Stamp Tax on Vertical Property Under Item 28 TGIS – CAAD Arbitration 327/2016-T

ARBITRAL DECISION

REPORT

A - PARTIES

A..., with address at Rua..., no...,..., ...-..., ..., holder of tax identification number ..., B..., with address at Rua..., no...,..., ...-..., ..., holder of tax identification number ... and C..., with address at Av..., ..., ..., ...-...,..., holder of tax identification number ..., hereinafter designated as Claimant or taxpayer.

TAX AND CUSTOMS AUTHORITY hereinafter designated as Respondent or AT.

The application for the establishment of the arbitral tribunal was accepted by the President of CAAD, and the Arbitral Tribunal was duly established on 08-09-2016 to consider and decide on the subject matter of these proceedings, and automatically notified the Tax and Customs Authority on 08-09-2016, as shown in the respective record.

The Claimant did not proceed with the appointment of an arbitrator, wherefore, in accordance with the provisions of no. 1 of Article 6 and subsection b) of no. 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council designated arbitrator Paulo Ferreira Alves, the appointment having been accepted in accordance with legal provisions.

On 24-08-2016 the parties were duly notified of this designation, having manifested no intention to refuse the designation of the arbitrators, in accordance with Article 11 no. 1, subsections a) and b), of the RJAT and Articles 6 and 7 of the Deontological Code.

In accordance with the provision of subsection c) of no. 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the single arbitral tribunal is duly established on 08-09-2016.

Both parties agree to waive the meeting provided for in Article 18 of the RJAT.

The Claimant was granted a period to respond to the exceptions raised by the Respondent in its response to the request for arbitral pronouncement.

The Claimant did not present a response to the exceptions within the granted period.

The arbitral tribunal is duly established. It is materially competent, in accordance with Articles 2, no. 1, subsection a), and 30, no. 1, of Decree-Law no. 10/2011, of 20 January.

The parties have legal personality and capacity, are legitimate and are legally represented (Articles 4 and 10, no. 2, of the same statute and Article 1 of Order no. 112-A/2011, of 22 March).

The proceedings do not suffer from defects that would invalidate them.

B - REQUEST

1. The Claimant seeks the declaration of illegality of the tax acts of assessment under Stamp Tax: nos. 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016... and 2016..., which fixed a total tax payable of €5,281.44 (five thousand, two hundred eighty-one Euros and forty-four cents).

C - CAUSE OF ACTION

1. To substantiate its request for arbitral pronouncement, the Claimant alleged, with a view to the declaration of illegality of the tax acts of assessment under Stamp Tax, already described in point 1 of this Award, in summary, the following:

2. The urban property to which the tax acts in question refer does not fall within the concepts of "residential property" or "land for construction whose building, authorized or planned, is for housing", provided for in item 28.1 of the General Stamp Tax Table (TGIS), as amended by Law no. 83-C/2013, of 31 December;

3. And the interpretation of the Tax and Customs Authority (AT), in the sense of considering, for the purposes of applying the Stamp Tax, a total property value of the property instead of the property value of each floor/unit capable of independent use, violates what is provided for in the law, specifically what is provided for in the Code of Municipal Property Tax (CIMI), applicable by force of Article 67 of the Stamp Tax Code (CIS).

4. Each of the Claimants is the holder of 1/3 of the urban property located at Avenue..., no... to no..., facing the ..., in ..., described in the ... registry office of Property Registration of ... under no. ... and registered in the respective assessment roll under article ..., of the parish of....

5. It is recorded in the property assessment register of the aforementioned property that it is an urban property in full ownership, consisting of 9 floors or units with the possibility of independent use, intended for commerce and housing.

6. The total property value of the property is €1,184,297.44.

7. However, each of the floors/units capable of independent use has a taxable property value well below €1,000,000.00, which varies between €128,008.40 and €132,036.13.

8. The Claimant alleges that the property is in ruins, and that at present a judicial proceeding is pending in the tax court of..., case.../14..., a judicial proceeding for the declaration certifying that the property is in ruins.

9. The Claimant alleges that the property in question is not licensed for housing and its state of complete degradation, even of ruin, does not allow it to be considered as having habitation as its normal purpose, not least because it does not have any habitability conditions.

10. Furthermore, the Claimant argues that when units of the same property with independent use are involved, the property value relevant for the purposes of applicability of Item 28 of the TGIS can only be that of each unit, autonomously considered.

11. Thus, the assessment of the Stamp Tax suffers, in the interpretation of the Claimants, from the defect of violation of law, by error on the legal presuppositions.

