Summary
Full Decision
ARBITRAL DECISION
Report
A… – Property Administration Company, Ltd., TAX ID …, civil company in the form of a limited liability company, with registered office at Av. …, no. …, in …, as identified in the proceedings, filed a request for arbitral pronouncement, pursuant to article 10 of the Legal Regime for Tax Arbitration (Decree-Law no. 10/2011, of 20 January) and Articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March (Binding of the Tax and Customs Authority), for a declaration of illegality and consequent annulment of the Stamp Tax assessments (relating to item 28.1 of the corresponding General Schedule), for the year 2012, in the total amount of €17,467.64 (seventeen thousand, four hundred and sixty-seven euros and sixty-four cents).
The Tax and Customs Authority (AT) is the respondent.
The claimant failed to appoint an arbitrator. For this purpose, the President of the Deontological Council of the Administrative Arbitration Center appointed the undersigned, who expressly accepted that appointment. The parties were duly notified of that appointment and did not manifest the intention to refuse it.
The arbitral tribunal was thus constituted on 6 June 2014.
The AT timely filed its answer, arguing for the total lack of merit of the claim, with consequent absolution of the respondent. By order of 13 November 2014, the period for the decision was extended for a period of two months, counting from the end of the six-month period counted from the beginning of the arbitral proceedings.
The meeting provided for in article 18 of the RJAT took place on 16 December 2014 and both parties made written submissions.
The tribunal was regularly constituted and is materially competent.
The parties have legal capacity and standing, are legitimate, and the proceedings do not suffer from any defects.
Subject Matter of the Dispute and Factual Matter
The proceedings concern the applicability of the new item 28.1 of the General Schedule of the Stamp Tax Code to property in vertical ownership. The claimant argues for the invalidity of the tax acts, with consequent refund of the tax paid and also of court costs incurred in fiscal enforcement proceedings and default interest equally incurred in the same context, and further petitions for compensatory interest. The respondent, for its part, in addition to arguing for the validity of the contested tax acts, further raises the untimeliness of the request for arbitral pronouncement and that neither the costs in enforcement proceedings nor the default interest are capable of being included within the scope of tax arbitration, wherefore, in addition to also considering that the claim should be meritless in this respect, it further questions the value attributed to the case.
For the resolution of the case, the following factual matter is relevant. The tax assessments in question are those contained in the collection documents with the numbers:
2012…,
2012…,
2012…,
2012…,
2012…,
2012…,
2012…,
2012…,
2012…,
2012…,
2012…,
2012…,
2012…,
2012…,
2012…,
2012…,
2012…,
2012…,
2012…, and
2012…;
all of them relating to the 1st, 2nd and 3rd installments of Stamp Tax due in 2013 by reference to 31 December 2012, which had as their payment deadline April, July and November 2013, respectively (documents 1 to 20 of the arbitral petition).
The claimant is a civil company in the form of a limited liability company, with registered office at Av. …, no. …, in …, having precisely as its object the purchase and management of the property located at Av. …, no. …, in the parish of …, in …, for which purpose it was, moreover, constituted, with the aim of avoiding the absence of its constitution in horizontal ownership.
In 2012, the claimant was the owner of that property, which was registered in the urban property register of the parish of …, in …, under article … (corresponding to the former article … of the extinct parish of …) and to which corresponded a total tax patrimonial value (VPT) of €1,681,590.00 (one million, six hundred and eighty-one thousand and five hundred and ninety euros). This property corresponded to a residential building in complete ownership, not constituted, therefore, at that time, in horizontal ownership, with various floors subject to independent use: specifically, two dwellings per floor (left and right), in a total of ten floors (from the first to the tenth floors). Each of these divisions constituted an autonomous property registration unit, having been the subject of separate determination of its respective VPT, and to none of those property articles corresponded a VPT equal to or exceeding one million euros (as appears from the urban property register provided in the arbitral petition as document 21).
Meanwhile, horizontal ownership has already been constituted.
The assessments in question, twenty in total, corresponding to each of the aforementioned property articles, result from the application of the new item 28.1 of Stamp Tax (IS) to the various independent divisions dedicated to residential use of that property, were not notified to the claimant, and their total value amounts to €16,815.90.
Having the tax assessments not been notified to the claimant, they were not paid within the period for their voluntary payment, having given rise to debt certificates. As a consequence, fiscal enforcement proceedings were instituted on 22-12-2013, subsequently extinguished by voluntary payment on 19-2-2014 (doc. 24).
The claimant became aware of those assessments only by the citation for the enforcement proceedings just mentioned. The citation documents for enforcement are dated 27 January 2014, wherefore the claimant had no knowledge of the assessments in question before that date.
The item in question in the case thus corresponds to the above-mentioned value of the tax, added to €651.74 relating to default interest for the delay in payment and also to costs in the aforementioned enforcement proceedings, totaling all of the above-mentioned total amount of €17,467.64, a sum that was already disbursed by the claimant on 19 February 2014.
