Stamp Tax on Property: CAAD Rules on Verba 28.1 TGIS Application to Urban Buildings (Case 308/2014-T)

ARBITRAL DECISION

CAAD: Tax Arbitration

Process No. 308/2014 – T

Matter: Stamp Tax – Item 28 of the General Table of Stamp Tax

I. Report

1. A, S.A, with Tax Number ..., with registered office at ..., (hereinafter referred to as "Applicant"), filed, on 31.03.2014 a request for constitution of an arbitral tribunal in tax matters, which was accepted, seeking the declaration of illegality of the tax acts of Stamp Tax assessments, relating to the application of item 28.1 of the General Table of Stamp Tax (hereinafter "GTST") on an urban property of which it is owner, registered in the urban property register under article ..., of the parish and municipality of ..., in relation to the year 2012, presenting a joinder of claims for procedural economy.

2. Pursuant to the provisions of paragraph a) of article 2, item 6 of Decree-Law No. 10/2011, of 20 January, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Ethics Council of the Administrative Arbitration Centre appointed as arbitrator Ana Teixeira de Sousa, and the parties, after being duly notified, did not manifest opposition to such appointment.

3. Thus, in accordance with the provision contained in paragraph c) of article 1, item 11 of Decree-Law No. 10/2011, of 20 January, as amended by article 228 of Law No. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 20.06.2014.

4. The highest-ranking official of the Tax and Customs Authority (hereinafter referred to as "Respondent") was notified to, if willing, within a period of 30 days, submit a reply and request production of additional evidence, a reply was submitted on 12.09.2014, signed by the legal practitioners ... and ..., in the name and representation of the Respondent.

5. In light of the Respondent's Reply, the tribunal, through an order dated 03.12.2014, decided that the meeting referred to in article 18 of the Legal Framework for Tax Arbitration is dispensed with and that the final decision will be presented by 20 December 2014, the deadline having been extended until 20 February 2015.

The Request for Arbitral Pronouncement

Summarizing, the grounds presented by the Applicant are as follows.

On 16.10.2013 the Applicant was notified of the following documents for payment, in the month of December, of Stamp Tax under Item 28.1 of the GTST, in relation to the following properties:

Following requests by the Applicant for second valuation for purposes of IMI (Property Tax), the Applicant was notified of new Stamp Tax assessments for the year 2012 issued by the Lisbon Tax Office 3 by application of Item 28.1 of the GTST as per documents Nos. 11 to 20:

Following notification of these second assessments, the Applicant was notified of the "account adjustment statement" which reflects the issuance of the second assessments.

The property subject to the Stamp Tax assessments in question is constituted in vertical ownership, being composed of 10 divisions capable of independent utilization, each of which subject to individual valuation for purposes of IMI, as follows (See Docs. 1 to 20):

The Applicant considers that the first Stamp Tax assessments cannot fail to be regarded as revoked by substitution by the second assessments made.

In effect, although the tax act is a divisible act, susceptible to partial annulment, in this case it appears that the Tax and Customs Authority instead pursued an annulment of the previous assessments, as it proceeded with the correction of the Market Values in second valuation.

Proceeding thus to new assessments which were substituting the previous ones in their totality, without limiting itself to proceeding with a mere partial annulment and substituting the corresponding collection notices previously existing, instead having proceeded by total annulment of the previous assessments by new assessments, which occupied the place of those previously existing.

In this regard, the Applicant considers that the subject matter of the present request for pronouncement consists of the Stamp Tax assessments, issued by the Lisbon Tax Office 3, by application of item 28.1 of the GTST, identified above and contained in Table 2 (See Docs. Nos. 11 to 20), which amount to the value of Stamp Tax of € 15,656.10.

The Applicant alleges the ILLEGALITY OF THE ASSESSMENT ACTS for the following reasons:

• The normative provisions which determined the Stamp Tax assessments in question cannot be applicable to the property in question because it is constituted in vertical ownership, consisting of divisions that are (i) capable of independent utilization, (ii) each with its own market value, (iii) independently taxable, namely for purposes of Municipal Property Tax.

From the law, and in particular from item 28 of the GTST, there does not follow any discrimination between properties which are constituted in horizontal or vertical ownership, with regard to their identification as "residential urban properties".

That is, in the case of a property composed of parts capable of independent utilization, the "market value used for purposes of IMI" is the one corresponding to each of those parts.