D - THE RESPONDENT'S RESPONSE

1. The Respondent, duly notified for this purpose, timely submitted its response in which, in abbreviated summary, alleged the following:

2. With reference to the year 2013, in compliance and in accordance with the provisions of Article 6, no. 2 of Law no. 55-A/2012, of 29/10, which added item no. 28 to the TGIS, as amended by Law no. 83-C/2013 of 31/12 and whose respective rule of incidence refers to urban properties, valued in accordance with the CIMI, with VPT equal to or greater than €1,000,000.00 and, in accordance with its no. 28.1, housing allocation.

3. Thus the Respondent alleges that what is at issue here is an assessment that results from the direct application of the legal norm, which translates into objective elements, without any subjective or discretionary appraisal.

4. And the concept of property is defined in Article 2, no. 1 of the CIMI, with it being established in its no. 4 that in the regime of horizontal property, each autonomous fraction is deemed to constitute a property.

5. In compliance with the provisions of Article 119, no. 1 of the CIMI, the tax bill is sent to the taxpayer with a breakdown of the parts capable of independent use, their respective taxable property value and the tax collection allocated to each municipality of the location of the properties.

6. It alleges that subjection to stamp tax of item 28.1 of the General Table attached to the CIS results from the combination of two facts: the housing allocation and the property value of the urban property registered in the assessment roll being equal to or greater than €1,000,000.00.

7. It argues that finding the property in the regime of full ownership, not possessing autonomous fractions, to which tax law attributes the qualification of property, because from the notion of property of Article 2 of the CIMI, only autonomous fractions of property in the regime of horizontal property are deemed to be properties – no. 4 of the cited Article 2 of the CIMI.

8. From the above, the defect of violation of law by error as to the legal presuppositions should be judged not to be founded, with the assessments challenged remaining in the legal order by constituting a correct application of the law to the facts.

9. Furthermore, the Respondent alleges that as alleged by the Claimant when the property is found to be in ruin, the Respondent alleges that the certificate of property register content of the urban property that is the basis of the present assessment, it is verified that the property in question is indeed allocated to housing.

10. From a tax perspective, the property is an urban property with housing allocation, in that capacity it was acquired and thus it is and remains property classified.

E - STATEMENT OF FACTS

1. Before entering into the appraisal of these matters, it is necessary to present the factual matter relevant to the respective understanding and decision, which was carried out on the basis of documentary evidence, and taking into account the alleged facts.

2. As a matter of relevant fact, this tribunal takes the following facts as established:

3. Each of the three Claimants is the holder of 1/3 of the urban property located at Avenue..., no... to no..., facing the ..., in ..., described in the ... registry office of Property Registration of ... under no. ... and registered in the respective assessment roll under article ..., of the parish of....

4. The Claimant is the owner of an urban property corresponding to a property in full or vertical ownership (not horizontal).

5. The aforementioned property consists of 5 floors, intended for commerce and housing, composed of 9 (nine) units, of which 8 (eight) units with independent use and housing allocation.

6. The property value of the property is €1,184,297.44, and the value of the fractions with independent use and housing allocation of the property is €1,056,289.04.

7. The assessment notices for the respective property relate to the following floors and units, whose taxable property value of the said units with independent use, which make up the urban property, was determined separately, in accordance with the provisions of Article 7, no. 2, subsection b), of the Code of Municipal Property Tax (CIMI), resulting in the issuance of the following tax acts, here challenged:

1.1.1. Tax Act no. 2016..., 2016..., 2016..., with a tax collection to be assessed of €440.12, and with a VPT of €132,036.13, relating to the 1st RIGHT;

1.1.2. Tax Act no. 2016..., 2016..., 2016..., with a tax collection to be assessed of €440.12, and with a VPT of €132,036.13, relating to the 1st LEFT;

1.1.3. Tax Act no. 2016..., 2016..., 2016..., with a tax collection to be assessed of €440.12, and with a VPT of €132,036.13, relating to the 2nd RIGHT;

1.1.4. Tax Act no. 2016..., 2016..., 2016..., with a tax collection to be assessed of €440.12, and with a VPT of €132,036.13, relating to the 2nd LEFT;

1.1.5. Tax Act no. 2016..., 2016..., 2016..., with a tax collection to be assessed of €440.12, and with a VPT of €132,036.13, relating to the 3rd RIGHT;

1.1.6. Tax Act no. 2016..., 2016..., 2016..., with a tax collection to be assessed of €440.12, and with a VPT of €132,036.13, relating to the 3rd LEFT;

1.1.7. Tax Act no. 2016..., 2016..., 2016..., with a tax collection to be assessed of €440.12, and with a VPT of €132,036.13, relating to the 4th RIGHT;

1.1.8. Tax Act no. 2016..., 2016... and 2016..., with a tax collection to be assessed of €440.12, and with a VPT of €132,036.13, relating to the 4th LEFT;

1. The property value of the fractions with independent use and housing allocation of the property at the date of the assessments is €1,056,289.04, with none of the parts or floors with housing allocation and with independent use having a taxable property value greater than €1,000,000.00.

