AIMI Unconstitutionality Challenge Under Article 135-B CIMI: CAAD Arbitral Decision 324/2018-T

ARBITRAL DECISION

The sole arbitrator Dr. José Rodrigo de Castro, appointed by the President of the Deontological Council of CAAD to constitute the Sole Arbitral Tribunal, which was established by his order of 19-09-2018, hereby decides as follows:

I - REPORT

A... - REAL ESTATE COMPANY, SA, Legal Entity No..., with registered office at ..., ...-..., ...-... Porto, hereby requests the establishment of an arbitral tribunal pursuant to Decree-Law No. 10/2011, of 20 January (hereinafter "RJAT") and Order No. 112-A/2011, of 22 March.

The request presented by the Claimant was accepted on 10/7/2018.

Having not appointed an arbitrator, the Arbitral Tribunal appointed Dr. José Rodrigo de Castro as arbitrator on 23/07/2018.

By Order of the President Counselor of the Deontological Council, of 19/09/2018, the Arbitral Tribunal was established.

The Claimant seeks:

• the annulment of the tax assessment act for the levy of AIMI - Additional Municipal Property Tax with No... for the year 2017, in the total amount of € 1,803.58,

• the annulment of the act refusing the Administrative Review filed against such assessment,

on the grounds that it is, in its view, affected by illegality, due to material unconstitutionality of article 135-B, No. 1 of the CIMI, through violation of constitutional principles of equality and contributory capacity, a defect which it substantiates.

The Defendant was notified on 19/09/2018 to respond, pursuant to No. 1 of article 17 of the RJAT, the AT did so on 22/10/2018, which was notified to the Claimant.

In its Response, the AT defends, as shall be seen below, the impossibility of disapplying the applicable legal rule despite the claimed unconstitutionality.

By order of 23/10/2018, the tribunal dispensed with the meeting referred to in article 18 of the Legal Regime of Tax Arbitration (RJAT), finding it to lack utility, and invited the parties to submit written arguments, optionally, within a period of 10 days, successively, first the Claimant and then the Defendant, with the Tribunal setting 31/12/2018 as the date for rendering the decision.

The Tribunal proceeded to notify said Order to both the AT and the Claimant on 23/10/2018, with neither party submitting arguments by the end of the granted period.

PROCEDURAL CLARIFICATION

Thus, because:

The Arbitral Tribunal is materially competent and was properly established pursuant to articles 2, No. 1, paragraph a), 5 and 6, No. 1 of the RJAT, by decision of 19-09-2018 of the President of the Deontological Council of CAAD;

The parties are legitimate and possess legal standing and capacity (articles 4 and 10, No. 2 of the same instrument and article 1 of Order No. 112-A/2011, of 22 March) and are properly represented;

By order of 23-10-2018, the meeting referred to in article 18 of the RJAT was dispensed with and it was decided that proceedings would continue with written arguments, if desired.

The issue is raised of the impossibility for the AT to apply a legal rule on the grounds of its material unconstitutionality (specifically article 135-B, No. 1 of the CIMI), insofar as it violates the principle of tax equality enshrined in articles 13 and 104, No. 3 of the CRP, that is, the Claimant argues that said rule should be disapplied, but not with the nature of a peremptory exception, a matter which shall be opportunely clarified.

This Tribunal has competence and is therefore in a position to assess any defect that the Claimant raises, including that of illegality of the taxation act in question due to unconstitutionality of the applicable rule.

The proceedings do not suffer from any nullities.

II - THE FACTS

II - 1 - Established Facts

The facts established as proven are the following:

a) The Claimant A... is a joint-stock company that carries out its activities in the real estate sector.

b) It holds in its assets, as of 29/08/2017, the following properties, cf. Doc. 2, allegedly intended exclusively for the exercise of its economic activity:

1. Urban property in Full Ownership, without floors or divisions susceptible to independent use, registered in the matrix of the parish of ..., municipality of ..., district of Porto, under article ..., with current VPT of € 11,421.33.

2. Urban property in Full Ownership, without floors or divisions susceptible to independent use, registered in the matrix of the parish of ..., municipality of ..., district of Porto, under article ..., with current VPT of € 8,435.63.

3. Urban property in Full Ownership, without floors or divisions susceptible to independent use, registered in the matrix of the parish of ..., municipality of ..., district of Porto, under article ..., with current VPT of € 17,523.38.

4. Land for Construction, with total area of 5,448,000 m² and gross construction area of 2,040,000 m², registered in the urban matrix of the parish of ..., municipality of ..., district of Porto, under article ..., with current VPT of € 135,225.63, with location coefficient type: industry.

5. Parcel of Land intended for Urban Construction, with total area of 7,132,000 m² and gross construction area of 3,566,000 m², registered in the urban matrix of the parish of ..., municipality of ..., district of Porto, under article ..., with current VPT of € 225,910.00, with location coefficient type: Housing.

6. Urban property in Full Ownership, without floors or divisions susceptible to independent use, registered in the matrix of the parish of ..., municipality and district of Porto, registered in the matrix under article ..., with current VPT of € 52,380.00.

c) The total VPT of the properties described above is € 450,895.97, to which applied the rate of 0.40 of article 135-F, No. 1 of the CIMI, in the wording given by Law No. 42/2016, of 28 December, resulted in an assessment with No. 2017 ... and dated 30-07-2017, in the amount of AIMI of € 1,803.58.

d) Only the land for construction referred to in item 4 has as location coefficient type: industry.

e) The Claimant was presumptively notified on 30/08/2017 to pay the tax during the month of September, and was also informed that it could file an objection or appeal within the terms and periods established in art. 129 of the CIMI and arts. 70 and 102 of the CPPT, cf. doc. 3.

f) The Claimant made the respective payment on 29/09/2017, cf. doc. 3.

g) On a date not specified in the record, the Claimant filed an Administrative Review, which was evaluated, and a Draft Order to Dismiss was issued, which was notified to it on 5/03/2018 for the exercise of the right to prior hearing, pursuant to article 60 of the LGT, as per office No. 2018....

h) Having not exercised its right to prior hearing, a final order dismissing the Administrative Review was issued on 29/03/2018 by the Head of Finances of ..., by delegation of the Director of Finances of Porto, pursuant to order No. .../2017, published in the Official Gazette No. 62, Series II, of 28/03/2017.

i) Of said final order of dismissal, the Claimant was notified by registered mail with acknowledgment of receipt, dated 6/04/2018, to its representative, informing it that it could file a hierarchical appeal within 30 days pursuant to No. 2 of art. 66 of the Code of Tax Procedure and Process (CPPT) or challenge it judicially within three months, as provided in art. 102 of the same CPPT, counting from the date on which notification became effective, pursuant to No. 3 of art. 39 of the CPPT. It was sent the reasoning of the decision, pursuant to art. 77 of the General Tax Law (LGT), all in accordance with doc. 1 attached to the PI.

j) On 09/07/2018, the petition for arbitral challenge was sent to the Arbitral Tribunal, which accepted it on 10/07/2018, being therefore considered timely submitted, in light of the provisions of articles 38, 3 and 39, No. 1 of the LGT and likewise of paragraph a) of No. 1 of article 10 of the RJAT.