Article 67, paragraph 2 of the Stamp Tax Code refers matters not regulated in this Code concerning item No. 28.1 of the General Table to the subsidiary application of the provisions of the Property Tax Code.

And article 12, paragraph 3 of the Property Tax Code provides that each floor or part of a property capable of independent utilization is considered separately in the property register which also discriminates the respective market value.

For purposes of Property Tax, autonomous units and parts of properties capable of independent utilization have exactly the same legal treatment.

• Therefrom the Applicant concludes that to assess the Stamp Tax in question, the Tax and Customs Authority invented a Market Value – corresponding to the sum of the Market Values relating to the parts capable of independent utilization of the property – which does not in fact correspond to the "market value for purposes of IMI".

But it is not permissible for the Tax and Customs Authority to distinguish in law what the law itself does not distinguish, and even more so when the distinction is aimed at tax incidence.

Given the foregoing, only when the "market value used for purposes of IMI" of any of the parts capable of independent utilization exceeds one million euros can the taxation provided for in item 28 of the GTST operate.

In this sense have already pronounced themselves, inclusive, Arbitral Tribunals constituted pursuant to the Legal Framework for Tax Arbitration, at the CAAD, of which Arbitral Decisions Nos. 50/2013-T and No. 132/2013-T are reference.

It is thus concluded that there is manifest illegality in the interpretation of item 28 of the GTST, made by the Tax and Customs Authority, insofar as it invents a Market Value for purposes of taxation in the Stamp Tax context which does not serve as the basis for purposes of IMI.

The Applicant also alleges the unconstitutionality of the interpretation given by the Tax and Customs Authority to the application of item 28.1 of the GTST, by tolerating an intolerable violation of the principle of equality and contributory capacity.

For the Applicant it is evident that, had the building in question been subject to the regime of horizontal ownership there would not occur the taxation in the Stamp Tax context in question, given that the Market Value of each division capable of independent utilization individually considered, if it were an autonomous unit, does not in any case come even close to one million euros.

Therefrom the Applicant considers it is possible to configure the hypothesis that, before two identical properties, with the same characteristics and with the same Market Values, only distinguished by the first being in vertical ownership and the second in horizontal ownership, the first property would be taxed for purposes of Stamp Tax and the second would not be so taxed.

In the interpretation given by the Tax and Customs Authority to item 28 of the GTST, the economic premise erected as the object or taxable matter is not in fact revealing of contributory capacity, and contributory capacity must necessarily be based on the strength or economic potential of the taxpayer expressed in the ownership or utilization of wealth (or income).

Now, the contributory capacity of the owner of a property is exactly the same, regardless of whether such property is constituted in horizontal or vertical ownership.

This is, after all, what is designated as material equality and which results, in generic terms, in treating equally what is equal and namely treating differently what is different.

It follows therefore that the Tax and Customs Authority must interpret item 28 of the GTST in accordance, not only with the principles of contributory capacity, equality and tax legality.

It is thus necessary that the Tax and Customs Authority interpret item 28 of the GTST in light of fundamental principles, constitutionally enshrined, and of the provisions of the General Tax Law itself, which prima facie instruct the Tax Authority on the manner in which it should interpret any tax provision.

The Applicant concludes by requesting the annulment of the Stamp Tax assessment acts contested with all legal consequences flowing therefrom.

Response of the Tax and Customs Authority

The Tax and Customs Authority (or Respondent) submitted a reply maintaining the assessments contested on the basis, briefly summarized, of the following arguments:

Contrary to what is argued by the Applicant, it follows unequivocally from the letter of the law that the legislator intended to tax with item 28.1 of the GTST properties as a single legal-tax reality.

The Tax and Customs Authority recognizes that the assessments in question – identified in Table 1 of the initial petition – were subsequently subject to official correction for the values contained in Table 2 of the same petition, in light of the existence of an error that occurred in the context of general valuation, as follows from the Administrative Process.

In the view of the Respondent what is at issue here is exclusively a set of assessments relating to a single property, and which result from the direct and immediate application of the legal norm, which translates into objective elements, without any subjective or discretionary appraisal.