2. The AT assessed the stamp tax provided for in item nos. 28 and 28.1 of the General Table of Stamp Tax (TGIS), as amended by Article 4 of Law no. 55-A/2012, of 29/10, at the rate of 1%, considering as "VPT – total subject to tax", of the stamp tax assessments resulted in a tax collection payable in the total amount of €5,281.44.

3. The Respondent was notified to pay stamp tax, calculated on the total value of the seven fractions with housing allocation and taxed individually on each fraction.

F - FACTS NOT PROVEN

1. Of the facts of interest for the decision of the case, contained in the challenge, all objects of concrete analysis, those that are not contained in the factuality described above were not proven.

G - ISSUES TO BE DECIDED

1. Considering the positions of the parties assumed in the arguments presented, the central issues to be decided are the following, which must therefore be considered and decided:

a. As alleged by the Claimant:

(i) As alleged by the Claimant, the declaration of illegality of the tax acts of assessment under Stamp Tax relating to the year 2015, 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016... and 2016..., which fixed a total tax payable of €5,281.44 (five thousand, two hundred eighty-one Euros and forty-four cents).

H - SUBSTANTIVE LAW

1. Given the positions of the parties assumed in the pleadings filed, the central issue to be settled by this arbitral tribunal consists in appraising the legality of the stamp tax assessment acts, which fell upon the housing fractions of the Claimant in the urban property described above, for violation of law, by the erroneous interpretation and application of item 28.1 of the TGIS in the amendments introduced by Article 4 of Law no. 55-A/2012, of 29 October.

2. In the case sub judice, it is necessary to determine whether the fractions targeted by the tax are covered by the criteria of stamp tax incidence, in accordance with item no. 28 of the TGIS, in the amendments introduced by Article 4 of Law no. 55-A/2012, of 29 October.

3. It is necessary to first verify whether the fractions are of housing allocation, and secondly whether the VPT of the fractions recorded in the assessment roll is equal to or greater than €1,000,000.00, for which it is necessary to appraise the fundamental question, of what VPT of a property in vertical ownership (that is not horizontal) to consider for the purposes of the said item. Whether the VPT that corresponds to each of the parts of the property with housing allocation individually, or whether, instead, it is determined by the global VPT of the property, which would correspond to the sum of all VPTs of the housing fractions that compose it.

4. The matter of fact is established and proven, which is why we will now determine the law applicable to the disputed facts, giving priority, in compliance with the provisions of subsection a) of no. 2 of Article 124 of the CPPT, to the defects whose finding would determine a more stable and effective protection of the interests of the Claimant, as to the defect of violation of law by error on the legal presuppositions of assessment, as to the question of the classification of urban properties in the regime of full or vertical ownership, within the scope of the rule of incidence of Article 28 no. 1 of the TGIS, introduced by the Regime of Law no. 55-A/2012, of 29 October.

5. The amendment to the regime as to the subjection to stamp tax of properties with housing allocation by the addition of item 28 of the General Table of Stamp Tax, carried out by Article 4 of Law 55-A/2012, of 29/10 and amended by Law no. 83-C/2013, of 31 December, came to typify the following tax facts, through the following wording:

"28 – Ownership, usufruct or surface right of urban properties whose taxable property value recorded in the assessment roll, in accordance with the Code of Municipal Property Tax (CIMI), is equal to or greater than (euro) 1,000,000 – on the taxable property value used for IMI purposes:

28.1 – For residential property or for land for construction whose building, authorized or planned, is for housing, in accordance with the provisions of the IMI Code - 1%;

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

1. The transitional provisions contained in Article 6 of Law no. 55-A/2012 establish the rules relating to the assessment of the tax, provided for in that item:

"1 – In 2012, the following rules must be observed by reference to the assessment of stamp tax provided for in item no. 28 of the respective General Table:

a) The tax fact occurs on 31 October 2012;

b) The taxpayer of the tax is that mentioned in no. 4 of Article 2 of the Stamp Tax Code on the date referred to in the preceding subsection;

c) The taxable property value to be used in the assessment of the tax corresponds to that which results from the rules provided for in the Code of Municipal Property Tax by reference to the year 2011;

d) The assessment of the tax by the Tax and Customs Authority must be carried out by the end of November 2012;

e) The tax must be paid, in a single installment, by the taxpayers by 20 December 2012;

f) The applicable rates are as follows:

i) Properties with housing allocation valued in accordance with the IMI Code: 0.5%;

ii) Properties with housing allocation not yet valued in accordance with the IMI Code: 0.8%;

iii) Urban properties when the taxpayers who are not individuals are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in a list approved by order of the Minister of Finance: 7.5%.

