Stamp Tax on Vertical Property: CAAD Ruling on Verba 28 TGIS Illegality (310/2015-T)

ARBITRAL DECISION

I. REPORT

1. A…, S.A. (hereinafter "Claimant"), with the tax identification number ("TIN") …, with tax domicile at Av. …, no. …, …, Lisbon, filed, on the 15th day of May 2015, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, that is, the Legal Framework for Arbitration in Tax Matters ("LFATM"), a petition for constitution of an arbitral tribunal, in order to declare illegal the assessment acts for Stamp Duty ("SD"), in the total amount of € 10,603 (see table below);

The Tax Authority and Customs Authority ("Respondent" or "TA") being the defendant.

A) Constitution of the Arbitral Tribunal

1. Pursuant to the provisions of subparagraph a) of paragraph 2 of Article 6 and subparagraph b) of paragraph 1 of Article 11 of the LFATM, the Ethics Council of this Centre for Administrative Arbitration ("CAAD") appointed the undersigned as sole arbitrator, who communicated acceptance of the mandate within the applicable deadline, and notified the parties of such appointment on the 13th day of July 2015.

2. Thus, in accordance with the provisions of subparagraph c) of paragraph 1 of Article 11 of the LFATM, and through the communication of the President of the Ethics Council of CAAD, the Sole Arbitral Tribunal was constituted on the 29th day of July 2015.

B) Procedural History

1. In the petition for arbitral decision, the Claimant petitioned for the declaration of illegality of the SD assessments mentioned above, relating to the year 2014, by reference to an urban property, constituted in full ownership, located at Av. …, no. …, no. …, no. … and no. …, in Lisbon, which is registered in the urban property matrix of the parish of Avenidas Novas under the property registration number …

2. It should be noted that, within the scope of the petition for arbitral decision referred to above, the Claimant had already paid the tax assessments relating to the 1st instalment of SD, in the total amount of € 3,534.40.

3. In parallel, on the 3rd day of August 2015, the Claimant, by submitting a petition, informed the present tribunal of the payment of the assessment notices relating to the 2nd instalment of SD, in the total amount of € 3,534.30.

4. The TA submitted a response, petitioning for the dismissal of the petition for arbitral decision, on the grounds that there was no defect or violation of law, requesting that the tax acts under analysis, as they did not violate any legal or constitutional provision, be upheld.

5. By order of 6 November 2015, the Sole Arbitral Tribunal, pursuant to the provisions of subparagraph c) of Article 16 of the LFATM, and following the request by the TA, decided, without opposition from the parties, that it was not necessary to hold the meeting referred to in Article 18 of the LFATM, as a result of the simplicity of the matters at issue, as well as considering that it had at its disposal all the necessary elements to reach a clear and impartial decision.

6. It likewise decided, in accordance with paragraph 2 of Article 18 of the LFATM, that it was not necessary to produce oral arguments, as the positions of the parties were clearly defined in their respective pleadings, and set the 11th of December 2015 as the deadline for the arbitral decision.

7. Within the scope of final written arguments, the TA, in addition to reaffirming its position, brought to the discussion a Decision of the Constitutional Court, Decision No. 590/2015, of 11 November, which, in its view, was relevant to the case at hand.

8. For its part, the Claimant, within the scope of its final arguments, limited itself to reinforcing the perspective previously defended (when submitting the petition for arbitral decision).

9. The Tribunal was properly constituted and is competent to assess the matters indicated (Article 2, paragraph 1, subparagraph a) of the LFATM), the parties possess legal personality and capacity and have full standing (Articles 4 and 10, paragraph 2 of the LFATM and Article 1 of Order No. 112-A/2011, of 22 March). No defects occur and no exceptions were raised, so nothing prevents judgment on the merits.