II - 2 - Reasoning on the Established Facts

The facts established as proven result from the tribunal's conviction, based on critical examination of the documents attached to the record, all of which is hereby reproduced.

III - ON THE LAW

III.1 Of the Impossibility of the AT Disapplying a Legal Rule on Grounds of Unconstitutionality

1. The Claimant argues that in cases where AIMI is imposed on the ownership of real estate intended for the exercise of an economic activity, and insofar as the rule of incidence lacks any sufficient foundation, article 135-B, No. 1 of the CIMI should be disapplied due to material unconstitutionality, insofar as it violates the principle of tax equality enshrined in articles 13 and 104, No. 3 of the CRP.

2. It further argues that this taxation does not take into account the different contributory capacity of owners of the properties to which it applies, affecting indiscriminately taxpayers with and without the necessary contributory force to support it.

3. The Defendant argues on this issue that, regardless of any alleged unconstitutionality defects raised by the Claimant, the AT is obliged to act, pursuant to No. 2 of article 266 of the CRP, in accordance with the principle of legality.

4. And that this principle is materialized at the infra-constitutional level in No. 1 of article 3 of the Administrative Procedure Code (CPA).

5. This principle determines that the AT (and other organs of Public Administration) "must act in obedience to law and right, within the limits of the powers conferred upon them and in accordance with the purposes for which such powers were granted."

6. When doubts arise regarding the constitutionality of one or more rules, it is the responsibility of the Courts, pursuant to article 204 of the CRP, to exercise the review of unconstitutionality invoked or detected, within the scope of diffuse and concrete review of rules whose constitutional conformity they are called upon to verify.

7. This is a matter sufficiently clarified through various Opinions of the Office of the Attorney General, particularly those cited by the Defendant, and by all, Opinion No. 16/92, according to which: "since the declaration of unconstitutionality of a rule with general binding force is the competence of the Constitutional Court, the Administration must obey the rule until such defect is declared."

Thus, this Tribunal likewise understands that the Tax Authority does not have, as a rule, competence to assess the constitutionality or otherwise of any tax rule, and particularly in the case at issue, since it is a matter exclusive to the Courts, as an organ of a Rule of Law, to whom it falls to resolve conflicts of public and private interests and therefore to administer justice within its jurisdictional power.

Whence, even if doubts of unconstitutionality may be raised, the Tax Authority cannot refuse to apply the rule, since it is subject to the principle of legality, as provided in articles 266, No. 2 of the CRP, 3, No. 1 of the CPA and 55 of the LGT, and therefore the AIMI assessment in question is not affected by illegality.

III.2 - OF THE CLAIMANT'S GENERAL GROUNDS:

1. The Claimant argues in its PI that the AIMI assessment violates "two basic principles of the Portuguese Constitution, with article 135-B, No. 1 of the CIMI suffering from unconstitutionality due to violation of the principle of equality, in its aspect of contributory capacity, as well as violation of the principle of proportionality."

2. As addressed in III.1, the Claimant further states that, in view of this, "article 135-B, No. 1 of the CIMI should be disapplied by the AT, given its material unconstitutionality, on the above-mentioned grounds, insofar as it applies to real estate held by companies that pursue real estate activity…"

3. And even if this were not accepted, particularly if no material unconstitutionality of said provision were perceived, as regards its application to real estate held by companies pursuing real estate activity, it appears to it that there would clearly and unavoidably be material unconstitutionality, under the same assumptions and with the same grounds, "insofar as it were applied to land for construction, in light of the exemption of urban properties classified as 'commercial'."

4. The Claimant also provides a historical-legislative review of the creation of this tax (from Stamp Tax to current AIMI) and its grounds, particularly the legislator's intention to tax the accumulation of residential real estate property of very high value, in accordance with the Government Budget Proposal/2017, with the aim of expanding the financing base of Social Security, to which the tax is allocated.

5. Whence resulted the addition of articles 135-A to 135-K to the IMI Code, in which the AIMI regime is embodied, and thus the creation of this tax, configured as a supplementary tax to IMI, with the purpose of taxing the "accumulation of residential real estate property of very high value."

6. In its PI, the Claimant emphasizes that the provision in No. 2 of article 135-B of the CIMI, which establishes that: "the following are excluded from the additional municipal property tax: urban properties classified as 'commercial', industrial or service properties' and 'others', pursuant to paragraphs b) and d) of No. 1 of article 6 of this Code."

7. And concludes that from the aforementioned provision it follows that "AIMI applies to real estate with residential use, as well as to land for construction, regardless of its use - insofar as they are not expressly mentioned in the negative delimitation of the rule of incidence" (article 17 of the PI).

8. The Claimant alludes to the previous taxation of luxury real estate property under Stamp Tax, which contained many flaws and suffered from certain defects, which, in its view, continue to occur in AIMI, particularly regarding real estate essential to obtaining income in the context of economic activity.

9. And it understands that, in view of this, the AIMI rule in No. 2 of article 135-B of the CIMI violates the principle of equality, materialized in its aspect of contributory capacity, in accordance with jurisprudence already established (in the context of Stamp Tax taxation and now in AIMI).

10. It emphasizes in this regard that the AT, desirous of obtaining revenue, proposed the amendment to the law of a rule of incidence of Stamp Tax on "land for construction."

11. And it considers that the legislator intended to tax, from the outset, under Stamp Tax, only "urban residential properties," that is, buildings of high patrimonial value.

12. And it is by force of this legal distortion that the taxation, according to the Claimant, ceased to be just and equitable, to become "unjust and profoundly unequal," through "violation of the most basic canons of equality, proportionality and contributory capacity."

13. And it is because it violates the principle of equality, according to the Claimant, directly derived from the constitutional text and paradigm of the Rule of Law, that the taxation in question is unconstitutional.

14. It cites the Decision of the Constitutional Court No. 590/2015, to emphasize the principle of equality as a limit on legislative discretion, arguing that it does not require equal treatment of all situations, implying that those in equal situations be treated equally and those in unequal situations be treated unequally, in a manner as to not create arbitrary and unreasonable discriminations, as they lack sufficient material foundation.

15. It also refers to No. 1 and 2 of article 5 of the LGT - General Tax Law, which materializes the principle of equality, and from which it is concluded that this principle prohibits the establishment of distinctions lacking objective and rational justification.

16. Therefore, in the Claimant's view, all of the above necessarily implies assessing the legality of AIMI, weighing the admissibility of this taxation in light of the fundamental principles governing the tax system.

