Summary
Full Decision
ARBITRAL DECISION
Claimant: A… – ...
Respondent: Tax and Customs Authority.
I – REPORT
A – Procedural Conduct
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A… – ..., NIF ..., residing at ... Street, ... Tower – ..., in Lisbon, (hereinafter Claimant) applied on May 5, 2015 for the constitution of an Arbitral Tribunal, under the provisions of art. 10/2, subsection c), of Decree-Law no. 10/2011, of January 20, which established the Legal Regime for Tax Arbitration (hereinafter, for short, referred to as LRTA), with a view to annulling the Stamp Duty assessment acts, relating to the year 2012, concerning the Property, located at ..., of the parish and municipality of ..., with the registry number U-....
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The Claimant further requests the condemnation of the Respondent to reimburse the amount improperly paid, plus compensatory interest.
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In the request for arbitral pronouncement, the Claimant chose not to appoint an arbitrator.
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Pursuant to art. 6/2, subsection a), and art. 11/1, subsection b), of the LRTA, the Deontological Council appointed as Arbitrator the undersigned, who accepted the position within the legally stipulated period.
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The Arbitral Tribunal was constituted on July 20, 2015.
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The Respondent filed its response on September 25, 2015.
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The arbitral hearing took place on November 2, 2015.
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On November 5, 2015, the Claimant filed a written response to the exceptions.
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November 30, 2015 was set for the issuance of the final decision.
B. Position of the Parties
- The Claimant alleges, in summary, that:
10.1. He is the owner of the urban property (land for construction) located in the parish and municipality of ..., registered and described under registry number U-..., of that parish.
10.2. The Claimant was notified of the Stamp Duty assessment acts, through the application of item 28.1, added by Decree-Law no. 55-A/2012, of October 29, embodied in documents numbered 2012 ..., resulting in an amount due of €6,019.16 and number 2013 ..., resulting in an amount due of €4,163.26.
10.3. At the date of those assessments, the property had taxable real property values of €1,203,832.00 and €1,248,975.00, respectively.
10.4. The Claimant filed a courtesy complaint and hierarchical appeal, which were rejected.
10.5. He contends that the Respondent acted illegally and unconstitutionally regarding the acts in question.
10.6. He concludes by requesting that the tax arbitral tribunal declare the illegality of the acts in question.
10.7. He further requests reimbursement of the total amount paid pursuant to the assessments described, plus compensatory interest due until the date of reimbursement.
- The Respondent alleges, in summary, that:
11.1. By way of exception, it invokes the lack of jurisdiction of the arbitral tribunal to hear the claim, insofar as it concerns the collection document containing the Stamp Duty assessment, embodied in document no. 2013 ... (1st installment of 2012), issued pursuant to item no. 28 of the Stamp Duty Code Table, in the amount of €4,163.26.
11.2. In support of its thesis, it contends that – pursuant to art. 2 of the LRTA, which delimits the jurisdiction of arbitral tribunals – the request for arbitral pronouncement regarding collection document no. 2013 ... is excluded from its scope, citing decisions rendered in cases 736/2014-T, 27/2015-T, 726/204-T.
11.3. On the merits, it contends the legality of the contested assessments and the interpretation given by the Tax Authority to item no. 28 of the TGIS, concluding finally in favor of dismissal of the claim.
C – Proven Facts
- Based on the facts alleged by the parties and not contested, as well as on the documentation attached to the file, the following relevant facts are established:
12.1. The Claimant was, in 2011 and 2012, owner of the urban property, corresponding to land for construction, located at ..., municipality and parish of ..., registered in the urban real property registry under art. ....
12.2. On November 8, 2012, the Stamp Duty assessment was issued, pursuant to Law no. 55-A/2012, art. 6/subsections l), f) and i), which gave rise to the document identified as no. 2012 ..., resulting in a tax collection of €6,019.16.
12.3. At the date of the assessment, the property had a taxable real property value of €1,203,832.00.
12.4. The following statement appears in this document: "The assessment issued complies with subsections a) through f), of no. 1, of art. 6 of Law no. 55-A/2012, of October 29".