10. Thus, the present proceedings are in a position for the final decision to be delivered.

II. ISSUE TO BE DECIDED

1. The central issue to be assessed and decided regarding the merits of the case, as emerges from the procedural documents of the parties, is the following: with reference to properties not constituted in the horizontal property regime, composed of various floors and divisions capable of independent use (and with residential allocation), what is the Tax Patrimonial Value ("TPV") relevant for purposes of calculating the SD to be paid, pursuant to Item No. 28 of the General Table of SD ("GTSD")?

2. That is, the present tribunal seeks to assess whether, as the Claimant alleges, the amount to be considered is the TPV attributed, individually, to each of the parts capable of autonomous use, or, alternatively, the total value resulting from the sum of the TPVs of those autonomous fractions, as the Respondent suggests.

III. DECISION ON THE FACTS AND ITS REASONING

1. Having examined the documentary evidence produced, the tribunal finds proven, with relevance for the decision of the case, the following facts:

I. The Claimant is the owner of an urban property, constituted in full ownership, located at Av. …, no. …, no. …, no. … and no. …, in Lisbon, which is registered in the urban property matrix of the parish of Avenidas Novas under registration no. …, with 12 floors capable of independent use, a total TPV of € 1,171,520 and the following description, within its respective certificate, "modern style property consisting of ground floor, 1st, 2nd, 3rd and 4th floors (…). Modern, modest construction, well preserved (…). Number of floors or divisions with independent use: 12 (…)".

II. Of those 12 divisions, 11 have residential allocation (as detailed above), with the sum of their individual TPVs totalling € 1,060,300.

III. The Claimant received, with respect to the tax year 2014, and as a result of the provisions of Item No. 28 of the GTSD, the assessment notices from the TA, mentioned above, in the total amount of € 10,603.

IV. The Claimant, at the time of filing the petition for constitution of an arbitral tribunal, had already received and proceeded to pay the 1st instalment of SD.

V. On 18 June 2015, the Claimant was likewise notified to proceed with payment of the 2nd instalment of the aforementioned notices, which it did, in the total amount of € 3,534.30.

1. The Tribunal's conviction concerning the facts found to be proven resulted from the documents attached to the case file and contained in the petition and pleadings of the parties, not contested, as specified in the points of the facts section above.

2. There is no factual matter relevant to the decision of the case found to be not proven.

IV. ON THE LAW

A) Legal Framework

1. Given that the legal issue to be decided in the present proceedings requires the interpretation of the relevant legal texts, it is important, in the first place, to set out the norms that compose the relevant legal framework, as of the date of the occurrence of the facts.

2. The subjection to SD of properties with residential allocation resulted from the addition of Item No. 28 to the GTSD, carried out by Article 4 of Law 55-A/2012, of 29 October, which typified the following taxable facts:

"28 – Ownership, usufruct or surface right of urban properties whose tax patrimonial value contained in the matrix, pursuant to the Municipal Property Tax Code (MPTC), is equal to or greater than € 1,000,000.00 – on the tax patrimonial value for purposes of MPT:

28.1 – For property with residential allocation – 1%

28.2 – For property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, contained in the list approved by order of the Minister of Finance – 7.5%."

1. The aforementioned law likewise added, in the SD Code, paragraph 7 of Article 23, regarding the assessment of SD: "in the case of tax due in respect of 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 Authority and Customs Authority, applying, with the necessary adaptations, the rules contained in the MPTC", and Article 67, paragraph 2 which provides that "to matters not regulated in this code concerning item 28 of the General Table shall be applied, subsidiarily, the MPTC".

2. In this context, and taking into account the indication above, let us now turn to the Municipal Property Tax Code.

3. First, note Article 2, paragraph 4 of the MPTC which states that "for purposes of this tax, each autonomous fraction, in the horizontal property regime, is considered as constituting a property".

4. In turn, paragraph 3 of Article 12 of the MPTC establishes that "each floor or part of property capable of independent use is considered separately in the property registration, which also discriminates the respective tax patrimonial value".

