Summary
Full Decision
CAAD – Tax Arbitration Center
ARBITRAL PROCEEDINGS No. 311/2015-T
Subject Matter: Stamp Duty. Item 28.1 of the General Table of Stamp Duty. Vertical ownership. Request for revision of the tax act.
ARBITRAL DECISION
1. REPORT
A, S.A., with registered office in … with Tax Identification Number … (hereinafter referred to as the Claimant), hereby, pursuant to the combined provisions of articles 2, paragraph 1, subparagraph a) and 10 of Decree-Law no. 10/2011, of 20 January, which approved the Legal Regime for Tax Arbitration (LRTA), requests the establishment of an Arbitral Tribunal, with the intervention of a single arbitrator, in which the Tax and Customs Authority (AT) is the Respondent, with a view to declaring the illegality and consequent annulment of the Stamp Duty tax assessments (Item 28.1 of the General Table of Stamp Duty) for the years 2012 and 2013, in the total amount of € 39,729.00 (thirty-nine thousand, seven hundred and twenty-nine euros), relating to the urban property located at …, registered in the property register of the parish of ... under article ..., not constituted in horizontal property ownership and composed of shops, ground floor and 7 floors with divisions susceptible to independent use.
Additionally, the Claimant seeks to condemn the Respondent, pursuant to articles 43, paragraph 1, of the General Tax Law (GTL) and 61, paragraphs 2 and 5, of the Tax Procedure and Process Code (TPPC), to pay indemnificatory interest at the legal rate, from the date of payment of the undue tax until the date of its actual reimbursement.
The grounds for the request to annul the Stamp Duty tax assessments for the years 2012 and 2013 are as follows:
a. "The taxable person requested on 14/01/2015 ex officio review (…) of the stamp duty tax assessments (…); [i]n accordance with article 57 of the GTL, the tax procedure must be concluded within four months;
b. To date the procedure has not been concluded, therefore pursuant to the provisions of paragraph 5 of article 57 of the GTL, deemed rejection is presumed on 14/05/2015; [i]n accordance with article 102 of the TPPC, judicial challenge may be presented within three months of the deemed rejection (…);
c. (…) The total value of the property amounts to € 2,184,620 considering the divisions allocated to commerce and housing, although the floors with independent use, as confirmed by analysis of the property register, were subject to independent valuation in accordance with article 7, paragraph 2, subparagraph b) of the CIMI (…);
d. At issue is the assessment of stamp duty at the rate of 1% in relation to all divisions allocated to housing in accordance with item 28.1 of the General Table of Stamp Duty;
e. (…) The AT considered that the criterion for determining the scope of stamp duty is the general TPV of the floors and divisions subject to housing, considering that since the property is not constituted in horizontal property ownership, the criterion was the sum of the TPV of the various floors and/or divisions allocated to housing, although with independent use;
f. Thus, applying this criterion, the AT assessed on 21.3.2013, in relation to the year 2012, 1% on the property in vertical property ownership better identified above (…);
g. In the year 2013, in relation to the year 2012, the taxable person assessed the amount of € 19,864.50, in relation to the TPV of all divisions with independent use totalling € 1,986,450 (nineteen thousand, eight hundred and sixty-four euros and fifty cents);
h. In the year 2014, verifying the same TPV of € 1,986,450 relating to the sum of the floors with independent use, the AT again assessed for each autonomous division 1% on the TPV of each one in the amount of € 1,986,450, that is, € 19,864.50;
i. The taxable person, at the date of the assessments, notwithstanding disagreement therewith, proceeded to payment (…); [h]owever, it has been consistent case law of the administrative arbitral tribunals that in the case sub judice stamp duty should not be applied;
j. (…) The essential issue to be decided is whether, with reference to properties not constituted in horizontal property ownership (…), comprised of various floors and divisions with independent use, of which some with residential allocation, what is the relevant TPV; (…) whether (…) it is the amount corresponding to the sum of the taxable patrimonial value attributed to the different parts or floors (total TPV) as occurred in the case "sub judice" with the assessments whose illegality and annulment are sought, in which only by summing the various independent divisions would one arrive at a TPV value of more than € 1,000,000, or instead, the TPV attributed to each of the parts or residential floors;
k. (…) The subjection to stamp duty of properties with residential use resulted from the amendment of item 28 of the General Table of Stamp Duty, made by article 4 of Law 55-A/2012, of 29/10, which typified the following tax facts:
"28 — Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value contained in the register, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000.00 — on the taxable patrimonial value for the purpose of Municipal Property Tax:
28-1 — For property with residential use — 1% (…)";
l. This law entered into force on the day following its publication, that is, on 30 October 2012. From the transitional provisions in article 6 thereof, it follows that the tax fact is considered to have occurred on 31 October 2012 and that the taxable patrimonial value to be used in the assessment of the tax corresponds to that resulting from the rules of the Municipal Property Tax Code by reference to the year 2011;
m. Law 55-A/2012 says nothing regarding the qualification of the concepts in question, namely, regarding the concept of "property with residential use."; [a]rticle 67, paragraph 2 of the Stamp Duty Code, amended by the said Law, provides that "to matters not regulated in this Code relating to item 28 of the General Table, the provisions of CIMI shall apply on a subsidiary basis.";
n. (…) From the terms of CIMI, it is verified that article 6 only indicates the different types of urban properties, among which it mentions residential ones (see subparagraph a) of paragraph 1), clarifying in paragraph 2 of the same article that "residential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of a license, which have as their normal purpose each of these ends.";
o. (…) Thus, given that the registration in the property register of properties in vertical ownership, comprised of different parts, floors or divisions with independent use, in accordance with the Municipal Property Tax Code, obeys the same rules of registration of properties constituted in horizontal property ownership, and the respective Municipal Property Tax, as well as the new Stamp Duty, are assessed individually in relation to each part, it is beyond doubt that the legal criterion for determining the scope of the new tax must be the same;
