Process: 309/2014-T

Date: June 20, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 309/2014-T addressed whether Stamp Duty under Item 28.1 of the General Stamp Duty Table (TGIS) applies to urban properties held in total ownership with independently usable parts valued collectively above €1 million. The claimant company owned an urban property registered as full ownership with multiple floors capable of independent residential use, with a total tax property value of €2,613,660 in 2012, though no individual part exceeded €1,000,000. The claimant argued that Article 67(2) of the Stamp Duty Code, referencing the Municipal Property Tax Code (CIMI), required each independently usable part to be assessed separately for Stamp Duty purposes, similar to horizontal property regime treatment. Since no individual part exceeded the €1 million threshold, the claimant contended no Stamp Duty was due and requested annulment of the assessments and refund of taxes paid with compensatory interest. The Tax Authority countered that full ownership properties differ fundamentally from horizontal property under Article 2(4) CIMI, as fractions in horizontal property constitute separate properties while independently usable parts in full ownership do not. The initial arbitral tribunal ruled in favor of the claimant, annulling the assessments by refusing to apply Item 28.1 TGIS on constitutional grounds. However, the Public Ministry appealed to the Constitutional Court under Article 70(1)(a) LTC. In Judgment 620/2015 of December 3, 2015, the Constitutional Court ruled the norm constitutional, rejecting the equality principle violation argument and finding legitimate grounds for differential treatment between full ownership and horizontal property regimes. Consequently, the Constitutional Court ordered the arbitral tribunal to reform its decision, effectively upholding the Tax Authority's Stamp Duty assessments on the property's total value, confirming that Item 28.1 TGIS applies to the aggregate value of properties in full ownership regardless of internal divisions.

Full Decision

ARBITRAL DECISION

Claimants: A…, S.A.

Respondent: AT - Tax and Customs Authority

I – REPORT

A…, S.A., taxpayer no. …, with registered office at Av. …, no. …, … floor, in Lisbon, filed, on 31-03-2014, pursuant to article 2(1)(a) and articles 10 et seq. of Decree-Law no. 10/2011, of 20 January, which approves the Legal Regime of Arbitration in Tax Matters (RJAT), in conjunction with article 99(a) and article 102(1)(d) of the Tax Procedure and Process Code (CPPT) – applicable by virtue of article 10(1)(a) of the aforementioned decree-law, a request for arbitral decision, in which the Respondent AT - TAX AND CUSTOMS AUTHORITY is named, with a view to:

(i) The annulment of the tax assessment act for Stamp Duty (IS), by Item 28.1 of the General Table of Stamp Duty (TGIS), for the year 2012, and relating to the urban property registered in the property register matrix of the parish of ... under no. … (as per document 14 attached to the initial petition and hereby reproduced), assessment act notified to the Claimant through documents 2012 …; 2012 …; 2012 …; 2012 …; 2012 …; 2012 …; 2012 …; 2012 …; 2012 …, 2012 …, 2012 … and 2012 …;

(ii) The condemnation of the AT – Tax and Customs Authority to refund the unduly paid tax and to pay corresponding compensatory interest.

On 04-06-2014, this Sole Arbitral Tribunal was constituted.

Pursuant to article 17(1) of the RJAT, the Respondent AT - Tax and Customs Authority was required to file a response, which it did on 06-07-2014.

On 21/10/2013, the parties were requested to submit written submissions. The claimant submitted submissions on 31/10/2013, reiterating the arguments previously presented in its initial petition. The respondent did not submit submissions.

The parties agreed to dispense with the holding of the meeting provided for in article 18 of the RJAT as well as the phase of final submissions.

In a decision issued on 04-12-2014, the Tribunal annulled the impugned tax acts based on a refusal to apply, on grounds of unconstitutionality, the taxable event norm contained in item 28.1 of the General Table of Stamp Duty, when interpreted in the sense that it includes properties in full ownership composed of parts susceptible to independent use.

The Public Ministry appealed this decision to the Constitutional Court, pursuant to article 70(1)(a) of the Law on Organization, Functioning and Process of the Constitutional Court (LTC), requesting review of the constitutionality of the refused norm.