The initial arbitral petition was filed on 31 March 2014.
There are no other facts with relevance to the assessment of the merits of the case that are not proven, with the exception of the absence of notification of the tax assessments to the claimant, a fact however of which the respondent failed to provide proof (article 74 of the LGT: "the burden of proof of the facts constitutive of rights …. rests upon whoever invokes them").
The proven facts are based on the documents provided by the parties, whose correspondence to reality, with the exception just mentioned, is not disputed.
Matters of Law
Position of the Parties
The question in the case concerns the application, in situations of so-called vertical ownership, of the new taxation in IS affecting urban properties with residential allocation and VPT equal to or exceeding one million euros. This new taxation was introduced in 2012 to reinforce budget control measures on the revenue side, within a framework of financial state of necessity[1].
As is well known, that new taxation in IS has raised strong doubts and considerable contestation. This is not only for specific cases of its application (e.g., vertical ownership, co-ownership, building land or its application to the year 2012), but also in general terms, for its possible unconstitutionality, whether of its general regime or of its transitional regime[2].
Now, the claimant comes precisely to contest the application of said taxation resulting from the application of the new item 28.1 of the TGIS to urban properties not constituted in horizontal ownership, but which include divisions capable of independent use, in which the minimum value fixed in the law of incidence is reached by the sum of the VPT of the property articles corresponding to the various divisions, but not by any one of them individually considered. From which would follow therefore the illegality of the tax acts in question.
Indeed, the claimant argues that it is not the owner of a property with VPT equal to or exceeding the said amount, but merely the owner of a property in vertical ownership in which the VPT exceeding that value is only reached by the sum of the VPT of divisions capable of independent use dedicated to residential purposes, without any of them, considered individually, reaching that minimum amount of tax relevance. For this reason, according to the claimant, the assessments in question suffer from the defect of violation of law, which renders them voidable.
The claimant further considers that the AT's interpretation of the scope of the new item is unconstitutional, for violating, among others, the principles of fiscal legality and equality (article 103 of the CRP).
Having proceeded to the payment of the tax deemed undue, the claimant argues that it is owed compensatory interest.
Since such payment occurred within the scope of fiscal enforcement proceedings, the claimant simultaneously disbursed, with the tax, default interest and procedural costs, sums that it considers should be refunded to it, as a consequence of the annulment of the tax act and the consequent underlying obligation.
Differently, the respondent contests that understanding. Preliminarily, it considers the arbitral tribunal incompetent for the "declaration of illegality of the amounts paid in fiscal enforcement proceedings and as default interest and procedural costs," from which would further result the necessary reduction of the case value, which would correspond exclusively to the value of Stamp Tax collected in the enforcement proceedings.
Additionally, as an exception, the respondent further raises the untimeliness of the claim. For this purpose, it alleges (without proving it, as was seen) that the assessments were sent to the claimant by ordinary mail and that, even if not so, just as in the IMI, in the case at hand the notification of the assessments is not a legal obligation, wherefore the claimant could not fail to know the payment deadlines for voluntary payment, from which it followed that the period to request the constitution of the Arbitral Tribunal would end on 28-2-2014, having however been presented on 31-3-2014. From this fact it follows further, for the respondent, that the invoked defect of lack of reasoning and consequent violation of legal formalities is without merit (by virtue of both the assessments and the citation for enforcement proceedings).
By way of opposition, the respondent argues for the maintenance of the assessment. In support of its thesis, it emphasizes, in summary, the diversity between horizontal and vertical ownership, in which complete ownership, or vertical, corresponds to a property, being this the reality to be taken into account to ascertain the verification of the minimum value contained in the rule of incidence. For this purpose, it invokes article 2, no. 1 of the CIMI that integrates the concept of property, by comparison with no. 4 of that same article, pursuant to which in the case of horizontal ownership each autonomous unit is deemed to constitute a property. It further adds that no. 3 of article 12 of the CIMI concerns only the manner of registering property data.
For the respondent, the VPT relevant for purposes of tax incidence is thus the VPT of the urban property and not the VPT of each of the parts that compose it, even though capable of independent use, since they are dedicated to residential use.
Finally, it considers that there is no violation of the constitutional principles of equality and fiscal legality, nor of contributory capacity nor even of proportionality.
Regarding compensatory interest, the respondent argues that it applied the law at the date of the facts as it is constitutionally bound as an executive body, wherefore there is no error by the services pursuant to article 43 of the LGT, and therefore such interest is not legally owed to the claimant.
Summary of Disputed Questions
In summary, in the case at hand, there are thus five disputed questions of law:
-
whether the claim is timely;
-
whether in situations of vertical ownership the minimum VPT provided for in the rule of incidence should be assessed by reference to each division dedicated to residential use and capable of independent use or rather by the sum of the VPT corresponding to all such divisions that make up the same property;
-
whether the second interpretation is in conformity with the Constitution;
-
whether in arbitral proceedings the refund of enforcement proceeding costs and default interest can be claimed;
-
whether compensatory interest is owed.