p. (…) the assessment itself issued is very clear in its essential elements, from which it results that the value of taxability is that corresponding to the TPV of each of the individualized fractions and the assessment documents are individualized on the part of the property corresponding to the various floors;
q. 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 ownership, it clearly established the criterion, which must be unique and unambiguous, for the definition of the rule of scope of the new tax;
r. Thus, there will only be taxability (…) if any of the parts, floors or divisions with independent use presented a TPV exceeding € 1,000,000.00, which is not the case in the case "sub judice";
s. Thus, the AT cannot consider as the reference value for the scope of the new tax the total value of the property, when the legislator itself established a different rule in the Municipal Property Tax Code, and this is the applicable code for matters not regulated concerning item 28 of the General Table of Stamp Duty;
t. The criterion sought by the AT (…), finds no legal support and is contrary to the criterion applicable in the Municipal Property Tax Code and, by referral, in the Stamp Duty Code;
u. To which is added the fact that the law itself expressly establishes, in the final part of item 28 of the General Table of Stamp Duty, that the Stamp Duty to apply to urban properties of value equal to or greater than € 1,000,000.00 — "on the taxable patrimonial value used for the purpose of the Municipal Property Tax.";
v. Therefore, the adoption of the criterion defended by the AT violates the principles of legality and fiscal equality, as well as the prevalence of material truth over legal-formal reality;
w. Added to which is the fact that the ratio legis underlying the rule of item 28 of the General Table of Stamp Duty, introduced by Law no. 55-A/2012 of 29 October, and in obedience to article 9 of the Civil Code, according to which the interpretation of the legal norm should not be limited to the letter of the law, but should reconstitute from the texts and other interpretative elements the legislative intent, taking into account the unity of the legal system, the circumstances in which it was drawn up and the specific conditions of the time in which it is applied;
x. The legislator (…) considered as the determining element of taxable capacity urban properties with residential use, of high value (luxury), more precisely, of value equal to or greater than € 1,000,000.00, on which a special stamp duty tax rate began to apply, intending to introduce a principle of taxation on the wealth externalized in the ownership, usufruct or right of superficies of luxury urban properties with residential use. Therefore, the criterion was the application of the new rate to urban properties with residential use, whose TPV is equal to or greater than € 1,000,000.00;
y. The justification for the measure designated as "special tax on the highest value residential urban properties" is based on the invocation of the principles of social equity and fiscal justice, calling upon the holders of properties of high value intended for housing to contribute in a more intense manner, making the new special rate apply to "houses of value equal to or greater than 1 million euros.";
z. The legislator understood that this value, when attributed to a residence (house, autonomous fraction or floor with independent use), translates to a taxable capacity above average and, as such, capable of determining a special contribution to ensure fair apportionment of fiscal effort; (…) the existence of a property in vertical or horizontal ownership cannot be, by itself, an indicator of taxable capacity. On the contrary, it follows from the law that both should receive the same tax treatment in obedience to the principles of justice, fiscal equality and material truth;
aa. (…) Thus it is illegal and unconstitutional to consider as the reference value that which corresponds to the sum of the TPVs attributed to each part or division. Firstly, because that would be a clear violation of the principle of equality and proportionality in fiscal matters.".
The Claimant concludes by formulating the following requests:
A – Declaration of the illegality and annulment of the Stamp Duty assessments identified, from which resulted tax payable in the amount of € 39,729.00, which should now be reimbursed to it;
B – Condemnation of the Respondent, pursuant to article 43, paragraph 1, of the GTL and 61, paragraphs 2 and 5, of the TPPC, to payment of indemnificatory interest, at the rate resulting from paragraph 4 of article 43 of the GTL, from the day the assessments mentioned above were paid until the complete reimbursement of the amount referred to, as well as for the costs of the proceedings.
Notified in accordance with the terms and for the purposes provided in article 17 of the LRTA, the AT presented its response, defending itself by exception and by impugnation, with the following grounds:
A – By Exception:
a. "The request for establishment of the Arbitral Tribunal appears to be time-barred; [i]n fact, the assessments now impugned were made on 21/03/2013 and on 17/03/2014;
b. (…) the request for ex officio review of the assessment is not the appropriate means to obtain the review of the assessments, in the terms and period in which it was formulated and, much less, can have the effect of opening a new and last period for the request to establish the arbitral tribunal (…).
c. (…) the timeliness of the present petition would always depend on verification of the requirements and conditions for the applicability of article 78 of the GTL, which the learned Tribunal should submit the present petition to, so as to dispel the legitimate doubt that the same petition was only an attempted means to open a new period for presenting the present petition. Now,
d. Pursuant to the provisions of article 78, paragraph 1, of the GTL:
1 – The review of tax acts by the entity that performed them may be effected at the initiative of the taxable person, within the administrative complaint period and on the basis of any illegality, or at the initiative of the tax administration, within four years after the assessment or at any time if the tax has not yet been paid, on the basis of error attributable to the services.
2 – Without prejudice to the legal burden of complaint or impugnation by the taxpayer, error in self-assessment is considered attributable to the services for the purposes of the preceding paragraph.
3 – (…)
4 - The head of the service may, exceptionally authorize, in the three years following the year of the tax act, the review of the taxable matter determined on the basis of gross or notorious injustice, provided that the error is not attributable to negligent conduct by the taxpayer.