2 – In 2013, the assessment of stamp tax provided for in item no. 28 of the respective General Table must fall upon the same taxable property value used for the purposes of assessment of municipal property tax to be carried out in that year.

3 – The failure to deliver, in whole or in part, within the indicated period, of the amounts assessed as stamp tax constitutes a tax violation, punished in accordance with the law."

1. On the interpretation of this statute, award 53/2013-T has already ruled, which states:

"In the mentioned item 28.1 and in the subitems i) and ii) of subsection f) of no. 1 of Article 6 of Law 55-A/2012, a concept was used that is not used in any other tax legislation in these precise terms that is that of 'property with housing allocation'. Namely in the CIMI, which in several norms of the CIS in the resources introduced by that Law is indicated as a statute of subsidiary application with respect to the tax provided for in the mentioned item no. 28 [Articles 2, no. 4, 3, no. 3, subsection u), 5, subsection u), 23, no. 7, and 46 and 67 of the CIS], a concept defined in those terms is not used."

1. As for the concept of property, it is necessary for this purpose to resort to the concepts of properties used in the CIMI, in which the types of properties are enumerated in its Articles 2 to 6, which is transcribed:

Article 2

Concept of Property

1 – For the purposes of this Code, property is any parcel of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated or built thereon, with a character of permanence, provided that it is part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the aforementioned circumstances, endowed with economic autonomy in relation to the land on which they are located, although located in a parcel of territory that constitutes an integral part of a diverse patrimony or does not have a property nature.

2 – Buildings or constructions, although movable by nature, are deemed to have a character of permanence when assigned to non-transitory purposes.

3 – The character of permanence is presumed when the buildings or constructions are located in the same place for a period exceeding one year.

4 – For the purposes of this tax, each autonomous fraction, in the regime of horizontal property, is deemed to constitute a property.

Article 3

Rural Properties

1 – Rural properties are land located outside an urban agglomeration that are not to be classified as land for construction, in accordance with no. 3 of Article 6, provided that:

They are assigned or, in the absence of concrete assignment, have as normal destination a use generating agricultural income, such as are considered for the purposes of income tax on individuals (IRS);

Not having the assignment indicated in the preceding subsection, they are not built or have only buildings or constructions of an accessory character, without economic autonomy and of reduced value.

2 – Rural properties are also land located within an urban agglomeration, provided that, by force of legally approved provision, they may not have use generating any income or may only have use generating agricultural income, they are actually having this assignment.

3 – Rural properties are also:

Buildings and constructions directly assigned to the production of agricultural income, when located on the land referred to in the preceding numbers;

Waters and plantations in the situations referred to in no. 1 of Article 2.

4 – For the purposes of this Code, urban agglomerations are considered, in addition to those located within legally fixed perimeters, nuclei with a minimum of 10 dwellings served by public use roads, with their perimeter delimited by points distanced 50 m from the axis of the roads, in the transversal direction, and 20 m from the last building, in the direction of the roads.

Article 4

Urban Properties

Urban properties are all those that should not be classified as rural, without prejudice to the provisions of the following article.

Article 5

Mixed Properties

1. Whenever a property has rural and urban parts it is classified, in its entirety, according to the main part.

2. If neither of the parts can be classified as main, the property is deemed to be mixed.

Article 6

Types of Urban Properties

1 - Urban properties are divided into:

Residential;

Commercial, industrial or for services;

Land for construction;

Others.

2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, which have such purposes as their normal destination.

3 – Land for construction is considered to be land located inside or outside an urban agglomeration, for which a license or authorization has been granted, an advance notice admitted or favorable prior information issued for a subdivision operation or construction, and also those that have been declared as such in the acquisition title, excepting land in which the competent entities prohibit any of those operations, namely those located in green areas, protected areas or that, in accordance with municipal land use plans, are assigned to public spaces, infrastructure or equipment. (Amended by Law no. 64-A/08, of 31-12)

4 – Framed in the provision of subsection d) of no. 1 are land located within an urban agglomeration that are not land for construction nor are covered by the provisions of no. 2 of Article 3, and also buildings and constructions licensed or, in the absence of a license, which have as their normal destination other purposes than those referred to in no. 2 and also those of the exception of no. 3.