Legislative Summary
For ease of exposition, it is understood to be useful to proceed now with the transcription of the essential legal provisions of Law no. 55-A/2012, of 29 October, which, among other things, amended the Stamp Tax Code, doing so in the following terms:
Article 3
Amendment to the Stamp Tax Code
Articles 1, 2, 3, 4, 5, 7, 22, 23, 44, 46, 49 and 67 of the Stamp Tax Code, approved by Law no. 150/99, of 11 September, shall have the following wording:
(…)
Article 2
[...]
1 - ...
2 - ...
3 - ...
4 - In the situations provided for in item no. 28 of the General Schedule, the passive subjects of the tax are those referred to in article 8 of the CIMI.
Article 23
[...]
1 - ...
2 - ...
3 - ...
4 - ...
5 - ...
6 - ...
7 - In the case of tax due for the situations provided for in item no. 28 of the General Schedule, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI.
Article 67
[...]
1 - (Previous body of the article.)
2 - To the matters not regulated in this Code relating to item no. 28 of the General Schedule, the provisions of the CIMI shall apply subsidiarily."
Article 4
Addition to the General Schedule of Stamp Tax
Item no. 28 is added to the General Schedule of Stamp Tax, annexed to the Stamp Tax Code, approved by Law no. 150/99, of 11 September, with the following wording:
"28 - Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value contained in the register, pursuant to the Urban Property Tax Code (CIMI), is equal to or exceeding (euro) 1,000,000 - on the tax patrimonial value used for purposes of IMI:
28.1 - Per property with residential allocation - 1%;
28.2 - Per property, when the passive subjects who are not natural persons are resident in a country, territory or region subject to a regime clearly more favorable from a tax perspective.
Article 6
Transitional Provisions
1 - In 2012, the following rules shall be observed by reference to the assessment of stamp tax provided for in item no. 28 of the respective General Schedule:
a) The taxable event occurs on 31 October 2012;
b) The passive subject of the tax is that mentioned in no. 4 of article 2 of the Stamp Tax Code on the date referred to in the preceding subparagraph;
c) The tax patrimonial value to be used in the assessment of the tax corresponds to what results from the rules provided for in the Urban Property Tax Code by reference to the year 2011;
d) The assessment of the tax by the Tax and Customs Authority must be carried out by the end of November 2012;
e) The tax must be paid, in a single installment, by the passive subjects by 20 December 2012;
f) The applicable rates are as follows:
i) Properties with residential allocation assessed pursuant to the Urban Property Tax Code: 0.5%;
ii) Properties with residential allocation not yet assessed pursuant to the Urban Property Tax Code: 0.8%;
iii) Urban properties when the passive subjects who are not natural persons are resident in a country, territory or region subject to a regime clearly more favorable from a tax perspective, contained in the list approved by ordinance of the Minister of Finance: 7.5%.
2 - In 2013, the assessment of stamp tax provided for in item no. 28 of the respective General Schedule must be based on the same tax patrimonial value used for purposes of the urban property tax to be assessed in that year.
3 - The failure to deliver, in whole or in part, within the stated period, of the sums assessed as stamp tax constitutes a tax violation, punished pursuant to law.
Article 7
Entry into Force and Effective Date
1 - This law enters into force on the day following its publication.
2 - The amendments to article 72 of the Personal Income Tax Code and to article 89-A of the General Tax Law have effect from 1 January 2012.
Exception of Untimeliness
Prima facie the claim is timely, pursuant to article 36 of the CPPT, according to which "acts in tax matters that affect the rights and legitimate interests of taxpayers only produce effects in relation to them when validly notified to them." The time period is to be counted pursuant to subparagraph f) of no. 1 of article 102 of the CPPT, that is, from knowledge of the act injurious to the legally protected interest, which here only occurs with the citation for enforcement proceedings.
Nevertheless, the exception raised regarding the untimeliness of the claim will be better analyzed after verification of the legality of the tax acts in question, since the nature of any defect may be relevant to reassess the (un)timeliness of the claim. For this reason, any specificity regarding IMI, and the item in question here, by effect of the referral to the CIMI, will be better weighed after analysis of the legality of the act. Indeed, to ascertain whether the claimant was, or was not, in time to contest the legality of the act, it is namely relevant to keep in mind the nature and specificities of the tax act (massified) in question here.
Vertical Ownership
Regarding the problem of determining the VPT (minimum) relevant for the application of item 28.1 of the TGS in cases of vertical ownership, decisions have already been made by the CAAD in the proceedings numbered 50/2013-T, 132/2013, 181/2013-T, 183/2013-T, 272/2013-T, 280/2013-T, 26/2014-T, 30/2014-T, 88/2014-T, 177/2014-T and 206/2014-T.