However, legal support is lacking for the thesis defended by the Applicant, for although the assessment of Stamp Tax in the situations provided for in item No. 28.1 of the GTST is processed in accordance with the rules of the Property Tax Code, the truth is that the legislator reserves the aspects which require appropriate adaptations, namely those in which, as is the case of properties in full ownership, even with floors or divisions capable of independent utilization (although IMI is assessed for each part capable of independent utilization) for purposes of Stamp Tax, the property in its entirety is relevant, because divisions capable of independent utilization are not regarded as property, but only autonomous units in the horizontal ownership regime, as per paragraph 4 of article 2 of the Property Tax Code.

For the Respondent, what expressly results from the letter of the law is that the legislator intended to tax with item 28.1 in discussion properties as a single legal-tax reality.

Effectively, subjection to the stamp tax of item 28.1 of the General Table annexed to the Stamp Tax Code results from the conjugation of two facts: residential use and the market value of the urban property registered in the land register being equal to or exceeding € 1,000,000.00.

In truth, it appears from the property card that the property is in a full ownership regime, composed of several parts capable of independent utilization.

Being this the property register information, in accordance with article 23, paragraph 7 of the Stamp Tax Code, the stamp tax assessments relating to the year 2012 were made by the Tax Administration, 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 Property Tax Code.

In accordance with the rules of the Property Tax Code, the property being in full ownership, not possessing autonomous units, to which tax law attributes the qualification of property, because from the concept of property in article 2 of the Property Tax Code, only autonomous units of property in the horizontal ownership regime are regarded as properties – paragraph 4 of the said article 2 of the Property Tax Code.

From the foregoing, the defect of violation of law due to error as to the legal premises must be judged to be without merit, maintaining in the legal order the assessments contested as they constitute a correct application of law to the facts.

The argument for violation of the constitutional principle of tax equality is without merit because this principle prohibits arbitrary or unjustified discriminations but not discriminations eventually justified by the more evolved character of the institutions or by the coherence of the tax system.

The provision of item 28.1 of the GTST does not constitute any arbitrary discrimination in the taxation of properties constituted in horizontal ownership and properties in full ownership with floors or divisions capable of independent utilization because it applies to ownership, usufruct or right of superficies of urban properties with residential use, whose market value contained in the land register, pursuant to the Property Tax Code, is equal to or exceeding € 1,000,000.00, being applied to all cases in which the respective factual and legal premises are verified.

Taxation in the Stamp Tax context obeys the criterion of adequacy, aiming at the taxation of wealth embodied in the ownership of high-value properties, arising in a context of economic crisis which cannot be ignored.

The distinct treatment of properties in horizontal and vertical ownership regimes is a discrimination imposed by the need to impose coherence on the tax system, not arbitrary because it is a matter of distinct realities, differently valued by the legislator.

The measure seeks maximum effectiveness as to the objective to be attained with the minimum of harm to other interests considered relevant, the chosen scope of application is legitimated by obtaining revenue and would only be censurable, in light of the principle of proportionality, if it resulted manifestly indefensible – and it is not because it applies in an undifferentiated manner to all holders of properties with residential use of value exceeding € 1,000,000.00.

The assessments are correct and should be maintained and the request for pronouncement should be judged to be without merit, absolving the Respondent from the claim.

Subject Matter of the Request

1. The issue which the Applicant seeks to have decided is:

• Legality of the assessment of Stamp Tax provided for in item 28.1 of the GTST (added by article 4 of Law No. 55-A/2012, of 29 October) in relation to the total market value of a building, corresponding to the sum of the market values of various floors or divisions capable of independent utilization.

• Unconstitutionality of the norm applied due to violation of the principle of equality enshrined in article 13 of the Constitution.

Clarification of Jurisdiction

The arbitral tribunal is substantively competent, pursuant to the provisions of articles 2, paragraph 1, subparagraph a) of the Legal Framework for Tax Arbitration.

The parties enjoy legal personality and capacity and have standing pursuant to article 4 and paragraph 2 of article 10 of the Legal Framework for Tax Arbitration, and article 1 of Ordinance No. 112-A/2011, of 22 March.

The process does not suffer from any nullity nor have the parties raised any exceptions which prevent the consideration of the merits of the case, so the conditions are met for the rendering of the arbitral decision.

