Summary
Full Decision
ARBITRAL DECISION
Claimant: A…, S.A.
Respondent: Tax and Customs Authority
I – REPORT
1. On 09 June 2016 the commercial company "A…, S.A.", with registered office at …, n.º…, … Floor, …-… Lisbon, with the collective person identification number …, (hereinafter referred to as the "Claimant"), submitted to the Administrative Arbitration Centre (CAAD) a request for constitution of an arbitral tribunal for the purpose of obtaining an arbitral decision, in accordance with the provisions of articles 2.º, n.º 1, paragraph a) and 10.º of Decree-Law n.º 10/2011, of 20 January (hereinafter referred to as RJAT), following the tax acts for assessment of Stamp Duty (IS) for the year 2015, dated 5 April 2016, on each of the floors with independent use that make up the urban property registered under article…, in the property register of the parish of …, in the municipality of Lisbon, in the total amount of € 13,845.90 (thirteen thousand, eight hundred and forty-five euros and ninety cents).
2. In the request for arbitral decision the Claimant chose not to appoint an arbitrator.
3. Pursuant to n.º 1 of article 6º and paragraph b) of n.º 1 of article 11º of the RJAT, as amended by article 228.º of Law n.º 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as sole arbitrator, who accepted the position within the legally prescribed timeframe.
4. The arbitral tribunal was constituted on 01 September 2016.
5. On 03 October 2016, the Respondent, duly notified for this purpose, filed its reply.
6. However, on 10 October 2016, the Respondent requested acceptance of a new Reply, since in the first one it had improperly raised a defence by exception based on the timeliness of the request for arbitral decision, and the request was granted, accepting the new Reply filed.
7. For reasons of procedural efficiency and speed, the Tribunal deemed it appropriate to dispense with the meeting provided for in article 18.º of the RJAT, as well as the submission of pleadings, to which the parties did not object.
8. The position of the Claimant, expressed in the request for arbitral decision, is, in summary, as follows:
8.1. The acts of assessment subject to the present arbitral decision are vitiated by error in the legal premises, error in the factual premises and a defect of violation of law.
8.2. The Claimant does not accept the position of the AT (Tax Authority) according to which the tax value of the property to be considered for purposes of application of the rule of incidence contained in Item 28.1 of the General Table of Stamp Duty (TGIS) is the sum of the 17 autonomous units with housing allocation registered in the property records, in flagrant violation of law.
8.3. It follows from the law that subject to Stamp Duty (IS) is the ownership of urban residential properties whose tax value of the property (VPT) contained in the property register, in accordance with the Code of Municipal Property Tax (CIMI), is equal to or greater than € 1,000,000, serving as the basis for the respective assessment, at the rate of 1%, the tax value of the property used for purposes of property tax.
8.4. Now, given that there is no definition of urban residential property in Law n.º 55-A/2012, which added Item 28 to the TGIS, it is necessary to resort to the CIMI, in accordance with article 67.º, n.º 2 of the Code of IS.
8.5. It follows from the reading of articles 2.º, 4.º and 6.º, n.º 1, paragraph a) and n.º 2, all of the CIMI, that the concept of residential property corresponds to that of a building or construction licensed for residential purposes or, in the absence of a license, that has as its normal destination that purpose.
8.6. Furthermore, in accordance with n.º 4 of article 2.º of the CIMI "for purposes of this tax, each autonomous fraction, in the regime of horizontal property, is regarded as constituting a property".
8.7. In this regard, in case n.º 132/2013-T, the Arbitral Tribunal already stated that there is no sense in distinguishing between "autonomous fraction" and "autonomous unit/part" for purposes of incidence of the tax rule in question, both because it finds no legal support, and because from the provision of n.º 3 of article 12.º of the CIMI, it clearly appears otherwise.
8.8. Moreover, were it not for the independent units in question in the present case being individually classified as a property, it would make no sense to draw up 17 assessment notices for IS, relating, individually, to each independent unit.
