Stamp Tax on High-Value Properties: CAAD Ruling 296/2014-T on Verba 28.1 TGIS

ARBITRAL DECISION

CAAD: Tax Arbitration

Process No. 296/2014 – T

Subject: IS – Item 28.1 of the GSIS

I – Report

1. On 27 March 2014, A, S.A., legal person No. …, with registered office at Street …, hereinafter designated as Claimant, requested the constitution of an arbitral tribunal and submitted a request for an arbitral pronouncement, pursuant to paragraph a) of No. 1 of article 2 and paragraph a) of No. 1 of article 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as LFTM), in which the Tax and Customs Authority (hereinafter designated as TCA) is the Respondent.

2. The Claimant is represented, in the scope of the present proceedings, by its representatives, … and …, and the Respondent is represented by the legal experts, … and ….

3. The request for constitution of the arbitral tribunal was accepted by the Honorable President of CAAD and was notified to the Respondent on 31 March 2014.

4. By means of the request for constitution of the arbitral tribunal and pronouncement, the Claimant seeks the annulment of the following acts of assessment of Stamp Duty, relating to the year 2012, in the total amount of € 15,985.30, which are as follows:

1. Having verified the formal regularity of the presented request, pursuant to paragraph a) of No. 2 of article 6 of the LFTM and because the Claimants did not proceed to appoint an arbitrator, Dr. Jorge Carita was designated by the President of the Deontological Board of CAAD.

2. The Arbitrator accepted the appointment made, and the arbitral tribunal was constituted on 4 June 2014, at the headquarters of CAAD, located at Avenida Duque de Loulé, No. 72-A, in Lisbon, as per the minutes of constitution of the arbitral tribunal that was drawn up and is attached to the present proceedings.

3. On 10 July 2014, the Respondent presented its respective Answer, contending that the claims formulated by the Claimant are unfounded, and consequently, for the dismissal of the Respondent regarding the request presented against it.

4. There was no occasion for the first meeting of the arbitral tribunal as it was waived, in light of the request from the Respondent of 10.07.2014, and regarding which, having been notified for this purpose, the Claimant said nothing.

5. No exceptions having been raised, there being no need for the production of additional evidence beyond that which documentarily is already incorporated in the proceedings, the proceedings containing all the necessary elements for the pronouncement of a decision, for reasons of procedural economy and celerity, and in light of the position manifested by the parties expressed and tacitly, the Tribunal understood that, in addition to waiving the meeting of art. 18, as referred to, it should waive the presentation of memoranda.

6. The Tribunal, in compliance with No. 2 of article 18 of the LFTM, designated 24 November 2014 as the date for the pronouncement of the arbitral decision.

II. The Claimant sustains its requests, in summary, as follows:

The Claimant supports the request for annulment of the acts of assessment of stamp duty to which it was subjected, with respect to the floors or parts susceptible of independent use, allocated to residential use, of the property located at …, in Lisbon, registered in the cadastral matrix under article … of the parish of … and described in the Property Registry Office of Lisbon under number …, municipality of …, which is in vertical ownership, on the grounds that the acts of assessment of IS sub judice are illegal, based on:

a) Violation of law by error concerning the factual and legal premises, namely, that had "as an erroneous premise the consideration of a VPT of € 1,598,530.00 (one million five hundred and ninety-eight thousand five hundred and thirty euros) resulting from the sum of the VPTs of all fractions with residential allocation of the urban property identified above, when, the VPT for purposes of incidence of IS under item 28.1 of the GSIS should have been assessed separately for each fraction, as they are units with independent use, subsumable in the concept of 'urban property' for purposes of application of that rule, given that the said fractions considered separately in the cadastral registration, and being the VPT of each one less than € 1,000,000.00, there would consequently be no occasion for the assessment of IS pursuant to the said item 28.1 of the GSIS."