5 – For the purposes of the preceding paragraph, only egregious and unambiguous injustice and grave injustice resulting from obviously excessive and disproportionate taxation with reality or which has resulted in substantial prejudice to the National Treasury shall be considered notorious.
6 –(…)
7 – (…)
e. (…) we conclude that the request for ex officio review could only have been presented on the basis of paragraph 1 of article 78 of the GTL (…): either the review of the tax act at the initiative of the taxpayer (first part of the norm), or at the initiative of the AT (second part of the article).
f. But we immediately conclude, in the present situation, that review of the tax act is impossible at the initiative of the AT, since, the respective request being required to be made within the administrative complaint period, the truth is that the Claimant did not present it in that period, but only on 14.01.2015.
g. There would thus remain (…) only to know whether the request for ex officio review of the assessments at the request of the taxable person could, perhaps, be considered a request for review of the tax act at the initiative of the AT, which would depend on verification of the respective normative requirements.
h. (…) the review of the tax act at the initiative of the tax administration, in accordance with the provisions of article 78, paragraph 1, of the GTL, may be made within four years after the assessment, or at any time if the tax has not yet been paid, on the basis of error attributable to the services.
i. Now, it being unquestionable that the said four-year period had not yet elapsed, we thus arrive at the crux of the matter: the existence, or otherwise, of error attributable to the Services in the assessment in question, which could possibly justify an ex officio review at the initiative of the services.
j. Now, not only does the Claimant fail to prove that there was any error attributable to the Services as, undoubtedly, there was no error attributable to the AT in the assessment in question, the situation that motivated the assessment being duly explained and justified in the assessments and in the law.
k. Thus, the request for ex officio review provided for in article 78, paragraph 1, of the GTL, even if at the initiative of the AT, is not, nor can be, a form of creating a new mechanism for appeal to the arbitral tribunal independent of the expiration of legally fixed periods, but indeed as a new procedure precisely created to enable circumventing those already elapsed periods.
l. The principles of decision, definition of legal situations, celerity and procedural economy, by which administrative activity is governed, so determine.
m. The administration should clearly not perform acts essentially useless. Indeed, if it were otherwise, (…), the existence of the administrative complaint procedure would be pointless, and much less so the fact that it is subject to periods, since the same objective could be achieved with the review of the tax act, governed at the limit without a period, or with a period of 4 years, instead of 120 days.
n. Let us be clear: the ex officio review of the tax act can only be used, at the initiative of the AT, on the sole basis of the existence of error attributable to the services, thus distinguishing it from the administrative complaint, which may be based on any illegality.
o. It was thus useless, and therefore not admitted by law (article 57, paragraph 1, of the GTL), to consider the request for review at the initiative of the Claimant (article 78, paragraph 1, of the GTL), given the time-barred nature thereof and its lack of basis due to the non-existence of any error attributable to the services.
p. In light of the foregoing, the Arbitral Tribunal cannot consider the present petition timely, as it clearly does not meet the legal requirements established by article 78, paragraph 1, of the GTL, and as it is evident both that the period for the Claimant to request review of the tax act at its initiative has elapsed, and that there is no error attributable to the Services in the contested assessments.
q. Even if (…) it were legally possible to consider the review of the tax act at the initiative of the Services, it would be doomed to failure by the non-existence and non-recognition of any error that could be attributed to it – cfr. article 78, paragraph 1, of the GTL".
B – By Impugnation
a. "(…) With reference to the years 2012 and 2013, in compliance with and in accordance with the provisions of article 6, paragraph 2 of Law no. 55-A/2012, of 29/10, which amended item no. 28 of the General Table of Stamp Duty, (…) the respective rule of taxability referring to urban properties, assessed in accordance with CIMI, with TPV equal to or greater than € 1,000,000.00 and, in accordance with its item 28.1, residential use, the AT proceeded to the assessment that is the subject of the present request for arbitral decision.
b. (…) these are assessments resulting from the direct application of the legal norm, which is translated into objective elements, without any subjective or discretionary appreciation.
c. (…) the Claimant challenges the taxable patrimonial value of the property, on the ground that it is characterized by being property in full ownership with floors or divisions susceptible to independent use and as such do not possess taxable patrimonial value exceeding € 1,000,000.00.
d. It defends that there is no legal norm that stipulates that the taxable patrimonial value of a property composed of several floors or divisions susceptible to independent use, corresponds to the sum of the respective parts, arguing that we are faced with the defect of violation of law by error on legal grounds, (…) with no legal provision making the taxable patrimonial value of a property composed of several floors or divisions susceptible to independent use correspond to the sum of the respective parts.
e. However, the thesis defended by the Claimant lacks legal support, for although the assessment of Stamp Duty, in the situations provided for in item no. 28.1 of the General Table of Stamp Duty, proceeds in accordance with the rules of CIMI, the truth is that the legislator reserves the aspects that require the necessary adaptations, (…) as is the case with properties in full ownership, even with floors or divisions susceptible to independent use (…) for the purposes of Stamp Duty, the property in its entirety is relevant (…).
f. (…) it appears from the property register that the property is in a regime of full ownership, composed of various parts susceptible to independent use.
g. (…) in accordance with article 23, paragraph 7 of the Stamp Duty Code, the stamp duty assessments for the years 2012 and 2013, were made by the Tax Administration, taking into account the nature of the urban property, at the date of the tax fact, applying, with the necessary adaptations, the rules contained in CIMI.
h. (…) From the foregoing, the defect of violation of law by error on legal grounds should be judged unfounded, with the contested assessments remaining in the legal order as they constitute a correct application of the law to the facts.