8.9. On the other hand, the position of the Respondent in not considering the individual VPT of each floor or independent use division, but taking into account its housing allocation to apply IS, is totally incoherent and lacks legal foundation.
8.10. Therefore, the value to be considered for purposes of application of Item 28.1 of the TGIS must always be the value contained in the property register of each one of the independent units that make up the property and not the global value thereof, resulting from the sum of those values taken as individual.
8.11. Indeed, the Claimant further emphasizes that this understanding has been widely followed by CAAD decisions (see cases n.ºs 48/2013-T, 50/2013-T, 181/2013-T, 183/2013-T, 185/2013-T, 248/2013-T, 451/2014-T, 478/2015-T and 681/2015-T) and by the Supreme Administrative Court, through judgments of 09/09/2015, delivered in the context of case n.º 047/15 and of 04/05/2016, delivered in the context of case n.º 01504/15.
8.12. Furthermore, enforcement proceedings were instituted for the coercive collection of the IS assessments of 2015 in question, and a voluntary mortgage was constituted in favor of the Respondent, as an appropriate guarantee, in order to suspend the enforcement proceedings mentioned, in accordance with articles 52.º, n.º 2 of the LGT and articles 169.º, n.º 2 and 199.º, n.º 2, both of the CPPT.
8.13. Thus, with the IS assessments being based on error attributable to the services, under article 53.º of the LGT and 171.º, n.º 1 of the CPPT, by virtue of article 29.º, n.º 1, paragraph a) of the RJAT, the Respondent necessarily must be ordered to pay compensation for the losses resulting from the provision of guarantee for the purpose of suspending the enforcement proceedings for coercive collection of IS for 2015, in an amount corresponding to the costs of the guarantee already provided and which came to be borne.
8.14. For all the foregoing, the IS assessments referring to the year 2015, in the total amount of € 13,845.90, corresponding to the property in question, must be annulled, with all legal consequences.
9. The position of the Respondent expressed in the reply, is, in abbreviated summary, as follows:
9.1. Item 28 of the General Table provides that Stamp Duty falls on the ownership, usufruct or right of superficies of urban properties whose tax value contained in the property register, in accordance with the CIMI, is equal to or greater than € 1,000,000.00.
9.2. The urban property was not constituted in a regime of horizontal property as of the date of the tax event for Stamp Duty, in which case each one of the autonomous fractions would be regarded as an urban property, including for purposes of the application of IS under Item 28.1 of the General Table, but in a regime of vertical property.
9.3. Pursuant to article 12.º, n.º 3 of the CIMI, each floor or property capable of independent use is considered separately in the registration in the property register, which also discriminates the respective VPT on which property tax is assessed. For purposes of registration in the property register, such rule reveals the autonomy which, within the same property, can be attributed to each one of its parts, economically and functionally independent.
9.4. Thus, the unit of an urban property in vertical property composed of various floors or divisions is, nevertheless, not affected by the fact that all or some of those floors or divisions are capable of independent economic use.
9.5. The Respondent understands that such property does not cease to be one only, and that its distinct parts are not, therefore, legally equated to autonomous fractions in a regime of horizontal property.
9.6. Therefore, the VPT upon which the incidence of Stamp Duty under Item 28.1 of the General Table depends had to be, as it was, the global tax value of the property and not that of each one of its independent parts.
9.7. The procedural rules of assessment, on registration in the property register, and also the rules on the assessment of parts capable of independent use, do not allow affirming that there should be an equation of the property in a regime of complete ownership to the regime of vertical property, at the risk of incurring in defects of illegality and unconstitutionality.
9.8. Moreover, another interpretation would violate the principle of legality constitutionally enshrined.
9.9. Finally, the Respondent refers that the Claimant's request for payment of compensation for losses resulting from the provision of a guarantee provided cannot proceed, since compensation for provision of an undue guarantee is subject to the rules established in article 53.º of the LGT and those, in the present case, are not met. Therefore, at risk of violation of the principle of legality, the Respondent cannot be held responsible for any compensation.