b) In the violation of the principles of fiscal legality and material truth, because the TCA taxed in stamp duty, distinguishing where the legislator did not do so, differentiating the regime of vertical ownership from horizontal ownership, "ignoring the material truth underlying the existence of each fraction with independent use as an urban property";

c) In the violation of the principle of fiscal equality and the principle of taxpayer capacity, on which property taxes rest, given that it seems "the tax legislator wished to discriminate against holders of properties constituted in the regime of horizontal ownership in relation to owners of properties in vertical ownership constituted by economically autonomous fractions, to the detriment of the latter", since it understands to be "identical the realities consisting in the autonomous fractions of properties constituted in the regime of horizontal ownership and in the fractions with independent use of properties in vertical ownership, both framed in the concept of property contained in article 2 No. 1 of the MPIT", whereby "the legal criterion for defining the incidence of IS pursuant to item 28.1 of the GSIS must be the same";

d) Concluding to the effect that "the acts of assessment of IS object of the present request for pronouncement suffer from the vice of violation of law, by error attributable to the services of the Tax Administration, in the erroneous qualification, interpretation and application of the law, having violated No. 1 of article 1 of the CIS, as well as item No. 28 of the GSIS, read in conjunction with articles 2, No. 1 and 12, No. 3 of the MPIT and articles 58 of the LGT, 13, 103 No. 1 and 2, 104 No. 3 and 266 No. 2 of the CRP, for which reason the same should be annulled, as well as the respective collection documents."

III. In its Answer, the Respondent invoked, in summary, the following:

For its part, the TCA comes to allege, in its answer:

a) "at the time, the Claimant held full ownership of the urban property under analysis, evaluated pursuant to the MPIT, in the scope of the general evaluation, described as 'property in full ownership with floors or divisions susceptible of independent use' r/ch, plus 4 floors or divisions susceptible of independent use and allocated to residential use, with patrimonial value for tax purposes (VP) exceeding € 1,000,000.00 (1,598,530.00€)";

b) That the TCA proceeded to the assessment object of the present request for pronouncement, in compliance with and pursuant to the terms of article 6, No. 2 of Law No. 55-A/2012, of 29.10, which added item No. 28 to the GSIS and whose respective incidence rule refers to urban properties, evaluated pursuant to the MPIT, with VPT equal to or exceeding € 1,000,000.00, whereby it is a matter of "an assessment that results from the direct application of the legal rule";

c) Regarding the alleged violation of law by error concerning the legal premises, it responds by saying that: "the legislator safeguards the aspects that lack the necessary adaptations, namely those in which, as is the case of properties in full ownership, even though with floors or divisions susceptible of independent use (although the IMI is assessed regarding each part susceptible of independent use) for purposes of IS, the property as a whole is relevant, because the divisions susceptible of independent use are not had as a property, but merely autonomous fractions in the regime of horizontal ownership, as per No. 4 of art. 2 of the MPIT";

d) Moreover, it understands that, "which expressly results from the letter of the law is that the legislator wished to tax with item 28.1 in discussion the properties as a single legal-tax reality";

e) The assessments of stamp duty relating to the year 2012 were made by the Respondent, taking into account the nature of the urban property, at the date of the taxable event, applying, with the necessary adaptations, the rules contained in the MPIT;

f) Thus, the Respondent argues that, being the property in the regime of full ownership, not possessing autonomous fractions, to which the tax law attributes the qualification of property, because from the notion of property of article 2 of the MPIT, only autonomous fractions of property in the regime of horizontal ownership are had as properties – No. 4 of article 2 of the MPIT;

g) Regarding the alleged violation of the principle of equality, the Respondent argues that there is no discrimination in the taxation of properties constituted in horizontal ownership and property in full ownership with floors or divisions susceptible of independent use, or between properties with residential allocation and properties with other allocations, since "horizontal ownership and vertical ownership are different legal institutions, and the constitution of the first implies merely a legal alteration of the property, there being no evaluation, (office-circular No. 40,025, of 11.08.200, of the DSCA), but the legislator can, nevertheless, submit to a distinct tax legal framework, and thus, discriminatory, properties in the regime of horizontal ownership and vertical, in particular, benefiting the legally more evolved institute of horizontal ownership, without that discrimination should be considered necessarily arbitrary";

h) It further submits that "this discrimination can also be imposed by the need to impose coherence to the tax system", without, however, implying the violation of any principle of tax law or even constitutional law;

