Summary
Full Decision
ARBITRAL DECISION
The Arbitrator Marisa Almeida Araújo, appointed by the Deontological Council of the Administrative Arbitration Center (CAAD) to constitute this Singular Arbitral Tribunal, makes the following:
ARBITRAL DECISION
Report:
1.1. A…, Lda., a limited liability company with tax identification number…, (hereinafter referred to as the "Claimant"), with registered office at …, no.…, …, …-… Lisbon, submitted a request for arbitral pronouncement and constitution of a singular arbitral tribunal, on April 28, 2017, pursuant to the provisions of article 4 and no. 2 of article 10 of Decree-Law no. 10/2011, of January 20 (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "LFATM"), wherein the Tax and Customs Authority (hereinafter referred to as the "Respondent" or "TCA") is the Defendant.
1.2. The Claimant seeks in the aforementioned request for arbitral pronouncement that:
(i) The nullity of the stamp duty assessment of item 28.1 of the General Tax Table, relating to the fiscal year 2014, in the total amount of € 32,345.44 (thirty-two thousand, three hundred and forty-five euros and forty-four cents), dated 20/03/2015, be declared, or if not deemed appropriate, which is not granted, that its annulment be ordered.
(ii) The TCA be condemned to pay to the Claimant the amount unduly paid by it, plus compensatory interest on that amount, calculated from the date of the undue payment until the date of issuance of the respective credit note, at the legal rate, based on the provisions of nos. 1 and 2 of article 43 of the General Tax Code and article 61 of the Tax Procedural Code, plus default interest between the date of the end of the period for voluntary compliance with the arbitral decision that judges the present request for arbitral pronouncement well-founded and the date of issuance of the credit note, in accordance with articles 43, no. 5 and 102, no. 2 of the General Tax Code.
1.3. The request for constitution of the Singular Arbitral Tribunal was accepted by the President of CAAD and notified to the Respondent on April 28, 2017.
1.4. The Claimant did not proceed with the appointment of an arbitrator, wherefore, in accordance with the provisions of subparagraph a) of no. 2 of article 6 and subparagraph b) of no. 1 of article 11 of the LFATM, the President of the Deontological Council of CAAD appointed the undersigned as arbitrator of the singular arbitral tribunal, who communicated acceptance of the assignment within the applicable period and the parties did not manifest any refusal of the appointment, in accordance with article 11, no. 1, subparagraphs a) and b) of the LFATM and article 7 of the Deontological Code.
1.5. On July 11, 2017, the arbitral tribunal was constituted.
1.6. Notified for this purpose on July 11, 2017, the Respondent presented, on October 3, 2017, its Reply, having sent a copy of the administrative file on October 2, 2017.
1.7. On October 4, 2017, the Claimant was notified to respond to the matter of exception raised by the TCA, for which a period of 10 days was granted, which the Claimant did on October 17, 2017.
1.8. On October 23, 2017, the arbitral hearing provided for in article 18 of the LFATM was dispensed with, and the Claimant and Respondent were invited to submit written arguments.
1.9. The Claimant submitted written arguments on November 10 and the Respondent submitted its arguments on November 28, 2017, maintaining, in essence, positions already assumed.
1.10. On November 28, 2017, the deadline for publication of the final decision was set for December 21, 2017.
1.11. The Claimant supports its request, in summary, in the following manner:
(i) The Claimant pursues, as its principal activity, the construction of residential and non-residential buildings, and as of 12/31/2014 was the owner of the urban property, registered in the respective property register under article …, of the parish of…, municipality of Loulé, with a tax-assessed value of € 3,234,544.42, determined in the year 2014.
(ii) The property in question corresponds to a land parcel for construction, with a total area of 8,145.0000 m² and a gross construction area of 5,500.0000 m².
(iii) The land in question was intended, as of 12/31/2014, and continues to be intended at present, for construction, and is fiscally a property of the type or species "land for construction".
(iv) On 20/03/2015, the TCA proceeded to assess Stamp Duty of item 28.1 of the General Tax Table, in the total amount of € 32,345.44, reported to the year 2014 and relating to the aforementioned property.
(v) The Claimant became aware of the existence of the disputed assessment through Collection Notice no. 2015…, with payment deadline in April 2015, intended for collection of the first installment of the Stamp Duty contained in item 28.1 of the General Tax Table, and was subsequently notified of Collection Notices nos. 2015… and 2015…, with payment deadline in July and November 2015, intended for collection of the 2nd and 3rd installments of the Stamp Duty contained in item 28.1 of the General Tax Table.
(vi) Having never been notified of the tax assessment act itself, as it alleges, becoming aware of it only through its date, the Claimant therefore does not know its issuer.
(vii) With the same grounds, in essence, that result from the request for arbitral pronouncement, the Claimant submitted on 28/09/2016 a request for review of the tax assessment act for stamp duty of 2014, better identified above, which was received on 03/10/2016 at the Service Directorate for Municipal Tax on Onerous Property Transfers, Stamp Duty, Unique Circulation Tax and Special Contributions.
(viii) On that request for review of a tax act, no express decision was rendered to the present date, wherefore the same is presumed to have been tacitly rejected on 03/02/2017, although it considered, based on the grounds invoked, that its review was necessary.
(ix) The Arbitral Tribunals should be considered competent to assess the act of tacit rejection of a request for review of an assessment based on error attributable to the services, submitted within a period of 4 years, since this is an act of second instance, the assessment of its legality necessarily presupposes the assessment of the legality of the assessment.
(x) The Claimant understands that the Stamp Duty Assessment (Item 28.1) in dispute is null, in accordance with article 161, no. 2, subparagraph d) of the Administrative Procedure Code, or in any case voidable, in accordance with article 163 of the Administrative Procedure Code, since, in addition to not being reasoned, it was issued based on a norm that is deemed unconstitutional, for violation of the constitutional principles of legality, justice and equality and impartiality, as will be set forth below.
(xi) The Claimant alleges, in a first argumentative approach, the lack of reasoning of the assessment since, according to item 28.1 of the General Tax Table, in the wording of Law no. 83-C/2013, of December 31 (State Budget Law for 2014), which entered into force on 01/01/2014, lands subject to stamp duty are residential properties or "land for construction whose construction, authorized or planned, is for residential use, as provided in the Code for Municipal Property Tax".
(xii) Assuming that the Collection Notices correspond to the tax assessment act itself, since no other act was made known to the Claimant, it appears that the same contains no reasoning.
(xiii) In order for the Claimant's property to be subject to stamp duty of item 28.1, it was necessary for the TCA to have explicitly stated, in the reasoning of the assessment act, whether the property in question had authorization, project or planned construction for residential use.
(xiv) If it had concluded that the residential designation of the property was merely partial, the TCA would have had to justify the application of item 28.1 of the General Tax Table – since that situation is not expressly provided for in the letter of the norm – and would have had to exclude the non-residential component of the property, which may have influenced the respective property valuation, from the incidence of the tax.
(xv) As these are elements of the objective incidence of the tax, constitutive of the right to assessment, the burden of proof rested with the TCA.
(xvi) Concluding that, as the assessment act does not contain the reasoning owed, not even by reference, it violated the provisions of article 77, no. 1 of the General Tax Code, and is therefore voidable in conformity with the provisions of article 99, subparagraph c) of the Tax Procedural Code and article 163 of the Administrative Procedure Code, ex vide article 2, subparagraph d) of the Tax Procedural Code.
