation and not also those that do not have it, lets it be seen that the concerns for social equity and the proclaimed intention to distribute sacrifices among all, affects far more some than it does properly all.
In this context, there being no sure interpretative elements that allow detecting legislative coherence in the solution adopted in the said item nº 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretative purposes in light of nº 3 of article 9 of the Civil Code), the tenor of the legal text must be the paramount element of interpretation, in accordance with the presumption, imposed by the same nº 3 of article 9, that the legislator knew how to express its thought in adequate terms.
In light of those meanings of the words 'allocation' and 'to allocate', which are 'to give purpose' or 'to apply', the formula used in that item nº 28.1 of the GSDT manifestly encompasses properties that are already applied to housing purposes, whereby it is incumbent to inquire whether it will also encompass properties that, although not yet applied to housing purposes, are destined for these and those whose purpose is unknown.
Therefore, it is necessary to clarify when a property can be understood to be allocated to a housing purpose, namely whether it is when that purpose is fixed for it in a licensing act or similar, or only when the effective assignment of that purpose is materialized. From the outset, the confrontation of item nº 28.1 of the GSDT with nº 2 of article 6 of the CIMI, which defines the concept of residential properties, manifestly points in the sense of there being necessary an effective allocation.
In truth, a building or construction licensed for housing or, even without a license, but that has housing as its normal purpose, is, in light of nº 2 of that article 6, a residential property.
Therefore, on the presumption that the legislator of Law nº 55-A/2012 knew how to express its thought in adequate terms (as article 9, nº 3 of the Civil Code imposes to be presumed), if it intended to refer to those properties already licensed for housing or that have housing as their normal purpose, it would certainly have used the concept of 'residential properties', which would express perfectly and clearly its thought, in light of the definition given by that nº 2 of article 6 of the CIMI.
Consequently, it must be presumed that the use of a different expression is aimed at a distinct reality, whereby in good hermeneutics, 'property with housing allocation' cannot be a property merely licensed for housing or destined for that purpose (that is, it will not suffice that it be a 'residential property'), having to be a property that has already effective allocation to that purpose.
That this is the meaning of the expression 'allocation', in the same context of classification of properties that the CIMI makes, is confirmed by article 3, in which, regarding rural properties, reference is made to those 'that are allocated to or, in the absence of concrete allocation, have as their normal purpose an use generating agricultural income', which evidences that allocation is concrete, effective. In truth, as can be seen from the final part of this text, a property may have as its purpose a particular use and be or not be allocated to it, which evidences that allocation is, at the level of the connection of a property to a particular use, something more intense than mere purpose.
Moreover, the text of the law in adopting the formula 'property with housing allocation', instead of 'urban properties of housing allocation', which appears in the said 'Statement of Reasons', strongly points in the sense that it is required that the housing allocation be already materialized, for only thus will the property have that allocation. – In this sense, see Arbitral Judgment nº 53/2014 – T.
This interpretation, in the sense that only properties that are effectively allocated to housing are within the scope of incidence of item nº 28.1 of the GSDT, is also confirmed by the perceptible ratio legis of the restriction of the field of application of the rule to properties with housing allocation, in the context of the 'circumstances in which the law was drafted and the specific conditions of the time in which it is applied', which article 9, nº 1 of the Civil Code also upholds as interpretative elements.
Finally, the limitation of taxation in Stamp Duty to 'properties with housing allocation' lets it be perceived that it was not intended to encompass within the scope of incidence of the tax properties with allocation to services, industry or commerce, that is, properties allocated to economic activity, which is understood in a context in which, as is notorious, the economy is in recessionary spiral, publicly proclaimed at the highest level, with unemployment rates reaching maximum historical levels, with an avalanche of business closures stemming from economic unsustainability.
Therefore, it is to be concluded that the available interpretative elements, including the 'circumstances in which the law was drafted and the specific conditions of the time in which it is applied', clearly point in the sense of it not being intended to encompass within the scope of incidence of item nº 28.1 situations of properties whose effective allocation is an economic activity, commerce, industry or services. In the case under examination, the property acquired was acquired in 2008 by the Claimant with the objective of yielding it by lease contract to the entity holding the school "O C..." for the purpose of destining it to the operation of the school, resulting from the investment and lease contract the intention of altering the use to be given to the property. It was proven in the records that the lessee undertook the licensing procedures for construction of the school building, and that this was completed and that the educational establishment referred to in the aforesaid contracts is in operation. Thus, the very licensing procedure for the new purpose of the property was initiated and undertaken, with only the new occupancy permit not yet having been issued by virtue of pending litigation.
The application of the principles aforesaid to the situation of the Claimant results in that the property in question in the records was acquired as a property licensed for housing already with the intention of altering its purpose. This very fact results from the investment contract and the lease contract attached to the records. This very fact was confirmed by the licensing requests required and granted to the lessee and, as a consequence, to the now Claimant, which authorized and negotiated with the lessee the aforesaid contracts for that purpose. This purpose is moreover prior to the property's very acquisition by the now Claimant, as results from the investment and lease contract attached to the records.
The housing that existed at the date of acquisition was demolished and replaced by another destined for "educational equipment", in which the School designated by C... – Children's Education Ltd. operates.
Despite the litigation with the construction company that has prevented the issuance of the new definitive occupancy permit for the intended purpose "educational equipment," the truth is that a school already operates therein, that is, an educational establishment. Whereby the effective allocation of the property in 2012 was already no longer housing but rather an economic activity in the process of definitive licensing for that purpose.