As a consequence, case 3015/2015 was initiated in the second section of that Court, which pronounced itself on the said appeal through judgment no. 620/2015, of 3 December 2015, in which the Constitutional Court ruled that the refused norm was constitutional, and ordered the reform of the appealed decision in accordance therewith.

In compliance with that judgment of the Constitutional Court, on the present date, the reform is undertaken – given the suspension of the effects of the filing notification until the rendering of the Constitutional Court Judgment – of the previous decision, in accordance with article 80(2) of the LTC.

II. SUBMISSIONS OF THE PARTIES

The Claimant alleged, in essence, the following:

  • The Claimant is the owner of the urban property registered in the property register matrix of the parish of ... under no. … and described as property in full ownership with divisions susceptible to independent use and with residential use;

  • By virtue of the referral made by article 67(2) of the Stamp Duty Code (CIS), to the Municipal Property Tax Code (CIMI), article 13(3) of the CIMI is applicable for purposes of determining the incidence of IS, whereby it is on the basis of the tax property value of each floor or part of property with independent use that its subjection to tax is determined;

  • The impugned assessment acts, by taking as their basis for determining incidence the total value of the property, rest on error regarding the factual and legal presuppositions of the application of item 28.1 of the TGIS;

  • In the case of the property subject to the impugned assessments, the tax property value of each of the parts is less than 1,000,000 euros, whereby none of the parts is subject to taxation by item 28.1 of the TGIS;

  • The impugned assessments also result in violation of the constitutional principle of tax equality, by treating residential properties in full ownership composed of parts susceptible to autonomous use and with separate property registration differently from the way in which residential properties constituted in horizontal property are treated;

In its response to the request for arbitral decision, the Respondent AT - Tax and Customs Authority argues against the granting of the request, alleging, in summary, the following:

  • The IMI Code, to which article 67(2) of the CIS refers, does not treat residential properties in full ownership composed of parts susceptible to autonomous use and with separate property registration equally with residential properties constituted in horizontal property;

  • In fact, pursuant to article 2(4) of the CIMI, fractions of properties in horizontal property are considered property, while parts of properties in full ownership susceptible to independent use are not property;

  • Full ownership and horizontal property do not constitute substantially identical legal realities, justifying thereby that they not receive the same tax treatment;

  • On the other hand, it is not merely by "property registry autonomization" that the 12 floors or divisions susceptible to independent use acquire, by themselves alone, the status of property;

  • The property registry registration of the floors susceptible to independent use and the assignment of an individual tax property value not only do not remove the tax property value of the respective property where these are inserted, but also end up competing or determining the very tax property value of the urban property;

  • Thus, the interpretation of item 28.1 of the General Table in the sense advocated by the Claimant must be held to be unconstitutional, for violation of the aforementioned principles of tax legality and equality.

III – QUESTIONS TO BE DECIDED

In the decision that is now being reformed, the Tribunal considered that the following questions were to be decided by the Tribunal:

  • The applicability of item 28.1 of the TGIS to urban properties in vertical ownership formed by parts susceptible to independent use considered as a whole;

  • The constitutionality of the taxable event norm contained in item 28.1 of the TGIS, if interpreted in the sense of encompassing urban properties in full ownership composed by parts susceptible to independent use and separately evaluated, in light of the constitutional principle of tax equality.

The second question having been dismissed by the decision of the Constitutional Court, the first question remains.

IV – PRELIMINARY MATTERS

The Tribunal is competent and duly constituted, pursuant to articles 2(1)(a), 5 and 6, all of the RJAT.

The parties possess legal personality and capacity, are legitimate, and are duly represented.

No procedural defects were identified, whereby nothing prevents the consideration of the merits of the request.

V – REASONING

1. FACTUAL MATTERS

The following are the established facts considered relevant for the decision:

  • The Claimant is the owner of the urban property registered in the property register matrix of the parish of ... under no. …;

  • The property is described as property in full ownership with floors or divisions susceptible to independent use;

  • In the year 2012, the tax property value of the property was 2,613,660.00 euros, this value being the result of the sum of the tax property values of the various parts susceptible to independent use with residential use;

  • No division susceptible to independent use with residential use had, in the same year, a tax property value equal to or greater than 1,000,000.00 euros;

  • In July 2013, the Claimant was notified of the acts of assessment for Stamp Duty, by item 28.1 of the TGIS, for the year 2012 and relating to each one of the divisions susceptible to independent use allocated for housing in the property in question, totaling 26,136.60 euros (documents 1, 2, 6, 7, 8, 9, 10, 11 and 12 attached with the initial petition);

  • The Claimant proceeded to pay the assessed tax;

The established facts are based on the documents brought by the Claimant into the proceedings, whose authenticity and correspondence with reality were not contested.