12.5. The Claimant was notified to make payment of the single installment, in the amount of €6,019.16, by December 20, 2012.
12.6. On December 19, 2012, the Claimant made payment of the tax in the amount of €6,019.16.
12.7. On March 22, 2013, a Stamp Duty assessment was issued, by application of item no. 28.1, year 2012, at the rate of 1% on the TRV, which gave rise to the document identified as no. 2013 ..., resulting in a tax collection of €12,489.76.
12.8. At the date of this assessment, the property had a taxable real property value of €1,248,975.70.
12.9. The following also appears in this document: "Tax Year – 2012", and the following statement: "You may file a courtesy complaint or contest the assessment in accordance with the terms and deadlines established in articles 70 and 102 of the TCPP."
12.10. The Claimant was notified to pay the first installment by the end of April 2013, in the amount of €4,163.24.
12.11. On April 29, 2013, the Claimant made payment of the first installment in the amount of €4,163.26.
12.12. The Claimant filed a courtesy complaint and hierarchical appeal, which were rejected by the Respondent.
II – PRELIMINARY MATTERS
The Tribunal is properly constituted, pursuant to articles 5/2 and 6/1, all of the LRTA. The parties have legal capacity and standing, are legitimate and are duly represented, pursuant to art. 4 and 10/2 of the LRTA and art. 1 of Order no. 112-A/2011, of March 22. The proceedings are not affected by defects that would invalidate them.
III. REASONING
The two issues to be decided in the present proceedings are as follows:
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The first issue concerns the jurisdiction of the Arbitral Tribunal to hear the claim relating to the Stamp Duty assessment issued on March 22, 2013;
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The second is to determine whether the scope of item no. 28.1 of the TGIS, as amended by Law no. 55-A/2012, of October 29, specifically whether it includes land for construction, that is, whether land for construction constitutes property with residential purpose for purposes of applying item no. 28.1 of the TGIS, added by art. 4 of Law no. 55-A/2012, of October 29.
a) On the Jurisdiction of the Arbitral Tribunal
The two claims filed by the Claimant, although consistent as to the applicable legal provisions – the application of item no. 28.1 of the TGIS, as amended by Law no. 55-A/2012, of October 29, to land for construction – were defined differently. Whereas with respect to the first claim (document no. 2012 ...), it raised no doubt as to the subject matter of the present proceedings, in the second the Respondent raised an exception of lack of jurisdiction of the Arbitral Tribunal. In fact, the second claim – embodied in the document identified as no. 2013 ... – the Claimant appears to contest its assessment. However, in specifying that claim, the Claimant refers that it results in an amount due of €4,163.26, remaining silent as to the amount of the tax collection resulting from the assessment issued. The identification of the subject matter of the claim, as formulated by the Claimant, may give rise to doubts as to the actual subject matter of the request for arbitral pronouncement, namely, whether the Claimant contests the Stamp Duty assessment or only the payment of the first installment that resulted from that assessment.
The Claimant supported its claim with two documents, the first relating to Stamp Duty assessment no. 2012 ..., in the amount of €6,019.16 and the second to Stamp Duty assessment no. 2013 ..., in the amount of €12,489.78, with payment of the first installment in the amount of €4,163.26.
In the Respondent's view, this latter document constitutes a mere collection document which leads the Respondent to contend that the Claimant does not contest the tax act but merely contests the payment of the first installment of a tax act. It concludes by arguing that, in this respect, the subject matter of the proceedings is the annulment of a collection notice for payment of the first installment of a tax, a matter not within the jurisdiction of tax arbitral tribunals in accordance with art. 2 of the LRTA.
In its response to the exceptions raised, the Claimant contends that the request for arbitral pronouncement concerns the annulment of the Stamp Duty assessment acts pursuant to item no. 28.1 of the Table, of which the collection notice is a mere consequence.
In fact, the formulation of this second claim does indeed appear to generate doubt as to the subject matter of the contest: whether it is the Stamp Duty assessment act or a collection notice concerning the payment of the first installment.