9.10. In this sequence, the Respondent concludes that the request for arbitral decision filed is entirely without merit, and it is evident that the act subject to the present case is legally compliant.
II – QUESTION FOR DECISION
10. In view of what has been set out in the previous numbers, the principal question to be decided is as follows:
− Are the tax acts of assessment of Stamp Duty under Item 28.1 of the General Table, Annexed to the Code of IS, referring to the year 2015, dated 05 April 2016, on each one of the floors with independent use that make up the urban property registered under article…, in the property register of the parishes of…, in the municipality of Lisbon, in the total amount of € 13,845.90 (thirteen thousand, eight hundred and forty-five euros and ninety cents), by the Tax and Customs Authority, vitiated by error in the factual and legal premises and also by a defect of violation of law?
III – PRELIMINARY EXAMINATION
11. The Tribunal is regularly constituted and is materially competent, pursuant to articles 2.º, n.º 1, paragraph a), 5º., n.º 2, and 6.º, n.º 1, of the RJAT.
The request for arbitral decision is timely, in accordance with n.º 1 of article 10.º of the RJAT.
The parties have legal personality and capacity, are legitimate and are legally represented, pursuant to articles 4.º and 10.º, n.º 2, of the RJAT and article 1.º of Ordinance n.º 112-A/2011, of 22 March.
The proceedings are not vitiated by defects that would invalidate them.
All being considered, it is proper to render judgment.
IV – FACTUAL GROUNDS
12. Taking into account the tax administrative proceedings and the documentary evidence attached to the file, it now behooves us to present the factual matter relevant to understanding the decision, which is established as follows:
The Claimant is an anonymous commercial company whose corporate purpose is "Carrying out real estate investments. The company in pursuing real estate investments shall proceed to construction, purchase, sale, resale and rental of rustic and urban properties." (see document attached to the present case as doc. n.º 1 attached to the Arbitral Petition).
The Claimant is the legitimate owner of the urban property registered under article…, in the property register of the parish of…, in the municipality of Lisbon, constituted in complete ownership with floors or divisions capable of independent use (see documents attached to the present case as docs. n.º 2 and 3 attached to the Arbitral Petition).
The AT (Tax Authority) attributed to the property in question, for purposes of application of Item 28.1 of the TGIS, the "tax value of the property – total subject to tax" of € 1,384,590.00 (one million, three hundred and eighty-four thousand, five hundred and ninety euros) – (see acts attached to the Arbitral Petition submission form with record #...).
In accordance with the tax value attributed to the property in question, the AT proceeded with the respective IS assessments on the basis of Item 28.1 of the General Table of Stamp Duty, dated 05 April 2016, notified to the Claimant, in the total amount of € 13,845.90 (thirteen thousand, eight hundred and forty-five euros and ninety cents) – (see IS assessments incorporated in the Arbitral Petition submission form itself, which includes notifications for payment of the 1st. installment).
Having not been paid the amounts referring to the 1st. installment, in the amount of € 4,697.83, the respective enforcement proceedings were instituted against the Claimant for coercive collection (see documents attached to the present case as docs. n.ºs 4 to 20 attached to the Arbitral Petition).
In order to suspend the enforcement proceedings mentioned above, the Claimant constituted, as an appropriate guarantee, a voluntary mortgage in favor of the Tax and Customs Authority (see document attached to the present case as doc. n.º 21 attached to the Arbitral Petition).
The Claimant with a view to suspending the enforcement proceedings for coercive collection of the Stamp Duty assessments of 2015, corresponding to the first installment, spent a total of € 312.25 corresponding to the costs inherent in the voluntary mortgage mentioned (see documents attached to the present case as docs. n.ºs 22 to 24 attached to the Arbitral Petition).
13. The facts set out in the previous number are uncontested matters and are documentarily demonstrated in the file.
14. There are no facts established as unproven, because all facts relevant to the assessment of the request were established as proven.