There are no established facts considered unproven relevant for the decision.

2. LEGAL REASONING

(i) Question of the applicability of item 28.1 of the TGIS to urban properties in full ownership, considered as a whole, when formed by parts considered separately in the property registration

The following is the text of item 28 of the General Table of Stamp Duty:

  1. "Ownership, usufruct or surface right of urban properties whose tax property value shown in the property register, under the terms of the Municipal Property Tax Code (CIMI), is equal to or greater than (euro) 1,000,000 - on the tax property value used for purposes of IMI:

28.1 For property with residential use – 1%"

The Claimant argues that properties in full ownership considered as a whole, when formed by parts susceptible to independent use and separately evaluated for purposes of IMI, do not fall within this normative provision.

As support for this conclusion, the Claimant starts from the text of item 28 of the TGIS, in which it is provided that Stamp Duty is levied "on the tax property value used for purposes of IMI".

Since, in the case of properties in full ownership composed of parts susceptible to independent use, IMI is assessed on the tax property value of the parts, also in IS the tax property value of each of those parts should be taken as the basis for taxation.

And, since none of the parts considered separately in the property registration forming the properties in question in this case has a tax property value equal to or greater than 1,000,000 euros, no Stamp Duty could be levied on those same parts.

The question of the applicability of item 28.1 to properties in full ownership composed of parts with independent use was, in the meantime (i.e., subsequent to the pronouncement of the decision that is now being reformed), the subject of various decisions of the Supreme Administrative Court (see the judgments: of 09-09-2015, case no. 47/15; of 24-05-2016, case no. 1352/15; of 24-05-2016, case no. 01344/15; of 04-05-2016, case no. 1504/15; of 04-05-2016, case no. 0172/16, among others).

In the judgment of 09-09-2015, rendered in case no. 47/15, which we take as the basis for our decision in the present case, that Court pronounces itself in the following terms:

"Taking into account that the registration in the property register of properties in vertical ownership, for purposes of the IMI Code, follows the same registration rules as properties constituted in horizontal property, the respective IMI, as well as the new IS, being assessed individually in relation to each one of the parts, it does not seem, (…), that there exists any doubt that the legal criterion for defining the incidence of the new tax must be the same.

In this context, if the law requires, with respect to IMI, the issuance of individualized assessment notices for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal property, it will require, in the same terms, with respect to the rule of incidence of Item no. 28 of the TGIS.

Whereby, IS, within the scope of Item no. 28 of the TGIS, could only be levied on a given fraction if this, possibly, had a VPT [tax property value] greater than € 1,000,000.00.

And, moreover, it was this very understanding adopted by the ATA [Tax and Customs Authority].

In fact, this [ATA] also issued individualized assessment notices, relating to each one of the fractions susceptible to autonomous use, demonstrating that, in its view, the aforementioned fractions, although juridically not constituted in horizontal property, would be, for all purposes, independent from each other.

However, the ATA overlooked that it could not, by virtue of the framework previously set forth, proceed to the sum of the individual VPTs of the previously mentioned fractions, aiming at a value that would already fall within the basis of incidence of Item no. 28 of the TGIS.

This when the legislator itself established a different rule within the scope of the IMI Code which, as previously mentioned, is the Code applicable to matters not regulated in the IS Code, with respect to Item no. 28 of the TGIS.

In summary, the criterion established by the ATA, of considering the value of the sum of the individual VPTs assigned to the parts, floors or divisions with independent use, making use of the fact that the property is not constituted in the regime of horizontal property, does not find, in the eyes of the present court, legal support, being, namely, contrary to the criterion applicable in the context of IMI and, by referral (in the terms mentioned above), in the context of IS.