5. Thus, it is within this legal framework that it is important to decide whether, in cases where the horizontal property of an urban property with various autonomous fractions is not constituted, the TPV, for purposes of Item No. 28 of the GTSD, is calculated, individually, per fraction capable of being used autonomously, or, alternatively, ascertained by means of the sum of the TPVs of those fractions.

B) Arguments of the Parties

1. In this regard, the Claimant, in its petition, alleges, in summary, the following:

2. With respect to the assessments mentioned above, the Claimant understands that, since the property in question meets, in its view, the conditions necessary for the constitution of horizontal property, the ascertainment of its respective TPV, for purposes of the application of Item No. 28 of the GTSD, should be done individually (that is, per autonomous fraction) and not, as the TA intends, by its total TPV (which could only be computed through the sum of the individual TPVs).

3. The Claimant begins by asserting that, as had already occurred with respect to 2012 and 2013, the TA, basing itself on Item No. 28.1 of the GTSD, came to require the payment of SD.

4. Considering that such requirement "is at odds with the normative reality, subverting the meaning of the law".

5. The Claimant likewise recalled that, within the scope of the arbitral decision in Case No. 387/2014-T, of 15 December, the SD assessments had, with respect to the present property, been declared illegal, pursuant to Item No. 28.1 of the GTSD, relating to 2012 and 2013.

6. Now, for the Claimant, it is easily apparent that each of the divisions of the aforementioned property has a TPV less than one million euros, and a differentiated assessment notice, "all because the registration in the property matrix of properties in full ownership, constituted by parts capable of independent use, follows the same rules as the registration of properties constituted in horizontal property".

7. By which, in its view, there is "a manifest disproportionality in the assessment, in that a property which per se has a TPV greater than one million euros will have the same treatment as a property under the conditions of the property in question".

8. Given that, "for purposes of taxation as regards Item No. 28.1 of the GTSD the TA cannot consider as the reference value the total value of the property, in the parts that suit it".

9. Considering, in this manner, that "the charging of SD in the terms presented by the TA violates the spirit of the law, going in the opposite direction to the real will of the legislator, for what was intended, exclusively, was a taxation of property considered luxury, which does not correspond, at all, to the present case".

10. The Claimant points, namely, to the designation contained in the property certificate of the aforementioned property, where it can be seen that it classifies the property as a modest construction, "being, therefore, the complete opposite of a luxury asset, so the TA should revise its concepts".

11. Within the scope of its petition, the Claimant further makes reference to two arbitral decisions, relating to Case Nos. 50/2013-T and 218/2013-T, respectively, considering that the same apply to the present case.

12. In conclusion, the Claimant requests the annulment of the assessment notices mentioned above (and paid), relating to the 1st and 2nd instalments of the SD assessments, and, likewise, future assessment notices relating to the 3rd instalment (that is, the annulment of the assessment as a whole).

13. In parallel, it also requested the payment of compensatory interest, with respect to the amount already paid as SD.

14. For its part, the Respondent, after being duly notified thereof, submitted its response in which it first questioned the value of the case, requesting its correction, since, in its view, it cannot "be examined the legality of future acts and of which the Claimant has not yet even been notified".

15. In parallel, the Respondent understands that the Claimant is attempting to challenge an assessment that results from the direct application of the legal norm, which translates into objective elements, without any subjective or discretionary appraisal.

16. Indeed, in its view, a property in full ownership with floors or divisions capable of independent use is, unequivocally, different from a property in the horizontal property regime, constituted by autonomous fractions, that is, multiple properties, so that, as for the assessment of MPT, and subsidiarily of SD, "the TPV that serves as the basis for its calculation, will unquestionably be the TPV that the now Claimant defines as total value".

17. As for the violation of the principle of legality, the Respondent understands that the thesis defended by the Claimant lacks legal support, "for although the assessment of SD, in the situations provided for in Item No. 28.1 of the GTSD, is processed in accordance with the rules of the MPTC, the truth is that the legislator reserves the aspects that require necessary adaptations, namely those in which, as is the case with properties in full ownership, although with floors or divisions capable of independent use (very although MPT is assessed in relation to each part capable of independent use) for purposes of SD the property as a whole is relevant since the divisions capable of independent use are not considered as property, but only autonomous fractions in the horizontal property regime, as per paragraph 4 of Article 2 of the MPTC".