i) Item 28.1 of the GSIS, relating to the ownership, usufruct or right of surface of urban properties with residential allocation, whose patrimonial value for tax purposes contained in the matrix, pursuant to the MPIT, is equal to or exceeding € 1,000,000.00, is a general and abstract rule, applicable indistinctly to all cases in which the respective factual and legal premises are met;

j) It maintains, moreover, that the constitution of horizontal ownership determines the division/partition of full ownership and the independence or autonomy of each of the fractions that constitute it, for all legal purposes, pursuant to No. 2 of article 4 of the MPIT and art. 1414 and following of the CC, whereas a property in full ownership constitutes, for all purposes, a single legal-tax reality;

k) Concluding to the effect that the alleged discrimination in violation of the principle of equality is not verified, because we are dealing with distinct realities, valued by the legislator differently;

l) Finally, it concludes by arguing that "the tax acts in question do not violate any legal or constitutional principle, and should therefore be maintained."

IV. Sanation

The Tribunal is competent and is regularly constituted, pursuant to paragraph a) of No. 1 of article 2 and articles 5 and 6, all of the LFTM.

The parties have legal personality and capacity, show themselves to be legitimate and are regularly represented.

There are no nullities, exceptions or preliminary matters that prevent the tribunal from hearing the merits of the claim.

V. Factual Matter

With interest for the decision, the following facts are taken as proved:

• The Claimant is the owner of the urban property located at …, registered in the matrix under article … of the parish of ... and described in the Property Registry Office … under number …. (cf. Permanent Property Certificate and Urban Property Booklet, attached as Documents 3 and 4).

• The property comprises a total of four fractions with independent use, namely: …, corresponding, respectively, to the ground floor, 1st, 2nd, 3rd and 4th floors (cf. Permanent Property Certificate and Urban Property Booklet, attached as Documents 3 and 4).

• The property in question is in the regime of vertical ownership or complete ownership, with the floors and divisions with independent use allocated to residential use. (cf. property booklet attached as Document No. 4).

• The said urban property was subject to general evaluation pursuant to article 38 and following of the MPIT and art. 15-D of DL 287/2003 of 12/11, with each of its fractions being individually considered and evaluated in that procedure, with the VPT determined separately (cf. evaluation notifications attached as Document No. 5).

• The sum of the VPTs of the said residential fractions amounts to € 1,598,530.00 (one million five hundred and ninety-eight thousand five hundred and thirty euros), with each of the fractions having a VPT of less than € 1,000,000.00 (one million euros). (cf. Document No. 5 and 6).

• The cadastral registration No. 216 separately identifies each one of the fractions, also being discriminated the respective VPT resulting from the general evaluation (cf. Document No. 4).

• The IMI of 2012 was assessed individually in relation to each fraction (cf. collection notes of the IMI – single installment and additional – attached as Document No. 6).

• The Claimant was notified of the acts of assessment of IS regarding the year 2012 identified in the collection documents No. …, No. …, No. …, No. … and No. … made on 14 July 2013 by the Finance Office of …, assessed, pursuant to item 28.1 of the General Table of Stamp Duty ("GSIS") individually, in relation to each residential fraction of the urban property on which that tax is levied, in the amounts of, respectively, € 3,439.60 (three thousand four hundred and thirty-nine euros and sixty cents), (in the collection document regarding fraction 1st 56) € 3,439.60 (three thousand four hundred and thirty-nine euros and sixty cents), (in the collection document regarding fraction 2nd+S), € 2,679.30 (two thousand six hundred and seventy-nine euros and thirty cents) (in the collection document regarding fraction 2nd 58), € 3,021.20 (three thousand and twenty-one euros and twenty cents) (in the collection document regarding fraction RC 56) and € 3,405.60 (three thousand four hundred and five euros and sixty cents) (cf. Document No. 1).

• From the sum of the said acts of assessment resulted a total amount of IS to be paid of € 15,985.30 (fifteen thousand nine hundred and eighty-five euros and thirty cents). (cf. Document No. 1).

• On 30 December 2013, the Claimant proceeded to full payment of the amounts corresponding to the assessments of IS object of the present request for pronouncement (cf. payment proofs attached as Document No. 7).