V – LEGAL GROUNDS
15. We shall now determine the law applicable to the underlying facts, in accordance with the question already stated (see, supra n.º 10).
16. Thus, the question that arises consists in determining the legality of the understanding according to which Item 28.1 of the TGIS should be interpreted (or not) as providing, within its scope, properties in complete ownership with parts or divisions capable of independent use, with housing allocation, which are characterized by the fact that none of those parts or divisions has been assigned a VPT equal to or greater than € 1,000,000.00.
17. The subjection to Stamp Duty of properties with housing allocation resulted from the addition of Item 28 of the TGIS, effected by article 4.º of Law 55-A/2012, of 29 October, which typified the following tax events, in accordance with the current wording:
"28 – Ownership, usufruct or right of superficies of urban properties whose tax value of the property contained in the property register, in accordance with the Code of Municipal Property Tax (CIMI), is equal to or greater than € 1,000,000.00 – on the tax value of the property for purposes of property tax (Added by article 4.º of Law n.º 55-A/2012 of 29 October):
28-1 – For residential property or for land for construction whose building, authorized or provided for, is for housing, in accordance with the provisions of the Code of Property Tax (Wording of Law n.º 83-C/2013 of 31 December) – 1%
28.2 – For property, when the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance (Added by article 3.º of Law n.º 55-A/2012 of 29 October) – 7.5%."
This law came into force on the day following its publication, that is, on 30 October 2012.
18. However, Law 55-A/2012 says nothing as to the qualification of the concepts in question, namely, as to the concept of "property with housing allocation" contained in Item 28.1.
19. In this sense, it is necessary to determine its true meaning, in accordance with the techniques and interpretative elements generally accepted by legal doctrine, in accordance with article 9.º of the Civil Code and article 11.º of the General Tax Law.
20. In this regard, one should pay attention to the concept of property that results from the provision of article 2.º of the Code of Property Tax – "any portion of territory, embracing waters, plantations, buildings and constructions of any nature incorporated or situated therein, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are situated, although located in a portion of territory that constitutes an integral part of assets other than such or does not have a patrimonial nature." –, by referral from article 67.º, n.º 2 of the Code of IS, added by the said Law, which provides that "to matters not regulated in the present code regarding Item 28 of the General Table, the CIMI shall apply subsidiary." thus obeying, determination of the VPT to the terms of the provision of article 38.º and following of the same code.
21. In the Code of Property Tax, there is also a reference to article 6.º, which indicates the different kinds of urban properties, among which it mentions residential ones in paragraph a) of its n.º 1, clarifying in its n.º 2 that "residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal destination each one of these purposes.".
22. In a first analysis, we can already conclude that the legislator was concerned with the normal use of the property, the purpose to which it is intended, and not with the rigor of the concept itself.
23. We can further add that "(…) for the legislator the situation of the property in vertical property or in horizontal property was not relevant, since no reference or distinction is made between one and the other. What is relevant is the material truth underlying its existence as an urban property and its use.". Understanding expressed, to which we adhere, in the Arbitral Decision delivered in case n.º 50/2013-T.
24. Thus, the legislator, in the rule of incidence of Item 28.1 of the TGIS, did not consider it relevant to distinguish between properties in horizontal property and properties in vertical property. Therefore, we can already state that the argument put forward by the Respondent reported in article 24º of its Reply does not hold, when it states that "The urban property was not constituted in a regime of horizontal property as of the date of the tax event for stamp duty – 31 December 2013 -, in which case each one of the autonomous fractions would be regarded as an urban property, including for purposes of the application of stamp duty under Item 28.1. of the General Table, but in a regime of vertical property.".
25. It is also important to pay attention to article 12.º, n.º 3, of the Code of Property Tax, which provides that "each floor or part of a property capable of independent use is considered separately in the registration in the property register, which also discriminates the respective tax value of the property.".