18. Concluding, with respect to that point, that the legislator intended to tax, with Item No. 28.1 of the GTSD, properties as a single legal-tax reality.

19. With regard to the violation of the principle of tax equality, the Respondent understands that Item No. 28.1 of the GTSD "does not constitute any violation of the principle of equality, there being no discrimination in the taxation of properties constituted in horizontal property and properties in full ownership with floors or divisions capable of independent use, or between properties with residential allocation and properties with other allocations".

20. In fact, for the Respondent, horizontal property and vertical property are differentiated legal institutions, and "the tax law respects them!".

21. Finally, already within the scope of the principle of taxpayer capacity, the Respondent understands that the aforementioned taxation complies "with the criterion of adequacy, to the exact extent that it aims at the taxation of wealth embodied in the ownership of real estate of high value, arising in a context of economic crisis that cannot be entirely ignored".

22. The Respondent thus understands that the assessments it promoted result from a correct interpretation and application of the law to the facts, requesting, in this manner, that the claim raised be judged without merit and it be absolved of the claim.

23. Within the scope of its final arguments, the Respondent further brings to the discussion the Decision of the Constitutional Court No. 590/2015, of 11 November, since the same, in its opinion, is relevant to the case at hand, namely as regards the unconstitutionality of the norm contained in Item No. 28 of the GTSD.

24. "Moreover, and with respect to the absence of any unconstitutionality of the norm, namely for alleged violation of the principles of tax legality, taxpayer capacity and proportionality, the TA cannot fail to attach a learned Decision of the Constitutional Court, very recent, and of which the TA was notified on 13.11.2015, and delivered as a result of the appeal filed by the Claimant in Case No. 219/2013 of CAAD".

C) Assessment by the Tribunal

1. By way of introduction, it must be stated that, in the understanding of the present tribunal, and taking into account the legal framework previously presented, the essential normative proposition to be considered for the decision of the case is that which results from Item No. 28 of the GTSD.

2. It should likewise be noted that, in the eyes of the arbitral tribunal, the issue to be decided concerns, exclusively, a matter of law, namely to understand, for purposes of the application of the aforementioned item, what TPV is relevant.

3. First, let it be clarified that it is clear, from the letter of the law, that the TPV to be considered, for purposes of the application of Item No. 28 of the GTSD, can only be the one that is ascertained within the scope of the Municipal Property Tax Code.

4. It is, indeed, this that the aforementioned item tells us, in the exact words, "(…) whose tax patrimonial value contained in the matrix, pursuant to the Municipal Property Tax Code (MPTC), is equal to or greater than € 1,000,000.00".

5. Thus, let attention be drawn once more to what follows from Article 2, paragraph 4 of the MPTC which tells us that "for purposes of this tax, each autonomous fraction, in the horizontal property regime, is considered as constituting a property".

6. Reinforced, however, by Article 12, paragraph 3 of the same Code, which establishes that "each floor or part of property capable of independent use is considered separately in the property registration, which also determines the respective tax patrimonial value".

7. It is concluded, thus, that, for purposes of calculating the MPT to be paid, the TPV is considered, individually, for each floor or part capable of independent use.

8. And if this is the method of ascertainment followed for MPT, it will necessarily have to be the model likewise applied within the scope of Item No. 28 of the GTSD, in the terms set out above.

9. Notwithstanding, and should the doubts raised still persist, the present tribunal relies on some previously rendered arbitral decisions, which addressed the matter under analysis.

10. Thus, first, let us note the decision No. 50/2013-T, of 29 October, likewise mentioned by the Claimant, which provides the following.