1. On the interpretation of Tax Rules, for the case sub judice, Article 11 of the General Tax Law tells us, which establishes the essential rules of interpretation of tax laws, which it does in the following terms:

Article 11

Interpretation

In determining the meaning of tax rules and in the qualification of the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

Whenever tax rules employ terms peculiar to other branches of law, they must be interpreted in the same sense as they have therein, unless otherwise directly provided for in the law.

Should doubt persist regarding the meaning of the rules of incidence to be applied, the economic substance of the tax facts must be considered.

The gaps resulting from tax rules covered in the reserve of law of the Assembly of the Republic are not susceptible to analogical integration.

1. To this provision, it is also necessary to resort to the general principles of interpretation of laws, to which no. 1 of Article 11 of the LGT refers, are established in Article 9 of the Civil Code, which establishes the following:

Article 9

Interpretation of Law

1 – The interpretation must not be limited to the letter of the law, but must reconstruct from the texts the legislative thought, especially taking into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

2 – However, the legislative thought that does not have in the letter of the law a minimum of verbal correspondence, although imperfectly expressed, cannot be considered by the interpreter.

3 – In determining the meaning and scope of the law, the interpreter must presume that the legislator adopted the most correct solutions and knew how to express its thought in adequate terms.

1. In light of the legal grounds already presented, and considering the articles transcribed and mentioned, the following interpretative hypotheses arise regarding the concept of "property with housing allocation", as to the Concept of "property with housing allocation" as relating to residential properties, and as to the Concept of "property with housing allocation" as a concept distinct from "residential properties".

2. It results from Articles 2 to 6 of the CIMI transcribed above, the legislator does not use, in the classification of properties, the concept of "property with housing allocation", nor is this concept, with this terminology, found in any other statute.

3. The lack of exact terminological correspondence of the concept of "property with housing allocation" with any other used in other statutes may give rise to various interpretative hypotheses.

4. The text of the law, being the starting point for the interpretation of the expression "properties with housing allocation", being on the basis of which the "legislative thought" must be reconstructed, as imposed by no. 1 of Article 9 of the Civil Code, applicable by force of the provisions of Article 11, no. 1, of the LGT, already transcribed.

5. On the interpretation of the concept of "property with housing allocation", it is important to cite award 53/2013-T which has already ruled on this matter. An award that also sustains two interpretative hypotheses to the concept of "property with housing allocation", respectively in the same sense of the present decision, as to the concept of "property with housing allocation" as relating to residential properties, and as to the Concept of "property with housing allocation" as a concept distinct from "residential properties".

6. Award 53/2013-T states, regarding the concept of "property with housing allocation" as relating to residential properties:

"The concept closest to the literal tenor of this expression used is manifestly that of 'residential properties', defined in no. 2 of Article 6 of the CIMI as encompassing 'buildings or constructions' licensed for housing purposes or, in the absence of a license, which have housing purposes as their normal destination.

If it is understood that the expression 'property with housing allocation' coincides with that of 'residential properties', it is manifest that the assessments will suffer from error on the facts and legal presuppositions, for all the properties in relation to which the Stamp Tax was assessed pursuant to the mentioned item no. 28.1 are land for construction, without any building or construction, required to fulfill that concept of 'residential properties'.

For this reason, if the interpretation is adopted that 'property with housing allocation' means 'residential property', the assessments whose declaration of illegality is requested will be illegal, for there being no building or construction in any of the lands.

However, the non-correspondence of the terms of the expression used in item no. 28.1 of the TGIS with what is extracted from no. 2 of Article 6 of the CIMI, points to the sense that it was not intended to use the same concept."

1. On the interpretation of the second hypothesis: Concept of "property with housing allocation" as a concept distinct from "residential properties", award 53/2013-T is cited again, in which it states:

"The word 'allocation', in this context of use of a property, has the meaning of 'action of assigning something to a determined use'. ( [3] )

'When, as is the rule, legal rules (legislative formulas) have more than one meaning, then the positive function of the text translates into giving stronger support to or suggesting more strongly one of the possible meanings. For among the possible meanings, some will correspond to the more natural and direct meaning of the expressions used, whereas others can only fit within the verbal framework of the rule in a forced, contrived manner. Now, in the absence of other elements that induce the choice of the less immediate sense of the text, the interpreter must generally opt for that meaning that best and most immediately corresponds to the natural meaning of the verbal expressions used, and in particular to its technical-legal meaning, in the supposition (not always exact) that the legislator knew how to correctly express its thought'. ( [4] )

The relevance of the text of the law is especially emphasized in the matter of interpretation of rules of incidence of Stamp Tax, which are reduced to an amalgam, under a common denomination, of an incongruous set of taxes of completely different natures (on income, on spending, on patrimony, on acts, etc.), which leaves no appreciable margin for the application of the primary interpretative criterion, which is the unity of the legal system, which demands its overall coherence.