17. And it concludes that in the case of commercial companies of this type, the ownership of land for construction constitutes the "patrimonial substratum of their economic activity" and the possibility of generating income, thus failing the premise of the manifestation of an increased contributory capacity, which, by itself, "should be subject to ablation through taxation."

18. And it highlights, in support of its thesis, the following excerpt from Arbitral Decision No. 507/2015-T:

"It is unequivocal that companies engaged in the marketing of land for construction face a significant additional burden compared to the generality of companies, based on a hypothetical index of contributory capacity that does not necessarily correspond to reality, since the imposition of taxation has no relationship whatsoever with the actual income from the activity carried out by the company and burdens them even when they have negative results, with the taxation being accentuated, accumulated annually, precisely in situations where, due to the failure of the land marketing activity, the land is held for several years and therefore there would be even less justification for imposing additional taxation, exclusive to this type of company.

For this reason, from this perspective as well, AIMI materializes an unjustified negative discrimination of land marketing companies, which implies its material unconstitutionality, due to offense to the principle of equality."

1. The Claimant also emphasizes that this is what happens with its economic activity, maintaining the land for construction that it holds in its current assets for several years, for various reasons (market, financing, obtaining licenses, etc.), until it can incorporate buildings on them.

2. And while this does not happen, the taxation now effected in AIMI, over several years, produces an aggravated effect of decapitalization, with deterioration, perhaps decisive, of the economic conditions of its company.

3. And it also emphasizes that, "what is especially more burdensome, without there being any perceptible and materially justified causal link between the contributory capacity manifested by the ownership of these lands, and the payment of a tax that, in a vague and generic manner, claims to reinforce the 'global progressivity of the system.'"

4. And this situation creates a glaring material inequality in the economic sector between companies pursuing economic activity, some with holdings of land for construction and others without.

5. According to the Claimant, "more than that, there are legally created conditions for the constitution of manifest situations of material inequality between the claimant and companies that, holding real estate, pursue in them a commercial, industrial or service provision activity."

6. And it highlights the fact that "with the tax act in question, the construction sector is the only sector of activity taxed for the ownership of goods in its inventory," with the aggravating factor that "the value considered for application of the tax is not an actual cost of production, calculated and recorded in accounting, but rather the VPT determined for tax purposes."

7. In addition, the real estate held by companies pursuing real estate activities "does not correspond to any luxury real estate property," but to goods that may be sold or possibly intended for construction.

8. It further states that the Statement of Reasons that shaped the final version of this tax aimed to ensure the absence of impact on economic activity.

9. And that it is to this extent that "the taxation in question constitutes a violation of the principles of contributory capacity, equality and proportionality - insofar as the fact that the claimant has in its inventory real estate for construction or sale, in no way demonstrates a relevant contributory capacity worthy of being (differently and autonomously) taxed."

10. Excerpts from two other Arbitral Proceedings are also cited in support of its thesis.

11. Thus, it cites Arbitral Decision No. 150/2017-T, in the part where it refers to:

"By gathering in the same item the taxation of luxury homes and land for construction, on the assumption that both fall generically under the category of real estate of high patrimonial value subject to tax, the rule whose validity is disputed confused manifestations of wealth with factors of production of that same wealth.

Now, in truth, one cannot seriously formulate a judgment about the contributory capacity of a company pursuing an economic activity based on the factors of production employed in it. The legislative intent to increase budgetary consolidation efforts through the contribution of the most favored, those who show greater contributory capacity, is clear. The constitutional censure does not reside in this aspect. It exists, rather, when the legislator regards the productive process of a company, more properly the factors of production, as a manifestation of that contributory capacity."

1. It also refers to the arbitral proceeding No. 668/2017-T of the CAAD, citing the following passage from the Illustrious Counselor Jorge Lopes de Sousa:

"(…) if one were to adopt a literal interpretation of this rule, with the meaning that all land for construction is covered by the incidence of AIMI, it would be materially unconstitutional, being incompatible with the principle of equality (article 13 of the CRP), by considering as a taxable fact the ownership of land for construction of buildings intended for services and not the ownership of the buildings built on them, as it constitutes an underprivileged treatment of taxpayers in the first situation, without material justification, since the contributory capacity indicated by real estate property in that situation is necessarily less, which must be present, and with an increase, in the second."

1. And in support of its thesis, the Claimant further cites, from the decision rendered in Arbitral Proceeding No. 507/2015-T, the following excerpt:

"…one cannot consider that there exists a reliable indication of superior contributory capacity when faced with the ownership of rights over buildings or fractions intended for the exercise of economic activities (commercial, industrial, service provision or similar), since they must be adequate to the functioning of their respective companies, and their size and corresponding value are not an indication of a level of wealth corresponding to the 'highest standards of Portuguese society'."

1. Whence the Claimant concludes that "by applying to the ownership of real estate intended for the exercise of an economic activity, and insofar as it is completely devoid of any sufficient foundation, article 135-B, No. 1 of the CIMI should be disapplied due to material unconstitutionality, insofar as it violates the principle of tax equality enshrined in articles 13 and 104, No. 3 of the CRP."

And that therefore the decision rendered on the Administrative Review and the contested assessment should be declared illegal.

1. And it further substantiates its thesis in the Jurisprudence of the Constitutional Court when it refers to:

"(…) only those choices of regime made by the ordinary legislator in those cases can be censured on the grounds of violation of the principle of equality, in which it is proven that they result in differences of treatment between persons that find no justification in reasonable, perceptible or intelligible grounds, taking into account the constitutional purposes pursued by the measure of difference."

1. The Claimant argues that this is what happens in the case at issue, by reason of the non-existence of "any minimally perceptible, rational and reasonable material ground for proposing a negative discrimination, at the fiscal level, of companies owning land for construction, which they use in pursuing their activity, in relation to other companies owning real estate of the same or higher value and exempt from taxation because they are devoted to other activities."

2. And it concludes, in light of all the arguments put forward, that the assessment now under review violates the principle of fiscal equality provided for in article 13 of the CRP and the principle of contributory capacity provided for in article 104 of the CRP,

3. Because:

• it is based on a rule that treats very differently taxpayers in identical situations, with the measure of difference not being assessed by their actual contributory capacity; and

• it is based on an arbitrary rule devoid of perceptible or rational material foundation and

1. That, for all these reasons, in its view, article 135-B, No. 1 of the CIMI should be disapplied by the Tribunal, given its material unconstitutionality.

2. Beyond which, it appears to the Claimant to be clear and unavoidable, at least, the material unconstitutionality of the provision, under the same assumptions and with the same grounds, insofar as it applied to land for construction, in light of the exemption of urban properties classified as commercial,

• determining the annulment of the contested assessment.

III.3 - OF THE DEFENDANT'S GENERAL REASONING

1. The AT in its Response confirms the facts, particularly the ownership of all the aforementioned properties, totaling six, as per the breakdown made in Point II.I, recalling that only the land for construction registered in the matrix of the parish of ... under article ... has a location coefficient inherent to industry.