VI. Motivation regarding the Factual Matter

For the conviction of the Arbitral Tribunal, regarding the facts proved, the documents attached to the proceedings were relevant, as well as the administrative process, all analyzed and considered in conjunction with the written submissions, from which results agreement regarding the factuality presented by the Claimant in the request for pronouncement.

VII. Facts taken as not Proved

There are no facts taken as not proved, because all facts relevant to the appraisal of the claim were taken as proved.

VIII. Grounds of Law

In the present case, there are two questions of law in dispute:

1. whether subjection to stamp duty, pursuant to what is provided in item No. 28 of the GSIS, relating to the year 2012, is determined by the VPT that corresponds to each one of the parts of the property with residential allocation, or whether, instead, it is determined by the global VPT of the property, which would correspond to the sum of all VPTs of the floors that compose it – Incidence of item 28.1 of the GSIS;

2. whether item No. 28 of the GSIS is unconstitutional by violation of the principle of equality, as well as of the provisions of article 104, No. 3, of the CRP, in the interpretation that the TCA makes of it;

3. whether the Claimant, should the preceding matters proceed, is entitled to indemnity interest.

Let us see,

A – On the incidence of item 28.1 of the GSIS

1. Law No. 55-A/2012, of 19 October (hereinafter referred to as Law No. 55-A/2012 or simply Law), proceeded to the amendment, among others, of various articles of the Code of Stamp Duty, more specifically 12 of its articles.

2. The fundamental amendment, which conditions all others, is contained in article 4 of Law No. 55-A/2012, which adds to the General Table of Stamp Duty (GSIS), annexed to the Code of Stamp Duty (CIS), a new item, No. 28, with the following wording:

"28. Ownership, usufruct or right of surface of urban properties whose patrimonial value for tax purposes contained in the matrix, pursuant to the Code of Municipal Property Tax (MPIT), is equal to or exceeding (euro) 1,000,000 - on the patrimonial value for tax purposes used for purposes of IMI:

28.1 Per property with residential allocation ───────────────────────────── 1%

28.2 Per property, when the taxable persons 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 ministerial order of the Minister of Finance ────────────────────── 7.5%

1. Thus, according to the said item, and in what here concerns us, only is subject to Stamp Duty the ownership, usufruct, right of surface of:

a) "urban properties,

b) with residential allocation,

c) And whose patrimonial value for tax purposes contained in the matrix, pursuant to the Code of Municipal Property Tax (MPIT), is equal to or exceeding (euro) 1,000,000;" (underlined ours)

1. The logic of the taxation of wealth and fortune prevails, with greater or lesser intensity, within the framework of this law, a conclusion that results from the generalized increase in the tax burden, in the financial logic, exclusively directed at tax situations that would produce immediate revenue.

2. The taxation of capital income is increased, the list of manifestations of fortune is expanded, the taxation of income obtained in Portugal by entities domiciled in tax havens is increased, and finally, to all of this is added the taxation of properties for residential use, of value exceeding € 1,000,000.00.

3. And if the legislator includes in this law properties for residential use, setting a value above which they would start to be taxed by another tax, such could only mean that he considered that whoever was the owner of a property of that value, such expressed an indicative element of additional means of fortune, which could be called upon to participate in the collective effort of collection of supplementary tax revenues.

4. In fact, the legislator in introducing this legislative innovation considered as a determining element of taxpayer capacity urban properties with residential allocation, of high value (luxury), more precisely, of value equal to or exceeding € 1,000,000.00, on which a special rate of stamp duty now applied, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of surface of luxury urban properties with residential allocation. Therefore, the criterion was the application of the new rate to urban properties with residential allocation, whose VPT is equal to or exceeding € 1,000,000.00.

5. This same conclusion results from the analysis of the discussion of legislative proposal No. 96/XII in the Assembly of the Republic, available for consultation in the Diary of the Assembly of the Republic, I series, No. 9/XII/2, of 11 October 2012.

6. The justification of the measure designated as "special tax on the highest-value residential urban properties" rests on the invocation of the principles of social equity and fiscal justice, calling to contribute in a more intense manner the holders of properties of high value intended for residential use, bringing to bear the new special rate on the "properties with value equal to or exceeding 1 million euros."