11. "Law No. 55-A/2012 says nothing regarding the qualification of the concepts in question, namely, regarding the concept of 'property with residential allocation'. However, Article 67, paragraph 2 of the SD Code, added by the aforementioned Law, provides that 'to matters not regulated in this code concerning item 28 of the General Table shall be applied, subsidiarily, the MPTC'.

The taxable event norm refers, therefore, to urban properties, whose concept is that resulting from the provisions of Article 2 of the MPTC, with the determination of the TPV complying with the terms of Articles 38 and following of the same code.

Consulting the MPTC, it is verified that its Article 6 only indicates the different types of urban properties, among which it mentions the residential (…).

From this we can conclude that, in the eyes of the legislator, it is not the legal-formal precision of the concrete situation of the property that matters but its normal use, the purpose for which the property is intended. We further conclude that for the legislator the situation of the property in vertical or horizontal property did not matter, since no reference or distinction is made between one and the other. What matters is the material truth underlying its existence as an urban property and its use.

(…)

Using the criterion that the law itself introduced in Article 67, paragraph 2 of the SD Code, 'to matters not regulated in this code concerning item 28 of the General Table shall be applied, subsidiarily, the Municipal Property Tax Code'" (emphasis ours).

1. That is, taking into account that the registration in the property matrix of properties in vertical ownership, for purposes of the Municipal Property Tax Code, follows the same registration rules as properties constituted in horizontal property, with their respective MPT, as well as the new SD, being assessed individually in relation to each of the parts, it does not appear, to the present tribunal, that there is any doubt that the legal criterion for defining the incidence of the new tax has to be the same.

2. In this context, if the law requires, with respect to MPT, 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 GTSD.

3. By which, the SD, within the scope of Item No. 28 of the GTSD, could only apply to a given fraction if it, eventually, had a TPV exceeding €1,000,000.00.

4. And, it should further be said, that this was, indeed, the understanding adopted by the TA.

5. In fact, the TA also issued individualized assessment notices, relating to each of the fractions capable of autonomous use, demonstrating that, in its opinion, the aforementioned fractions, although not legally constituted in horizontal property, would, for all purposes, be independent from one another.

6. However, the TA overlooked that it could not, by virtue of the framework previously set out, proceed to sum the individual TPVs of the aforementioned fractions, seeking a value that would already fall within the tax base of Item No. 28 of the GTSD.

7. This when the legislator itself established a different rule within the scope of the Municipal Property Tax Code which, as previously referred to, is the Code applicable to matters not regulated in the SD Code, with respect to Item No. 28 of the GTSD.

8. In summary, the criterion established by the TA, of considering the value of the sum of the individual TPVs attributed to the parts, floors or divisions with independent use, availing itself of the fact that the property is not constituted in the horizontal property regime, does not find, in the eyes of the present tribunal, legal support, being, namely, contrary to the criterion applicable in the context of MPT and, by referral (in the terms mentioned above), in the context of SD.

9. In this context, the present tribunal considers that the criterion defended by the TA violates the principles of legality and fiscal equality, and, likewise, that of the prevalence of material truth over legal-formal reality.

10. In parallel, note that Article 12, paragraph 3 of the MPTC does not make any distinction as to the regime of properties that are in horizontal or vertical ownership.

11. As such, and once if the property were in the horizontal property regime, none of its residential fractions would be subject to the incidence of the new tax, the TA cannot treat materially equal situations differently.

12. In this regard, see what was said regarding this issue in the arbitral decision rendered within Case No. 132/2013-T, of 16 December, whose understanding the present tribunal adopts.

"Indeed, it makes no sense to distinguish in the law what the law itself does not distinguish (ubi lex non distinguit nec nos distinguere debemus).

Moreover, to distinguish, in this context, between properties constituted in horizontal and in full ownership would be an 'innovation' without associated legal support, especially because, as has been stated here, nothing indicates, neither in item no. 28, nor in the provisions of the MPTC, a justification for that particular differentiation.

Note, by way of example, what Article 12, paragraph 3, of the MPTC says: each floor or part of property capable of independent use is considered separately in the property registration, which also discriminates the respective tax patrimonial value.