2. Thus, given the typology of the properties in question, it says the Defendant that "all fall within the scope of the objective incidence enshrined in No. 1 of article 135-B of the IMI Code, not being applicable to them the exclusion contained in No. 2 of the same provision."

3. And because it is noted, according to the Defendant, "that the properties in question were not exempt from IMI in the year 2016, their respective patrimonial values are counted towards the sum referred to in No. 1 of article 135-B, as provided in No. 3 of article 135-C."

4. Whence, further according to the AT, "it is considered that the AIMI assessment in question observes all the legal conditions for its legal validity."

5. With respect to what concerns AIMI inciding on urban properties, of which legal entities and equivalent structures are owners (Article 135-A, No. 2 of the CIMI), the Defendant argues that the tax assumes the nature of a real tax, insofar as the modulation of the quantitative amount to be paid abstracts from the economic dimension of the entities and does not affect the totality of net property.

6. The Defendant AT reinforces its reasoning with an excerpt from the following part of the work by José Maria Pires:

"Thus, with respect to legal entities, AIMI is not actually intended to tax entities with higher indices of wealth, because all patrimonial values subject are taxed, without minimum limit or any deduction. Also for that reason, the AIMI inciding on legal entities approaches more a general tax on real estate property." (cf. JOSÉ MARIA PIRES, in The Additional IMI and Personal Property Taxation, Almedina, 2017, p.42)."

1. It is, therefore, argues the Defendant, that with respect to legal entities, AIMI has the nature of real taxation, "thereby reflecting the idea that the elements making up the real estate property held by these entities perform, as a rule, an economic function, not representing, therefore, mere accumulation of wealth."

2. And the Defendant states that the framework in which the legislator moved, when configuring the scope of subjective and objective incidence, also calibrating its choices with the purpose of mitigating the impact of this imposition on the exercise of economic activities in general, through the exclusion of urban properties for industrial, commercial and service purposes, and "others" (…) "with the purpose of not burdening in fiscal terms the competitiveness of companies, especially in international markets (…) (cf. JOSÉ MARIA PIRES, The Additional IMI and Personal Property Taxation, Almedina, 2017, p. 50)."

3. On the alleged violation of the constitutional principles of equality and capacity, the Defendant responds in the following terms and with the following grounds.

4. The AT agrees that the principle of equality is one of the structuring principles of the constitutional system, enshrined generically in art. 13 of the CRP, which it cites.

5. However, it states that the binding of administrative authorities to this principle of equality finds enshrining in art. 266, No. 2 of the same fundamental instrument.

6. On the other hand, it emphasizes that the provision in art. 104, No. 3, also of the CRP, which provides that "The taxation of property must contribute to the equality of citizens."

7. Still regarding the aforementioned constitutional provision, it says the Defendant that "doctrine warns that the principle of equality, as concerns property, must be interpreted restrictively, in the sense that it does not involve a particular and autonomous legal content of the principle of equality."

8. And in reinforcement of doctrinal content, the Defendant cites the following authors:

a) Américo Brás Carlos, in Taxes - General Theory, 4th edition, Coimbra, 2014, p.172:

"…as the instrument to use to pursue such equality is not specified, nor is tax equality always synonymous with the application of progressivity or other specific mechanism, the rule has no utility."

b) Xavier de Basto, in "The Constitution and the Tax System, Review of Legislation and Jurisprudence, year 138 (2009), p. 282, reminds that:

"[the] No. 3 of art. 104 on property taxation is today completely ineffective, nothing more than a statement of principle, not even a very sonorous one."

c) José Casalta Nabais, in Tax Law, Almedina; 2012, 7th Edition, p. 155, in addition to grounding and having as corollary the principle of contributory capacity, also projects into the principle of justice:

"[…] the principle of tax equality always has inherent especially the idea of generality or universality, under which all citizens are bound to comply with the duty to pay taxes, and of uniformity, requiring that such duty be assessed by the same criterion - the criterion of contributory capacity. This thus implies equal tax for those with equal contributory capacity (horizontal equality) and different tax (in qualitative and quantitative terms) for those with different contributory capacity in proportion to such difference (vertical equality)."

d) And it also cites Sérgio Vasques, in Manual of Tax Law, Almedina, 2011, p. 248, who advises the following on this same point:

"As happens in other domains, the principle of tax equality can be summed up in the formula according to which one should 'treat equally what is equal and differently what is different,' this being a formula that decomposes into two essential elements: (a) the equality or difference of the realities to be treated and (b) the equality or difference of treatment given to them. The second element, that of equality of treatment, has merely descriptive content and is the simplest to realize, being possible to say that there is equality of treatment when two situations are subject to the same legal statement. The first element, that of equality of situations, already contains normative content and shows itself always difficult to realize, since the relation of equality between two situations requires a judgment of comparison and the choice of a relevant distinctive criterion for that purpose."

And this author further adds:

"[…] 'treating equally what is equal' has a meaning that differs according to the categories of public taxes to which we refer. Thus, the principle of tax equality must materialize looking at the contours of the different tax species and identifying the distribution criteria that best suit them, that is, comparing the object and the distribution criterion, with the distribution criterion that appears materially adequate for the effect being the criterion of contributory capacity."

And the Defendant returns to this author, who further refers, on p. 253 of the Manual mentioned, regarding the comparison of contributory capacities, in order to determine compliance with the principle of tax equality, which presupposes appealing, within the scope of property taxation, to a general or synthetic tax on property, an indicator that, according to this author:

"can reflect the economic force of taxpayers,"

Adding that:

"[…] the best indicator of the economic force of taxpayers is in their income and not so much in property, as occurred in other times. And in contemporary tax systems it is income taxes that best allow attention to the personal condition of taxpayers […]. One of the elementary corollaries of the principle of contributory capacity is therefore in the requirement that personal taxes on income constitute the center of the tax system, an idea reflected in the order in which the different taxes are mentioned in article 104 of the Portuguese Constitution."

e) Within the scope of these doctrinal scholars, the Defendant also cites J.L. SALDANHA SANCHES (Manual of Tax Law, Coimbra Publisher, 2007, 3rd edition, p. 212: who states:

"From the choice of certain objects as taxable facts can result tax arbitrariness. This is because this choice can imply the excessive burden of a certain group of taxpayers or the fiscal privilege with the effective relief of other groups - all as a direct result of legal provision or, then, as a practical result of its application."

And regarding the principle of equality this author further states:

"This does not mean that the law must ensure, in its application, an equal result for each of its addressees: it means rather that the differentiation of results must correspond to the actual difference existing between the addressees. The differentiation of results must be a function of the concrete situation of each taxpayer and constitute, in this way, a differentiation that is the subject of specific protection by the legal order."