However, from the grounds or reasons invoked by the Claimant and the express references in the request for constitution of the Arbitral Tribunal, it results that the Claimant questions two Stamp Duty assessments: "The Claimant was notified of the Stamp Duty tax assessment acts, identified below" (cf. art. 12), "The Assessments relate to (...) and the rule on which they are based is Item 28 of the TGIS" (art. 13), "The Assessments relate to the Property (...)" (art. 14), "At the date of the Assessments (...)" (art. 20).
It results from the claim that the Claimant requests the Arbitral Tribunal to declare the "illegality of the Stamp Duty assessments issued pursuant to Item 28 of the TGIS and relating to the year 2012, affecting the property located in ..., ... Porto district, Municipality of ... Parish of ... with registry number U-..., based on its illegality/unconstitutionality as it rests on grounds suffering from deficient interpretation of the applicable rules."
From the reference to the contested acts that we can read in art. 12 of the request for constitution of the Arbitral Tribunal, the Claimant states that it was notified of the Stamp Duty assessments that constitute the subject matter of the present request for arbitral pronouncement, by reference to documents numbered 2012 ... and 2013 ..., identifying them as the "Assessments", both relating to the year 2012.
The final formulation of the claim and the petition lead us to conclude that the Claimant contests two Stamp Duty assessments by application of item no. 28.1 of the TGIS, as amended by Law no. 55-A/2012, of October 29, to land for construction, which gave rise to documents numbered 2012 ... and 2013 ....
Although the formulation of the claims does not indeed constitute a perfect model, it is true that the Claimant sufficiently made known to the arbitral Tribunal the legal effect it intended to obtain and which acts emanated by the Respondent that were the object of its annulment claim: two Stamp Duty assessments embodied in documents numbered 2012 ... and 2013 ....
In fact, the Claimant identifies as the subject matter of the arbitral claim the Stamp Duty assessment acts and, consequently, requests the annulment of both, for defect of violation of law.
As is the case law of the Supreme Administrative Court, the law does not impose in this matter rigid, sacred or irreplaceable formulas, requiring only that the contestant describe its claim by setting out its grounds and subject matter, or in other words, the legal effect intended to be obtained through the contestation action (cf. Decision SAC of February 9, 1993, October 4, 1995 and October 29, 2008, rendered in case 541/08). This understanding corresponds to that which also best accords with the principle of effective judicial protection and the principles pro actione.
It is concluded, therefore, that the Claimant intends to have reviewed in the context of the present proceedings the legality of two Stamp Duty assessment acts, so that the subject matter of the present claim refers to two annulment claims of tax assessment acts. Thus it is decided that the Arbitral Tribunal is competent to hear them, pursuant to art. 2/1, subsection a), of the LRTA.
The exception of lack of jurisdiction raised by the Respondent is therefore unfounded.
b) On the Application of Item no. 28.1 of the TGIS to Land for Construction
The issue to be decided in the present proceedings is to determine the scope of application of item no. 28.1 of the TGIS, as amended by Law no. 55-A/2012, of October 29, more specifically, whether it includes land for construction. In brief, the question is whether land for construction constitutes property with residential purpose for purposes of applying item no. 28.1 of the TGIS, added by art. 4 of Law no. 55-A/2012, of October 29.
The Tax Arbitral Tribunal is again called upon to pronounce on the question of whether land for construction, with TRV equal to or greater than €1,000,000.00, can fall within the concept of (urban) property "with residential purpose," to which the already identified item no. 28.1 of the TGIS refers.
This issue has already been considered in several proceedings, both within Tax Arbitration (cf. decisions rendered in cases numbered 42/2013-T, 48/2013-T, 49/2013-T, 51/2013-T, 144/2013-T, 2/2015-T, 54/2015-T and 84/2015-T among others), as well as in successive decisions rendered by the Supreme Administrative Court, which have pronounced on the issue to be decided, repeatedly and uniformly (cf. Decision SAC of April 22, 2015, rendered in case 347/15, and all the case law cited therein, and Decision SAC of April 29, 2015, rendered in case 21/15, Decision SAC of July 8, 2015 rendered in case 573/15 among others), without identifying, to date, arguments that would allow breaking the unanimity achieved by the decisions already rendered, thus warranting reiteration of the established case law, which decided that "land for construction" cannot be considered, for purposes of the application of Stamp Duty provided for in item no. 28.1 of the TGIS, as amended by Law no. 55/2012, of October 29, as (urban) property with residential purpose.