i. (…) On the violation of this principle [of equality], the AT considers that the provision of item 28.1 of the General Table of Stamp Duty does not constitute any violation of the principle of equality, with no discrimination existing in the taxation of properties constituted in horizontal property ownership and properties in full ownership with floors or divisions susceptible to independent use, or between properties with residential use and properties with other uses.
j. (…) these norms, procedures for valuation, the norms on property register entry, and also the norms on the assessment of parts susceptible to independent use, do not permit the assertion that there should be an assimilation of the property in full ownership regime to the regime of vertical ownership, this because, and as already mentioned, it would be illegal and unconstitutional.
k. (…) It is thus a consequence that the tax fact of stamp duty of item 28.1 consists of the ownership of urban properties whose taxable patrimonial value contained in the register, in accordance with CIMI, is equal to or greater than € 1,000,000.00, the taxable patrimonial value relevant for the purposes of the scope of the tax being, thus, the total taxable patrimonial value of the urban property and not the taxable patrimonial value of each of the parts that compose it, even when susceptible to independent use.
l. Item 28.1 thus applies to the ownership, usufruct or right of superficies of urban properties with residential use, whose taxable patrimonial value contained in the register, in accordance with CIMI, is equal to or greater than € 1,000,000.00.
m. (…) one cannot conclude for an alleged discrimination in violation of the principle of equality when, in truth, we are faced with distinct realities, valued by the legislator differently.
n. (…) Therefore, we must necessarily conclude that the tax acts in question did not violate any legal or constitutional principle, and should thus be maintained.
o. In such terms, the assessments now impugned remain entirely valid and legal and duly justified in the administrative proceeding, concluding for the legality thereof.
p. (…) the present request for arbitral decision should be judged unfounded, absolving the Respondent entity from the request.".
The request for establishment of the Arbitral Tribunal was filed with the CAAD on 15 May 2015, having been accepted by the Esteemed President of the CAAD on 19 May 2015 and automatically notified to the AT, on the same date.
The Claimant informed that it did not intend to use the faculty to designate an arbitrator, therefore, pursuant to the provisions of paragraph 1 of article 6 of the LRTA, the undersigned was appointed arbitrator by the Esteemed President of the Deontological Council of the CAAD, an assignment which she accepted within the legally prescribed period, without opposition from the Parties.
The Single Arbitral Tribunal was duly established on 29 July 2015 and is materially competent to decide the dispute.
The Parties have legal personality and legal capacity, are legitimate and are duly represented (articles 4 and 10, paragraph 2, of the LRTA and article 1 of Order no. 112-A/2011, of 22 March).
Having the AT invoked the dilatory exception of time-barred nature of the petition, it was determined, by arbitral order of 30 September 2015, that the proceedings continue with successive written pleadings, for a period of 10 days, the holding of the meeting referred to in article 18 of the LRTA being dispensed with, and 30 October 2015 indicated for the pronouncement of the arbitral decision.
No pleadings were produced.
2. FACTUAL MATTER
2.1. Facts deemed proven:
2.1.1. Whether at the date of the occurrence of the tax facts or at the date of the request for establishment of the arbitral tribunal, the Claimant was the owner of the urban property registered under article ... of the parish of ..., municipality of Lisbon, corresponding to the former article ... of the extinct parish of ..., composed of 18 floors or divisions susceptible to independent use, 14 of which with residential use, with a total taxable patrimonial value of € 2,184,620.00;
2.1.2. The sum of the TPV attributed to the floors or divisions susceptible to independent use and residential use is the amount of € 1,986,450.00, this being the value indicated in each of the Stamp Duty collection notes as "Taxable Patrimonial Value of the property – total subject to tax";
2.1.3. The TPV attributed to each floor or division susceptible to separate lease and residential use, as appears in the collection notes issued and in the property register, ranges from € 104,710.00 to € 262,240.00;
2.1.4. In the name of the Claimant, on 21 March 2013, for voluntary payment in three annual installments, until 30 April 2013, 31 July 2013 and 30 November 2013, respectively, the Stamp Duty assessments for the year 2012 were issued, based on the TPV of each of the divisions susceptible to independent use and the rate of 1%, as shown in the table below:
[TABLE showing property identification, TPV, and collection amounts - omitted for brevity as it contains specific property identifiers and financial data]
2.1.5. The installments in which the assessments identified in the table above were divided, in the total amount of € 19,864.50, were paid on 23 April 2013, 24 July 2013 and 26 November 2013, respectively;
2.1.6. By reference to the year 2013, assessments were issued on 17 March 2014, for voluntary payment in three annual installments, until 30 April 2014, 31 July 2014 and 30 November 2014, respectively, the Stamp Duty assessments for the year 2013 relating to the same property identified above, at the rate of 1%, as shown in the table below:
[TABLE showing property identification, TPV, and collection amounts - omitted for brevity]
2.1.7. The first, second and third installments of the assessments identified in the table above, in the total amount of € 19,864.50, were paid on 11 April 2014, 29 July 2014 and 19 November 2014, respectively;
2.1.8. On 14 January 2015, the Claimant submitted, at the Finance Office of the area of its registered office (Porto 3), a petition containing a request for ex officio review, in accordance with article 78 of the GTL, of the Stamp Duty assessments for the years 2012 and 2013 identified above;
2.1.9. The ex officio review procedure was filed at the Finance Office of Porto 3, on 26 June 2015, with indication that it had been opened on 14 January 2015, and officially sent to the Finance Office of the area of the property location (Lisbon 1), where it was filed on 1 July 2015, under number ...;
2.1.10. On the request for ex officio review, an opinion was rendered to the effect that the impugned act should be maintained, with an order of agreement by the Head of the Finance Office of Lisbon 1, of 1 July 2015.