In this context, the present court considers that the criterion defended by the ATA violates the principles of legality and tax equality, and, as well, the principle of the prevalence of substantial truth over legal-formal reality.

In parallel, note that article 12(3) of the IMI Code makes no distinction regarding the regime of properties that are in horizontal or vertical ownership.

As such, and since if the property were in a regime of horizontal property, none of its residential fractions would suffer incidence of the new tax, the ATA cannot treat materially equal situations differently."

In summary, the doctrine of the SAC in this matter is that to treat differently, within the scope of IS, fractions in horizontal property and parts of property in full ownership would correspond to treating materially identical situations differently, which is not permissible in light of the principle of tax equality. Moreover, the Tax and Customs Authority itself implicitly recognizes that the two realities are identical, when it assesses IS on the parts individually and not on the property as a whole.

But the Court adds further:

"(…)This matter is, from the outset by virtue of article 67(2) of the IS Code, subject to the norms of the IMI Code, – 'to matters not regulated in the present code relating to item 28 of the General Table the CIMI is applied subsidiarily'.

As such, and as has already been mentioned so many times, in the understanding of the present court, the mechanism for the determination of the VPT relevant for purposes of the aforementioned item, is that which is found established in the IMI Code.

Now, article 12(3) of the IMI Code establishes that 'each floor or part of property susceptible to independent use is considered separately in the property registration, which also discriminates the respective tax property value'.

The legislator, in the terms previously mentioned, devaluing any prior constitution of horizontal or vertical property.

In fact, for the legislator, what is relevant is the material truth underlying its existence as an urban property and its use.

It should be noted that the ATA itself seems to agree with the criterion set forth, which is why the assessments that it itself issues are very clear in their essential elements, from which results that the value of incidence is the corresponding to the VPT of each one of the floors and the individualized assessments.

Therefore, if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal property, it clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of the new tax.

Thus, IS incidence would only occur (within the scope of Item no. 28 of the TGIS) if any one of the parts, floors or divisions with independent use presented a VPT greater than € 1,000,000.00.

The ATA cannot consider as the reference value for the incidence of the new tax the total value of the property, when the legislator itself established a different rule in the context of IMI (and, as previously mentioned, this is the code applicable to matters not regulated regarding Item no. 28 of the TGIS).

In conclusion, the current legal regime does not impose the obligation to constitute horizontal property, whereby the action of the ATA amounts to an arbitrary and illegal discrimination.

In fact, the ATA cannot distinguish where the legislator itself understood not to do so, on pain of violating the coherence of the tax system, as well as the principle of tax legality provided for in article 103 of the Constitution of the Portuguese Republic, and also the principles of justice, equality and tax proportionality.

In the case in question, the property in question was, at the relevant date of the facts, constituted in full ownership and had […] fractions with independent use, as results from the documents […].

Given that none of those fractions has a tax property value equal to or greater than € 1,000,000.00, as results from the documents attached to the case, it is concluded by the non-verification of the legal presupposition of incidence."

It is this doctrine that is also embraced here, in accordance with all the vast and unanimous previous arbitral jurisprudence, whereby it is incumbent to conclude that the Stamp Duty assessments impugned are illegal, by violation of tax law, in that they are levied on independent parts of properties in full ownership but taking as their basis the tax property value of the sum of those same parts.

VI. ON THE RIGHT TO COMPENSATORY INTEREST

Given the illegality of the impugned assessment acts, for the reasons set forth, and having the Claimant paid in full the assessed tax, the Claimant has the right, in accordance with articles 24(1)(b) of the RJAT and 100 of the General Tax Law (LGT), to the refund of the unduly paid tax.

As to compensatory interest, article 43 of the LGT stipulates that "compensatory interest is due when it is determined, in a gracious claim or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than legally due".

As to the existence, in this case, of error attributable to the services, this error is considered verified, according to uniform jurisprudence of the SAC (see, in this sense, the Judgments of the SAC of 22-05-2002, Case no. 457/02; of 31.10.2001, Case no. 26167; of 2.12.2009, Case no. 0892/09) whenever they proceed to a gracious claim or challenge of the assessment (in the same sense, the decision in arbitral case 218/2013-T, already cited).