Item no. 28 of the TGIS, attached to the Stamp Duty Code (SDC), was added by art. 4 of Law no. 55-A/2012, of October 29, in effect at the date of the assessment in question in these proceedings, and read as follows:
"28 – Ownership, usufruct or right of superficies of urban property whose taxable real property value recorded in the registry, in accordance with the Municipal Property Tax Code, is equal to or greater than €1,000,000 – on the taxable real property value for purposes of Municipal Property Tax:
28.1 – Per property with residential purpose – 1%;
28.2 – Per property, when the taxpayers that 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 Ministry of Justice – 7.5%."
The wording of item no. 28.1 was subsequently amended by Law no. 83-C/2013, of December 31, which approved the State Budget for 2014, with point 28.1 now using the concept of residential property, and providing as follows: "28.1 Per residential property or per land for construction whose building, authorized or foreseen, is for residential purposes, in accordance with the Municipal Property Tax Code – 1%". However, the legislative amendment does not apply to the present proceedings which relate to prior years. In fact, as was noted in the Decision of the Supreme Administrative Court of April 29, 2015, this amendment does not apply to prior situations (assessments from 2012 and 2013).
As we have already mentioned, the question posed in the present proceedings is to determine the scope of application of item no. 28.1 of the TGIS as amended by Law no. 55-A/2012, of October 29, that is, to ascertain whether land for construction can fall within the concept of (urban) property with residential purpose.
Let us see:
The concept of (urban) property with residential purpose was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the SDC or in the MPTC to which art. 67/2 of the SDC refers for subsidiary purposes, when matters not regulated relating to item no. 28.1 of the TGIS are at issue, was the concept of property with residential purpose defined.
From a reading of the MPTC we find a distinction between urban and rural property, with urban property being defined as all property that should not be classified as rural – cf. art. 4 of the MPTC. Article 6/1 of that law tells us that urban property is divided into: residential [subsection a)], commercial, industrial or service [subsection b)]; land for construction [(subsection c)] and others [(subsection d)].
The MPTC defines residential, commercial, industrial or service properties as buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal purpose each of these uses – cf. art. 6/2 of the MPTC. Land for construction is defined as land located, within or outside an urban cluster, for which a license or authorization has been granted, prior communication admitted or prior favorable information issued for subdivision or construction operations, and also those declared as such in the acquisition document, excepting land in which the competent entities prohibit any of those operations, namely, those located in green zones, protected areas or that, in accordance with municipal land use plans, are assigned to public spaces, infrastructure or facilities – cf. art. 6/3 of the MPTC.
It results, therefore, that the MPTC does not offer a specific definition of what constitutes property with residential purpose, and the question of what its scope of application should be was raised in the various disputes arising from the original wording of item no. 28.1.
As has been upheld in the various decisions and arbitral awards already mentioned, the term "residential purpose" can have no meaning other than "residential" use, that is, urban property with effective use for residential purposes, whether because they are licensed for such purposes or because they have that normal purpose.
Land for construction, not being built upon, does not of itself satisfy any condition to be considered property with residential purpose, since it does not have a license for residential use and, on the other hand, is not, by its own nature, habitable.
In fact, the residential purpose referred to in the MPTC is always referred to "buildings" or "constructions," existing, authorized or foreseen, because only these can be inhabited, which does not happen, naturally, with land for construction. Or, in other words, land for construction is not susceptible of being used for residential purposes.
The fact that in determining the TRV of urban property classified as land for construction the intended use authorized or foreseen is taken into account in determining the respective value of the site area (cf. art. 45/1 and 2 of the MPTC) does not transform land for construction into property with residential purpose.
The term urban property with residential purpose found in item no. 28.1 of the TGIS, when compared with the categories of property found in art. 6, no. 1, excludes from its scope of application urban property that is not residential, such as property with commercial, industrial uses, land for construction and others, the categories of which we can read in art. 4/1, subsections b) through d) of the MPTC.