2.2. Basis for the factual matter deemed proven:
The Tribunal's conviction as to the factual matter given as proven resulted from the analysis of the documentary evidence attached to the request for arbitral decision (copies of the property register of the identified property and proof of payment of the collection notes issued in the name of the Claimant), as well as from the Respondent's response and the Administrative Proceeding attached thereto.
2.3. Facts not proven
There are no facts relevant to the decision of the case that should be considered as not proven.
3. LEGAL MATTER – JUSTIFICATION
3.1. Order of consideration of the questions raised by the Parties
Since the period of impugnation is a period of expiration, whose lapse precludes the right to impugn, the time-barred nature of the petition invoked by the AT, constitutes a dilatory exception which, pursuant to paragraph 1 of article 608 of the Code of Civil Procedure (CCP), subsidiarily applicable to tax arbitral proceedings by force of article 29, paragraph 1, subparagraph e), of the LRTA, shall be considered as a matter of priority since, if verified, it will result in the dismissal of the proceedings.
However, the AT making the dilatory exception of time-barred nature of the petition dependent on the means of impugnation previously used by the Claimant, through the administrative route – the request for ex officio review of the Stamp Duty tax assessment acts impugned here, beyond the period which this would have to present the administrative complaint referred to in the first part of paragraph 1 of article 78 of the GTL and, the admissibility of the petition as a requirement being error of the services, in accordance with the second part, final segment of that norm, it must be determined previously whether in the issuance of the impugned assessments there is error attributable to the services of the AT so that, subsequently, the invoked exception of time-barred nature of the petition can be assessed.
3.2. The interpretation and application of the rule of taxability, in the concrete case
3.2.1. On the concept of urban property with residential use
In its original wording, applicable to the situation under analysis, item 28 of the General Table of Stamp Duty provided that the following situations were subject to stamp duty:
«28 — Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value contained in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 — on the taxable patrimonial value used for the purpose of Municipal Property Tax:
28.1 — For property with residential use — 1 %;
28.2 — For property, when the taxable persons who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, appearing on the list approved by order of the Minister of Finance — 7.5 %.»
The cumulative requirements for application of the rule of taxability inherent in Item 28.1 of the General Table of Stamp Duty are that the property to be taxed be an urban property "with residential use," whose taxable patrimonial value, for the purpose of the Municipal Property Tax, is equal to or greater than € 1,000,000.00.
It has long been unanimously accepted by doctrine that tax norms are interpreted like any other legal norms, a solution which is now expressly contained in paragraph 1 of article 11 of the General Tax Law (GTL), in establishing that "1 - In determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles for the interpretation and application of laws are observed".
Among the elements of interpretation, the one from which the applicator of the norm must depart is, precisely, the grammatical element, that is, the text of the law, although it must be emphasized that, in determining the meaning and value of the norm, the interpreter cannot fail to consider the logical element or, in accordance with paragraph 1 of article 9 of the Civil Code, fail to "reconstitute (…) the legislative intent, taking above all into account the unity of the legal system, the circumstances in which the law was drawn up and the specific conditions of the time in which it is applied".
The rule of taxability contained in item 28.1 of the General Table of Stamp Duty uses the expression "property with residential use," the concept of which is not defined in the Code in which it is contained, nor in any other legislation of a tax nature.
Being an expression that may bear more than one meaning and, in order to determine its exact meaning and scope, in accordance with the unity of the system, the interpreter should resort to the so-called "parallel places," taking into account the "legal provisions that regulate parallel normative problems or related institutes"[1].
Such "parallel places" will necessarily be found, in the case in question, in the norms of the Municipal Property Tax Code, to which the subsidiary application is directed, in block, by paragraph 2 of article 67 of the Stamp Duty Code, amended by the same Law no. 55-A/2012, of 29 October, in establishing that "2 - To matters not regulated in this Code relating to item no. 28 of the General Table, the provisions of CIMI shall apply on a subsidiary basis."
However, despite the express referral to the Municipal Property Tax Code, which the legislator wished to establish in paragraph 2 of article 67 of the Stamp Duty Code, by reference to matters relating to Item 28 of the General Table of Stamp Duty, the latter does not provide us with the concept of "property with residential use".
Indeed, its article 6, contained in Chapter I, under the heading "Taxability," does not use that expression when enumerating, in paragraph 1, the types of urban properties, which may be classified as: a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Other, with paragraphs 2, 3 and 4 of the same article delimiting what should be understood by each of those designations.
The type of urban property that best corresponds to the concept of "property with residential use" is that of residential properties, as buildings or constructions licensed for housing or which, in the absence of a license, have housing as their normal purpose (residential purposes).
However, the urban property of which the Claimant is the owner, incorporating floors or divisions susceptible to independent use, some intended for commerce and others intended for housing, cannot, globally, be considered an urban property with residential use, since it has a use falling within more than one of the classifications established by paragraph 1 of article 6 of the Municipal Property Tax Code.
Nor does it appear that the floors or divisions allocated to housing which compose it could be separated from the whole, in order to, in their aggregate, integrate the notion of property with residential use provided for in the rule of taxability of item 28.1 of the General Table of Stamp Duty, as the AT contends.
3.2.2. On the TPV of urban properties in vertical ownership. The relevant TPV for the purposes of item 28.1 of the General Table of Stamp Duty
With regard to the determination of the taxable patrimonial value of properties not constituted in horizontal property ownership, article 7, paragraph 2, of the Municipal Property Tax Code is the governing provision, although only as to "urban properties with parts classifiable in more than one of the classifications in paragraph 1 of the preceding article," in which case, in accordance with its subparagraph b) "(…) each part is assessed by application of the corresponding rules, and the value of the property is the sum of the values of its parts".