Consequently, the Claimant has the right to compensatory interest, pursuant to article 43(1) of the LGT and article 61(2) and (5) of the CPPT, calculated on the amounts of unduly paid tax, accruing from the date of the undue payment until the full refund of the amount paid.

VII. DECISION

For the reasons set forth, the request for annulment of the impugned assessment acts is found to be fully justified, and it is decided:

  1. Annul the Stamp Duty assessment acts impugned by the Claimant.

  2. Condemn the Tax Authority, pursuant to article 24(1)(b) of the RJAT, to restore the situation that would exist if the annulled assessment acts had not been carried out, adopting the acts and operations necessary for that purpose, through the refund of the amounts of unduly paid tax and the payment of the corresponding compensatory interest.

Value of the case: The value of the case is fixed at 26,136.60 euros.

Costs: Pursuant to article 22(4) of the RJAT, the amount of costs is fixed at 1,530.00 euros, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Register and notify this arbitral decision to the parties.

Lisbon, Administrative Arbitration Centre, 20 June 2016

The Sole Arbitrator

(Nina Aguiar)

ARBITRAL DECISION

Process no. 309/2014-T - CAAD

Claimants: A…, S.A.

Respondent: AT - Tax and Customs Authority

I – REPORT

1. Request

A…, S.A., taxpayer no. …, with registered office at Av. …, no. …, … floor, in Lisbon, filed, on 31-03-2014, pursuant to article 2(1)(a) and articles 10 et seq. of Decree-Law no. 10/2011, of 20 January, which approves the Legal Regime of Arbitration in Tax Matters (RJAT), in conjunction with article 99(a) and article 102(1)(d) of the Tax Procedure and Process Code (CPPT) – applicable by virtue of article 10(1)(a) of the aforementioned decree-law, a request for arbitral decision, in which the Respondent AT - TAX AND CUSTOMS AUTHORITY is named, with a view to:

(iii) The annulment of the tax assessment act for Stamp Duty (IS), by Item 28.1 of the General Table of Stamp Duty (TGIS), for the year 2012, and relating to the urban property registered in the property register matrix of the parish of ... under no. … (as per document 14 attached to the initial petition and hereby reproduced), assessment act notified to the Claimant through the documents:

  • 2012 …
  • 2012 …
  • 2012 …
  • 2012 …
  • 2012 …
  • 2012 …
  • 2012 …
  • 2012 …
  • 2012 …
  • 2012 …
  • 2012 …
  • 2012 …

(iv) The condemnation of the AT – Tax and Customs Authority to refund the unduly paid tax and to pay corresponding compensatory interest.

The Claimant alleges, in essence, the following:

  • The Claimant is the owner of the urban property registered in the property register matrix of the parish of ... under no. … and described as property in full ownership with divisions susceptible to independent use and with residential use;

  • By virtue of the referral made by article 67(2) of the Stamp Duty Code (CIS), to the Municipal Property Tax Code (CIMI), article 13(3) of the CIMI is applicable for purposes of determining the incidence of IS, whereby it is on the basis of the tax property value of each floor or part of property with independent use that its subjection to tax is determined;

  • The impugned assessment acts, by taking as their basis for determining incidence the total value of the property, rest on error regarding the factual and legal presuppositions of the application of item 28.1 of the TGIS;

  • In the case of the property subject to the impugned assessments, the tax property value of each of the parts is less than 1,000,000 euros, whereby none of the parts is subject to taxation by item 28.1 of the TGIS;

  • The impugned assessments also result in violation of the constitutional principle of tax equality, by treating residential properties in full ownership composed of parts susceptible to autonomous use and with separate property registration differently from the way in which residential properties constituted in horizontal property are treated;

Response

In its response to the request for arbitral decision, the Respondent AT - Tax and Customs Authority argues against the granting of the request, alleging, in summary, the following:

  • The IMI Code, to which article 67(2) of the CIS refers, does not treat residential properties in full ownership composed of parts susceptible to autonomous use and with separate property registration equally with residential properties constituted in horizontal property;

  • In fact, pursuant to article 2(4) of the CIMI, fractions of properties in horizontal property are considered property, while parts of properties in full ownership susceptible to independent use are not property;

  • Full ownership and horizontal property do not constitute substantially identical legal realities, justifying thereby that they not receive the same tax treatment;

  • On the other hand, it is not merely by "property registry autonomization" that the 12 floors or divisions susceptible to independent use acquire, by themselves alone, the status of property;

  • The property registry registration of the floors susceptible to independent use and the assignment of an individual tax property value not only do not remove the tax property value of the respective property where these are inserted, but also end up competing or determining the very tax property value of the urban property;

  • Thus, the interpretation of item 28.1 of the General Table in the sense advocated by the Claimant must be held to be unconstitutional, for violation of the aforementioned principles of tax legality and equality.