7. In fact, the legislator clearly considered that this value, when attributed to a residence (house, autonomous fraction or floor with independent use) reflected a taxpayer capacity above the average and, as such, capable of determining a special contribution to ensure the fair distribution of the fiscal burden.

8. Also following these considerations inspiring the legislative innovation under appraisal, it must be concluded that the existence of a property in vertical or horizontal ownership cannot be, by itself, an indicator of taxpayer capacity.

9. On the contrary, from the law it follows that some and others should receive the same tax treatment, in obedience to the principles of justice, fiscal equality and material truth.

10. In fact, the existence in each property of independent residences, in the regime of horizontal or vertical ownership, may be capable of triggering the incidence of the new tax, but only if the VPT of each one of the parts or fractions is equal to or exceeding the limit defined by the law: € 1,000,000.00.

11. It does not seem sensible that urban properties can be framed as a whole, i.e., constituted by independent units, with separate VPT evaluations.

12. As mentioned, the introduction of Law No. 55-A/2012, of 19 October, intended to tax in fact luxury.

13. Now, the property in question belongs to the Claimant, and is composed of 4 divisions with independent use, all with residential allocation.

14. It is the understanding of the TCA that the sum of the VPTs relating to those 4 divisions with independent use that have residential allocation, totaling a global VPT of € 1,598,530.00 (one million, five hundred and ninety-eight thousand, five hundred and thirty euros), in the year 2012, gives rise to the incidence of stamp duty, for which reason it understood to proceed to the assessment of the Stamp Duty impugned in the present proceedings.

15. Thus, from the viewpoint of the TCA, for a property in vertical ownership (or not constituted in the regime of horizontal ownership) the criterion for determining the incidence of stamp duty is the global VPT of the floors and divisions intended for residential use.

16. Let us see whether the thesis of the TCA is convincing.

17. Law 55-A/2012, of 29 October entered into force on the day following its publication, that is to say, on 30 October 2012.

18. However, it says nothing concerning the qualification of the concepts in question, namely, concerning the concept of "property with residential allocation", which here concerns us.

19. However, article 67, No. 2 of the Code of Stamp Duty, added by the said Law, provides that "to matters not regulated in the present code relating to item 28 of the General Table, the MPIT is applied subsidiarily."

20. Thus, we have that the incidence rule refers to urban properties, whose concept is the one resulting from the provisions of article 2 of the MPIT, with the determination of the VPT obeying the terms of article 38 and following of the same code.

21. Consulting the MPIT, it is verified that its article 6 only indicates the different types of urban properties, among which it mentions residential properties (see paragraph a) of No. 1), clarifying in No. 2 of the same article that "residential, commercial, industrial or service properties are buildings or constructions licensed for such or, in the absence of license, that have as their normal purpose each one of these ends."

22. From this we can conclude that, in the perspective of the legislator, what matters is not the legal-formal rigor of the concrete situation of the property, but rather its normal use, the purpose to which the property is destined.

23. Furthermore, we note that, for the legislator the situation of the property in vertical or horizontal ownership did not matter, as no reference or distinction is made between one and the other. What does matter is the material truth underlying its existence as an urban property and its use.

24. In fact, the subjection to the stamp duty contained in item No. 28.1 of the GSIS is determined by the combination of three facts, namely:

a) being before an urban property;

b) residential allocation; and

c) the VPT contained in the matrix equal to or exceeding €1,000,000.00.

1. Now, dealing with a property with the characteristics described above and which appear in the property booklet attached as Document No. 4, the subjection to stamp duty must be determined not by the VPT of the property "as a whole", but by the VPT attributed to each of the floors or divisions with independent use, allocated to residential use.

2. Thus, the understanding of the TCA to the effect that the sum of the VPTs of the various fractions or divisions with independent use allocated to residential use, resulting in a global VPT equal to or exceeding € 1,000,000, legitimates the incidence of stamp duty, pursuant to item 28 of the GSIS, under the general rule, is manifestly illegal!

3. Thus, there not being, in this manner, a single fraction or division with independent use, allocated to residential use, with VPT equal to or exceeding € 1,000,000, could the TCA never subject the Claimant to stamp duty, pursuant to item 28 of the GSIS, of the year 2012, which is now being impugned, as the same is illegal, and therefore unacceptable and non-conforming, among others, with the principle of fiscal legality, as well as with the principle of equality, provided constitutionally in article 13 of the Constitution of the Portuguese Republic (CRP).