(xvii) Furthermore, and now in another argumentative line, the Claimant also invokes that the wording of item 28.1 of the General Tax Table, introduced by Law no. 83-C/2013, of December 31, is unconstitutional on various grounds.
(xviii) This Law came to alter the wording of item 28.1 of the General Tax Table that was previously in force, and the new wording came to include, for tax purposes, as from 01/01/2014, lands "for construction whose construction, authorized or planned, is for residential use, as provided in the Code for Municipal Property Tax".
(xix) An alteration which appears, from the Claimant's perspective, to be unconstitutional, for violation of the constitutional principles of legality, justice, equality and impartiality, provided for in no. 2 of article 266, as well as in articles 13 and 104, no. 3, all of the Constitution of the Portuguese Republic.
(xx) Furthermore, the interpretation that was in fact made by the TCA of item 28.1 of the General Tax Table, introduced by Law no. 83-C/2013, of December 31, is also violative of the principle of equality and in that measure unconstitutional.
(xxi) Constituting a negative fiscal discrimination of companies that regularly exercise the activity of purchasing land for construction and/or for resale, since, in taxing lands for construction intended for residential use, the law is not necessarily taxing the possession of luxury goods, although the value of the lands may be very high, and may be taxing an economic activity, or rather, assets affected to the development of an economic activity (in this case, the construction of residential and non-residential buildings), taxation which is deemed entirely unconstitutional.
(xxii) Furthermore, the Claimant also concludes that there is negative fiscal discrimination of companies that regularly exercise the activity of purchasing land for construction and/or for resale.
(xxiii) Since lands for construction of buildings intended for residential use may correspond solely and only to raw materials in inventory, in the case of construction companies, or merchandise, in the case of companies that deal in urban development and buying and selling of lands.
(xxiv) Being that, from the Claimant's perspective, these companies, without anything to justify it, are clearly being discriminated against in a negative way, essentially being penalized for the fact that, in the context of the constitutionally established freedom of economic initiative, they have chosen this economic activity, to the detriment of others.
(xxv) And even outside the context of the development of an economic activity, the taxation of the situation of ownership of a land intended for residential use, whose Tax-Assessed Value is equal to or greater than one million euros, and the non-taxation of the ownership of another land intended for a purpose other than residential use, with an identical or even higher (much higher) Tax-Assessed Value, directly violates the constitutional principle of tax equality – and the principle of contributory capacity that derives from it.
(xxvi) There is an absolute equality of circumstances, on the fiscal level, between the position of taxpayers who own a land for construction whose construction will have a residential designation, and that of those taxpayers who own a land for construction whose construction will have a designation for services or industry, for example.
(xxvii) There are, in their view, no reasons, for the observation of such discrimination, ending up treating differently what, on the fiscal level, constitutes an exactly equal situation – the situation of taxpayers who own lands for construction, merely by reason of the fact that the building to be constructed on one will be designated for residential use, and the building to be constructed on the other will have some designation other than residential use.
(xxviii) The intention was, therefore, to burden the holders of luxury goods, or rather, luxury residential units, and it is not clear in what manner anyone could state that a company, whose activity is directly linked with the construction of buildings, in acquiring an asset (land with a Tax-Assessed Value greater than one million euros) that appears necessary for the maintenance of its productive source is, for the purposes provided therein, a "holder of a luxury residence".
(xxix) It should always be considered that, if there is no doubt that real estate companies holding lands for construction do not have a contributory capacity above the average, and therefore the existence of a "solidarity tax" such as the case of Stamp Duty (item 28.1 of the General Tax Table) on lands for construction, is clearly unconstitutional for violation of the constitutional principle of equality.
(xxx) All the more so it should always be said that real estate companies holding lands for construction whose construction is for residential use do not reveal a contributory capacity superior to that of real estate companies – or any other entities – that hold lands for construction whose construction is for purposes other than residential use.
(xxxi) Moreover, even the taxation of Item 28.1 on properties with actual residential designation (which does not include lands for construction) departs from the principles of strengthening social equity and the effective distribution of sacrifices that inspired it, as well as violates the principle of equality.
(xxxii) For the foregoing, in presupposing the application of a norm that is deemed unconstitutional, for violation of the constitutional principles of legality, justice and equality and impartiality, provided for in no. 2 of article 266, as well as in articles 13 and 104, no. 3 of the Constitution of the Portuguese Republic, the disputed assessment is, consequently, null, in accordance with article 161, no. 1, subparagraph d) of the Administrative Procedure Code.
(xxxiii) Furthermore, the Claimant also invokes, finally, the unconstitutionality of the interpretation of item 28.1 of the General Tax Table made by the TCA.
(xxxiv) Since, according to item 28.1 of the General Tax Table, in the wording of Law no. 83-C/2013, of December 31 (State Budget Law for 2014), only lands for construction (i.e., the type of property provided for in subparagraph c) of no. 1 of article 6 of the Municipal Property Tax Code) whose construction, authorized or planned, is for residential use, are subject to tax.
(xxxv) Whereby everything suggests that the TCA did not undertake to determine whether the residential designation of the property in question was total or partial, being satisfied with the designation contained in the property register.
(xxxvi) From this it follows that the non-residential component that may have influenced the property valuation of the property is not excluded from the incidence of the tax.
(xxxvii) Now, in that case, the burdening of mixed buildings with a residential component, for which no justification is apparent, for which reason such interpretation does not appear reasonable, but rather clearly arbitrary and would thus violate, the principle of equality and in that measure would be unconstitutional.
(xxxviii) It concludes that the interpretation of item 28.1 of the General Tax Table, introduced by Law no. 83-C/2013, of December 31, according to which it would not be necessary to specify the residential component of the land for construction, as the TCA appears to have understood, would be unconstitutional for violation of the principle of equality provided for in article 13 of the Constitution of the Portuguese Republic.
(xxxix) If it were to be understood that this interpretation would be appropriate, then the norm itself would suffer from unconstitutionality for violation of the principle of equality, the assessment in question is, consequently, null, in accordance with article 161, no. 1, subparagraph d) of the Administrative Procedure Code.
(xl) The Claimant also concludes that even if this were not understood, the disputed assessment would always be voidable, in accordance with article 163 of the Administrative Procedure Code.
(xli) It concludes by contending for the well-foundedness of the requests and, consequently, for the restitution of the amount, allegedly unduly paid by it as tax, interest and costs, plus compensatory interest on these amounts, calculated from the date of undue payment (30/10/2015 and 30/11/2015), until the date of issuance of the respective credit note, at the legal rate, based on the provisions of nos. 1 and 2 of article 43 of the General Tax Code and article 61 of the Tax Procedural Code, plus default interest between the date of the end of the period for voluntary compliance with the arbitral decision that judges the present request for arbitral pronouncement well-founded and the date of issuance of the credit note, in accordance with articles 43, no. 5 and 102, no. 2 of the General Tax Code.
1.12. For its part, the Respondent responded, contending for the lack of merit of the request for arbitral pronouncement and alleging, in summary, that:
(xlii) The Respondent defends itself, in the first place, by exception, invoking the material incompetence of the arbitral tribunal since, in its conception, it is clear that the TCA, not having issued an express decision on the request presented, has (not yet) expressed itself, on the one hand, on the admissibility of the prerequisites of the request for review, namely as regards legitimacy, timeliness, adequacy of the means, etc... (established in article 78 of the General Tax Code), and, on the other hand, and consequently, has not expressed itself as to the materiality underlying (the legality of the stamp duty assessment).