1. The Defendant understands, with respect to the Claimant's invocation of the unconstitutionality of the AIMI regime by the Defendant, through violation of the principle of equality (art. 13 of the CRP) and contributory capacity (art. 104, No. 3 of the CRP), on the grounds of negative discrimination of companies engaged in real estate activity in relation to other companies, that the Claimant has no legal basis for such.

2. And further regarding the Claimant's invocation (cf. articles 135 and 136 of the PI), of said unconstitutionality because AIMI applies to all land for construction, even if intended for commercial, industrial and service purposes,

3. The Defendant argues that, "for various reasons, the provisions established do not result in unjustified differences of treatment among taxpayers in breach of those constitutional principles,"

Justifying, in the first place:

1. From what was previously stated regarding the application of the constitutional principles invoked, it follows, in light thereof, that the choices underlying the delimitation of the objective incidence of AIMI are made within the margin of "freedom of legislative shaping."

2. The Defendant invokes the teleology of the tax, according to which it is interpreted, in light of all that is being stated, that AIMI aims, first, "to affect a portion of the property of the respective taxpayers, inciding on real estate constituting property recognizable in law as capital of a certain entity (singular or collective), regardless of whether it is affected to any productive process or revenue-generating."

3. And it emphasizes that "the legislator opted in No. 2 of that provision for a negative delimitation of incidence, excluding from AIMI real estate which, by their potential use, can be economically recognized as factors of production, as capital, that is, as intermediate goods which, combined with the other factors of production, produce new utilities - economic goods that satisfy needs."

4. And it further states that, "for that purpose, it resorted to a criterion that invokes the structure of urban property typologies provided for in article 6 of the IMI Code and which operates through the subtraction from AIMI of urban properties which, as a result of licensing of use declared by municipalities or, failing that, of their normal purpose, are recognized to fall within the typologies of paragraphs b) and d) of No. 1 of that provision."

5. Whence, according to the Defendant, "the universe of urban properties subject to AIMI is determined by recourse to the remaining two typologies contained in No. 1 of article 6, i.e. urban residential properties and land for construction."

6. It argues that "the different treatment given by the legislator which, for economic and social reasons, decided, within its shaping freedom, to remove from incidence real estate intended for purposes other than residential."

7. Whence, to understand that "it is therefore clear that we are faced with a rule of objective incidence of general and abstract character, applicable indiscriminately to all cases in which its respective material and legal presumptions are met."

8. It is, therefore, a partial taxation of the total property of taxpayers, and therefore it is not normatively appropriate to carry out a comparison between the global value of property of other taxpayers.

9. And that is why when comparing general or synthetic taxation of property with another specific one that only aims to tax urban properties for residential purposes and land for construction, distorted conclusions will result.

10. Beyond this, this tax (AIMI) does not specifically target companies, since it comprises all kinds of taxpayers who are owners of such real properties, regardless of whether they are characterized by business nature or not - companies, foundations, associations or natural persons.

11. The Defendant further reinforces its thesis with an excerpt from the learned Decision of the Constitutional Court No. 846/2014, of 3/12, in which the following is stated:

"Doctrine and constitutional jurisprudence have been firm in concluding that the exercise, by the State, of the power to tax cannot be conceived as an affecting or restriction of fundamental rights, in the face of which it is legitimate to invoke the regime of requirements or demands that constitutionally apply to laws restricting rights, freedoms and guarantees. This itself results from the existence of the (improperly called) 'tax constitution,' in which the guarantees of taxpayers, the formal and material principles that shape the constitutional concept of tax, and the configuration of the latter not as affecting of a right but rather as a public obligation of all citizens when constituted under article 103 of the CRP are defined."

1. Thus, concludes the Defendant, contrary to what the Claimant seeks, it is not possible to invoke the unconstitutionality of a tax rule based simply on it having significant influence on the economic decisions of taxpayers, since this occurs by force of the application of the rules in question.

2. And regarding the Claimant's argument that the properties in question are the fruit of activity, the Defendant states that, although this is true and also that in a real estate company the ownership of real estate constitutes an essential prerequisite for the exercise of its economic activity, it is also true that "we are dealing with goods with economic value and market value and intrinsic economic value derived from different factors, such as location, construction suitability and even their tending scarcity."

3. And it emphasizes that the properties in question are not merely instrumental to the exercise of activity, insofar as they form the core of economic activity, being, furthermore, autonomous goods that always have intrinsic value and normally, quotation in the real estate market.

4. And even though they are goods that evidence a specific affluence compared to other owners. They are a factor of production, but also signify particular wealth with capacity to support an additional contribution such as AIMI.

Justifying, now, in a second place, the Defendant understands that:

1. As to the fact that land for construction may constitute potential use for commerce, industry or service, this is not relevant, as the Claimant seeks, because AIMI applies to land for construction, even where such potential use exists. And this argument does not imply a violation of the principle of equality (cf. arts. 135 and 136 of the PI).

2. Regarding the issue of unconstitutionality invoked by the Claimant with respect to land for construction, the Defendant argues that the Tribunal could only discuss the legality of the assessment in the part in which they may come to have potential use for purposes other than residential - and in this situation only one of the taxed properties is found.

3. And it makes explicit that, in the remaining cases, "the discussion of legality is barred, as it would be abstract, since it has no effective connection with the factuality that should be given as proven by the Tribunal."

4. That is, continues the Defendant, "without such nexus of dependence between the subject matter of the dispute and the grounds for judgment of unconstitutionality of the rule at issue, everything is limited to an abstract evaluation of the confrontation between the rule or constitutional principle and the ordinary rule, therefore without direct and effective connection with the 'matter submitted for judgment' (art. 204 of the CRP), with the consequence that the disapplying of a rule for unconstitutionality is determined based on grounds inapplicable to the subject matter of the dispute."

5. And that, in its view, this determines the incompetence of the Arbitral Tribunal to hear the matter raised.

6. In any case, "the understanding that it is unconstitutional, through infringement of the principles of equality and contributory capacity, the taxation of land for construction without regard to the type of buildings that may come to be built on them does not hold" - "as has been understood almost unanimously by arbitral jurisprudence, of which examples are the orders issued in proceedings Nos. 654/2017-T and 664/2017-T."

7. And even if there is potential use of one of the lands for purposes other than residential, the Claimant's thesis is unfounded, "under penalty of the Tribunal making a (forbidden) judgment 'of vertical partial unconstitutionality' (notably, that which resides in the applicability of the rule to certain situations or categories not autonomized in the normative content - cfr. order of the TC No. 124/84, of 8 February)."

8. And it does not even make sense, nor is it consistent with the principle of equality, to make any discrimination of land for construction, solely because one of them may come to be used for services, after eventual future building, because the taxation is effected based on the nature of the goods in question at the time of their taxation (taxable event) and not as a function of a future and eventual contributory capacity - "as that would constitute a frontal breach of the basic principles of our legal order."