B – On the principle of equality – article 13 of the Constitution of the Portuguese Republic in the application of item 28.1 of the GSIS.

1. In fact, the constitutional principle of fiscal equality, as a specific expression of the general structural principle of equality (article 13, of the CRP), is not limited to the rule of universality of taxes, according to which these apply to all those who have taxpayer capacity, determining also that all should be bound to the payment of taxes on the basis of the same criterion - the rule of uniformity of taxes.

2. According to this rule, what is equal should be taxed equally, and what is unequal should be taxed unequally, in the measure of that inequality.

3. The tax legislator cannot treat equal situations in a different manner. Now, if the property were to be found in the regime of horizontal ownership, none of its residential fractions would suffer incidence of the new tax.

4. For this very reason, article 12, No. 3 of the MPIT says that "each floor or part of property susceptible of independent use is considered separately in the cadastral registration which equally discriminates the respective patrimonial value for tax purposes."

5. In consequence, the discrimination that is verified, and that is being operated by the TCA in the concrete case, translates into an arbitrary and illegal discrimination. Nothing in the law imposes the obligation of constitution of horizontal ownership.

6. On the other hand, it is known that many of the properties existing in vertical ownership are old, with an undeniable social utility, as in many cases they accommodate residents with modest rents and more accessible, factors that must necessarily be taken into account. And, certainly, taking into account all that social and economic reality, the tax legislator himself in the MPIT treated the two situations (horizontal and vertical ownership) in an equitable manner, applying the same criteria.

7. The TCA cannot distinguish where the legislator himself understood not to do so, under penalty of violating the coherence of the tax system, as well as the principle of fiscal legality, provided for in article 103, No. 2 of the CRP, and also the principles of justice, equality and fiscal proportionality.

8. However, it should be stated that the constitutional principles are here invoked only as support for an interpretation according to the CRP, given that the operation of assessment of IS carried out by the TCA, in the situation of the proceedings, is not in conformity with item 28 of the GSIS and No. 7 of article 23 of the CIS.

9. Following this reasoning, and transcribing what has already been sanctioned in the Decisions of the CAAD in processes No. 30/2014 and 177/2014 T which we subscribe to in their entirety:

"The matter does not require, in our understanding, to be raised to the level of violation of the CRP, sufficing, in compliance with the provisions of No. 7 of article 23 of the CIS, that there be carried out a reading, 'with the necessary adaptations of the rules of the MPIT' that will be to consider that the expression 'each urban property' comprises not only floors in horizontal ownership (which are urban properties ope legis) but also 'floors or parts of property susceptible of independent use' (No. 3 of article 12 of the MPIT).

That is, at the level of the interpretation of tax norms one can use the very own rule that is contained in No. 3 of article 11 of the LGT: 'persisting the doubt as to the meaning of the incidence norms to apply, one must pay attention to the economic substance of the tax facts.'

Now, if, for example, for the floors that make up the autonomous fractions of urban properties for residential use, in horizontal ownership, (even though they are by definition and 'ope legis' urban properties) the VPTs are not added to determine the threshold of the VPT eligible for subjection to IS (1,000,000.00 euros) of item 28 of the GSIS (operation of determination of taxable matter), because is it that regarding the 'parts of property or floors' of properties in vertical ownership such must occur?

In both cases the same taxpayer capacity is manifested (his level of wealth at the level of real property). It is the same 'economic substance' analyzed on different angles.

Items 28 and 28-1 of the GSIS, as incidence norms of IS, in the reading that is proposed in this decision, do not suffer this time of any non-conformity with the text of the fundamental law. (…)

In truth it is the said rule, in its literality, particularly the final part of item 28 of the GSIS, combined with No. 7 of article 23 of the CIS, that permits concluding, with the 'necessary adaptations of the rules of the MPIT' that the TCA should not add the VPTs of the floors or part of the property identified above to find a new VPT relating to those that are allocated to residential purposes, separate from the VPT of those that are allocated to other purposes."