(xliii) Concluding that we are not faced with an administrative act in tax matters that entails the assessment of the legality of the assessment act, the same cannot be subject to review through judicial impugnation, in accordance with the provisions of subparagraph a) of no. 1 of article 97 of the Tax Procedural Code.
(xliv) The reason for which the contentious means to be used would be, in accordance with subparagraph p) of no. 1 and no. 2 of article 97 of the Tax Procedural Code, the previously denominated "contentious appeal" (current administrative action, in accordance with article 191 of the Administrative Procedure Code), provided for and regulated by articles 37 et seq. of the Administrative Procedure Code.
(xlv) Furthermore, the material competencies deferred to the arbitral tribunal are restricted only to those expressly listed in subparagraphs a) and b) of no. 1 of article 2 of the LFATM, from which are not listed the administrative acts in tax matters that do not entail the assessment of the legality of an act of taxation.
(xlvi) By way of impugnation, the TCA raises that there is no lack of notification of the assessment act or absence of the issuer of the act, since the collection notices contain all legally required elements.
(xlvii) But, even if this defect argued by the Claimant were considered well-founded, it would affect not the disputed assessment, but rather the act of notification of the assessment, having, consequently, as a consequence, the nullity of the act of notification, in accordance with article 39, no. 12 of the Tax Procedural Code, and the ineffectiveness of the underlying tax act.
(xlviii) The Arbitral Tribunal not having, therefore, competence to assess questions relating to the ineffectiveness of the disputed assessment.
(xlix) On the other hand, the Respondent pronounces itself as to the alleged lack of reasoning of the assessment act, considering that, in accordance with what is established in article 77 of the General Tax Code, the procedural decision must be reasoned by means of a succinct statement of the factual and legal reasons that motivated it, and the reasoning may consist of a mere declaration of agreement with the grounds of prior expert opinions, information or proposals, including those that are part of the report of the tax audit.
(l) To achieve that objective, a succinct but clear, concrete, congruent reasoning that is contextual is sufficient, and the reasoning of the administrative-tax act is sufficient if, in the context in which it was practiced, and considering the factual and legal reasons expressly stated therein, they are capable or apt and sufficient to allow a normal recipient to apprehend the cognitive and evaluative path of the decision.
(li) It results, from its perspective, that the Claimant understood perfectly the meaning and scope of the assessment, as results from the legal-argumentative exercise it now makes in the present request for arbitral pronouncement.
(lii) From the analysis of the disputed assessment it seems clear that the TCA considered that the urban property in question was subsumable to the concept of "land for construction with residential designation" and for that reason taxed the Claimant, in its capacity as owner of that property, in stamp duty pursuant to item 28.1 of the General Tax Table.
(liii) This reasoning appears to be elucidative as to the cognitive and evaluative path followed by the TCA to decide as it decided, especially if we take into account that it is an act affecting a large number of persons.
(liv) In that measure, the TCA does not perceive in this case that the assessment lacks legal reasoning, wherefore it considers that the burden of reasoning was fulfilled and that the Claimant's request necessarily lacks merit.
(lv) The disputed assessment, in that it merely applies a fixed rate to the Tax-Assessed Value that was fixed, is of easy perception by the recipient, as indeed results from the allegations of the Claimant.
(lvi) The Respondent does not understand that the Claimant questions the existence of authorization, project or planned construction intended for residential use, stating that it is unaware of the elements of objective incidence of the tax, or that the factual situation could be different without presenting any proof, the burden of which would fall upon it.
(lvii) Indeed, the TCA considers that from the Declaration Form 1 for Municipal Property Tax, the indication of Building Permit and Project/Construction Feasibility, elements which were the basis for the evaluation of the land, which was not questioned by the Claimant.
(lviii) Concluding, thus, in favor of the lack of merit of the Claimant's claims.
(lix) As to the alleged unconstitutionality of the assessment for alleged violation of the principle of equality stricto sensu and in its dimensions of the principle of proportionality, contributory capacity and progressivity, the Respondent raises decisions of the Constitutional Court that indicate, from its perspective, correctly, that the principle of equality requires that what is necessarily equal be treated equally and what is essentially different be treated differently, not preventing differentiation of treatment, but only arbitrary, unreasonable discriminations, i.e., distinctions of treatment that do not have sufficient justification and material basis.
(lx) It is clear to the Respondent that the tax legislator considered that the ownership, usufruct or right of superficies of a residential property or land for construction whose construction, authorized or planned, is for residential use, of Tax-Assessed Value equal to or greater than € 1,000,000.00 represented a manifestation of wealth and was susceptible, by itself, to reveal significant contributory capacity, and therefore caused item 28.1 of the General Tax Table to apply to the possession of a certain type of property, as opposed to income from work and pensions, already affected by other tax measures (and not only).
(lxi) And the taxation under stamp duty is subject to the criterion of suitability, to the exact extent that it aims at the taxation of wealth embodied in the ownership of immovable property with residential designation of high value and arises in a context of economic crisis that cannot be ignored.
(lxii) Considering the TCA entitled by this choice of mechanism for obtaining revenue, since such a measure is applicable indistinctly to all and any holders of immovable property with residential designation of value greater than €1,000,000.00, applying to the wealth embodied and manifested in the value of the immovable property.
(lxiii) Adding that, neither the fact that, in the attempt to support the theses of the alleged, but non-existent, constitutional non-conformity of Item 28.1 of the General Tax Table, boundary/borderline cases are presented, attributing, in this context, any unconstitutionality of Item 28.1 of the General Tax Table for violation of the principle of equality, favors the theses advocated.
(lxiv) For indeed, as regards a difference in situations between the possession of "concentrated" immovable property (a single property worth €1,000,000) or "dispersed" immovable property (several properties whose total value totals €1,000,000), one must immediately note that the measure embodied in item 28.1 of the General Tax Table is, in its very essence, entirely unrelated to any weighing or global assessment of the taxpayer's immovable property.
(lxv) Since, for the Respondent, the essential objective of the legislator was to establish a taxation of individually designated "properties of high value intended for residential use", of "homes worth equal to or greater than 1 million euros", or, commonly, of luxury immovable property or homes.
(lxvi) As to the taxation of lands for construction with residential designation when affected to the exercise of an economic activity, the TCA concludes that there is no basis for differentiation, wherefore it is irrelevant the fact that the Claimant is a business, since any and every entity that is a holder of real rights over residential urban properties with a Tax-Assessed Value equal to or greater than € 1,000,000.00.
(lxvii) In any case, it is not demonstrated the intended significant influence on the ownership of residential properties by real estate companies, given that Item no. 28.1 of the General Tax Table does not have general scope, but has its scope of application restricted to properties with a Tax-Assessed Value equal to or greater than €1,000,000.00 regardless of the nature of the owner, usufructuary or superficiary.
(lxviii) On the other hand, as regards the legislative choice not to include in the incidence of Item 28.1 of the General Tax Table urban properties intended for purposes other than residential, that is, without residential designation (as well as, indeed, not to encompass rural properties), the TCA begins by pointing out that what is at issue here is a differentiation with a material basis widely recognized by the legislator.