II. JUSTIFICATION

Proved Facts

On the basis of the documents submitted by the Applicant (request for arbitral pronouncement, Docs. No. 1 to 30 attached to this Request; Reply of the Tax Authority), the following factual findings are established:

• The Applicant is owner of a property composed of floors or divisions in full or vertical ownership, that is, not constituted in horizontal ownership (article 1 of the Request for Arbitral Pronouncement; article 1 of the Reply and assessment documents submitted to the file by the Applicant with the Request, the contents of which are deemed reproduced).

• On 16.10.2013 the Applicant was notified of a set of assessments for payment, in the month of December, of Stamp Tax under Item 28.1 of the GTST, in relation to the property identified in article 1 of the initial petition.

• These assessments were subsequently subject to official correction, having been replaced by new assessments for the values contained in Table 2 of the same initial petition, in light of the existence of an error that occurred in the context of general valuation, as follows from the Administrative Process, which is admitted by the Applicant and the Respondent.

• The amounts referred to in the assessments as the total Market Value of the property identified correspond to the values mentioned in point 8 of the present decision of the arbitral tribunal, in the total amount of € 15,656.10.

• The assessments referred to the year 2012, indicated as grounds item 28.1 of the GTST, applied the rate of 1% to the market value of the property subject to IMI, but taking into account the total Market Value of the property in which each of the taxed properties was inserted.

Unproved Facts

The unproved facts are considered irrelevant for the consideration of the merits of the case.

The Applicable Law

The Scope of Application of Item 28 of the General Table of Stamp Tax

It follows from the positions of the Parties that the essential issue in the present case consists in determining whether in the case of properties in full ownership, with floors or divisions of independent utilization but not constituted in the horizontal ownership regime, the Market Value to be considered for purposes of the Stamp Tax provided for in item 28.1 of the GTST should correspond to the Market Value of each floor or division with residential use and independent utilization, or to the sum of the Market Values corresponding to the floors or divisions of independent utilization with residential use. That is, to determine whether the Market Value relevant as a criterion for the incidence of the tax is the one corresponding to the sum of the market values attributed to the different parts or floors (total Market Value) or, rather, the Market Value attributed to each one of the residential parts or floors individually.

This issue has already been appreciated in various proceedings within the scope of Tax Arbitration [1], no arguments having been identified so far which would allow breaking the unanimity which has been achieved in the decisions rendered.

We follow in this proceeding essentially the justification in Process 194/2014-T of 28.07.2014, which we fully subscribe to.

Item 28 of the General Table of Stamp Tax, annexed to the Stamp Tax Code, was added by article 4 of Law No. 55-A/2012, of 29 October, with the following content:

"28 – Ownership, usufruct or right of superficies of urban properties whose market value contained in the land register, pursuant to the Property Tax Code, is equal to or exceeding € 1,000,000 – on the market value for purposes of Property Tax:

28-1 – For property with residential use – 1%;

28.2 – For property, where the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favourable tax regime, listed in the ordinance approved by the Minister of Finance – 7.5%."

According to the amendments to the Stamp Tax Code, introduced by article 3 of Law No. 55-A/2012, of 29/10, the stamp tax provided for in item 28 of the GTST applies to a legal situation (paragraph 1 of article 1 and paragraph 4 of article 2 of the Stamp Tax Code), in which the respective taxpayers are those referred to in article 8 of the Property Tax Code (paragraph 4 of article 2 of the Stamp Tax Code), to whom falls the burden of the tax (subparagraph u) of paragraph 3 of article 3 of the Stamp Tax Code).

The provision of the Stamp Tax Code, in the version given by Law No. 55-A/2012, whether in article 4, paragraph 6 ("In the situations provided for in item 28 of the General Table, the tax is due whenever properties are located in Portuguese territory"), or in article 23, paragraph 7 ("Where the tax due by the situations provided for in item No. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the Property Tax Code"), combined with article 1 of the Property Tax Code, consider the property in itself as the taxable event (the situation which triggers taxation) provided that it reaches the value foreseen in item 28 of the General Table of Stamp Tax, regardless of the number of taxpayers, possessors (as owners, usufructuaries or holders of superficies) of the property in question [2].

As for the rates, subparagraph f) of paragraph 1 of the same article 6, of Law No. 55-A/2012, provides for the application in 2012 of a rate lower than the 1% rate provided for in item 28.1 of the GTST for properties with residential use, distinguishing still between cases of properties valued in accordance with the Property Tax Code (rate of 0.5%) and properties with residential use not yet valued in accordance with the Property Tax Code (rate of 0.8%).