1. Having said this, the unequal taxation of the now claimant, compared with a situation in which the property is found in horizontal ownership of identical characteristics, is manifestly illegal and unconstitutional to consider as reference value the one corresponding to the sum of the VPTs attributed to each part or division, because it is a clear violation, among others, of the principle of equality and proportionality in tax matters, nothing legitimating the interpretation that the TCA makes of the applicable legal norms.

2. Finally, one cannot fail to mention the recent jurisprudence of the CAAD, handed down on the subject "Stamp Duty – Item 28, vertical ownership", in processes No. 185/2013-T, No. 183/2013-T, No. 181/2013-T, No. 132/2013-T, No. 50/2013-T, No. 248/2013-T of the CAAD, among others, whose motivation of law, the present tribunal adheres to in its entirety regarding the matter of the incidence of item 28.1 of the GSIS.

3. In light of the foregoing, there not being, in this manner, a single fraction or division with independent use, allocated to residential use, with VPT equal to or exceeding € 1,000,000, the acts of assessment of Stamp Duty relating to the year 2012, in the amount of € 15,985.30, are null, by violation of the provisions in item 28.1 of the GSIS and in article 13 of the CRP.

C – On Indemnity Interest

1. The Claimant further petitions that the right to indemnity interest be recognized, on the grounds of error attributable to the services.

2. No. 1 of article 43 of the LGT and article 61 of the Code of Tax Procedure and Process provide that indemnity interest is due when it is determined in a gracious complaint or judicial impugnation that there was error attributable to the services from which results the payment of tax debt in an amount higher than that legally due.

3. Error attributable to the administration is considered when the error is not attributable to the taxpayer and rests on erroneous factual premises that are not the responsibility of the taxpayer.

4. Now, resulting from the impugned tax act the obligation to payment of tax exceeding that which would be due, indemnity interest is due pursuant to the legally provided terms, the legislator presuming, in these cases, in which the annulment of the assessment is verified, that there occurred in the taxpayer's sphere a prejudice by virtue of having been deprived of the patrimonial amount that he had to deliver to the State by virtue of an illegal assessment. In consequence, the taxpayer has the right to this indemnification, independent of any allegation or proof of the prejudice suffered.

5. In the present case, it will be unquestionable that, in the sequence of the establishment of the illegality of the act of assessment, there will be occasion for reimbursement of the tax by virtue of the provisions of No. 1 of article 43 of the LGT, and of article 100 of the LGT, passing necessarily by there the restoration of the "situation that would exist if the tax act object of the arbitral decision had not been practiced."

6. Likewise, it is understood that it will be free from doubt that the illegality of the act is attributable to the Tax Authority, which autonomously practiced it in an illegal manner.

7. As to the concept of "error", it has been understood that only in cases of annulments grounded in vices relating to the tax legal relationship will there be occasion for the payment of indemnity interest, with such right not being recognized in the case of annulments due to procedural or formal vices.

8. Thus, being before a vice of violation of substantive law, which is embodied in error regarding the legal premises, attributable to the Tax Authority, the Claimant has the right to indemnity interest, in accordance with articles 43, No. 1 of the LGT, and 61 of the CPPT, calculated on the sum of € 15,985.30, and counted from the payment of the tax until the full reimbursement of the said amount.

DECISION

In harmony with the foregoing, it is decided:

1. Annul all acts of assessment of Stamp Duty impugned by the Claimant, relating to the year 2012.

2. Condemn the Tax and Customs Authority to reimburse the Claimants of the sum that they paid, increased with indemnity interest, calculated at the legal rate, from the payment of the tax until the full reimbursement.

Value of the Process

The value of the process is set at € 15,985.30 pursuant to art. 97-A, No. 1, a), of the CPPT, applicable by virtue of paragraphs a) and b) of No. 1 of art. 29 of the LFTM and of No. 2 of art. 3 of the Regulation of Costs in Tax Arbitration Processes.

Costs

Costs charged to the Respondent in accordance with article 22, No. 2 of the LFTM, of article 4 of the RCPAT, and of Table I attached to the latter, which are fixed at the amount of € 918.00.

Notify.

Lisbon, 27 November 2014

The Arbitrator

(Jorge Carita)