9. And the Defendant again emphasizes that this principle of equality, as it emerges from doctrine and jurisprudence, has as its premise to treat equals equally and unequals unequally, to the extent of their differences, moreover the incorrect comparison that the Claimant makes regarding land for construction with non-residential use "respects mere virtual abstractions of constituted situations not constituted."

10. And it reminds that after the building that occurs on the land, it will give rise to a new taxable event, a new VPT and therefore a legal-tax reality that will have, at the moment of its verification, its own treatment, in the context of taxation consistent with this new reality.

11. Whence "with a judgment of 'vertical partial unconstitutionality' being barred, it does not fall here, the Defendant states, 'any possibility of judgment of unconstitutionality of AIMI, based on violation of the principle of equality, starting from premises that are based on a comparison between incomparable situations (…)'."

12. It also emphasizes that "given all of the above, there cannot, therefore, be in the present discourse any censure regarding the legal-constitutional conformity of AIMI."

The Defendant emphasizes, in a third place:

1. The jurisprudence of the arbitral tribunals and the Constitutional Court, for which it cites some excerpts from orders, in support of its thesis.

2. Thus, regarding the order issued in arbitral proceeding No. 664/2017-T, it highlights the following passage:

"The Claimant further emphasizes the unconstitutionality resulting from the discrimination operated by the rule of article 135-B of the IMI Code, regarding land for construction, by disregard of the potential use of such land for the purposes of commerce, industry or services, taking as a reference point properties classified as commercial, industrial or service which are excluded from taxation by force of that provision.

On this plane of analysis, it must be taken into account that we are dealing with different taxable facts. In one case, the law subjects to taxation land that is susceptible to development constituting an economic asset by virtue of its suitability for construction. In another case, the law excludes from the tax built property that performs an instrumental function in relation to the productive activity.

There is not a necessary connection between these two realities. Land for construction has its own patrimonial value that constitutes, in itself, an indicator of contributory capacity that is susceptible of being the subject of an autonomous tax on property, regardless of its eventual and future use through the installation of a building for commercial, industrial or service purposes. Built property that is classified as a commercial, industrial or service property performs an instrumental function in relation to a certain productive activity which the legislator, within its margin of free shaping, may seek to safeguard in the context of its responsibilities for promoting economic and social development, which have constitutional grounding (article 81 of the Fundamental Law).

It is therefore possible to discern a sufficient material ground for distinguishing between these different taxable facts for the purpose of property taxation." (cfr. p. 14 of the same)

1. For its part, continues the Defendant, in the order issued in arbitral proceeding No. 654/2017-T, it was understood that:

"[…] it is believed that the identity of situations in light of legally relevant criteria is not verified, necessary to operate the said extension of the exclusion clause from objective subjection, that is, it does not appear that land for construction is in a situation identical to that of built properties, from the point of view of the teleology of that exclusion clause.

From a teleological point of view, such clause will underlie, in the first place, the purpose of not burdening with AIMI properties affected, or susceptible to immediate affectation, to productive processes, with land for construction not presenting such characteristics, given that while a built property will be, or will be susceptible of being immediately affected to productive processes, land for construction is not in such a situation." (cfr. p. 14 and 15 of the same)

And proceeding, it emphasizes that in the same order it is further made explicit that:

"Effectually, already-built properties have a material reality corresponding to the typology that falls to them. That is, to a built and licensed property for, or that has as normal purpose, commerce, industry or services, there will correspond a material reality adequate for such purposes and, for what interests, objectively distinct from a built and licensed property, or with normal purpose, for housing.

Land for construction, for its part, is distinguished from other land on a merely legal plane, that is, according to the action of a public entity (granting of license or authorization, admission of prior notice or issuance of favorable prior notice of subdivision or construction operation - cfr. art. 6/3 and 37/3 of the CIMI) or of the owners (declaration of purpose in the acquisition title; cfr. art. 6/3 of the CIMI) to which the Law attributes certain legal effects.

Thus, according to the aforementioned differentiation, the change of purpose of land for construction, from the point of view of the relevant notes for the issue at issue, may be simple, requiring, for example, merely a declaration in the acquisition title, the presentation and admission of prior notice, or the presentation and approval of a request for prior favorable notice.

Already the change of purpose of a built building, from housing to commerce/industry/services, or vice versa, will imply, under the point of view of normalcy, the carrying out of more or less deep works (and necessary licensing).

It further happens that a built property has incorporated a significant value corresponding to the construction which, even in cases where it is not concretely affected to the intended use, will constitute a natural incentive to its economic exploitation since, always from the point of view of normalcy, a built property will not only fail to generate revenues, but will lose value (as a function of its deterioration) from non-use.

Already land for construction, not only does not incorporate, in itself, any natural incentive for its construction and subsequent affectation to a productive activity, but also, from the point of view of normalcy, the opposite may occur, that is, depending on certain market conditions that create expectations of purely speculative gains, there may be incentives for their owners to maintain their condition as undeveloped land.

[…]

Now, in light of the teleology found in the interpreted rule, above expounded, the certain thing is that such impact may even be positive, to the extent that taxation of land for construction may constitute an incentive to its building, thus accelerating the effective use of properties in productive activities.

All that was set out, it is believed, will justify a distinction of treatment, in line with the regime legally enshrined, and contrary to the extension of the clause of non-objective subjection through interpretative extension." (cfr. p. 16 and 17 of the same).

And also in the same order, already in the assessment of the unconstitutionality issue, it is affirmed that:

"The answer to such question, as has also been seen, goes in the direction of there being a substantial difference between land for construction and already-built buildings, with the latter being susceptible of being, or being immediately capable of being affected to the activities for which they are intended, unlike the former.

Thus, contrary to the Claimant, it is not believed that 'By making that distinction - in addition to going against the spirit of the law, already demonstrated above - we would be distinguishing realities that cannot be distinguished for this purpose: on the one hand, i) commercial, industrial, service or other buildings already built and on the other, ii) land for construction intended for commerce, industry, services or other.' with the alleged violation of the principle of equality not occurring.

[…]

In this respect, as has also been seen, the contributory capacity aimed at is the same as that of IMI, to which AIMI is added, and the legislator chose to enshrine lighter taxation rates for legal entities, in relation to natural persons.

As to the fiscal burden of the real estate sector, in relation to other sectors, note first that within the economic sector in question, companies are treated equally, and it is contained within the scope of the legislator's freedom of action, and is, moreover, common practice and accepted, interference in economic activities, providing fiscal incentives to some and burdening others fiscally.

It further happens that, in the case, contrary to what the Claimant points out, we are not faced with a burden, but with a non-relief.

That is, when properly considered, the normative structure created for AIMI consists of general coverage of that tax, superimposed on real estate subject to IMI, followed by the removal of incidence with respect to certain types of properties.