Meeting provided for in article 18 of the RJAT and submissions

The parties agreed to dispense with the holding of the meeting provided for in article 18 of the RJAT as well as the phase of final submissions.

II – QUESTIONS TO BE DECIDED

The following are the questions to be decided by the Tribunal:

  • The applicability of item 28.1 of the TGIS to urban properties in vertical ownership formed by parts susceptible to independent use considered as a whole, with the consequence that the tax property value to be taken into account for purposes of tax incidence will be, in case of an affirmative answer, the tax property value of the property;

  • The constitutionality of the taxable event norm contained in item 28.1 of the TGIS, if interpreted in the sense of encompassing urban properties in full ownership composed by parts susceptible to independent use and separately evaluated, in light of the constitutional principle of tax equality.

III – PRELIMINARY MATTERS

The Tribunal is competent and duly constituted, pursuant to articles 2(1)(a), 5 and 6, all of the RJAT.

The parties possess legal personality and capacity, are legitimate, and are duly represented.

No procedural defects were identified, whereby nothing prevents the consideration of the merits of the request.

IV – REASONING

3. FACTUAL MATTERS

The following are the established facts considered relevant for the decision:

  • The Claimant is the owner of the urban property registered in the property register matrix of the parish of ... under no. …;

  • The property is described as property in full ownership with floors or divisions susceptible to independent use;

  • In the year 2012, the tax property value of the property was 2,613,660.00 euros, this value being the result of the sum of the tax property values of the various parts susceptible to independent use with residential use;

  • No division susceptible to independent use with residential use had, in the same year, a tax property value equal to or greater than 1,000,000.00 euros;

  • In July 2013, the Claimant was notified of the acts of assessment for Stamp Duty, by item 28.1 of the TGIS, for the year 2012 and relating to each one of the divisions susceptible to independent use allocated for housing in the property in question, totaling 26,136.60 euros (documents 1, 2, 6, 7, 8, 9, 10, 11 and 12 attached with the initial petition);

  • The Claimant proceeded to pay the assessed tax;

The established facts are based on the documents brought by the Claimant into the proceedings, whose authenticity and correspondence with reality were not contested.

There are no established facts considered unproven relevant for the decision.

4. LEGAL REASONING

(ii) Question of the applicability of item 28.1 of the TGIS to urban properties in full ownership, considered as a whole, when formed by parts considered separately in the property registration

The following is the text of item 28 of the General Table of Stamp Duty:

  1. "Ownership, usufruct or surface right of urban properties whose tax property value shown in the property register, under the terms of the Municipal Property Tax Code (CIMI), is equal to or greater than (euro) 1,000,000 - on the tax property value used for purposes of IMI:

28.1 For property with residential use – 1%"

The Claimant argues that properties in full ownership considered as a whole, when formed by parts susceptible to independent use and separately evaluated for purposes of IMI, do not fall within this normative provision.

As support for this conclusion, the Claimant starts from the text of item 28 of the TGIS, in which it is provided that Stamp Duty is levied "on the tax property value used for purposes of IMI".

Since, in the case of properties in full ownership composed of parts susceptible to independent use, IMI is assessed on the tax property value of the parts, also in IS the tax property value of each of those parts should be taken as the basis for taxation.

And, since none of the parts considered separately in the property registration forming the properties in question in this case has a tax property value equal to or greater than 1,000,000 euros, no Stamp Duty could be levied on those same parts.

The legal question that is at issue here is that of the interpretation of the term "urban property" contained in item 28 and subitem 28.1 of the TGIS, in order to determine whether that concept includes the parts, considered separately in the property registration, forming properties in full ownership.