The uniform criterion that is required is, therefore, one that determines that the incidence of the norm in question only takes place when any of the parts, floors or divisions with independent use of property in horizontal or full ownership with residential allocation, possesses a TPV exceeding €1,000,000.00.

Setting as the reference value for the incidence of the new tax the total TPV of the property in question, as the now respondent intended, does not find basis in the applicable legislation, which is the MPTC, given the referral made by the aforementioned Article 67, paragraph 2 of the SD Code.

(…)

Moreover, admitting the differentiation of treatment could produce results incomprehensible from a legal-formal perspective and contrary to the objectives that the legislator said it had for adding item no. 28. By way of example, suppose the following hypothesis, which seems plausible in light of the interpretation made by the now respondent: a citizen who is owner of a property constituted in full ownership intended for housing, the total value of the autonomous units being equal to or greater than €1,000,000.00 and the TPV of each one less than €1,000,000.00, is subject to annual taxation of 1% of that value (as happened in the situation under analysis); whereas another citizen who holds a property with the exact same characteristics as the former but which has been constituted in horizontal property, likewise the total value of the autonomous fractions being equal to or greater than €1,000,000.00 and the TPV of each one less than €1,000,000.00, will not be subject to taxation pursuant to the aforementioned item no. 28.

On the other hand, one could ask: if such fractions have the same owner, why does it not make sense to aggregate, for taxation purposes, their respective TPVs? The answer can be illustrated through another hypothesis: a citizen who is owner of a property in horizontal property, in which each of its 20 fractions possesses a TPV less than €1,000,000.00, would be subject to taxation if – if such aggregation were allowed – the total TPV exceeded that value; whereas another citizen with identical 20 fractions distributed across 5, 10 or 20 properties would not be subject to any taxation pursuant to the aforementioned item no. 28.

If this line of reasoning makes sense – justifying, therefore, the non-aggregation of the TPVs of the fractions of properties in horizontal property – no plausible reason is seen for the same not to be applied to the autonomous units of properties in full ownership.

Observing, now, the case under analysis, it is found that the TPVs of the floors (autonomous units) of the property with residential allocation vary between (…), so any one of them is less than €1,000,000.00.

From this it is concluded, as a result of what has been stated, that on the same cannot apply the SD to which item no. 28 of the GTSD refers, being, therefore, illegal the assessment acts challenged by the claimant" (emphasis ours).

1. One last point worth highlighting (notwithstanding the previous framework being sufficient to recognize the illegality of the assessment acts carried out by the TA), rests on the understanding recommended, both by the legislator and by the government itself, when adding Item No. 28 to the GTSD.

2. In this regard, let us focus now on the arbitral decision rendered within Case No. 48/2013-T, of 9 October, which extensively analyzes the objectives underlying the addition of the aforementioned item.

3. "Law No. 55-A/2012, of 29/10, has no preamble, hence from it is not possible to extract the intention of the legislator.

Such a law of the Parliament had its origin in the draft law no. 96/XII (2nd), which, in the statement of reasons, speaks of the introduction of fiscal measures inserted in a wider set of measures to combat the budget deficit.

In the statement of reasons of the aforementioned draft law, it is stated that, 'these measures are fundamental to strengthen the principle of social equity in austerity, ensuring an effective distribution of the necessary sacrifices to comply with the adjustment program. The Government is strongly committed to ensuring that the distribution of these sacrifices is made by all and not only by those who live from their labor income. In accordance with that purpose, this diploma expands the taxation of capital and property, equitably encompassing a broad set of sectors of Portuguese society'.

In that statement of reasons it is also stated that, in addition to the increase in taxation of capital income and securities gains, a tax is created in the context of stamp duty affecting urban properties with residential allocation whose tax patrimonial value is equal to or greater than one million euros.

That is, in such statement of reasons, it is also not clarified what is meant by urban properties with residential allocation.