Thus, it is not the Claimant - or the real estate owned by it and on which tax was assessed - that finds itself, when taxed, before a situation exceptional burdening, but rather the non-relief sought - through subjective or objective exclusion - which, if recognized, would revert to an exceptional character." (cfr. p. 21 and 22 of the same).

1. And finally, in terms of Jurisprudence, it refers to the order of the Plenary of the Constitutional Court No. 378/2018, which revokes the order of the same TC No. 250/2017, although in this order it has been held that "no consequences should be drawn from the Jurisprudence of the TC in question, regarding the constitutionality of AIMI rules, applied in the case, particularly as regards the violation of the Constitution rules pointed out by the Claimant, and therefore the arbitral petition is also unfounded in this respect." (cf. pages 23 to 25 of the same).

2. Whence it is important to mention now and finally what is made explicit in the cited and recent Order of the Plenary of the Constitutional Court No. 378/2018, of 4/7, with respect to the unconstitutionality of the rules still of Stamp Tax, on this same problematic:

"It is not the responsibility of the Constitutional Court to consider the (abstract) possibility of there existing situations or hypotheses which, in regard to the nature of the subject aimed at or branch of activity carried out by it, could justify different tax solutions, and, based on that, decide on the unconstitutionality of the solution adopted by the legislator, when, as is the case, its inclusion within the scope of incidence of the tax rule, alongside all the other hypotheses covered, of variable factual configuration, does not constitute an arbitrary or rationally unfounded solution, as it rests on reliable, though not infallible, indices of special or increased contributory capacity, as was demonstrated.

For this reason, it does not appear that the reasons invoked by the appealed decision, based on such considerations, can determine a judgment of unconstitutionality, through offense to the principle of tax equality." (pages 14 and 15 of the same).

And subsequently, the Learned Order further makes explicit:

"Considering such homogeneity of legal-tax concepts, it is clear that, for the purpose of applying the Stamp Tax Code, just as for the purpose of applying the CIMI, land for construction is not equal to an urban property, whether for housing or for other purposes, as is stated in the appealed decision. But, precisely because this is so, it is not possible to have acting retroactively, even if for purposes of mere analysis or legal construction, tax criteria that apply only after the building of the edifice, not before it.

As was emphasized, what is relevant for the purposes of applying the item 28.1 is the legal-patrimonial situation existing on the date of maturity of the tax payment obligation, and therefore it is by reference to the concrete taxable event existing on that date that the existence, or otherwise, of a rational or reasonable ground for justifying the legal-tax consequences that immediately emerge from it should be assessed.

The juridically relevant transformations that the object of the property may suffer in the course of time, from that moment onward, resulting, in particular, from the eventuality of there being built on land for construction of patrimonial value superior to € 1,000,000.00 a building consisting of autonomous fractions of lower value, configure hypotheses of verification and uncertain content, even considering the existence of licensing on those terms, which may be altered or not even used, and therefore cannot relevantly affect the assessment of the constitutionality of rules, or segments thereof, which, by virtue of their occurrence, will cease to be applicable.

The only certain data which, within the applicable legal framework, can and should be judged, on the constitutional plane, is the ownership, at the moment of maturity of the obligation in question, of real rights of enjoyment over land for construction of patrimonial value equal to or superior to € 1,000,000.00, whose building, authorized or foreseen, is intended for housing.

Now, in the perspective legally relevant to the demonstration of wealth, land intended for the construction of housing, regardless of the legal structure and typology that these latter may come to assume, are not comparable to properties constituted in autonomous fractions.

[…]

That is, being relevant, for tax purposes, only the VPT of each autonomous fraction - which, as was seen, constitutes an economic-legal unit legally qualified as constituting a single property - it is not valid to compare the patrimonial situation of the owner of a property for housing, already built, whose fractions be of patrimonial value subject to tax below € 1,000,000.00, with that of the owner of land for construction of value equal to or superior to that amount, even if this one has authorization to build on it a property with such characteristics:

[…]

As impressively stated in a dissenting opinion contained in Order No. 250/2017:

"(…) it is not the circumstance that the construction foreseen on a given land is conducive to a housing of luxury or property in horizontal property with various fractions of reduced or medium value that permits questioning the effective realization of the purpose of taxation of specific manifestations of wealth. Whether the corresponding owner wishes to build a housing provided with all manner of ostentation, a property in horizontal property with dozens of fractions or a simple dwelling, the reality is that, at the moment of verification of the taxable event, we are invariably faced with land whose foreseen construction is directed to housing and which assumes a VPT superior to € 1,000,000.00. And it is the ownership of such land - and no longer the specific housing that one wishes to build - that permits to reference the respective owner as endowed with particular affluence.

If, despite the multiple possibilities at its disposal, the owner decides on the implementation of construction that does not reach such magnitude - particularly by this being presented in horizontal property, importing a taxation of autonomous fractions and no longer of the overall building, such does not invalidate the finding that, as land, that property presented itself, by itself, as a special manifestation of wealth." (cfr. pages 16 to 19 of the same).

Whence, the Defendant proposes that the decision be rendered in the following sense:

"(1) The present petition for arbitral pronouncement should be judged unfounded and, consequently, the Defendant should be absolved of all pleas, in the terms above requested, all with the due and legal consequences.

"(2) …

IV - ASSESSMENT OF THE PARTIES' ARGUMENTS AND TRIBUNAL'S REASONING

Assessing now, in summary, the grounds of both parties previously set forth, this Tribunal, in light of the facts already previously established as proven and the applicable law, refers to the following:

a) Law No. 42/2016, of 28 December (Budget for 2017) added Chapter XV to the CIMI - Municipal Property Tax Code, therein including articles 135-A to 135-K, which constitute the regime of the Additional to the said Municipal Property Tax (AIMI), coming into force on 1/1/2017.

b) From the aforementioned rules, we cite those applicable to the AIMI assessment under analysis, which constitute the subjective and objective incidence, which are enshrined in article 135-A and in No. 1 of article 135-B of the IMI Code, added by Law No. 42/2016, of 28 December, with articles 135-C, 135-F and article 6 also being relevant, all of the IMI Code, which are as follows:

"Article 135-A

(Subjective incidence)

1 - The passive subjects of the additional municipal property tax are natural or legal persons who are owners, usufructuaries or surface rights holders of urban properties situated in Portuguese territory.

2 - For the purposes of No. 1, the following are equated to legal entities […).

3 - The status of passive subject is determined in accordance with the criteria established in article 8 of this Code, with necessary adaptations, having as reference the date of 1 January of the year to which the additional municipal property tax relates.

4 - The following are not passive subjects […] municipal enterprises."

"Article 135-B

(Objective incidence)

1 - The additional municipal property tax applies to the sum of the patrimonial values subject to tax of urban properties situated in Portuguese territory of which the passive subject is the owner.