(lxix) It being unquestionable that it does not constitute an absolutely unreasonable solution, that, in the context of the particular conjunctural situation of a serious economic and financial crisis, budgetary imbalance and deterioration of public finances, an additional tax burden be imposed on the owners of luxury residential properties, without equally encompassing the owners of properties with non-residential designations, which are intended for the development of economic activities.
(lxx) Concluding that as the differentiated treatment finds sufficient material justification, the principle of equality is respected, both per se and in its dimension of proportionate equality.
(lxxi) As to the alleged unconstitutionality of the interpretation of Item 28.1 of the General Tax Table, the Respondent concludes that, although alleged by the Claimant that the property sub judice may not have an exclusively residential designation, it does not present any proof as to derivations that it considers hypothetical.
(lxxii) Alleging that the property record presented is neither consistent with, nor compatible with what is alleged by it and in the Declaration Form 1 for Municipal Property Tax, presented by the Claimant, it annexed Building Permit and Project/Construction Feasibility, elements which, according to what the Respondent affirms, were the basis for the evaluation of the land and which appear in the respective evaluation sheet.
(lxxiii) And, as results either from the property valuation sheet, or from Form 1 for Municipal Property Tax and the subsequent property record of the property in question, which are attached to the file, the property is a land for construction with residential designation.
(lxxiv) Furthermore, the Claimant does not prove, at any time, that: There does not exist an authorized license for the construction of residential buildings, and that the land in question does not have authorized or planned construction for residential use (cf. the letter of Item 28.1 of the General Tax Table).
(lxxv) The Claimant having never, moreover, questioned the evaluation and qualification of that property as land for construction, coming now to contradict what was declared by it, could constitute an abuse of right in its configuration of venire contra factum proprium, solely because it is more convenient for it, in the vain attempt to evade the due fiscal characterization.
(lxxvi) The Respondent presents a summary of the position of the Constitutional Court which it transcribes.
(lxxvii) Concluding that there is no error attributable to the services in the taxation of the tax in the present proceedings, and no indemnification should be recognized to the Claimant, in accordance with the provisions of article 53 of the General Tax Code.
(lxxviii) Since assessments in dispute constitute a correct interpretation and application of law to the facts, suffering from no illegality or unconstitutionality, and should, consequently, be judged to lack merit and the Defendant Entity should be absolved of the request.
1.13. Notified for this purpose, the Claimant responded to the matter of exception contending, in general, in favor of its lack of merit.
2. Preliminary Examination:
2.1. Having the material competence of the Arbitral Tribunal and the suitability of the procedural means been raised, it is important, constituting a matter of dilatory exception and therefore a preliminary question, for us to pronounce on it forthwith.
The Respondent, in its reply, also presented the defense by exception raised since it is a tacit rejection of a request for official review and, therefore, there was, in fact, no analysis of the merits of the assessment act.
The Claimant submitted a request for constitution of a Singular Arbitral Tribunal to pronounce on the constitutionality and legality of stamp duty assessments pursuant to item 28.1 of the General Tax Table, relating to the fiscal year 2014, in the total amount of € 32,345.44 of the property duly identified in the proceedings.
The question that arises, therefore, is whether the arbitral tribunal is competent to assess the request against the tacit rejection of the request for review of the assessment sub judice.
On this matter, CAAD has already pronounced itself, namely in proceedings no. 320/2015-T, no. 323/2015-T, no. 630/2015-T, whose interpretation we follow.
In accordance with article 2 of the LFATM:
"1 — The competence of arbitral tribunals includes the assessment of the following claims:
a) The declaration of illegality of acts of taxation, self-assessment, withholding at source and payment on account;
b) The declaration of illegality of acts of fixing the taxable matter when it does not give rise to the taxation of any tax, of acts of determination of the taxable matter and of acts of fixing tax-assessed values."
For its part, Ordinance no. 112-A/2011, of March 22, approved pursuant to article 4, no. 1 of the LFATM, establishes the terms of binding of the Tax Administration to the jurisdiction of the arbitral tribunals functioning with the CAAD, having determined the binding of the TCA to the assessment of claims relating to taxes, with the exceptions provided for in subparagraphs a) to d) of article 2 of that Ordinance.
However, in this case, none of those exceptions is at issue.
It is understood, and on this matter we follow decisions of CAAD, namely in proceeding 630/2015-T, as well as in proceedings 320/2015-T and 323/2015-T, that the competence of arbitral tribunals includes the assessment of the legality of acts of taxation, that is, acts through which the amount of tax to be paid is determined.
The taxpayer may choose to proceed with direct impugnation of the tax act or, alternatively, the law grants him the faculty to choose, by the administrative route, by administratively impugning the act and, subsequently, to undertake the respective judicial impugnation or request for arbitral pronouncement, in case of rejection, express or tacit.
In the present proceedings, the Claimant submitted a request for official review of the Stamp Duty assessment, relating to the year 2014, due by application of item no. 28.1 of the General Tax Table to the property of which it is the owner.
What, thus being, is our understanding, that the acts that decide on requests for review of a tax act constitute acts of second and third instance to the extent that they entail the assessment of the legality of acts of first instance, that is, assessment acts and only not being so in case the TCA had refused the request for official review on the grounds of an actual preliminary question and therefore prejudicial to that assessment, which would obstruct knowledge of the legality of the act, which, as results from the present proceedings, was not the case.
Article 2, no. 1, subparagraph a) of the LFATM does not exclude cases in which the declaration of illegality results from the declaration of illegality of the second instance act, nor cases in which that declaration of illegality is requested in the sequence of the tacit rejection of the request for official review of the tax act.
In the wake of the decision rendered in proceeding no. 630/2015-T: "the tacit rejection constitutes a fiction intended to enable the use of contentious means of impugnation (article 57, no. 5 of the General Tax Code). It appears, thus, that the segment of article 2/1 of the LFATM that alludes to claims referring to requests for "declaration of illegality of acts" encompasses the declaration of illegality of tacit rejections of acts of Stamp Duty assessment, in harmony with the provisions of articles 2, no. 1, subparagraph a) and 10, no. 1 of the LFATM, conjugated with article 102, no. 1, subparagraph d) of the Tax Procedural Code".
And as such, it must be understood that it falls within the scope of the competence of arbitral tribunals the assessment of those acts.
For this reason, we conclude that the arbitral tribunal, in accordance with article 2, no. 1, subparagraph a) of the LFATM, may review the legality of the act of taxation, also in cases in which the declaration of illegality may be obtained in the sequence of the declaration of illegality of acts of second or third instance.
The exception of incompetence raised by the Respondent thus lacks merit.
Furthermore, as to the suitability of the procedural means used, also raised by the Respondent.
Analyzing the claim of the Claimant, it appears that it requests that the nullity of the stamp duty assessment be declared, or if not deemed appropriate, that its annulment be ordered.
Thus, concluding, as we conclude, that the Singular Arbitral Tribunal is competent to decide on the disputed matter, it is also suitable the procedural means used by the Claimant.
Thus, the exception of unsuitability of the procedural means alleged by the Respondent also lacks merit.
Therefore, the Tribunal is competent and is regularly constituted, in accordance with articles 2, no. 1, subparagraph a), 5 and 6, all of the LFATM.