In all cases the question was, as in these proceedings, whether the VPT relevant to the rule of incidence (28.1 of the TGIS) is the VPT corresponding to the division capable of independent use or whether, on the contrary, the VPT relevant should correspond to the sum of all such divisions of the same property, since such divisions are dedicated to residential purposes. And the answer, in those decisions, was always for the first option.
The Stamp Tax Code
The new item was inserted in the Stamp Tax Code, a choice that does not offer relevant contribution to systematically frame the new tax, since that tax "affects a heterogeneous multiplicity of facts or acts … without a common feature that gives them identity," which was, moreover, exacerbated by the 2003/2014 Tax Reform on Real Estate, making even more complex "the problem of classification of this tax"[3].
But it is known that this new item was introduced as a way to reinforce budget control measures on the revenue side, within a framework of financial state of necessity[4], with the aim of identifying new expressions of contributory capacity that could be called upon to contribute to that purpose.
And it did so by choosing to make the new taxation affect exclusively certain goods, thus implying a strong negative discrimination against these, which calls for a reinforced explanation of this choice, so as not to put into crisis the principle of equality, or equity in the terminology of Glória Teixeira, either in its sense of horizontal equity or vertical equity[5].
Now, it appears possible to discern in the legislator's thinking the intention to identify in luxury properties intended for residential use, a referential, not arbitrary, of an additional contributory capacity, capable of broadening the spectrum of contributions to the desired and necessary budget equilibrium.
Within this context, the question to be decided is whether a property constituted in complete or vertical ownership, but with floors or divisions with independent uses, is a "property with residential allocation" for purposes of the application of article 1 of the CIS and item 28.1 of the TGIS, added by article 4 of Law no. 55-A/2012, of 29 October.
For this purpose, it is important to note that each floor or part of a property capable of independent use is considered separately in the property registration, which also discriminates its respective tax patrimonial value (no. 2 of article 12 of the CIMI), and the IMI is assessed individually in relation to each floor or part of a property capable of independent use (article 119, no. 1 of the CIMI).
And, if so in IMI, so too it should be in Stamp Tax. Let us see why.
Literal Interpretation
As is stated in the decision made in proceedings 206/2014-T: "Given that the CIS refers to the CIMI, it must be concluded that the registration in the property register of properties in vertical ownership, constituted by different parts, floors or divisions with independent use, follows the same registration rules as horizontal."
Since the IMI and Stamp Tax "are assessed individually in relation to each of the parts," the "legal criterion for defining the incidence of the new tax must also be the same." Consequently, there will be incidence of item 28.1 of the TGIS should any of those parts, floors or divisions with independent use present a VPT at least equal to the amount provided for in the rule of incidence.
Also in the decision made in proceedings 272/2013-T (CAAD) it is stated that "considering that the registration in the property register of properties in vertical ownership, constituted by different parts, floors or divisions with independent use, pursuant to the CIMI, follows the same registration rules as properties constituted in horizontal ownership, and their respective IMI, as well as the new Stamp Tax, are assessed individually in relation to each of the parts, there is no question that the legal criterion for defining the incidence of the new tax must be the same." Indeed, there it is stated that the AT's position "finds no legal support and is contrary to the criterion that applies in the CIMI and, by referral, in Stamp Tax," which is why "the adoption of the criterion defended by the AT violates the principles of fiscal legality and equality, as well as the prevalence of material truth over juridical-formal reality."
And in the same sense it is stated in the arbitral decision of proceedings 30/2014-T (CAAD) to find in the doctrine of the AT a "nonconformity with the literal element of the final part of the rule of incidence (item 28 of the TGIS) which states that the tax affects "the tax patrimonial value used for purposes of IMI" and therefore, should not affect the sum of tax patrimonial values of properties, parts of properties or floors, there being no legal support for the operation of adding tax patrimonial values of the floors or parts of property capable of independent use, with residential allocation, split off from the VPT of the remainder with different purposes, so as to reach the threshold of eligible taxation of 1,000,000.00 euros or more."
However, as is stated in the arbitral decision made in proceedings 30/2014-T (CAAD), what happens with respect to urban properties with residential allocation, in vertical ownership, with floors or divisions capable of independent use, is that the AT proceeds, in the operations of assessment of the IS, as it proceeded in the case at hand, to the adaptation of the rules of the CIMI. And that "adaptation" corresponds to "summing the VPTs of each floor or independent division dedicated to residential purposes (split off from the VPT of the floors or divisions intended for other purposes), creating a new juridical reality, without legal support, which is a global VPT of urban properties in vertical ownership, with residential allocation," which violates "the literal element of the rule of incidence": incidence on "the tax patrimonial value used for purposes of IMI." Wherefore "in urban properties with residential allocation, in vertical ownership, with floors or divisions capable of independent use," the tax patrimonial value "resulting exclusively from no. 3 of article 12 of the CIMI should be considered. Both for the IMI and for this IS."