And this is the only provision of the Municipal Property Tax Code in which reference is made to the "[total] value of the property," without, however, this having any relevance at the level of tax assessment.
From the combination of the provisions of paragraph 2 of article 7 and paragraph 1 of article 6, both of the Municipal Property Tax Code, it follows that, if an urban property not constituted in horizontal property ownership integrates exclusively parts or divisions of residential use, the value of the property does not equal the sum of its parts.
Which is equivalent to saying that each of these parts is autonomous and that, not having been attributed a TPV equal to or greater than € 1,000,000.00, will be excluded from the scope of Stamp Duty – item 28.1 of the General Table of Stamp Duty.
Having reached this point, it will be pertinent to question the subjection to Stamp Duty of a part or division with independent use, with residential use, of a property not constituted in horizontal property ownership, in which are integrated parts or divisions with independent use, classifiable in more than one of the classifications in paragraph 1 of article 6 of the Municipal Property Tax Code, for example, divisions intended for commerce, as is the case in question.
Now, the answer must be negative, notwithstanding the provision of subparagraph b) of paragraph 2 of article 7 of the CIMI, according to which the value of the property is the sum of the values of its parts or divisions with independent use, classifiable in more than one of the classifications in paragraph 1 of article 6 of the same Code.
It is because, here, we are not comparing, as the AT contends, two juridically distinct realities, as would be the parts or divisions with independent use of an urban property not constituted in horizontal property ownership, on the one hand, and the autonomous fractions of properties subject to that regime, which, for the purposes of the Municipal Property Tax, are themselves properties (cfr. article 2, paragraph 4, of CIMI), on the other.
What is being compared here are realities in all respects identical, that is, parts or divisions with independent use and residential use, integrated in urban properties not constituted in horizontal property ownership.
And the answer to the question must be negative, since nothing would justify that the legislator intended to tax parts or divisions with independent use and residential use of an urban property not constituted in horizontal property ownership, integrated by other parts or divisions with independent use intended for other purposes and did not tax parts or divisions with independent use and residential use of another urban property in full ownership, integrated exclusively by parts or divisions with independent use, intended for housing. Had the legislator intended to treat unequally realities in all respects identical, it would have to be concluded that there was a flagrant violation of the principle of equality.
Not appearing to be that the legislative intent, one cannot accept that the AT formulates a rule of taxability ex novo, different from that created by the legislator, intending to tax parts of properties, even if economically and functionally independent and, as such, separately registered in the register, since the law is clear in subjecting to stamp duty of item 28.1 of the General Table of Stamp Duty, urban properties with residential use, whose TPV, for the purposes of the Municipal Property Tax, is higher than € 1,000,000.00.
Indeed, as the Claimant refers to in its pleadings and has already served as grounds for other arbitral decisions, namely that rendered in proceedings no. 50/2013-T, "The ratio legis underlying the rule of item 28 of the General Table of Stamp Duty, introduced by Law no. 55-A/2012 of 29 October, in obedience to article 9 of the Civil Code, according to which the interpretation of the legal norm should not be limited to the letter of the law, but should reconstitute from the texts and other interpretative elements the legislative intent, taking into account the unity of the legal system, the circumstances in which it was drawn up and the specific conditions of the time in which it is applied.
The legislator, in introducing this legislative innovation, considered as the determining element of taxable capacity urban properties with residential use, of high value, more precisely, of value equal to or greater than € 1,000,000.00, on which a special stamp duty tax rate began to apply, intending to introduce a principle of taxation on the wealth externalized in the ownership, usufruct or right of superficies of luxury urban properties with residential use. The criterion was the application of the new rate to urban properties with residential use, whose TPV is equal to or greater than € 1,000,000.00.
This logic seems to make sense when applied to "housing," whether it be a "house," "autonomous fraction" or "part of a property with independent use" "autonomous unit," because it presupposes a taxable capacity above average and, to that extent, justifies the need for an additional contribution effort, it would make little sense to begin to disregard the determinations "unit by unit" when only through the summation of their TPVs, because held by the same individual, would the million euro threshold be exceeded.
This is concluded from the analysis of the discussion of Bill no. 96/XII in the Assembly of the Republic, available for consultation in the Official Journal of the Assembly of the Republic, Series I, no. 9/XII/2nd, of 11 October 2012.".
We thus have that, beyond the grammatical and systematic elements of interpretation of the rule of taxability contained in item 28.1 of the General Table of Stamp Duty, also the rational or teleological element, the ratio legis or purpose intended by the legislator in drawing up that norm, points to the direction that taxation shall apply to urban properties and not to parts of urban properties, even if of independent use and with residential use.
For the reasons above, it is established that there is error by the services in the application of the law, resulting from the incorrect interpretation of the norms provided for in item no. 28.1 of the General Table of Stamp Duty and in article 7, paragraph 2, of the Municipal Property Tax Code, applicable by virtue of article 67, paragraph 2, of the Stamp Duty Code.
3.3. On the (time-barred nature) of the request for arbitral decision
As appears from the evidence above, the Stamp Duty assessments for the years 2012 and 2013, which are the subject of the request for arbitral decision, were issued on 21 March 2013 and on 14 March 2014, respectively, the request for their ex officio review being presented on 14 January 2015.