2.2. The parties have legal personality and legal capacity, are legitimate and are represented, in accordance with articles 4 and 10 of the LFATM and 1 of Ordinance no. 112-A/2011, of March 22.
2.3. There are no nullities nor other preliminary questions affecting the entire proceedings, wherefore it is now necessary to address the merits of the request.
Factual Matters:
3.1. Facts Proven:
It falls to the tribunal to select the facts that are relevant to the decision of the case and to discriminate the proven matter from the unproven (in accordance with article 123, no. 2 of the Tax Procedural Code and article 607, no. 3 of the Civil Procedure Code, applicable ex vi article 29, no. 1, subparagraphs a) and e) of the LFATM).
Thus, the facts relevant to the judgment of the case are chosen and defined in function of their legal relevance, which is established in consideration of the various plausible solutions of the legal question(s) (in accordance with the former article 511, no. 1 of the Civil Procedure Code, corresponding to the current article 596, applicable ex vi article 29, no. 1, subparagraph e) of the LFATM).
Thus, taking into consideration the positions assumed by the parties, the documentary evidence and the elements contained in the Administrative File attached to the proceedings, it was considered proven, with relevance to the decision, the facts listed below.
a) The Claimant pursues, as its principal activity, the construction of residential and non-residential buildings, and as of 12/31/2014 was the owner of the urban property, registered in the respective property register under article …, of the parish of …, municipality of Loulé, with a Tax-Assessed Value of € 3,234,544.42, determined in the year 2014, in accordance with Doc. no. 5 and property record attached with the arbitral request as Doc. no. 6.
b) The property in question corresponds to a land parcel for construction, with a total area of 8,145.0000 m² and a gross construction area of 5,500.0000 m², in accordance with the property record attached with the arbitral request as Doc. no. 6.
c) The property is described in the register as "land for construction", in the evaluation of the property, the type of location coefficient was considered: "residential", in accordance with the property record attached with the arbitral request as Doc. no. 6.
d) On 20/03/2015, the TCA proceeded to assess Stamp Duty of item 28.1 of the General Tax Table, in the total amount of € 32,345.44, reported to the year 2014 and relating to the aforementioned property, issuing Collection Notice no. 2015…, with payment deadline in April 2015, intended for collection of the first installment of Stamp Duty contained in item 28.1 of the General Tax Table, and was subsequently notified of Collection Notices nos. 2015… and 2015…, with payment deadline in July and November 2015, intended for collection of the 2nd and 3rd installments of Stamp Duty contained in item 28.1 of the General Tax Table – in accordance with Docs. nos. 1 to 3 attached with the request for arbitral pronouncement.
e) On 28/09/2016, the Claimant submitted a request for review of the tax assessment act for stamp duty of 2014, better identified above, which was received on 03/10/2016 at the Service Directorate for Municipal Tax on Onerous Property Transfers, Stamp Duty, Unique Circulation Tax and Special Contributions – in accordance with Doc. no. 4 attached with the request for arbitral pronouncement.
f) On that request for review of a tax act, no express decision was rendered to the present date.
g) The request for review had as its purpose the assessment of the legality of the Stamp Duty assessment, in general terms, in accordance with the present request for arbitral pronouncement, and did not have as its purpose any preliminary question that would obstruct knowledge of the legality of the act.
h) The Claimant paid, on 30/10/2015 and on 30/11/2015, the three installments of the tax in question, plus the respective interest and costs – in accordance with Docs. nos. 7 to 12 attached with the request for arbitral pronouncement.
3.2. Facts Not Proven:
With relevance to the assessment of the merits of the case, it was not proven that on the property in question any construction intended for residential use had been authorized, designed or planned, a fact whose proof incumbent upon the Respondent, as it constitutes a fact essential to the integration in the norm of objective incidence of the tax and is therefore constitutive of the right to assess it.
3.3. Reasoning for the Factual Matter Proven and Unproven:
The conviction as to the factual matter resulted from the allegations of the parties and their documentary support attached to the proceedings, as well as from the elements contained in the administrative file submitted by the Respondent, from which results the request for official review and information from the Service Directorate for Municipal Tax on Onerous Property Transfers, Stamp Duty, Unique Circulation Tax and Special Contributions, for the present request for arbitral pronouncement, whose joinder to the request for official review was ordered.
No other facts with relevance to the decision of the case were proven, considering the possible legal solutions.
Legal Matters – Questions to be Decided:
5.1. Object and Scope of the Present Proceedings:
The questions to be decided in the present proceedings are whether:
A) The assessment act is duly reasoned and, for the purpose of the application of item 28.1 of the General Tax Table, in the wording introduced by Law no. 83-C/2013, of December 13, the property in question is covered by the norm of incidence;
B) Whether item 28.1 of the General Tax Table, in the wording introduced by Law no. 83-C/2013, of December 13, is unconstitutional for violation of the constitutional principles of tax equality and contributory capacity, and should, in that case, the respective application be rejected, or whether from the interpretation made by the TCA of the aforementioned item results any unconstitutionality.
It is necessary to decide:
A) Whether the assessment act is reasoned and the property in question is covered by the norm of incidence:
The subjection to Stamp Duty of properties with residential designation resulted from the addition of Item no. 28 to the General Tax Table, effected by article 4 of Law 55-A/2012, of October 29, which classified the following taxable facts:
"28 – Ownership, usufruct or right of superficies of urban properties whose Tax-Assessed Value contained in the register, in accordance with the Code for Municipal Property Tax, is equal to or greater than € 1,000,000.00 – on the Tax-Assessed Value used for purposes of Municipal Property Tax:
28.1 – For property with residential designation – 1%
28.2 – For property, when the taxpayers are not individuals resident in a country, territory or region subject to a clearly more favorable tax regime, listed in an Ordinance approved by the Minister of Finance – 7.5%".
Law no. 83-C/2013, of December 31, came to alter the wording of the norm, which became the following:
"28.1 For residential property or for land for construction whose construction, authorized or planned, is for residential use, as provided in the Code for Municipal Property Tax" (in articles 2 to 6 of the Code for Municipal Property Tax are enumerated the types of properties).
It is within this legal framework that it is important to assess the legal qualification of the property on which the tax in dispute was levied.
On this matter, there are already decisions of CAAD, among others, in proceedings 53/2013-T, 49/2013-T, 42/2013-T, 180/2013-T, 75/2013-T, 215/2013-T, 240/2013-T, 284/2013-T, 288/2013-T, 310/2013-T, 12/2014-T, 151/2014-T, 202/2014-T, 210/2014-T, 276/2014-T, 514/2014-T, 516/2014-T, 523/2014-T, 599/2014-T and 663/2014-T, 467/2015-T, 615/2015-T, 630/2015-T, 447/2016-T, 467/2016-T.