To be concrete, as was concluded in the decision made in proceedings 26/2014-T of the CAAD, "for purposes of applying item 28 of the TGIS to properties in vertical ownership, the same rules of the CIMI apply as to properties in horizontal ownership, and in the same sense the VPT for purposes of applying the item is the individual VPT of each independent residential division, it being the case that in the present case none of the divisions exceeds the incidence criterion of 1,000,000.00€," as occurs in the case of these proceedings.
It is thus concluded, in summary, as clearly appears from the decisions cited, that the literal interpretation of the new item of the TGIS cannot fail to be different from that sustained by the AT, indeed, opposed, given the clear and indisputable referral to the rules of the CIMI.
Economic Substance
But as is well stated in the Judgment 117/2013 T of the CAAD, "interpretation exclusively based on the literal tenor … cannot be accepted, since in the interpretation of tax rules the rules and general principles of interpretation and application of laws are observed (article 11, no. 1, of the LGT) and article 9, no. 1, expressly prohibits interpretations exclusively based on the literal tenor of the rules in stating that 'interpretation must not be limited to the letter of the law,' rather 'reconstructing from the texts the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.' For there to be a correspondence between the interpretation and the letter of the law it will suffice 'a minimum verbal correspondence, even if imperfectly expressed' (article 9, no. 3, of the Civil Code), which will only prevent the adoption of interpretations that cannot in any way be reconciled with the letter of the law, even recognizing therein imperfection in the expression of the legislative intention."
Indeed, if we now look at the economic substance of the taxable facts, in compliance with article 11, no. 3 of the LGT, without for this purpose adhering to an economic interpretation of tax law rules, today condemned by doctrine (cf. Taxes, General Theory, Américo Fernando Brás Carlos, p. 196, 2014, 4th ed. Almedina), we must equally recognize that the expression "each urban property" used in no. 7 of article 23 encompasses not only urban properties in horizontal ownership, but also floors, divisions or parts of urban properties in vertical ownership, since they are dedicated to residential purposes, always proceeding, in any of the cases, from a single taxable base for all legal purposes: the tax patrimonial value used for purposes of IMI (final part of item 28 of the TGIS), as was concluded in the arbitral decision of proceedings 177/2014-T (CAAD).
Or, as is emphasized in the decision made in proceedings 272/2014-T of the CAAD, "from the legislator's perspective, it is not the juridical-formal rigor of the concrete situation of the property that matters but rather its normal use, the purpose to which the property is dedicated," wherefore "for the legislator the situation of the property in vertical or horizontal ownership was not relevant, since no reference or distinction is made between them. What is relevant is the material truth underlying its existence as an urban property and its use."
Indeed, in the case at hand, given the subsequent constitution of horizontal ownership, this conclusion is particularly evident: notwithstanding the maintenance of the economic substance of the underlying reality there would be incidence of IS up to a certain year (vertical ownership), but not in subsequent years (horizontal ownership), which well demonstrates the lack of adherence to the fact-economic reality of the administrative interpretation of which the tax act is an expression.
System Coherence
And if we seek to look at the totality of the tax system we will not find indications that would undermine the conclusion traced up to now.
As is stated in the Judgment made in proceedings 26/2014-T of the CAAD, no censure of the legislator against vertical ownership is discerned. Indeed, "it could be said, not without reasonableness, that the legislator, for purposes of taxation under IMI, chose to confer autonomy, independence, on each of the parts or each of the floors of a single property, since both show independent use, to the point of providing for individual registration in the property register of each of those independent parts and of imposing on taxation under IMI a collection also autonomous. Notwithstanding the juridical existence of a single property, it is the legislator itself who not only recommends but imposes the autonomous consideration of each of the independent parts, for purposes of taxation of real estate." Indeed, as would follow from an economic interpretation of the fact, with prevalence of its substance over its form, as was seen above. And if so in IMI, it would not be understood why so it would not also be, in Stamp Tax, namely in the case of the new taxation on luxury real estate (houses, better to say).
Thus, as was decided in proceedings 26/2014-T and 272/2014-T of the CAAD, "the current legal regime does not impose the obligation to constitute horizontal ownership," which is why "the discrimination operated by the AT represents an arbitrary and illegal discrimination," since "the AT cannot distinguish where the legislator itself chose not to do so, on pain of violating the coherence of the tax system, as well as the principle of fiscal legality provided for in article 103, no. 2 of the CRP, and also the principles of justice, equality and fiscal proportionality."
That is, the literal interpretation initially reached continues to hold.