26. And also to the provision of article 119.º n.º 1 of the Code of Property Tax, which provides that "The services of the General Directorate of Taxes send to each taxpayer, by the end of the month prior to that of payment, the respective tax notice, with discrimination of the properties, their parts capable of independent use, respective tax value of the property and the tax burden attributed to each municipality of the location of the properties.".
27. Now, considering that registration in the property register of properties in vertical property, constituted by different parts, floors or divisions with independent use, in accordance with the Code of Property Tax, using the criterion already referred to in article 67.º, n.º 2 of the Code of Stamp Duty – "to matters not regulated in the present code regarding Item 28 of the General Table, the CIMI shall apply subsidiary." – obeys the same registration rules as properties constituted in horizontal property, and the respective property tax, as well as IS under Item 28.1, are assessed individually in relation to each one of the parts, it is clear that if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical property, in the same manner as it establishes for properties in horizontal property, the same must be observed for the definition of the rule of incidence of Stamp Duty under Item 28.1.
28. Considering what has been set out in the previous points, there is only place for the incidence of the tax if one of the parts, floors or divisions with independent use presents a VPT greater than € 1,000,000.00, which in the present case does not occur, as appears in the property record of the property in question (see point B of n.º 12).
29. Therefore, the AT can never consider as the reference value for the incidence of stamp duty the total value of the property, when the legislator itself established a different rule in the context of the Code of Property Tax. As stated, in accordance with that code, there is no difference between a building in horizontal property and a building in vertical property or complete property constituted by parts or divisions capable of independent use – being this the code applicable to matters not regulated with regard to Item 28 of the TGIS (see article 67.º, n.º 2 of Law 55-A/2012, of 29/10).
30. This equal treatment which the legislator did not see fit to include in the rule of incidence contained in Item 28.1 of the TGIS, it also did in article 119.º of the Code of Property Tax, when it provides that the tax shall be assessed individually on each part or division capable of independent use, taking into account the VPT of each one of those parts or divisions capable of independent use, individually considered. From which it follows that the VPT that should be considered in the application of Item 28.1 of the TGIS, is that which flows from the letter and ratio of articles 2.º, 6.º n.º 1 paragraph a), 12.º and 119.º, all of the Code of Property Tax.
31. Let us make clear that this conclusion is in line with the overwhelming majority of the jurisprudence known to the CAAD (see, among many, cases 544/2015-T, 552/2015-T, 554/2015-T, 560/2015-T, 562/2015-T, 573/2015-T, 576/2015-T, 581/2015-T, 589/2015-T, 597/2015-T, 606/2015-T, 632/2015-T, 643/2015-T, 644/2015-T, 651/2015-T, 659/2015-T, 681/2015-T, 718/2015-T, 755/2015-T, 768/2015-T, 777/2015-T, 10-2016-T, 20/2016-T.).
32. In light of what we have just stated, we cannot support, with due respect, the position of the Respondent, since it is not acceptable that the criterion sought, of considering the value of the sum of the VPTs assigned to the parts, floors or divisions with independent use, on the argument that the property is not constituted in a regime of horizontal property, finds no legal support and is contrary to the criterion that is applicable in the context of the Code of Property Tax and, by referral, in the context of IS.
33. In the case in question, the property in question is in complete ownership and contains 19 floors and/or divisions with independent use (17 allocated to housing and 2 allocated to commerce), as was proven by document n.º 2 attached to the Request for Arbitral Decision and, none of those floors has a tax value equal to or greater than €1,000,000.00, as results from the documents attached to the file, from which it is concluded that the legal premise for the incidence of IS provided for in Item 28.1 of the TGIS is not verified.
34. Finally, in addition to the annulment of the assessments, the Claimant also petitions for payment of compensation for losses resulting from the provision of a guarantee for the purpose of suspending the enforcement proceedings for coercive collection of Stamp Duty for 2015.