2 - The following are excluded from the additional municipal property tax: urban properties classified as 'commercial, industrial or service properties' and 'others', pursuant to paragraphs b) and d) of No. 1 of article 6 of this Code."

Also cited, as relevant, are the following articles, all of the IMI Code:

"Article 135-C

Rules for determining taxable value

1 - The taxable value corresponds to the sum of the patrimonial values subject to tax, as of 1 January of each year to which the additional municipal property tax relates, of the properties appearing in the real estate matrices in the ownership of the passive subject.

2 - From the taxable value determined pursuant to the above are deducted the following amounts:

a) € 600,000.00, when the passive subject is a natural person;

b) € 6,000,000.00, when the passive subject is an undivided estate.

3 - The following are not counted towards the sum referred to in No. 1 of article 135-B:

a) The value of properties which in the previous year were exempt or not subject to IMI;

b) The value of properties intended exclusively for the construction of social housing or at controlled costs whose owners are housing and construction cooperatives or resident associations.

c) …

d) …"

"SECTION III

Article 135-F

Rate

1 - To the taxable value determined pursuant to article 135-C and after application of the deductions provided therein, where they exist, the rate of 0.4% for legal entities and 0.7% for natural persons and undivided estates is applied.

2 - To the taxable value, determined pursuant to No. 1 of article 135-C, exceeding one million euros, or double that amount when the option provided for in No. 1 of article 135-D is exercised, the marginal rate of 1% is applied when the passive subject is a natural person.

3 - The value of properties held by legal entities for personal use of the holders of their capital, members of corporate bodies or any organs of administration, management, direction or supervision or their respective spouses, ascendants and descendants, is subject to the rate of 0.7%, being subject to the marginal rate of 1% for the portion exceeding one million euros.

4 - For properties owned by entities subject to a more favorable fiscal regime, referred to in No. 1 of article 63-D of the General Tax Law, the rate is 7.5%.

6 - Properties referred to in No. 3 must be identified in the annex to the periodic income statement declaration provided for in the Code of Corporate Income Tax. (Added by Law No. 114/2017, of 29 December)"

"Article 6

Species of urban properties

1 - Urban properties are divided into:

a) Residential;

b) Commercial, industrial or service properties;

c) Land for construction;

d) Others.

2 - Residential, commercial, industrial or service properties are buildings or constructions licensed for such purposes or, failing licensing, having such purposes as their normal intended use.

3 - Land for construction is considered to be land situated within or outside an urban agglomeration for which construction or subdivision licensing or authorization has been granted, prior notice has been admitted or favorable prior notice information has been issued for construction operations, and also those so declared in the acquisition title, excepting land where the competent entities prohibit any such operations, particularly land located in green zones, protected areas or which, in accordance with municipal land use plans, are devoted to spaces, public infrastructure or equipment.

4 - Paragraph d) of No. 1 includes land situated within an urban agglomeration which are not land for construction nor are covered by No. 2 of article 3 and also buildings and constructions licensed or, failing licensing, having as normal intended use other purposes than those referred to in No. 2 and also those of the exception in No. 3."

The remaining AIMI rules are not determinative in nature for the situation under analysis.

b) - As stated in article 4 of the PI and established as proven, the amount of tax due by title of AIMI corresponds to the application of the rate of 0.4%, in accordance with the provision in No. 1 of article 135-F of the IMI Code, to the sum of the Patrimonial Values Subject to Tax (VPT) of the properties described above, contained in the real estate matrices in the name of the Claimant A... - REAL ESTATE COMPANY, S.A., Legal Entity No....

c) The disputed questions relate to the following issues:

1. That of the alleged material unconstitutionality of No. 1 of art. 135-B of the CIMI, particularly as regards the interpretation meaning that all land for construction of which real estate companies are owners are taxed, through violation of the principle of equality and contributory capacity;

2. That of the inapplicability of this rule by the AT; and

3. That of the exclusion of taxation of land for construction owned by companies, as in the case of the Claimant, which carry out a commercial, industrial or service provision activity.

d) The Claimant invokes the previously applicable regime under Stamp Tax, Item 28, and emphasizes the differences and the purpose of the taxation of this property.

e) For the Tribunal this genesis is of interest from the historical-systematic and teleological point of view, insofar as it brings light to the regime currently in force under AIMI, although today the controversial question, is sufficiently clarified, both doctrinally and jurisprudentially, particularly by the Constitutional Court itself, at least on certain matters brought to the proceeding.

f) It is certain that there are some orders with different decisions throughout the entire Stamp Tax regime and even AIMI, but jurisprudence shows itself today much more clarifying.

Let us therefore examine by parts each of the issues:

1. That of the alleged material unconstitutionality of No. 1 of art. 135-B of the CIMI, particularly as regards the interpretation meaning that all land for construction of which real estate companies are owners are taxed, through violation of the principle of equality and contributory capacity;

g) The Claimant, in this respect, refers to the distinction that existed, under Stamp Tax concepts and therefore their taxation or not, under Stamp Tax, between urban residential properties and land for construction.

h) And it understands that the current rule of incidence, within the scope of the CIMI, had the purpose of maximizing fiscal revenue, although, in its view, with violation of the constitutional principles of equality, proportionality and contributory capacity, which would make the AIMI regime contrary to the Constitution of the Portuguese Republic.

i) In fact, under Stamp Tax, the decision rendered by the Supreme Administrative Court Order, of 29/10/2014, in proceeding No. 505/14-30, was that:

"Since the legislator has not defined the concept of urban property with residential use but article 6 of the CIMI results in a clear distinction between urban residential properties and land for construction, these cannot be considered for the purposes of Stamp Tax incidence as urban properties with residential use.

And it concluded that:

"Thus, bearing in mind that land for construction - whatever the type and purpose of the building that will be, or may be, erected on it - does not satisfy, in itself, any condition to be so licensed or to be defined as having housing as its normal purpose, and referring to the incidence rule of stamp tax to urban properties with 'residential use,' without any specific concept being established for the purpose, cannot it be extracted from it that it contains a future potentiality inherent to a distinct building that may possibly be built on the land.

Having therefore taken the following Decision:

"In these terms, the Judges of the Tax Contentious Section of the Supreme Administrative Court agree to deny the appeal."

j) However, even if one considers, without fully conceding, that the legislator of that time did not intend to tax in AIMI the ownership of land for construction intended for housing, the truth is that the new rules, and in particular, articles 135-B, 135-C and 135-F and art. 6 all of the IMI Code, in the wording given by Law No. 42/2016, of 28/12, coming into force on 1/1/2017, leave now no less margin for doubts about the meaning and scope of current law.

k. The Claimant may consider that the new Law is unjust and profoundly unequal and violative of Constitutional principles, particularly equality, understanding that distinctions have been created lacking objective and rational justice.

l. And that therefore the AT could not and should not apply it, particularly taking into account the specific situation of the Claimant, given its economic activity, which maintains in its current assets land for construction