The recognized lack of coherence of Stamp Tax is particularly exuberant in the case of this item no. 28.1, hastily included at the margin of the General State Budget, by a fiscal legislator without perceptible overall fiscal orientation, which is successively implementing rules of fiscal aggravation as budgetary execution setbacks occur, imposing by institutional international creditors (represented by the 'troika') and the oversight of the Constitutional Court.

In truth, although in the 'Explanatory Statement' of Bill no. 96/XII/2nd ( [5] ), on which Law no. 55-A/2012 was based, reference is made to the laudable concern of the Government to 'reinforce the principle of social equity in austerity, guaranteeing an effective distribution of the necessary sacrifices to comply with the adjustment program' and its commitment 'to ensure that the distribution of these sacrifices will be made by all and not just by those who live off the income of their work', it is manifest, on the one hand, that these reasons of equity, certainly existing, did not begin to apply in mid-2012, already existing at the beginning of the year, when the General State Budget came into force, and on the other hand, that the scope of item no. 28.1, by taxing additionally the properties with housing allocation and not also the properties that do not have such allocation, leaves it perceived that the concerns of social equity and the proclaimed intention to distribute sacrifices among all, reaches much more some than truly everyone.

In this context, with no secure interpretative elements allowing detection of legislative coherence in the solution adopted in the mentioned item no. 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretative purposes in light of no. 3 of Article 9 of the Civil Code), the tenor of the legal text must be the primary element of interpretation, in compliance with the presumption, imposed by that same no. 3 of Article 9, that the legislator knew how to express its thought in adequate terms.

In light of those meanings of the words 'allocation' and 'to allocate', which are 'to assign a destination' or 'to apply', the formula used in that item no. 28.1 of the TGIS manifestly encompasses properties that are already applied to housing purposes, so it is necessary to inquire whether it will also encompass properties that, although not yet applied to housing purposes, are destined for these and those whose destination is unknown. (…)

For this reason, it will be necessary to clarify when it can be understood that a property is allocated to a housing purpose, namely whether it is when such destination is fixed for it in a licensing act or similar, or only when the actual attribution of such destination is concretized.

First and foremost, the comparison of item no. 28.1 of the TGIS with no. 2 of Article 6 of the CIMI, which defines the concept of residential properties, manifestly points to the sense that an actual allocation is necessary.

In truth, a building or construction licensed for housing or, even without a license, but which has housing as its normal destination, is, in light of no. 2 of that Article 6, a residential property.

For this reason, on the presumption that the legislator of Law no. 55-A/2012 knew how to express its thought in adequate terms (as Article 9, no. 3, of the Civil Code imposes as a presumption), if it intended to refer to those properties already licensed for housing or which have housing as their normal destination, it would certainly have used the concept of 'residential properties', which would express perfectly and clearly its thought, in light of the definition given by that no. 2 of Article 6 of the CIMI.

Consequently, it must be presumed that the use of a different expression is intended to address a different reality, so, in good hermeneutics, 'property with housing allocation' cannot be a property merely licensed for housing or destined for that purpose (that is, it will not suffice that it be a 'residential property'), but must be a property that already has actual allocation to that purpose.

That this is the sense of the expression 'allocation', in the same context of classification of properties that the CIMI makes, is confirmed by Article 3 in which, regarding rural properties, reference is made to those 'that are assigned or, in the absence of concrete assignment, have as normal destination a use generating agricultural income', which shows that the allocation is concrete, actual. In truth, as is seen from the final part of this text, a property may have as destination a certain use and be or not be allocated to it, which shows that allocation is, at the level of the connection of a property to a certain use, something more intense than mere destination and may or may not occur, downstream of it and not upstream of it. ( [6] )

The correctness of this interpretation in the sense that only properties that are actually allocated to housing are included within the scope of item no. 28.1 of the TGIS is also confirmed by the ratio legis perceptible from the restriction of the field of application of the rule to properties with housing allocation, in the context of the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', which Article 9, no. 1, of the Civil Code also erects as interpretative elements. ( [7] ).

First and foremost, the limitation of Stamp Tax taxation to 'properties with housing allocation' leaves it perceived that it was not intended to encompass within the scope of tax incidence properties with allocation to services, industry or commerce, that is, properties allocated to economic activity, which is understood in a context where, as is well known, the economy is in a recessionary spiral, publicly proclaimed at the highest level, with unemployment rates reaching maximum historical levels, with avalanche of company closures derived from economic unsustainability. (emphasis original)

Keeping in mind this situation and being well known and public that the revitalization of economic activity and the increase in exports are the doors out of the crisis, it is understood that measures would not be legislatively taken that would hinder economic activity, namely the aggravation of the fiscal burden that hinders it and affects competitiveness in international terms.