Legislative Intent
And the fact is that nothing induces the interpreter to conclude that the legislator of the new item of the TGIS, contrary to the legislator of the IMI, intended to discriminate vertical ownership as against horizontal. As is well recalled in the Judgment made in the already-mentioned proceedings 26/2014-T of the CAAD, "when presenting and discussing, in Parliament, Bill no. 96/XII (2nd), the Secretary of State for Tax Affairs explicitly stated: 'The Government proposes the creation of a special tax on high-value residential urban properties. It is the first time that Portugal has created special taxation on high-value properties intended for residential use. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses valued at equal to or exceeding 1 million euros' (cf. DAR I Series no. 9/XII-2, of 11 October, p. 32). Now, as is emphasized in that Judgment, "the Secretary of State for Tax Affairs presents this bill referring without hesitation to the expression 'houses'… valued at equal to or exceeding 1 million euros," wherefore "it results with meridian clarity that item 28.1 of the TGIS cannot be interpreted to the effect that it encompasses each of the floors, divisions or parts capable of independent use when only from their sum results a VPT exceeding that which that same item provides." This is because, in that case, "none of the 'houses' … presents, per se, 'value equal to or exceeding 1 million euros'."
Being therefore clear, as is stated in the said decision 272/2014-T, that for the legislator only that amount of one million euros, or a higher amount, since it is dedicated "to a residential dwelling (house, autonomous unit or floor with independent use) expresses an above-average contributory capacity and, as such, capable of determining a special contribution to ensure the fair distribution of the tax burden."
And if so, then, for that, we must take into account the concept of "house" as a unit capable of independent use, since it is in that economic reality that we will find the identification of the expression of contributory capacity that the legislator considered relevant. More, if so it were not, the legislator would proceed to a discrimination that would not be found to be justified, since as has been seen there is no censure in the system of vertical ownership when compared with horizontal. More, that distinction would clash with a necessary equity between identical expressions of the same contributory capacity.
Contributory Capacity and Interpretation in Conformity with the Constitution
It is certain that the tax legislator is subordinate to the principles of equality, which, as Sérgio Vasques well states[6], is more than a mere negative limit and imposes something more than mere prohibition of arbitrariness, rather postulating a distribution of taxes according to the criterion of contributory capacity, wherefore the legislator must anchor taxation in reasonable and non-arbitrary economic elements, capable of justifying the tax claim in a contributory capacity concretely expressed by the passive subject.
It is thus imperative to seek in the text of the new rule a reading that gives effect to those principles. Or, which amounts to the same, not to seek in that text a meaning that violates such principles.
Now, the contributory capacities expressed by the ownership of a property composed of a set of autonomous divisions in horizontal ownership or by a set of divisions with independent use in vertical ownership regime, cannot fail to be considered identical, if not indeed, possibly, smaller in the case of the second hypothesis. That is, a property does not have, surely, a greater market value for being organized as vertical ownership. It is worth the same, if not indeed less, since the alternatives for alienability are fewer. And we know that the VPT is intended to be an approximation, precisely, to the market value of properties.
Thus, the interpretation argued by the AT would lead to a manifest inequality between owners of properties in horizontal and vertical ownership and it has already been seen that no penalizing intent against the latter is discerned, even if it were admitted that such could be constitutionally admissible. In that same sense, as is well emphasized in the decision of proceedings 272/2014-T of the CAAD, the "existence of a property in vertical or horizontal ownership cannot, by itself, be an indicator of contributory 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."
Concluding, as is concluded in the decision made in proceedings 26/2014-T of the CAAD, "material truth is that which imposes itself as the determining criterion of contributory capacity and not the mere juridical-formal reality of the property, since the constitution of horizontal ownership implies a mere juridical alteration of the property not even requiring a new valuation." And that fact "does not appear coherent with the AT's decision to tax the residential parts of a property in vertical ownership, based on the global VPT of the property and not on what is effectively attributed to each part." Thus and as has already been transcribed above, "the AT cannot distinguish where the legislator itself chose not to do so, on pain of violating the coherence of the tax system, as well as the principle of fiscal legality … and also the principles of justice, equality and fiscal proportionality."
In these terms, the tax acts in question suffer from the defect of violation of law, due to error in the legal premises, since no part of the property possesses a VPT of value equal to or exceeding the threshold resulting from the applied rule, which renders said tax acts voidable.
Exception: Timeliness (continued)
It has already been seen the relevance of article 36 of the CPPT, leading to the beginning of the time period occurring pursuant to subparagraph f) of article 102 of the CPPT (see also with no. 4 of article 70 of the CPPT, regarding amicable reclamation), but also that the question should be reappraised after better dissecting the tax act in question.
Now, it is known that the claimant was only notified of the assessments placed in question with the present arbitral action with the citation for enforcement proceedings, due to absence of voluntary payment. Indeed, notwithstanding the tax assessments having been "made on 2013-3-22," the fact is that the same were not brought to the claimant's knowledge until the citation for the corresponding enforcement proceedings. Or, at least, the respondent has not demonstrated it, as was incumbent upon it, in view of the distribution of the burden of proof (cf. article 74 of the LGT already cited).
A different question is, nevertheless, whether it should have done so. This is because the AT invokes article 46, no. 5 of the CIS and article 119 of the CIMI, rules which provide that the AT must "send, by the end of the month prior to the month of payment, the corresponding collection document, with the discrimination of the properties, their parts capable of independent use, respective tax patrimonial value and the collection amount imputable to each municipality of the property locations," further determining that article 119, no. 3 of the CIMI, that if the collection document is not sent, it is incumbent on the passive subject to request duplicate copies to effect payment.