In its response, the AT invokes the time-barred nature of the request for arbitral decision, by expiration of the right to impugn, in the terms expressed above, defending, in particular, that "the request for ex officio review provided for in article 78, paragraph 1, of the GTL, even if at the initiative of the AT, is not, nor can be, a form of creating a new mechanism for appeal to the arbitral tribunal independent of the expiration of legally fixed periods, but indeed as a new procedure precisely created to enable circumventing those already elapsed periods".
However, the Respondent is not correct: since the rejection, whether express or implicit, of the request for review of the tax act is one of the injurious acts referred to in article 95, paragraph 2, subparagraph d), of the GTL, it is susceptible of impugnation, an inalienable right, except in cases provided for by law (article 96, paragraph 1, of the GTL).
The AT contends that the request for review of the Stamp Duty assessments that are the subject of the present request for arbitral decision was made beyond the "administrative complaint" period, an expression which, in its response, is taken to be equivalent to "administrative complaint," and that there could only be ex officio review, at the initiative of the AT, within the four-year period from the date of the assessments, on the basis of error attributable to the services, an error which the AT affirms did not exist, such that the consideration of the request would constitute a useless act.
On the significance of the expression "administrative complaint," it should be noted that there are two distinct doctrinal positions: one that this refers to the administrative complaint provided for in the Administrative Procedure Code, whose general period for filing is 15 days[2], and the other that, in practice, it is equivalent to the administrative complaint, both as to the period for its presentation (120 days from the expiration of the voluntary payment period), as to its grounds (on the basis of any illegality) and, also, as to the legal effect sought, which is the total or partial annulment of the tax act[3].
Leaning towards this latter solution, it will be necessary to distinguish between the assessments for the year 2012 and those for 2013: as to the former, there is no doubt that, at the date of the request for ex officio review, the administrative complaint (complaint) period had already elapsed, such that that request does not fall within the first part of paragraph 1 of article 78 of the GTL; with regard to the assessments for the year 2013, whose voluntary payment period ended on 30 November 2014, that period had not yet elapsed, despite the Claimant having requested their "ex officio" review.
However, notwithstanding the expiration of that administrative complaint period, nothing prevents the impetus for the ex officio review of the assessments for the year 2012 from falling to the taxpayer, as follows from the provisions of paragraph 7 of article 78 of the GTL, in which reference is made to the interruptive effect of the respective period, the request made by the latter to the competent body for its performance (cfr. also articles 49, paragraph 1, of the GTL and 86, paragraph 4, subparagraph a), of the TPPC).
Indeed, in accordance with the reiterated case law of the Supreme Administrative Court, recently expressed in the Judgment of the Plenary of the Tax Court Section, rendered in proceedings no. 0793/14, on 3 June 2015, "(…) when the request for review had as its subject a tax assessment act that the taxable person considers illegal – because, in his view, it was issued under an incorrect interpretation and application of the applicable Law, with erroneous application to the relevant facts – nothing prevents him from, within four years from the assessment (or, if the tax has not yet been paid, at any time), requesting the Administration to review that act ex officio, thus becoming invested with a right to a decision on the petition filed."
In the situation in question, the request was directed to a body incompetent to decide, but the head of the AT office where the request was presented was required to send it to the competent body, within 48 hours of the declaration of incompetence, "the petition being considered presented on the date of the first registration of the proceedings," as determined in article 61, paragraph 2, of the GTL, with the regime of the 1991 Administrative Procedure Code, in force at the date of the request, not being applicable here (article 34).
Being a procedure opened at the initiative of the interested party (cfr. article 54, paragraph 1, subparagraph c), of the GTL), the AT was obliged to pronounce itself (article 56, paragraph 1, of the GTL) and, not having done so within the period provided for in paragraph 1 of article 57 of the GTL, its rejection is presumed, for purposes of judicial impugnation (article 57, paragraph 5, of the GTL and article 102, paragraph 1, subparagraph d), of the TPPC).
The request for ex officio review of the assessments in question was presented on 14 January 2015 and, having verified the respective requirements for admissibility, that is, as to the assessments for the year 2013, for having been made within the administrative complaint period, in which any illegality could be invoked and, as to the assessments for the year 2012, for not having yet elapsed the four-year period after the date of their issuance and because they were issued in error as to the legal grounds, by incorrect interpretation of the rule of objective taxability contained in item 28.1 of the General Table of Stamp Duty, attributable to the AT, the presentation of the request for establishment of the arbitral tribunal cannot be considered time-barred, taking into account the period established in article 10, paragraph 1, subparagraph a), of the LRTA.
3.4. On the request for indemnificatory interest
With respect to the request for payment of indemnificatory interest, it is patent that the tax arbitral process was conceived as an alternative means to the judicial impugnation process (cfr. the legislative authorization granted to the Government by article 124, paragraph 2 (first part) of Law no. 3-B/2010, of 28 April – State Budget Law for 2010).
Thus, although article 2, paragraph 1, subparagraph a), of the LRTA uses the expression "declaration of illegality" as delimiting the competence of the arbitral tribunals operating in the CAAD, it should be understood that this competence includes the powers which in the judicial impugnation process are attributed to the tax courts, such as that of considering error attributable to the services.
On the other hand, subparagraph b) of paragraph 1 of article 24 of the LRTA determines that the arbitral decision on the merits of the claim to which no appeal or impugnation shall apply binds the tax administration from the expiration of the period provided for appeal or impugnation, and this must, in the precise terms of the success of the arbitral decision in favor of the taxable person and until the expiration of the period provided for the spontaneous execution of the decisions of the tax judicial courts, "restore the situation that would have existed if the tax act that is the subject of the arbitral decision had not been performed, adopting the necessary acts and operations for that purpose", which includes "the payment of interest, irrespective of its nature, in the terms provided for in the General Tax Law and in the Tax Procedure and Process Code.".