On this question pronounced the arbitral tribunal constituted in case no. 14/2014-T, in the terms that follow and which are fully subscribed:

"It is true that the IMI Code determines (article 12(3)) that parts of property susceptible to independent use be considered separately in the property registration, being assigned their own tax property value.

But on the other hand article 7(2)(b) of the same Code states that, in the case of a property formed by economically independent parts, each part is evaluated by application of the corresponding rules, the value of the property being the sum of the values of its parts.

Therefore, even for purposes of determining the tax property value, the IMI Code does not equate parts of property susceptible to independent use with property, but clearly separates the property and the parts of property. And only as property – for purposes of IMI, in the case of properties in full ownership – is the whole and not the parts.

(…)

Given this, one must start from article 1(6) of the IS Code, according to which, for purposes of this tax, 'the concept of property is the one defined in the Municipal Property Tax Code'.

Article 2(1) of the CIMI, in turn, defines property as 'any fraction of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated in or based upon it, with the character of permanence, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value'.

The urban properties being classified as 'residential', 'commercial, industrial or for services', 'land for construction' and 'others', combining this classification with the definition contained in article 2(1), it is concluded that residential urban properties are necessarily buildings or constructions incorporated in or based upon a fraction of territory.

Despite this definition, according to article 2(4), the autonomous fractions in the regime of horizontal property are considered as property for purposes of the tax, but the same cannot be said of parts of properties in full ownership considered separately in the property registration, as they neither fall within the definition of article 2(1) nor are expressly considered as such.

Parts of properties in full ownership considered separately in the property registration are not, therefore, property for purposes of IMI, not being so, also, consequently, for purposes of Stamp Duty. And being that the case, the tax event of IS cannot be other than the ownership of the property considered in its entirety, as this is property, in the sense of article 2(1) of the CIMI."

The request for annulment of the assessments in question is therefore unfounded, based on error in the legal presuppositions, concretized in the inapplicability of item 28.1 of the TGIS to properties in full ownership with parts considered separately in the property registration.

(iii) Question of the constitutionality of the taxable event norm contained in item 28.1 of the TGIS, when interpreted in the sense of encompassing urban residential properties in full ownership composed by parts susceptible to independent use and considered separately in the property registration, in light of the constitutional principle of tax equality

This same question was also considered in the arbitral award cited, in the terms that follow and which are embraced:

"The principle of taxpaying capacity is not expressly enshrined in the Constitution of the Portuguese Republic. However, its validity in the Portuguese constitutional order has been affirmed both by doctrine and by jurisprudence, having as its principal foundation the principle of equality established in article 13 of the Constitution (in this sense, see the judgments of the Constitutional Court: nos. 106/2013, 437/2006, 84/2003, 211/2003, 452/2003 and 601/2004, all available at www.tribunalconstitucional.pt).

The principle of equality, enshrined in article 13 of the CRP [Constitution of the Portuguese Republic] postulates that equal treatment be given to what is essentially equal and that different treatment be given to what is essentially different (judgment of the CC no. 437/2006).

However, to assess the equality or difference between two different realities, from the tax perspective, a parameter is needed – 'the criterion that must serve as the basis for comparison' – which is given by taxpaying capacity (judgment of the CC no. 197/2013).

Taxpaying capacity constitutes, thus – along with other aspects or functions of the principle (see the judgment of the CC no. 197/2013) – the criterion through which different taxpayers must be compared, for purposes of determining whether they should receive identical or different tax treatment.

In this manner, the principle of taxpaying capacity (in one of its aspects) concretizes the principle of tax or fiscal equality (judgment of the CC no. 84/2003), presupposing equal tax treatment in relation to persons with the same taxpaying capacity and different tax treatment in relation to persons with different taxpaying capacity.

As a consequence of the principle of taxpaying capacity, taxpayers with the same capacity to spend should pay the same taxes and taxpayers with different capacity to spend should pay different taxes (Judgment of the CC no. 197/2013).

It is this dimension of the principle of taxpaying capacity, as prohibiting different tax treatment of persons with the same taxpaying capacity and equal tax treatment of persons with different taxpaying capacity, that is of particular interest in the present case.