The Concept of Property Used in Item 28 of the GTST

The concept of "properties with residential use" used in item 28.1 [3] is not expressly defined in any provision of the Stamp Tax Code or of the Property Tax Code, the Act to which article 67, paragraph 2 of the Stamp Tax Code refers.

In the case before us, whether we consider the Applicant's property in vertical ownership or each one of its respectively autonomous divisions, it is (not contested) a property classified as urban and residential in accordance with the criteria established in articles 2, 4 and 6 of the Property Tax Code, applicable by reference of article 67 of the Stamp Tax Code.

Thus, only the exact meaning of the application of the "market value considered for purposes of IMI", contained in the tax incidence provision of the stamp tax in the body of item 28: in the case of properties in full ownership but with floors or divisions capable of independent utilization, does the relevant Market Value correspond to the sum of the Market Value of the various divisions/floors, as the Tax Authority contends, or what must be taken into account is the Market Value of each of the respective floors or autonomous divisions, as the Applicant argues?

Now this provision is integrated in a text which defines as the object of the incidence of the stamp tax "Ownership, usufruct or right of superficies of urban properties whose market value contained in the land register, pursuant to the Property Tax Code, is equal to or exceeding € 1,000,000 – on the market value for purposes of Property Tax":

As has been repeatedly invoked and admitted, the Property Tax Code enshrines, both as to property register registration and discrimination of the respective market value, and as to the assessment of the tax, the autonomization of parts of urban property capable of independent utilization and the segregation/individualization of the Market Value relating to each floor or part of property capable of independent utilization.

Thus, to each property corresponds a single article in the register (paragraph 2 of article 82 of the Property Tax Code) but, according to paragraph 3 of article 12 of the same Code, relating to the concept of property register (registration of property, its characterization, location, Market Value and ownership), "each floor or part of property capable of independent utilization is considered separately in the property register, which discriminates the respective market value", not taking as reference the sum of the market values attributed to the autonomous parts of the same property, but the value attributed to each of them individually considered.

As for the assessment of IMI – application of the rate to the taxable base – article 119, paragraph 1 provides that "the relevant collection document" contains the "discrimination of properties, their parts capable of independent utilization, respective market value and the collection amount (...)".

That is, the rule is autonomization, characterization as "property" of each part of a building, provided that it is functionally and economically independent, capable of independent utilization [4], in accordance with the concept of property defined immediately in paragraph 1 of article 2 of the Property Tax Code: property is any fraction (of territory, encompassing water, plantations, buildings and constructions of any nature therein incorporated or resting, with a character of permanence) provided that it is part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as water, plantations, buildings or constructions, in the preceding circumstances, endowed with economic autonomy (emphasis added and underlined by us). [5]

Thus, when paragraph 4 of article 2 provides that "For purposes of this tax, each autonomous unit, in the horizontal ownership regime, is regarded as constituting a property", it does not properly establish an exceptional or special regime for properties in horizontal ownership.

Each building in horizontal ownership (article 92) has only one property register entry (paragraph 1), describing the building generically and mentioning the fact that it is in the horizontal ownership regime (paragraph 2) and property register autonomy is realized in the attribution to each of the autonomous units, described in detail and individualized, of a capital letter, according to alphabetical order (paragraph 3). This appears to be the specificity of buildings in horizontal ownership; in other cases, of properties in vertical or full ownership, the divisions or floors with autonomy but without the status of horizontal ownership, the register also consecrates autonomy but evidencing the units with indication of the type of floor/story.

On the other hand, the argument that "taxation in the Stamp Tax context obeys the criterion of adequacy, aiming at the taxation of wealth embodied in the ownership of high-value properties, arising in a context of economic crisis which cannot be ignored", is not acceptable, because the distinct treatment of properties in horizontal and vertical ownership regimes is neither justified as "a discrimination imposed by the need to impose coherence on the tax system" (what coherence?) nor can it be freed from the qualification of being arbitrary when treating in a different manner realities which are largely identical, and, if they are different, with risk even of treating in a more burdensome way situations generally related to lesser contributory capacity than those which would have more beneficial treatment.