That is, the AT argues that it would be incumbent on the passive subject, by its own initiative and given the AT's silence, to request the assessment of the tax, or the notification of the act, to proceed to its payment or to react contentiously, questioning the legality of that assessment. Not having done so, it would now be precluded from its right, by lapse of the time period for reclamation, opposition or raising a request for arbitral pronouncement.
And it is here that the proceedings merit profound reflection.
The IS assessments are undue because they are illegal, as has been seen and is settled jurisprudence and accepted, whether in this CAAD or in the STA (besides that already cited here, the claimant cites in its submissions[7], still numerous decisions already made in the same sense[8]).
Even if it were accepted that, in the case at hand, the IMI rules would dispense with notification of the tax for the beginning of the time period for opposition, it would always be important to keep in mind that we are in the beginning of the application of a new tax, it being within the public domain that economic operators had not, even, anticipated the possibility of the administrative interpretation that came to include within the scope of incidence of the rule properties such as those of the proceedings.
That is, nothing could lead the claimant to suspect, even, the possibility of being a passive subject of an assessment such as those of the proceedings.
Could it be legitimate to impose upon it the burden of requesting an assessment (undue and which it could not even consider being due), or its notification, as a way to be able to exercise its right?
If we were to imagine another situation we would have greater ease of response: let us suppose that the "computer system" issued assessments by reference to urban properties with VPT less than one million euros and that the passive subject came to have knowledge of that fact only after the lapse of the supposed time period, counted from the date limit fixed for the (undue) payment. Could the AT defend itself by arguing the untimeliness of the claim, without manifest abuse of right? Obviously not! As the claimant well argues "It makes no sense whatsoever that the claimant had to make – or should have made - the request for issuance of duplicate copies for payment of a tax that (i) is not due, (ii) is illegal and, moreover, (iii) whose entry into force occurred in the year in question and for real estate that do not correspond to the object of the taxes now in question."
The passive subject cannot therefore rely upon illegal conduct by the AT and be subject to a time period whose commencement it does not know. This would correspond to the denial of the right to the investigation of its legality, in direct and express violation of the principle of protection of the rights of the claimant, constitutionally provided, among others, in the provisions of articles 20, no. 1 and 202, no. 2 of the CRP.
Therefore, the time period for reaction can only be counted from knowledge of the (illegal) claim by the AT. The RJAT does not impede this, since its article 10 provides that the time period for presentation of the arbitral action is counted from the facts provided for in no. 1 and 2 of article 102 of the CPPT, i.e., from "the end of the time period for voluntary payment of tax installments legally notified to the taxpayer."
Thus here applies article 36 of the CPPT and subparagraph f) of article 102 of the CPPT.
Now, as resulted from these proceedings, the assessments relating to the tax in question were notified to the claimant with indication of the payment deadline on 28 February 2014 and the claimant became aware of the acts in question here before 27 January 2014, wherefore the action was timely presented on 31 March 2014.
Having the claimant raised timely the illegality of the assessment, as soon as it became aware of the assessments (with the enforcement proceedings), the exception alleged by the AT does not therefore hold.
Costs of Enforcement Proceedings, Default Interest and Case Value
Although raised at the level of case value, the AT's objection is broader, since from it follows the understanding that the claim for refund of the amount paid as costs and default interest, on the occasion and because of enforcement proceedings resulting from the tax acts here censured, could not be assessed at this (arbitral) forum. On the other hand it is evident that the objection does not concern the value of the tax assessments under enforcement, since the claimant's claim, as is plain to see, does not result, in this respect, from the values coercively collected, but rather from the tax assessments that underlie them and which, as we have seen, had not been notified to it.
Now, it has been understood that the declaration of illegality of tax assessment acts (article 2, no. 1, subparagraph a) of the RJAT) should have the scope of the action for opposition and that in the assessment of the competence of the arbitral tribunals functioning at the CAAD there should be taken into account principles of celerity, economy and procedural efficacy, allowing effective and complete protection of the interests at stake, namely of the passive subjects.
In this sense, the arbitrability of those two questions accessory to the discussion of the legality of the tax act appears evident, since they result directly from the tax act in question, taking place within the framework of the administrative proceeding in the broad sense of assessment and collection of the tax. More, as is evident the annulment of the act will only be effective in restoring the situation prior to the illegality if there is refund of additional charges collected within the framework of the assessment and collection process in the broad sense referred to above. Note that, symptomatically and impressively, the citation contains a single exigible amount that includes the three items (tax, costs and interest – cf. documents 1 to 20) and the collection document and receipt gives quittance of the tax and additional charges (cf. doc 24).