Also the Higher Administrative Court has pronounced on this matter, and at this time, it appears useful to refer to the decision of the Higher Administrative Court of 09/04/2014 (proceeding no. 1870/13), among other decisions of the Higher Administrative Court, such as, among others, those decisions rendered on 26/10/2016, in proceeding 0886/16, on 9/9/2015, in proceeding no. 047/15; on 8/7/2015, in proceeding no. 0573/15; on 17/6/2015, in proceeding no. 1479/14; on 27/5/2015, in proceeding no. 0387/15; on 29/4/2015, in proceeding no. 021/15; on 15/4/2015, in proceedings nos. 01481/14 and 0764/14; on 5/2/2015, in proceeding no. 1387/14; on 5/11/2014, in proceeding no. 530/14; on 29/10/2014, in proceeding no. 864/14; on 24/9/2014, in proceedings nos. 01533/13, 0739/14 and 0825/14; on 10/9/2014, in proceedings nos. 0503/14, 0707/14 and 0740/14; on 9/7/2014, in proceeding no. 0676/14; on 2/7/2014, in proceeding no. 0467/14; on 28/5/2014, in proceedings nos. 0425/14, 0396/14, 0395/14; on 14/5/2014, in proceedings nos. 055/14, 01871/13 and 0317/14; on 23/4/2014, in proceedings nos. 270/14 and 272/14; and on 9/4/2014, in proceedings nos. 1870/13 and 48/14, which, in detail, makes a historical analysis of the evolution and framing of item 28, now under analysis:
"The concept of 'property (urban) with residential designation' was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the Code for Municipal Property Tax, to which no. 2 of article 67 of the Code for Stamp Duty (also introduced by that Law) refers on a subsidiary basis. And it is a concept which, probably due to its imprecision – a fact all the more serious as it is in function of it that the scope of objective incidence of the new taxation is determined – had a short life, since it was abandoned when Law of the Budget State for 2014 (Law no. 83-C/2013, of December 31) came into force, which gave new wording to that item no. 28 of the General Table, and which now determines the scope of its objective incidence through the use of concepts that are legally defined in article 6 of the Code for Municipal Property Tax. This alteration – to which the legislator did not attribute an interpretive character, nor does it appear to us that he did – merely makes it unambiguous for the future that lands for construction whose construction, authorized or planned, is for residential use are encompassed within the scope of item 28.1 of the General Table of Stamp Duty (provided that their Tax-Assessed Value is of a value equal to or greater than 1 million euros)".
Before the legislative amendment that innovatively came to include those lands for construction, it was necessary to ascertain, making use of the various interpretative elements, whether, in the absence of that literal reference, such lands could, nevertheless, be included within the scope of objective incidence of item 28. It is for that reason that it is understood that the aforementioned decision proceeded, saying that, the legislator not having clarified "(...) in relation to past situations [i.e., assessments prior to 2014], such as the one at issue in the present proceedings, it does not seem that the interpretation of the appellant can be adopted, [as to these] since it does not result unambiguously, either from the letter or from the spirit of the law, that the intention of the latter was, ab initio, to encompass within its scope of objective incidence lands for construction for which construction of residential buildings had been authorized or planned, as now unambiguously results from item 28.1 of the General Table of Stamp Duty".
And continues: "from the letter of the law nothing unambiguous results, indeed, for it itself, in using a concept which it did not define and which also was not defined in the statute to which it referred on a subsidiary basis, lent itself, unnecessarily, to equivocation, in a matter – of tax incidence – in which certainty and legal security should also be paramount concerns of the legislator".
It further results from the learned decision that "from its 'spirit', apprehensible in the statement of reasons of the bill proposal that is at the origin of Law no. 55-A/2012 (Bill Proposal no. 96/XII – 2nd, Diary of the Assembly of the Republic, series A, no. 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing further results than the concern with raising new tax revenues, from sources of wealth 'more spared' in the past from the rapacity of the Tax Authorities than income from work, in particular income from capital, movable capital gains and ownership, reasons which bring no relevant contribution to the elucidation of the concept of 'properties (urban) with residential designation', as they take it for granted, without any concern to elucidate it. Such elucidation would, however, have come – as stated in the Arbitral Decision rendered on December 12, 2013, in proceeding no. 144/2013-T, available in the CAAD database – upon the presentation and discussion in the Assembly of the Republic of that bill proposal, in the words of the Secretary of State for Tax Affairs, who is stated to have referred expressly, as is gathered from the Diary of the Assembly of the Republic (Diary of Assembly of Republic Series I no. 9/XII – 2, of October 11, p. 32) that: 'The Government proposes the creation of a special tax on high-value urban residential properties. This is the first time that Portugal creates a special taxation on high-value properties intended for residential use. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to homes worth equal to or greater than 1 million euros', from which it is gathered that the reality to be taxed envisioned is, after all, and notwithstanding the terminological imprecision of the law, 'properties (urban) residential', in common parlance 'homes', and not other realities".
"The fact that it may be considered that in the determination of the Tax-Assessed Value of urban properties classified as lands for construction the designation which the construction authorized or planned for it will have must be taken into account for determination of the respective value of the area of implementation (cf. nos. 1 and 2 of article 45 of the Municipal Property Tax Code), does not determine that lands for construction may be classified as 'properties with residential designation', since 'residential designation' always appears in the Code for Municipal Property Tax referred to 'buildings' or 'constructions', existing, authorized or planned, since only these can be inhabited, which is not the case with lands for construction, which do not, in themselves, have conditions for such, not being susceptible of being used for residential purposes unless and until a construction authorized and planned for them is erected thereon (but in that case they will no longer be 'lands for construction' but another type of urban property – 'residential', 'commercial, industrial or for services' or 'others' – article 6 of the Municipal Property Tax Code)".
And adds: "It would be strange, indeed, that the determination of the scope of the norm of tax incidence of item no. 28 of the General Table of Stamp Duty should, in the final analysis, be found in the norms of determination of the Tax-Assessed Value of the Code for Municipal Property Tax, and that the terminological imprecision of the legislator in the wording of that rule was, after all, elucidated and finally clarified by way of an indirect and equivocal reference to the coefficient of designation established by the legislator in relation to erected properties (article 41 of the Code for Municipal Property Tax)".
Thus, without the character of a summary, "taking into account that a land for construction – whatever the type and purpose of the construction that will be, or could be, erected thereon – does not satisfy, by itself, any condition to be licensed as such or to define itself as the normal destination of residential use, and referring the norm of incidence of stamp duty to urban properties with 'residential designation', without any specific concept being established for the purpose, cannot from it be extracted that it contains a future potentiality, inherent to a distinct property that may perhaps be erected on the land".
Concluding the Venerable Higher Administrative Court that "(...) resulting from article 6 of the Code for Municipal Property Tax a clear distinction between urban properties 'residential' and 'lands for construction', these cannot be considered as 'properties with residential designation' for the purposes of the provisions of item no. 28.1 of the General Table of Stamp Duty, in its original wording, which was given by Law no. 55-A/2012, of October 29".
In the same manner, in the decision of the Higher Administrative Court of 14-05-2014, proceeding no. 046/14, it is stated that "not having the legislator defined the concept of 'properties (urban) with residential designation', and resulting from article 6 of the Code for Municipal Property Tax – subsidiarily applicable to Stamp Duty provided for in the new item no. 28 of the General Table – a clear distinction between 'urban residential properties' and 'lands for construction', these cannot be considered, for the purposes of incidence of Stamp Duty (Item 28.1 of the General Tax Table, in the wording of Law no. 55-A/2012, of October 29), as urban properties with residential designation."
Furthermore, as to the matters encompassed by the reserve of law, note article 103, no. 2 of the Constitution of the Portuguese Republic and article 8 of the General Tax Code. According to these norms the principle of tax legality encompasses incidence, rate, tax benefits and taxpayer protections. This is also referred to in the work "The Principle of Tax Legality" by Ana Paula Dourado, Almedina, 2007, page 106.