Neither is the argument of the Respondent persuasive that in the case of properties in full ownership, even with floors or divisions capable of independent utilization, notwithstanding the fact that IMI is assessed for each part capable of independent utilization, the market value on which the incidence of the Stamp Tax of item No. 28.1 of the General Table depends, had to be, as it was, the total market value of the properties, and not that of each one of its floors or independent parts, because item No. 28.1 of the GTST is applied according to the rules of the Property Tax Code but "with reservation of aspects which require the necessary adaptations". (emphasis added).

There is therefore no discernible reason in the law approved for, in the matter of the incidence of the Stamp Tax provided for in item 28.1 of the GTST, giving fractions of properties in "vertical ownership", endowed with autonomy, treatment different from that granted to properties in horizontal ownership, when in any of these situations IMI is applied to the market value evidenced in the register for each of the autonomous units.

The interpretation above sustained, resulting from the analysis of the letter of the law and its insertion in the set of other applicable tax provisions, is the most consonant with the spirit of the legislative changes introduced by Law No. 55-A/2012, of 29 October.

As has already been evidenced in other arbitral decisions, "the legislator in introducing this legislative innovation considered as the determining element of contributory capacity urban properties, with residential use, of high value (luxury), more rigorously, of value equal to or exceeding €1,000,000.00, on which there came to be applied a special rate of stamp tax, intending to introduce a principle of taxation on the wealth externalized in the ownership, usufruct or right of superficies of urban luxury properties with residential use. For this reason, the criterion was application of the new rate to urban properties with residential use, whose Market Value is equal to or exceeding €1,000,000.00". (...) "The justification for the measure designated as 'special rate on urban residential properties of the highest value' is based 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 housing, bringing to bear the new special rate on 'houses of value equal to or exceeding 1 million euros. Clearly the legislator understood that this value, when imputed to a residence (house, autonomous unit or floor with independent utilization) translates a contributory capacity above the average and, as such, susceptible of determining a special contribution to ensure the just apportionment of fiscal effort." [6]

Now, it appears to entirely lack adhesion to reality the sustaining of the thesis that the possession of fractions devoid of the status of horizontal ownership denotes greater contributory capacity than if they were provided with that nature.

On the contrary, in most cases, as evidenced by Arbitral Decision No. 50/2013, "many of the existing properties in vertical ownership are old, with undeniable social utility, as in many cases they house residents with modest rents and more accessible ones, factors which must necessarily be taken into account."

Thus, the correct interpretation is considered to be that item 28 of the GTST does not encompass each one of the floors, divisions or parts capable of independent utilization when only from their sum results a Market Value exceeding that provided by the same item.

Just as decided in other arbitral proceedings, this tribunal considers that as to the date of constitution of the tax obligation, tax connection, determination of the taxable base, assessment and payment of the stamp tax in question, the corresponding rules of the Property Tax Code are applicable, by express reference of articles 5, paragraph 1, subparagraph u), 4, paragraph 6, 23, paragraph 7, 44, paragraph 5, 46, paragraph 5 and 49, paragraph 3, of the Stamp Tax Code.

Subjecting to the new stamp tax autonomous parts without the legal status of horizontal ownership and not subjecting any of the residential fractions if the property were in the horizontal ownership regime would constitute a violation of the constitutional principle of equality, treating equal situations in a different manner.

In the case before us, given that none of the "fractions" of any of the buildings in question presents, per se, "value equal to or exceeding 1 million euros", there is no place for the incidence of item 28 provided in the General Table of Stamp Tax.

Conclusion

Thus, the present arbitral tribunal concludes that the Stamp Tax assessments, based on item 28/28.1 of the GTST, in relation to each of the floors or parts capable of independent utilization, owned by the Respondent, subject to the present proceedings, are affected by illegality, because the said provisions cannot be interpreted in the sense of their application to floors or parts capable of independent utilization of a property in vertical ownership, when only from the sum of each of those floors or parts is there obtained a Market Value equal to or exceeding € 1,000,000.00 (one million euros), not exceeding the Market Value of each of the said floors or parts that legal threshold.

And, as follows from the factuality established, none of the floors intended for residential use of the property in vertical ownership, subject of this process, has a market value equal to or exceeding €1,000,000.00, it is concluded that the legal premise for the incidence of the Stamp Tax provided for in Item 28 of the GTST has not been met.