There will, however, be a need to ascertain whether such will result excepted from the binding (voluntary) nature of the AT's submission to the RJAT. Thus, in article 2 of the corresponding Ordinance, we find the binding of the AT to the jurisdiction of the arbitral tribunals functioning at the CAAD having as their object the assessment of claims relating to taxes whose administration is incumbent upon it, with a set of exceptions listed in that provision. However, those four exceptions in no way are connected with ancillary consequences of arbitrable tax acts, but rather with certain acts of self-assessment, withholding at source, payments on account or else the application of indirect methods, as well as certain claims relating to customs duties, other indirect taxes connected with imports or certain questions relating to certain customs matters.
It is thus important to conclude that the assessment of the assessment of tax acts such as those here in question, will also imply the assessment of the legality of charges for default interest and costs in enforcement proceedings, incurred as a direct consequence of the assessment of those acts.
Consequently, the illegality of those taxes being declared, it must be declared that the amounts disbursed by the claimant must be refunded not only as tax, but also as procedural costs and default interest (additional charges), as claimed.
Consequently, the case value shall be €17,467.64, this being the economic benefit of the proceedings.
Compensatory Interest
It has been settled jurisprudence that once the illegality of the assessment is verified, error is always imputable to the services, from which follows the obligation to indemnify the passive subject with compensatory interest counted from the date of disbursement until full refund. More, in the case at hand, as has also been settled jurisprudence, it is not seen how not to impute to the AT the error from the legislative interpretation that it itself created.
It is thus evident that compensatory interest is owed in the terms referred to, and the tax and additional charges should be considered "tax obligation" for purposes of no. 1 of article 43 of the LGT, with the interest being counted pursuant to article 61 of the CPPT, keeping in mind that the payment of tax and additional charges occurred on 19-02-2014.
Operative Part
As a result of the foregoing, this Singular Tribunal decides to judge the claim well-founded and, consequently,
a) annul the tax assessment acts in question, on the basis of violation of law, corresponding to error in the legal premises,
b) with consequent refund to the claimant of the amount of tax unduly assessed and paid of €16,815.90;
c) plus €651.74 relating to default interest for the delay in payment and costs in the corresponding enforcement proceedings, equally disbursed;
d) plus still compensatory interest at the legal rate, counted from the date of disbursement until full refund, calculated on the total amount of the claim (€17,467.64).
Case Value
In accordance with the provision of article 306, nos. 1 and 2, of the CPC and 97-A, no. 1, subparagraph a), of the CPPT and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the case value is fixed at €17,467.64.
Costs
Pursuant to article 22, no. 4, of the RJAT, the amount of costs is fixed at €1,224.00 (one thousand, two hundred and twenty-four euros), in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, at the expense of the Tax and Customs Authority.
Lisbon, 29-01-2015
Text prepared by computer, pursuant to the Civil Procedure Code (CPC), applicable by referral of article 29, no. 1, subparagraph e) of the RJAT, governed by the orthography prior to the 1990 Orthographic Agreement, with blank verses and reviewed by the undersigned arbitrator.
The Arbitrator
(Jaime Carvalho Esteves)
[1] Or financial-economic, cf. Sustainability and Solidarity in Times of Crisis, Suzana Tavares da Silva, in Fiscal Sustainability in Times of Crisis, Coord. José Casalta Nabais and Suzana Tavares da Silva, pp. 61 et seq.
[2] See Luís Menezes Leitão, On the Taxation in Stamp Tax of Luxury Real Estate (item 28.1 TGIS), in Tax Arbitration no. 1, pp. 44 et seq.
[3] Cf. José Maria Fernandes Pires, Lessons on Real Estate Tax and Stamp Tax, 2nd Ed., 2012, pp. 424 and 422, Almedina.
[4] Or financial-economic, cf. Sustainability and Solidarity in Times of Crisis, Suzana Tavares da Silva, in Fiscal Sustainability in Times of Crisis, Coord. José Casalta Nabais and Suzana Tavares da Silva, pp. 61 et seq.
[5] Glória Teixeira, Manual of Tax Law, p. 56, 2nd ed., Almedina.
[6] Manual of Tax Law, pp. 249 et seq, 2011, Almedina.
[7] Here extensively cited.
[8] See the decisions of the Arbitral Tribunal in proceedings nos. 42/2013-T, 48/2013-T, 49/2013-T, 50/2013-T, 75/2013-T, 132/2013-T, 144/2013-T, 158/2013-T, 180/2013-T, 181/2013-T, 189/2013-T, 183/2013-T, 205/2013-T, 215/2013-T, 218/2013-T, 225/2013-T, 231/2013-T, 288/2013-T and 310/2013-T, and the Superior Administrative Court judgments nos. 55/14, of 14-05-2014, 0271/14 of 23-04-2014, 0270/14 of 23-04-2014, 0272/14 of 23-04-2014, 01870/13 of 09-04-2014, 048/14 of 09-04-2014, 055/14 of 14-05-2014, 01871/13 of 14-05-2014 and 0317/14 of 14-05-2014.
Frequently Asked Questions
Automatically Created