On the other hand, as was emphasized in earlier decisions on this matter, at the time of presentation and discussion in Parliament of bill no. 96/XII (2nd), the Secretary of State for Tax Affairs expressly stated:
"The Government proposes the creation of a special tax on residential urban property of higher value. It is the first time in Portugal that special taxation on high-value properties intended for residential purposes is created. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to homes with a value equal to or greater than 1 million euros."
As was emphasized by decision no. 144/2013-T of the CAAD, the Secretary of State for Tax Affairs presented this bill referring to the terms "residential urban property," which are those listed in subsection a), no. 1, of art. 6 of the SDC, and "homes," it being clear that, in either case, these concepts do not include land for construction, which is referred to in subsection c) of the cited provision.
Thus, land for construction does not fall within the concept of property with residential purpose provided for in item no. 28.1 of the TGIS.
In light of the foregoing, it is reiterated, following the decisions already rendered, that land for construction is not covered by the concept of (urban) property with residential purpose contained in item no. 28.1 of the TGIS, as amended by Law no. 55-A/2012, of October 29, that is, as amended prior to the State Budget Law for 2014.
Having no legal basis for the assessments issued, their annulment is warranted.
c) On Compensatory Interest
The Claimant requests the condemnation of the Tax Authority to reimburse the tax improperly paid in the total amount of €10,182.42, as well as the respective compensatory interest.
Article 43/1 of the General Tax Law provides that "compensatory interest is due when it is determined, through courtesy complaint or judicial contest, that there was an error attributable to the services resulting in payment of the tax debt in an amount greater than legally due."
Article 24/1, subsection b) of the LRTA provides that the "arbitral decision on the merits of the claim which does not allow for appeal or contestation binds the tax administration from the end of the deadline for appeal or contestation, and it must, in the exact terms of the merits of the arbitral decision in favor of the taxpayer and until the end of the deadline for voluntary execution of sentences of tax judicial courts, restore the situation that would have existed if the tax act that is the subject of the arbitral decision had not been taken."
Since, in the case at bar, there is illegality of the contested assessment, due to error in the legal grounds, attributable to the Tax Administration that issued the contested assessment, due to incorrect application and interpretation of item no. 28.1 of the TGIS, the Claimant is entitled to reimbursement of the tax paid in the amount of €6,019.16 and €4,163.26 and to compensatory interest calculated from the date of payment until full reimbursement, at the interest rate resulting from art. 43/4 of the General Tax Law.
Decision:
For the reasons set out, the Arbitral Tribunal decides:
a) To dismiss the exception of lack of jurisdiction raised by the respondent;
b) To grant the request for arbitral pronouncement and, as a consequence, to declare illegal the Stamp Duty assessments at issue, which gave rise to the documents numbered 2012 ..., dated November 8, 2012 and 2013 ..., dated March 22, 2013, with all legal consequences;
c) To grant the request for condemnation of the Tax and Customs Authority to reimburse the Claimant the value of the tax improperly paid, in the amount of €10,182.42, plus compensatory interest from the date each payment was made until the date of its full reimbursement;
d) To condemn the Respondent to pay the costs of the present proceedings.
Value of the Case:
In accordance with the provisions of art. 306/1 and 2 of the Code of Civil Procedure, combined with art. 97-A/1, subsection a) of the Tax Process and Procedure Code (TPPC) and art. 3/2 of the Regulation on Costs in Tax Arbitration Proceedings, the value of the case is set at €18,508.92, which constitutes the total amount of tax resulting from the contested assessments whose annulment was requested.
In fact, the subject matter of the present proceedings, as results from the request contained in the initial petition, is the contestation of two Stamp Duty assessments, whose total tax collection is €18,508.92, so this is the amount whose annulment was requested (art. 97-A/1, subsection a) of the TPPC).
Costs:
For purposes of art. 12/2 and art. 22/4 of the LRTA and art. 4/4 of the Regulation on Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €1,224.00, in accordance with Table I attached to the Regulation, to be borne entirely by the Respondent.
Lisbon, November 26, 2015
The Arbitrator,
(Alexandra Gonçalves Marques)
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