For this reason, it is to be concluded that the available interpretative elements, including the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', clearly point to the sense that it was not intended to encompass within the scope of item no. 28.1 situations of properties that are not yet allocated to housing, namely land for construction held by companies. ( [8] )"

1. In light of the above, it is verified that the 39 fractions intended for housing are encompassed by the incidence rule by the item 28.1, as they are urban properties and properties with housing allocation, whose concept results from Article 2 of the CIMI.

2. It is now necessary, however, to decide for purposes of application of item no. 28 of the TGIS, which VPT to consider in properties in vertical regime (that is not horizontal) whether individually determined by the VPT that corresponds to each of the parts of the property with housing allocation, or whether determined by the global VPT of the property, which would correspond to the sum of all VPTs of the housing fractions that compose it.

3. On this matter, the Arbitral Tribunal of CAAD has already decided through decision no. 50/2013-T, and 132/2013 - T.

4. For the purposes of the case sub judice, it is important to state regarding decision 50/2013-T, which tells us about the treatment to be given for purposes of item 28.1 of the TGIS to properties in vertical ownership and cumulatively which VPT (individual or global) to consider:

"From this we can conclude that, in the legislator's view, what matters is not the legal-formal rigor of the specific situation of the property but rather its normal use, the purpose for which the property is intended. We also conclude that for the legislator the situation of the property in vertical or horizontal property ownership did not matter, as no reference or distinction is made between them. What matters is the material truth underlying its existence as an urban property and its use."

1. It is also important to mention from the respective decision:

"Using the criterion that the law itself introduced in Article 67, no. 2 of the Stamp Tax Code, 'to matters not regulated in the present code concerning item 28 of the General Table applies subsidiarily'.

Now, being thus, considering that the registration in the assessment roll of properties in vertical ownership, constituted by different parts, floors or units with independent use, in accordance with the CIMI, obeys the same registration rules as properties constituted in horizontal ownership, with the respective IMI, as well as the new IS, being assessed individually in relation to each of the parts, it leaves no doubt that the legal criterion to define the incidence of the new tax must be the same. (…)

Therefore, if the legal criterion requires the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, it clearly established the criterion, which must be unique and unequivocal, for defining the rule of incidence of the new tax.

Thus, the incidence of the new stamp tax would only occur if any of the parts, floors or units with independent use had a VPT exceeding €1,000,000.00.

The AT cannot therefore consider as reference value for the incidence of the new tax the total value of the property, when the legislator itself established a different rule in the context of CIMI, and this is the code applicable to matters not regulated regarding item 28 of the TGIS.

The criterion sought by the AT, of considering the value of the sum of the VPTs attributed to the parts, floors or units with independent use, with the argument that the property is not constituted in the regime of horizontal property, finds no legal support and is contrary to the criterion that results from application in the context of CIMI and, by referral, in the context of IS.

To which is added the fact that the law itself expressly establishes, in the final part of item 28 of the TGIS, that the IS to fall upon urban properties of value equal to or greater than €1,000,000.00 – 'on the taxable property value used for IMI purposes.'

Thus, the adoption of the criterion defended by the AT violates the principles of legality and fiscal equality, as well as the prevalence of material truth over legal-formal reality.

The fiscal legislator in Article 12, no. 3 of the CIMI says that 'each floor or part of a property capable of independent use is considered separately in matricial registration which equally discriminates its respective taxable property value.' It does not make any distinction as to the regime of properties that are in horizontal or vertical ownership; if the property were in the regime of horizontal property, none of its housing fractions would be subject to the incidence of the new tax, so the AT cannot treat equal situations differently."

1. In the same sense decided the decision of the arbitral tribunal of CAAD, no. 132/2013-T:

"Moreover, admitting the differentiation of treatment could produce results that are incomprehensible from a legal point of view and contrary to the objectives that the legislator said it had for adding item no. 28. By way of example, suppose the following hypothesis, which seems plausible in light of the interpretation made by the now Respondent: a citizen who is the owner of a property constituted in full ownership intended for housing, with the global value of the autonomous units equal to or exceeding €1,000,000.00 and the VPT of each one less than €1,000,000.00, is subject to annual taxation of 1% of that value (as occurred in the situation under review); while another citizen who holds a property with the exact same characteristics as the previous one but which has been constituted in horizontal property ownership, with, equally, the global value of the autonomous fractions equal to or exceeding €1,000,000.00 and the VPT of each one less than €1,000,000.00, will not be subject to taxation under the mentioned item no. 28...