Whereby it seems to be an evident fact that the presently existing property does not have effective allocation to housing, and already at the date of 2012, it was allocated to the operation of the educational establishment. Now, if at the date of the introduction of the tax contemplated in item 28.1 of the GSDT the property in question was already no longer effectively allocated to housing, the stamp duty assessments appear to be illegal, by violation of the provisions of rule item 28.1 of the GSDT.
Thus, this Arbitral Tribunal understands that by the tenor of the building permits and by the existence in operation of a School in the property in question, we are not dealing with a property with housing allocation, whereby stamp duty provided for in item 28.1 of the GSDT does not apply to such property.
Therefore, the assessments whose declaration of illegality is sought suffer from the vice of violation of that item nº 28.1, by error regarding the legal prerequisites, which justifies the declaration of its illegality and annulment, in accordance with the provisions of article 135 of the CPA.
In these terms and with the justification that is set forth, this arbitral tribunal decides to find the arbitral pronouncement request well-founded, with the consequent annulment of the impugned assessment act, embodied in the stamp duty assessment with reference to the year 2012, collected in three installments.
As a consequence of all the aforesaid, it results that the impugned assessments are illegal, suffer from the vice of violation of law, by error regarding the factual and legal prerequisites, whereby they should be the object of annulment, proceeding, consequently, to the reimbursement to the Claimant of the amount unduly paid.
IV - CLAIM FOR AND RIGHT TO INDEMNIFICATORY INTEREST
Subsection b) of nº 1 of article 24 of the LFTA provides that the arbitral decision on the merits of the claim of which no appeal or challenge is available binds the tax administration as from the end of the deadline provided for the appeal or challenge, with the latter – in the exact terms of the finding of the arbitral decision in favor of the taxpayer and up to the end of the deadline provided for the voluntary execution of the sentences of the tax courts – being required to restore the situation that would exist if the tax act that is the object of the arbitral decision had not been performed, adopting the necessary acts and operations for that purpose.
Such provision is in harmony with the provisions of article 100 of the GTL, applicable to the case by virtue of the provisions of subsection a) of nº 1 of article 29 of the LFTA, in which it is established that "the tax administration is required, in the case of full or partial finding of appeals or objections in administrative proceedings, or of court proceedings in favor of the taxpayer, to immediately and fully restore the situation that would exist if the illegality had not been committed, including the payment of indemnificatory interest, in accordance with the terms and conditions provided for in the law."
Article 43, nº 1 of the General Tax Law provides, in turn, that "indemnificatory interest is owed when it is determined, in voluntary appeal or judicial challenge, that there was error attributable to the services from which payment of the tax debt results in an amount superior to the legally due."
From the analysis of the probative elements contained in the present records, it is not possible to infer that the TA had knowledge of the relevant factual elements to proceed with the correct assessment of the tax at a moment prior to the notification of the presentation of the Arbitral Request. But it is certain that at that moment it had knowledge of the relevant facts, and from the tenor of the reply submitted by the TA, it is possible to infer that it was aware that the property in question was and is allocated to the operation of the School. It is certain that, with the notification of the Arbitral Request presented and the means of proof attached in annex to the Request, the TA had the possibility to revoke the acts, halting their effects, which did not occur. Not having done so and maintaining the assessments tainted with error regarding the prerequisites, it is required to indemnify.
Accordingly, given the provisions of article 61 of the CPPT and considering that the requirements for the right to indemnificatory interest are met, that is, the existence of error attributable to the services from which payment of the tax debt results in an amount superior to the legally due, as provided in nº 1 of article 43 of the GTL, the Claimant is entitled to indemnificatory interest at the legal rate, calculated on the amount of €14,626.50, counted from the date on which the payment was made until its complete reimbursement.
In the case of the present records, the aforesaid principles must be applied, and as a consequence of the illegality of the assessment acts referred to in this process, by virtue of those rules, there must be place for reimbursement of the amounts paid, whether as title of the tax paid, whether of the corresponding indemnificatory interest, as a way of achieving the restoration of the situation that would exist if the illegality had not been committed.
There do not appear to be other relevant questions raised by the parties.
V - DECISION
In light of the foregoing, this Arbitral Tribunal decides:
A) - To find the request for declaration of illegality of the stamp duty assessments impugned in the present records well-founded, as they suffer from the vice of violation of law by error regarding the factual and legal prerequisites, annulling, consequently, the corresponding tax acts;
B) - To find the request for condemnation of the Tax Administration for reimbursement of the amount unduly paid, in the amount of €14,626.50, plus indemnificatory interest at the legal rate, counted from the date of the payment made until the complete reimbursement of the said amount, well-founded, condemning the Tax and Customs Authority to make these payments.
Process Value: In accordance with the provisions of articles 306, nºs 1 and 2 of the CPC, article 97-A, nº 1, subsection a) of the CPPT, and article 3, nº 2 of the Rules of Costs in Tax Arbitration Proceedings, the process value is set at €14,626.50.
Costs: In accordance with the provisions of nº 4 of article 22 of the LFTA and in accordance with Table I attached to the Rules of Costs in Tax Arbitration Proceedings, the amount of costs is set at €918.00 to be borne by the Respondent Tax and Customs Authority.
Entered and notified.
Lisbon, 19 November 2014
The Single Judge-Arbitrator,
(Maria do Rosário Anjos)
[1] This decision is drafted in accordance with the former orthography.
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