As item 28.1 General Tax Table is a norm of incidence, encompassed by the principle of tax legality, its analogical application to situations not expressly provided therein is prohibited.
In the same manner, an extensive interpretation of the aforementioned item allowing the inclusion in the expression contained in the law of lands for construction is also not to be admitted. Interpretation is governed by article 11, nos. 1 to 3 of the General Tax Code and article 9 of the Civil Code.
We understand that it is not possible an interpretation of the aforementioned item that includes therein lands for construction, since the same would always have to have a minimum of correspondence in the letter of the law, which does not occur.
Also in the arbitral decision rendered in proceeding no. 467/2015-T, of 4/2/2016 and cited in the arbitral decision rendered in proceeding 294/2016/T and 454/2016-T, one should not conclude, immediately and without more, that the property in question may, at the time of the facts, be subject to Stamp Duty, in accordance with item 28.1 of the General Tax Table (in its current wording), this because: "(...) the essential question that, [in the context of the new wording of item 28.1 of the General Tax Table, given by art. 194 of Law no. 83-C/2013, of 31/12,] arises, is to know whether, … 'without [...] that forecast or expectation of 'construction for residential use' [...] concretized', one could accept the application of Stamp Duty here under analysis [...]. To respond to the aforementioned question, it appears particularly useful to ponder the following: 'As regards lands for construction, whether or not they are located within an urban agglomerate, as defined in art. 3/4 of this statute [Code for Municipal Property Tax] should, as such, be considered the lands regarding which the following have been granted: - license for subdivision operation; - building license; - authorization for subdivision operation; - construction authorization; - admitted favorable prior notification of subdivision or construction operation; issued favorable prior information of subdivision or construction operation, as well as; - those which have been declared as such in the acquisition title, and it should be taken into account that, also for this purpose, only the acquisition title with the form prescribed by civil law should be relevant, that is, the public deed or the authenticated private document referred to in article 875 of the Civil Code.' [see. António Santos Rocha / Eduardo José Martins Brás – Taxation of Property. Municipal Property Tax-Property Transfer Tax and Stamp Duty (Annotated and Commented). Coimbra, Almedina, 2015, p. 44]".
In the case at hand, the Claimant was notified of the assessment act, with the respective collection notices. But, from the assessment act, it does not result that we are faced with a property with residential designation.
We conclude, rather, that the Claimant's property is a land for construction, as results from the urban property record attached to the proceedings and nothing else is extracted, once again, from the assessment act, whereby Stamp Duty provided for in item 28.1 of the General Tax Table cannot apply to that property, since it is not the mere registration as 'land for construction' that carries the ineluctable application of item 28.1 of the General Tax Table, since it does not constitute, by itself, conclusive demonstration that a property has construction for residential use planned.
See in this regard, in the wake of decision 467/2016-T, JOSÉ MANUEL FERNANDES PIRES, (Lectures on Property Tax and Stamp Duty. Coimbra, Almedina, 3rd ed., 2015, pages 110 to 112): "The right to construct is not inherent in the right of ownership, but is born ex novo in the patrimony of the owner only when an administrative act of the competent public entity recognizes and authorizes the owner to construct or to subdivide. [...] only when that right is constituted in the legal sphere of the owner does the Code for Municipal Property Tax establish that we are faced with a land for construction".
Thus, and continuing in the wake of that decision, "(...) it seems clear that for the verification of the normative provision, the mere registration of a property as land for construction affected to residential use is not sufficient, since the delineation of the objective incidence here at issue does not abdicate from the demonstration of an effective construction potentiality, necessarily revealed by the existence of documentary supports that authorize it. The same is to say that the incidence of the tax, for the purposes of item 28.1 of the General Tax Table, is materialized only, and even then not in definitive or complete terms, with the verification of an 'effective designation', to use the felicitous expression of JOSÉ MANUEL FERNANDES PIRES (op. cit., p. 507)".
Now, without the express demonstration, in the assessment act itself, of this effective building potentiality, item 28.1 of the General Tax Table is not applicable and, nevertheless, even then, for the purposes of the application of item 28.1 of the General Tax Table, it would not be sufficient to demonstrate this effective building potentiality.
It is necessary to demonstrate, further, that the construction, authorized or planned, is, cumulatively, for residential use.
The same is to say that it cannot be for an end different from residential use, since construction for commerce or industry would not give rise to the application of the norms to which we have been referring.
Now, even if it were considered that there exists for the property in question a building permit or authorization, as the documents submitted by the Respondent in reply show, it would still be necessary for it to demonstrate this, to reason the assessment act, and to verify what would be authorized, and whether it was for residential use, excluding commerce or industry.
It is true that, although registered, the property is given as being "land for construction" affected to residential use, nevertheless there is no indication of what would be intended for residential use, in the proper sense, of others that could have alternative designation.
What it is certain to conclude is that the legislator did not intend to tax, under stamp duty, by application of item 28.1 of the General Tax Table, lands for construction whose authorized or planned construction was intended for offices or services. It wished only to tax those intended for residential use, the solution being thus consonant, namely, with the constitutional principle of tax equality.
It is true that in the evaluation of the land, the TCA used the location coefficient of the type "residential", and the taxpayer could, in fact, have reacted against the application of this coefficient, and it has not been demonstrated that he did so.
But, it is not, however, the criterion adopted by the legislator either in the Code for Municipal Property Tax or in the Code for Stamp Duty.
The legislator did not attribute to the use of that coefficient any relevance in the qualification of the property, only in its respective evaluation.
Thus, it would always be necessary, for the fulfillment of the norm of incidence, that the property be residential or, not being so, be land for construction and that construction has been authorized or is planned and this is intended for residential use.
Since, in accordance with item 28.1 of the General Tax Table, properties subject to tax, beyond residential properties (those of subparagraph a) of no. 1 of no. 2 of article 5 of the Code for Municipal Property Tax), are lands for construction (i.e., the type of property provided for in subparagraph d) of no. 1 of the same article of the Code for Municipal Property Tax), provided that construction has been authorized or is planned intended for residential use and, in this case, totally or partially, and, in the latter case, what is the value considered for the purpose of tax subjection.
Now, even if the relevance of the property valuation sheet and Form 1 for Municipal Property Tax, and the respective attached documents were considered, that is, building permit or authorization of use (these do not appear in the body of documents attached to the present proceedings), considering the location coefficient: "residential", as the Respondent contends, it would still be incumbent upon this to demonstrate this materiality for the reasoning of the assessment act, for the purposes of Stamp Duty now under analysis, of its effective existence and, in this case, whether totally or partially intended for residential use and, being partially, what is the value considered for the purpose of tax subjection.
Since, if it were not so, in the field of incidence and in the tax base of future non-residential components, it would lead to these elements being subject to incidence and, therefore, being penalized, while, as results from decision 454/2016-T, "(...) components of identical nature, if weighed for buildings exclusively non-residential, would escape the incidence of the tax and, consequently, would be rewarded in relation to the former (which is to say that the former would be penalized, by means of taxation, in relation to the latter)".