Prejudiced Questions: Unconstitutionality

As the arbitral tribunal did not uphold the understanding that item 28.1 of the GTST is applicable to the instant case, the consideration of the remaining defects which may affect the contested assessments is rendered moot as procedurally futile, specifically the question of the unconstitutionality of the norm introduced in the GTST (item 28/28.1) by Law No. 55-A/2012, of 28 October, due to violation of the principle of equality enshrined in article 13 of the Constitution.

Decision

In accordance with and on the grounds set forth, the arbitral tribunal decides to judge the request for arbitral pronouncement to be well-founded with the consequent annulment of the contested assessments, with all legal consequences.

Value of the Case

In accordance with the provision of paragraph 2 of article 315 of the Code of Civil Procedure, subparagraph a) of paragraph 1 of article 97-A of the Code of Tax Procedure and also paragraph 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 15,656.10 (fifteen thousand, six hundred and fifty-six euros and ten cents).

Costs

For the purposes of the provision of paragraph 2 of article 12 and paragraph 4 of article 22 of the Legal Framework for Tax Arbitration and paragraph 4 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 918.00, in accordance with Table I annexed to the said Regulation, to be borne entirely by the Respondent.

Let it be notified.

Lisbon, 23 February 2015

The Arbitrator

(Ana Teixeira de Sousa)

[Text prepared by computer, pursuant to article 131, number 5 of the Code of Civil Procedure, applicable by reference of article 29, paragraph 1, subparagraph e) of the Legal Framework for Tax Arbitration. The drafting of this decision follows the old spelling rules.]

[1] On the application of item 28 of the GTST in the case of properties in vertical ownership, decisions are already published on the CAAD website, namely, in Processes 50/2013-T; 132/2013-T; 181/2013-T; 183/2013-T; 185/2013-T; 248/2013-T; 240/2013-T; 280/2013-T, available at www.caad.org.pt.

[2] The provision of Law No. 55-A/2012, of 29 October, regarding the new item 28 of the General Table of Stamp Tax entered into force on the day following publication of the law, namely, 30 October 2012. Article 6 of Law No. 55-A/2012, provides for transitional provisions by virtue of which, in that first year of validity, namely 2012: the taxable event occurs on 31 October (when, in accordance with article 8 of the Property Tax Code, applicable by reference of paragraph 4 of article 2 of the Stamp Tax Code, it would be on 31 December); the taxpayer of the tax is the holder of the property (paragraph 4 of article 2 of the Stamp Tax Code) also on that 31 October; the market value to be used in the assessment of the tax corresponds to what results from the rules provided for in the Property Tax Code by reference to the year 2011; the assessment of the tax by the Tax Authority is carried out by the end of November 2012; the tax must be paid in a single instalment by the taxpayers on or before 20 December of that year 2012.

[3] The wording of this number was amended by Law No. 83-C/2013, of 31 December, now using the concept "residential property", but the assessments subject of the present proceedings refer to the year 2012.

[4] On this aspect, and in line with the commentary cited in the preceding note, see the justification contained in decision No. 248/2013-T: "The autonomization in the register of the parts functionally and economically independent of a property in full ownership is linked to reasons of a fiscal and extra-fiscal nature. On the fiscal level, this autonomization relates to the determination itself of the market value, which constitutes the taxable base of IMI, given that the formula for determining that value, provided for in article 38 of the same Code, contains elements that vary in accordance with the utilization attributed to each of those parts. On the extra-fiscal level, this autonomization continues to find justification in the relevance attributed to the market value of properties and their autonomous parts in the legislation concerning urban leasing." There is also mentioned the paragraph 1 of article 15-O of Decree-Law No. 287/2003, of 12/11, added by Law No. 60-A/2011, of 30/11 (providing that the safeguard clause relating to the increase in taxation in IMI resulting from the general valuation of urban properties is applicable per property or part of urban property which is subject to such valuation) as confirming the individualization, for tax purposes, of the autonomous parts of urban properties.

[5] As observed in Process 132/2013: "The provisions (...) listed establish the principle of autonomization of the independent parts of an urban property, even when not constituted in horizontal ownership. That is, each part capable of independent utilization should be, for purposes of IMI, valued in accordance with its specificities and utilization, resulting in an autonomous Market Value, individualizable and corresponding to each part capable of independent utilization."

[6] Excerpts from the Decision in process No. 50/2014-T, also referring to Arbitral Decision in process No. 48/2013-T, as to the analysis of the Discussion of the legislative proposal in the Parliament.