In his intervention in Parliament, in the presentation and discussion of the aforementioned draft law, the Secretary of State for Tax Affairs stated the following:

'The Government has chosen as the priority principle of its fiscal policy social equity. This is even more important in times of rigor as a way to ensure fair distribution of the fiscal burden.

In the demanding period the country is going through, during which it is bound to comply with the program of economic and financial assistance, it becomes even more pressing to affirm the principle of equity. It cannot always be the same ones - employees and pensioners, bearing the tax charges.

For the tax system to be more just it is crucial to promote the expansion of the tax base requiring an increased effort from taxpayers with higher incomes and thereby protecting Portuguese families with lower incomes.

For the tax system to promote more equality it is fundamental that the effort of budget consolidation be distributed among all types of income, encompassing with particular emphasis capital income and high-value properties. This matter, it is recalled, was extensively addressed in the Decision of the Constitutional Court.

Finally, for the tax system to be more equitable, it is crucial that all be called to contribute according to their taxpayer capacity, giving the tax administration enhanced powers to control and inspect situations of tax fraud and evasion.

Accordingly, the Government presents today a set of measures that effectively strengthen a fair and equitable distribution of the effort of adjustment among a broad and comprehensive set of sectors of Portuguese society.

This proposal has three essential pillars: the creation of special taxation on urban properties worth more than 1 million euros; the increase in taxation on capital income and on securities gains and the strengthening of rules to combat tax fraud and evasion.

First, the Government proposes the creation of a special tax on residential urban properties of highest value. It is the first time in Portugal that special taxation is created on high-value properties intended for housing. This rate will be 0.5% to 0.8% in 2012, and 1%, in 2013, and shall apply to houses worth equal to or greater than 1 million euros. With the creation of this additional tax the fiscal effort required of these owners will be significantly increased in 2012 and 2013'".

1. Next, it is necessary to gather the conclusions that allow, without margin for doubt, deciding on the matter under discussion (that is, whether, for purposes of the application of Item No. 28 of the GTSD, in cases where a property with various autonomous fractions, capable of independent use, is not constituted in horizontal property, the relevant TPV is ascertained by means of the sum of the individual TPVs, or, alternatively, is individually considered).

2. In this sense, note first that the present matter is, from the outset, by force of Article 67, paragraph 2 of the SD Code, subject to the norms of the Municipal Property Tax Code, "to matters not regulated in this code concerning item 28 of the General Table shall be applied, subsidiarily, the MPTC".

3. As such, and as has been so many times mentioned, in the understanding of the present tribunal, the mechanism for ascertaining the relevant TPV for purposes of the aforementioned item, is that which is provided for in the Municipal Property Tax Code.

4. Now, Article 12, paragraph 3 of the Municipal Property Tax Code establishes that "each floor or part of property capable of independent use is considered separately in the property registration, which also discriminates the respective tax patrimonial value".

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

6. Indeed, for it (the legislator), what matters is the material truth underlying its existence as an urban property and its use.

7. Note that the TA itself seems to agree with the criterion expounded, reason for which the assessments that it itself issues are very clear in their essential elements, from which it follows that the value of incidence is that corresponding to the TPV of each of the floors and the individualized assessments.

8. Thus, 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 has to be unique and unequivocal, for the definition of the rule of incidence of the new tax.

9. Thus, there would only be place for incidence of SD (within the scope of Item No. 28 of the GTSD) if any of the parts, floors or divisions with independent use presented a TPV exceeding € 1,000,000.00.

10. The TA 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 MPT (and, as previously mentioned, this is the code applicable to matters not regulated as regards Item No. 28 of the GTSD).

11. In conclusion, the current legal regime does not impose the obligation to constitute horizontal property, so that the conduct of the TA translates into an arbitrary and illegal discrimination.

12. Indeed, the TA cannot distinguish where the legislator itself understood not to do so, under penalty 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.

13. In the case at hand, the property in question was, as of the relevant date of the facts, constituted in full ownership and had 12 fractions with independent use, as results from the documents appended by the Claimant, 11 of which with residential allocation.