35. Although article 2.º, n.º 1, paragraphs a) and b) of the RJAT uses the expression "declaration of illegality" to define the competence of the arbitral tribunals operating in the CAAD and does not make reference to annulment and condemnatory decisions, it should be understood that its competences include the powers which in proceedings for judicial challenge are attributed to the tax courts in relation to acts whose appreciation of legality falls within their competences (see the legislative authorization on which the Government based itself to approve the RJAT, granted by article 124.º of Law n.º 3-B/2010, of 28 April).
36. In accordance with article 171.º of the CPPT "compensation in case of an undue bank guarantee or equivalent provided shall be requested in the proceedings in which the legality of the enforceable debt is controversial" (n.º 1) and that "compensation must be requested in the claim, challenge or appeal or in the event that its basis is subsequent within 30 days after its occurrence" (n.º 2).
37. Indeed, the judicial challenge proceedings encompasses the possibility of a condemnation to payment of undue guarantee.
38. Given that the request for constitution of the tribunal reflects discussion of the "legality of the enforceable debt", the arbitral proceedings is also the appropriate forum to assess the request for compensation for undue guarantee (see n.º 1 of the referred article 171.º of the CPPT).
39. The regime of the right to compensation for undue guarantee is contained in article 53.º of the LGT, under the heading "Guarantee in case of undue provision", which provides that "1. The debtor who, to suspend execution, offers a bank guarantee or equivalent shall be compensated in whole or in part for the losses resulting from its provision, provided he has maintained it for a period longer than three years in proportion to the ruling in administrative appeal, challenge or opposition to execution that have as their object the guaranteed debt.
2. The period referred to in the previous number does not apply when it is verified, in a gracious claim or judicial challenge, that there was error attributable to the services in the assessment of the tax.
3. The compensation referred to in number 1 has as its maximum limit the amount resulting from the application to the guaranteed value of the rate of indemnificatory interest provided for in this law and may be requested in the proceedings for claim or judicial challenge itself, or autonomously.".
40. In the case in question, the IS assessment acts have underlying a common error that affects all of them which is having understood that in dealing with a property constituted in vertical property, the incidence of IS should be determined by the VPT resulting from the sum of the VPT of all divisions or floors capable of independent use. Therefore, the assessments were the sole initiative of the Tax Administration and the Claimant in no way contributed to their being effected.
41. Thus, the Claimant has the right to be compensated for the expenses incurred and also for the subsequent ones that came to be proven, and the condemnation shall be carried out with reference to the amount that was proven to have been spent plus what comes to be assessed in execution of this decision.
VI – DECISION
The Tribunal hereby decides as follows:
a) In favor of the merits of the Claimant's request, considering illegal the acts of IS assessment in question, due to error in the factual and legal premises and violation of article 1.º n.º 1 of the Code of Stamp Duty and Item 28.1 of the TGIS, whereby the said acts must be annulled, given the fact that none of the parts or divisions capable of independent use, subject to the assessment acts which are the object of the present arbitral decision, have a tax value of the property greater than € 1,000,000.00, as was demonstrated in the present case.
b) To rule in favor of the Claimant's request for condemnation of the Tax and Customs Authority to pay to the Claimant compensation for the costs incurred with the guarantee provided to suspend the enforcement proceedings identified in point E of the established facts and to condemn the Tax and Customs Authority to pay to the Claimant the compensation that is assessed in execution of this decision.
The value of the case is fixed at € 13,845.90, in accordance with article 97.º-A, n.º 1, a), of the Code of Tax Procedure and Process, applicable by force of paragraphs a) and b) of n.º 1 of article 29.º of the RJAT and of n.º 2 of article 3.º of the Regulation of Costs in Tax Arbitration Proceedings.
The amount of costs is fixed at € 918.00, in accordance with Table I of the Regulation of Costs of Tax Arbitration Proceedings, to be paid by the Tax and Customs Authority, since the request was entirely successful, in accordance with articles 12.º, n.º 2, and 22.º, n.º 4, both of the RJAT, and article 4.º, n.º 4, of the cited Regulation.
Notify the parties.
Lisbon, 24 February 2017.
The Arbitrator
(Jorge Carita)
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