What is at issue, more specifically, is the different treatment given, by the IS Code in item 28.1 of the TGIS, to properties in horizontal ownership and to properties in full ownership, composed of parts considered separately in the property registration.

We have seen previously that the autonomous fractions of properties in horizontal property are considered property for purposes of IMI (article 2(4) of the CIMI), as they are also, by virtue of article 1(6) of the IS Code.

Being that the case, IS of item 28.1, in the case of properties in horizontal ownership, can only apply if the tax property value of the autonomous fraction is equal to or greater than 1,000,000 euros. On the other hand, the value resulting from the sum of the tax property values of the various residential fractions cannot be taken into account for purposes of application of the tax.

Even if a single person is the owner of all the fractions of a property in horizontal ownership, and the sum of the tax property values of the residential fractions of the property is equal to or greater than 1,000,000 euros, that owner will not be subject to IS on that patrimony.

Now, between the two situations described – residential property in horizontal ownership and residential property in full ownership composed of parts susceptible to independent use and considered separately in the property registration – there exists no substantial difference, the difference being only formal. Formal difference that does not affect, in any way, the taxpaying capacity of the respective owners.

In fact, the ownership of a residential property in full ownership, composed of parts susceptible to independent use and considered separately in the property registration, with a tax property value equal to or greater than 1,000,000 euros, does not reveal any special taxpaying capacity that the ownership of several autonomous residential fractions, in which the sum of the tax property values is equal to or greater than 1,000,000 euros, does not also reveal.

(…)

Any other understanding, which seeks to disregard the economic substantive identity between the situations of properties in horizontal ownership and of properties in full ownership composed of parts susceptible to independent use and considered separately in the property registration, and to attend only to the formal difference between both situations, would result in a violation of the principle of substance over form, which would have as its consequence a violation of the constitutional principle of taxpaying capacity."

In these terms, it must be concluded by the granting of the request for annulment of the impugned assessments based on violation of the constitutional principle of tax equality by the taxable event norm contained in item 28.1 of the General Table of Stamp Duty, when interpreted in the sense that it includes urban residential properties in full ownership composed by parts susceptible to independent use and considered separately in the property registration.

V. ON THE RIGHT TO COMPENSATORY INTEREST

Given the illegality of the impugned assessment acts, for the reasons set forth, and having the Claimant paid in full the assessed tax, the Claimant has the right, in accordance with articles 24(1)(b) of the RJAT and 100 of the General Tax Law (LGT), to the refund of the unduly paid tax.

As to compensatory interest, article 43 of the LGT stipulates that "compensatory interest is due when it is determined, in a gracious claim or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than legally due".

As to the existence, in this case, of error attributable to the services, this error is considered verified, according to uniform jurisprudence of the SAC (see, in this sense, the Judgments of the SAC of 22-05-2002, Case no. 457/02; of 31.10.2001, Case no. 26167; of 2.12.2009, Case no. 0892/09) whenever they proceed to a gracious claim or challenge of the assessment (in the same sense, the decision in arbitral case 218/2013-T, already cited).

Consequently, the Claimant has the right to compensatory interest, pursuant to article 43(1) of the LGT and article 61(2) and (5) of the CPPT, calculated on the amounts of unduly paid tax, accruing from the date of the undue payment until the full refund of the amount paid.

VI. DECISION

For the reasons set forth, the present Tribunal decides:

  1. Annul the Stamp Duty assessment acts impugned by the Claimant.

  2. Declare the Tax Authority obliged, pursuant to article 24(1)(b) of the RJAT, to restore the situation that would exist if the annulled assessment acts had not been carried out, adopting the acts and operations necessary for that purpose, through the refund of the amounts of unduly paid tax and the payment of the corresponding compensatory interest.

Value of the case: The value of the case is fixed at 26,136.60 euros.

Costs: Pursuant to article 22(4) of the RJAT, the amount of costs is fixed at 1,530.00 euros, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Register and notify this arbitral decision to the parties.

Lisbon, Administrative Arbitration Centre, 4 December 2014.

The Sole Arbitrator

(Nina Aguiar)

[1] Arbitral Decision annulled by the judgment of the Constitutional Court no. 620/2015, of 3 December 2015.