14. Given that none of those fractions, individually considered, has a tax patrimonial value equal to or exceeding €1,000,000.00, as results from the documents joined to the case file, it is concluded that the legal presupposition of incidence is not met.

15. Within the scope of its final arguments, the TA appended to the present proceedings a Decision of the Constitutional Court (Decision No. 590/2015, of 11 November), in which the alleged unconstitutionality of the norm contained in Item No. 28 of the GTSD, raised by a taxpayer, was dismissed.

16. Now, in this sense, the TA considers that such case law has special relevance to the case at hand, basing itself thereon to reinforce the understanding that its practice described above is entirely legal and in accordance with the Constitution.

17. Indeed, this tribunal also does not intend (nor can) assess the constitutionality of the aforementioned norm.

18. However, what is currently under discussion is not the possible unconstitutionality of Item No. 28 of the GTSD but, alternatively, the illegality of the discriminatory conduct of the TA which, in a wholly discretionary manner, gives differentiated treatment to properties constituted in horizontal property and in full ownership.

19. And, in that sense, the aforementioned Decision, in the understanding of the present tribunal, loses its relevance in the concrete case (since it concerns the unconstitutionality of the norm in the abstract and not its application by the TA).

20. From another perspective, it is important, naturally, to analyze the preliminary question raised by the TA.

21. Indeed, the TA understands that the Claimant cannot request the challenge of "future acts and of which the Claimant has not yet even been notified".

22. To this end, the present tribunal recalls that the assessment notices issued by the TA, notwithstanding that they respect individually considered instalments, bring the total value of SD to be paid, with respect to a given year (in this case, 2014).

23. In this sense, the Claimant, and other taxpayers, have knowledge, ab initio, of the total value of SD to be paid.

24. Moreover, the Claimant joined, once the present tribunal was constituted, a petition requesting that the assessment notices received, with respect to the 2nd instalment, be appended to the proceedings and, consequently, paid (in the total amount of € 3,534.30).

25. Now, having such knowledge, and the Claimant drafting a petition that is extensible to the three instalments of SD, the present tribunal cannot refrain from considering the assessment as a whole, and the respective petition should proceed with respect to the total value of the assessment.

V. DECISION

1. Whereupon this Arbitral Tribunal decides:

A) To judge the petition for arbitral decision as well-founded and, in consequence, declare illegal and annul the SD assessments mentioned above, with reference to the tax years 2014, from which resulted tax to be paid in the amount of € 10,603 (part of which, € 7,068.70, having already been paid, must now be reimbursed), relating to the taxation of urban properties with TPV equal to or greater than €1,000,000, pursuant to the provisions of Item No. 28 of the GTSD;

B) To condemn the Respondent, pursuant to Article 43, paragraph 1 of the General Tax Law and Articles 61, paragraphs 2 and 5 of the Code of Tax Procedure and Process, to the payment of compensatory interest, at the rate resulting from paragraph 4 of Article 43 of the General Tax Law, calculated on the amount paid in excess (that is, € 7,068.70), from the day on which the aforementioned assessments were paid and until the full reimbursement of the amount referred to; and

C) To condemn the Respondent in the costs of the proceedings.

VI. VALUE OF THE PROCEEDINGS

1. The value of the proceedings is fixed at € 10,603, pursuant to Article 97-A, paragraph 1, subparagraph a), of the Code of Tax Procedure and Process, made applicable by force of subparagraphs a) and b) of paragraph 1 of Article 29 of the LFATM and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings ("RCTAP").

VII. COSTS

1. In accordance with the provisions of Article 22, paragraph 4, of the LFATM, the amount of the arbitration fee is fixed at € 918, pursuant to Table I of the aforementioned Regulation, charged to the Respondent, given the full success of the claim.

Let it be notified.

Lisbon, CAAD, 10 December 2015

The Arbitrator

Sérgio Santos Pereira

(Sérgio Santos Pereira)