And concludes, "(...) in that case, the burdening of mixed buildings with a residential component, for which no justification is apparent, whereby such interpretation does not appear reasonable, but rather clearly arbitrary (see in this regard the arbitral decision of 6/2/17, in Proceeding no. 294/2016-T). Such an interpretation would thus violate the principle of equality and, in that measure, would be unconstitutional, as the Claimant contends".
In the wake of decision no. 447/2016-T of CAAD, this proof would always be incumbent upon the Respondent and should be contained in the reasoning of the assessment act, which is not the case here, and it has not been demonstrated that the land for construction in question actually had authorization, project or planned construction intended for residential use, so as to be subject to Stamp Duty in accordance with Item no. 28.1 of the General Tax Table, since it does not result from the assessment act nor, even if the property valuation sheet and Form 1 for Municipal Property Tax, attached by the Respondent, and the documentary support that was annexed thereto were considered, whether it was intended for residential use and, in this case, totally or partially, and, in the latter case, what is the value considered for the purpose of tax subjection.
This because, as results, it is insisted, from decision 454/2016-T, "(...) the proof of those presuppositions legitimizing taxation incumbent upon the Respondent (...)". which did not demonstrate it and constitutes a fact whose proof must fall upon the Respondent, as it constitutes an essential fact for the integration of the norm, as an element of real tax incidence and is therefore constitutive of the right to assess it, and should be contained in the assessment act itself, which is not the case.
It would always have had to be concluded that the property, land for construction regarding which it was not proven to have authorization or planning of construction intended for residential use, fulfills the norm of incidence of the tax that served as the basis for the assessment.
From the documentary elements, the Respondent attached the administrative file in which the Claimant's request for official review and information from the Service Directorate for Municipal Tax on Onerous Property Transfers, Stamp Duty, Unique Circulation Tax and Special Contributions are contained.
Thus, without the demonstration of this effective building potentiality, item 28.1 of the General Tax Table is not applicable and, nevertheless, for the purposes of the application of the aforementioned item 28.1 of the General Tax Table, the effective building potentiality is not sufficient, but that it, even if authorized or planned, is for residential use. The same is to say, repeating ourselves, that it cannot be for an end different from residential use, since construction for commerce or industry would not give rise to the application of the norms to which we have been referring, whereby there is, at minimum, a defect of reasoning, also by absence of a statement that the whole of the property, if authorized or planned, is intended for residential use, since nothing results from the collection notices as to these elements constitutive and which are necessary prerequisites for the incidence of Stamp Duty of Item 28.1 of the General Tax Table, whereby we conclude that the assessment lacks, absolutely, motivation.
Now, in the case, there exists no reasoning whatever of the assessment act and the exercise of the Claimant's defense rights does not remove that defect, since, in this case, it would constitute a way of justifying the non-fulfillment of the burden incumbent upon the Respondent, distorting, absolutely, this figure and causing a true reversal of the burden of proof.
And it cannot be confused the indication of the legal provision in the assessment act with the exercise – and respective burden – of bringing the factual matter suitable for the exercise of subsumption in the normative provision, as is required in the reasoning of the assessment, which must be the burden of the Respondent, as they constitute facts essential for the integration of the norm, as an element of real tax incidence and is therefore constitutive of the right to assess it, and should be contained in the assessment act itself, which is not the case, being totally omitted, as it was not fulfilled by the TCA, as was required of it.
Invoking the norm does not confuse with the exercise of subsumption of the facts to the provisions of the rule, this being the responsibility of the Respondent and totally omitted from the reasoning which was required of it for verification of the constitutive elements of the right to assessment.
Not having, therefore, for the purposes of the present request for arbitral pronouncement, been demonstrated that the land for construction in question had authorization, design and planned construction and, even if it were considered that it did, it would always remain omitted from the assessment act – and therefore maintaining the decision – a second element, cumulative, constitutive of the right to assessment, whether it was intended for residential use, totally or partially, and, in the latter case, what is the value considered for the purpose of tax subjection, so as to be subject to Stamp Duty in accordance with Item no. 28.1 of the General Tax Table.
By reason of this, there is verified the non-existence of the reasoning of the assessment act by absence of a statement and motivation as described, in accordance with article 77 of the General Tax Code, is voidable in conformity with the provisions of article 99, subparagraph c) of the Tax Procedural Code and article 163 of the Administrative Procedure Code, ex vi article 2, subparagraph d) of the Tax Procedural Code.
The assessment of the remaining defects indicated by the Claimant, namely the invoked unconstitutionality, is rendered unnecessary by this finding.
4. Compensatory Interest and Default Interest:
The Claimant requests condemnation of the TCA to reimburse it the tax unduly paid, plus compensatory interest and default interest.
As the request for annulment of the tax act is well-founded, the TCA should be condemned to reimburse the Claimant for the tax unduly paid.
Furthermore, article 43, no. 1 of the General Tax Code provides that "compensatory interest is due when it is determined, in a request for reconsideration or judicial impugnation, that there was error attributable to the services from which resulted payment of the tax debt in an amount greater than legally due".
In the case at issue, the error affecting the Stamp Duty assessment is attributable to the Tax and Customs Authority which made the assessment act on its own initiative, whereby the Claimant has a right to compensatory interest from the date of payment of each of the amounts until reimbursement, at the legal default rate, in accordance with articles 43, nos. 1 and 4, and 35, no. 10, of the General Tax Code, article 559 of the Civil Code and Ordinance no. 291/2003, of April 8.
Being affected by illegality, due to error attributable to the TCA, the Stamp Duty assessment, compensatory interest is due from the date of payment by the TCA, in accordance with articles 43 of the General Tax Code and 61, no. 2 of the Tax Procedural Code.
Being that, in accordance with no. 5 of article 43 of the General Tax Code, in the period that elapses between the date of the end of the period for voluntary compliance with a decision that has become final and the date of issuance of the credit note, regarding the tax which should have been reimbursed by a decision that has become final, default interest is due at a rate equivalent to double the rate of default interest defined in the general law for debts to the State and other public entities.
5. Liability for Payment of Arbitration Costs:
In accordance with article 527, no. 1 of the Civil Procedure Code, ex vi 29, no. 1 e) of the LFATM, it is established that the party which caused costs or, if there is no judgment on the merits, who benefited from the proceedings shall be condemned in costs.
In light of the foregoing, the Respondent should be condemned in costs.
6. Decision:
For these reasons and with the reasoning above, it is decided:
a. To find the dilatory exceptions of incompetence of the arbitral tribunal and unsuitability of the procedural means to lack merit.
b. To find the Claimant's requests well-founded and, consequently, to annul the assessment act in dispute, whereupon the Respondent must, as a result of annulment, reimburse the Claimant for all amounts it paid on 30/10/2015 and on 30/11/2015, plus the respective compensatory and default interest, in accordance with the provisions of nos. 1, 2 and 5 of article 43 and no. 2 of article 102 of the General Tax Code, as well as in article 61 of the Tax Procedural Code.
7. Value of the Proceedings:
In accordance with the provisions of articles 306, no. 2 of the Civil Procedure Code and 97-A, no. 1 of the Tax Procedural Code and 3, no. 2 of the Regulation on Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 32,345.44.
8. Arbitration Fee:
The arbitration fee is fixed at € 1,836.00, in accordance with Table I attached to the Regulation on Costs in Tax Arbitration Proceedings.
Notify the parties.
Lisbon, December 20, 2017
The Arbitrator
(Marisa Almeida Araújo)
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