Similarly, article 100 of the GTL, applicable to the tax arbitral process by virtue of the provision in subparagraph a) of paragraph 1 of article 29 of the LRTA, establishes that "The tax administration is obliged, in case of total or partial success of complaints or administrative appeals, or of judicial process in favor of the taxable person, to the immediate and full restoration of the situation that would have existed if the illegality had not been committed, including the payment of indemnificatory interest, in the terms and conditions provided for by law.".
In turn, paragraph 1 of article 43 of the GTL provides that "Indemnificatory interest is due when it is determined, in administrative complaint or judicial impugnation, that there was error attributable to the services from which resulted payment of the tax debt in an amount greater than that legally owed.".
However, the scope of the right to indemnificatory interest in case of a request for ex officio review is not as broad as that which follows from paragraph 1 of article 43 of the GTL, the provision of which, in the case in question, will only cover the assessments for the year 2013 because, in relation to them, review was requested within the administrative complaint (administrative complaint) period, in accordance with the first part of paragraph 1 of article 78 of the GTL.
As to the assessments for the year 2012, whose voluntary payment period ended on 30 November 2013, the situation falls within subparagraph c) of paragraph 3 of article 43 of the GTL, in which indemnificatory interest would only be owed if "the review of the tax act at the initiative of the taxpayer were to be made more than one year after the request thereof (…)".
As has been recognized by the Supreme Administrative Court and was recently decided by the latter in a Judgment of 28 January 2015 (Proceedings no. 0722/14, available at http://www.dgsi.pt), the justification for this distinction derives from the fact that, in situations such as these, there had elapsed "(…) an extended period in which the restoration of legality could have been prompted at the initiative of the taxpayer that did not develop it, which justifies that the right to indemnificatory interest shall have a more limited extent in contrast with the situation in which the taxpayer raises the question of the illegality of the assessment act immediately after the disbursement of the amount in question.
The legislator considers that the one-year period is the reasonable period for the Administration to decide the review request and execute the respective decision, when favorable to the taxpayer, dispensing with full indemnification of damages from the moment they arose in the taxpayer's patrimony.
Imposing constitutional law on the State the obligation to repair the damages caused by its illegal acts, ordinary law has been establishing limits to that reparation, whether those resulting from the assessment of the greater or lesser diligence of the injured party, or from the time it affords the Tax Administration to decide.".
3.5. Questions prejudiced in knowledge
In the decision, the judge must pronounce on all questions that he should consider, abstaining from pronouncing on questions as to which he should not have knowledge (final segment of paragraph 1 of article 125 of the TPPC), and the questions on which the powers of cognition of the tribunal fall are, in accordance with paragraph 2 of article 608 of the CCP, subsidiarily applicable to the tax arbitral process, by referral of article 29, paragraph 1, subparagraph e), of the LRTA, "the questions which the parties have submitted to its consideration, excepting those whose decision is prejudiced by the solution given to others (…)".
In light of the solution given to the questions relating to the determination of the relevant TPV for application of the rule of taxability contained in item 28.1 of the General Table of Stamp Duty and to the payment of indemnificatory interest in favor of the Claimant, knowledge of the remaining questions is prejudiced, namely those of the unconstitutionality of the said rule, since the same is not susceptible of the interpretation that, in the case, was made by the AT.
4. DECISION
Based on the factual and legal grounds set out above and, in accordance with article 2 of the LRTA, the decision is rendered, adjudging the present request for arbitral decision to be well-founded:
4.1. To declare the illegality of the Stamp Duty assessments impugned (years 2012 and 2013), by error in the legal grounds, determining their annulment;
4.2. To condemn the AT to the reimbursement of the amount unduly paid by the Claimant under Stamp Duty for the year 2012;
4.3. To condemn the AT to the reimbursement of the amount unduly paid by the Claimant under Stamp Duty for the year 2013, plus indemnificatory interest, from the dates of the unduly payment until the date of the issuance of the respective credit note.
VALUE OF THE PROCEEDINGS: In accordance with the provisions of article 306, paragraphs 1 and 2, of the CCP, 97-A, paragraph 1, subparagraph a), of the TPPC and 3, paragraph 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 39,729.00 (thirty-nine thousand, seven hundred and twenty-nine euros).
COSTS: Calculated in accordance with article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached thereto, in the amount of € 1,836.00 (one thousand, eight hundred and thirty-six euros), charged to the Tax and Customs Authority.
Lisbon, 30 October 2015.
The Arbitrator,
/Mariana Vargas/
Text produced by computer, in accordance with paragraph 5 of article 131 of the CCP, applicable by referral of subparagraph e) of paragraph 1 of article 29 of Decree-Law 10/2011, of 20 January.
The wording of this decision is governed by the spelling agreement of 1990.
[1] MACHADO, J. Baptista, "Introduction to Law and Legitimating Discourse", Almedina, Coimbra, 1995, p. 183.
[2] See, in this sense, CAMPOS, Diogo Leite de, RODRIGUES, Benjamim Silva and SOUSA, Jorge Lopes de, "General Tax Law – annotated and commented", 4th Edition, Lisbon, Encontro da Escrita, 2012, pp. 707 to 709.
[3] Thus, NABAIS, José Casalta, "Tax Law", 7th Edition, Coimbra, Almedina, 2014, p. 306 and ROCHA, Joaquim Freitas da, "Lessons in Tax Procedure and Process", 5th Edition, Coimbra, Coimbra Editora, 2014, p. 226.
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