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

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

Observing now the case under review, it is found that the VPTs of the floors (autonomous units) of the property with housing allocation vary between €104,140.00 and €113,780.00, so any one of them is less than €1,000,000.00. From this it is concluded, as a result of what was mentioned, that the stamp tax referred to in item no. 28 of the TGIS cannot fall upon them, being, therefore, the assessment acts challenged by the claimant illegal."

1. In light of the above, and applying what is told to us by the abovementioned decisions, to the present case, it results that for purposes of application of item 28 of the TGIS to properties in vertical ownership, the same rules of the CIMI that apply to properties in horizontal ownership apply, and in the same sense the VPT for purposes of application of the item is the individual VPT of each independent housing fraction, and in the present case none of the fractions exceeds the criterion of incidence of €1,000,000.00.

2. Material truth is what imposes itself as the determining criterion of tax capacity and not the mere legal-formal reality of the property, since the establishment of horizontal property ownership implies a mere legal alteration of the property not even imposing a new evaluation that now such finding does not seem coherent with the decision of the AT to tax the housing parts of a property in vertical ownership, based on the global VPT of the property and not on what is effectively attributed to each part.

3. The current legal regime does not impose an obligation for the establishment of horizontal property ownership, so the AT's action translates into an arbitrary and illegal discrimination. The AT cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the fiscal system, as well as the principle of fiscal legality provided for in Article 103, no. of the CRP, and also the principles of fiscal justice, equality and proportionality.

4. As none of the fractions intended for housing has a property value equal to or greater than €1,000,000.00, as results from the documents attached to the proceedings, it is concluded that the legal presupposition of IS incidence provided for in Item 28 of the TGIS is not met.

5. In this manner, the present tribunal concludes for the declaration of illegality of the assessments sub judice, for suffering from the defect of violation of that item no. 28.1, by error on the legal presuppositions, which justifies the declaration of its illegality and annulment (Article 135 of the CPA).

J - INDEMNIFICATORY INTEREST

1. The Claimant further petitions for the payment of indemnificatory interest.

2. In light of the above, the assessment of the IS, in the part covered by the annulment, which will be decreed, results from errors of fact and law attributable exclusively to the tax administration, insofar as the Claimant fulfilled its duty to declare and were committed by it and could not be unaware of different understandings.

3. In truth, being demonstrated that the Claimant paid the impugned tax in the part exceeding what is due, by force of the provisions of Articles 61 of the CPPT and 43 of the LGT, the Claimant has the right to the indemnificatory interest owed, such interest to be counted from the date of payment of the undue tax (annulled) until the date of issuance of the respective credit note, with the period for such payment being counted from the beginning of the period for spontaneous execution of the present decision (Article 61, nos. 2 to 5, of the CPPTRIB), all at the rate determined in accordance with the provisions of no. 4 of Article 43 of the LGT.

4. The Claimant's petition is granted.

J - RESTITUTION OF JUDICIAL COSTS

1. The Claimant petitions for the condemnation of the Respondent to restitution of judicial costs in the amount of €152.80.

2. In accordance with Article 2 (Competence of arbitral tribunals and applicable law) the competence of tax arbitration is limited to "a) The declaration of illegality of tax assessment acts, self-assessment acts, withholding at source acts and payment on account acts; b) The declaration of illegality of acts fixing the taxable matter when not giving rise to the assessment of any tax, of acts determining the taxable income and of acts fixing property values;".

3. In these terms the present tribunal is incompetent to appraise the legality or condemn the Respondent to restitution of judicial costs, of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December.

I - DECISION

Therefore, having considered all of the above, the present Arbitral Tribunal decides:

a. To judge founded the petition for declaration of illegality of the tax assessment acts under Stamp Tax, nos. 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016... and 2016..., which fixed a total tax payable of €5,281.44 (five thousand, two hundred eighty-one Euros and forty-four cents) for the defect of violation of law as to the rule contained in item 28, no. 1, by error on the legal presuppositions, which justifies the declaration of its illegality and annulment.

b. Condemns the Respondent to reimburse to the Claimant that amount improperly assessed and paid plus the payment of indemnificatory interest already accrued relating to the period from the payment of the tax in accordance with nos. 2 to 5 of Article 61 of the CPPT and at the rate determined in accordance with the provisions of no. 4 of Article 43 of the LGT until full reimbursement.

c. Judges not founded the petition for condemnation of the Respondent to restitution of judicial costs in the amount of €152.80.

The value of the case is set at €5,434.24 (five thousand four hundred thirty-four Euros and twenty-four cents) taking into account the economic value of the case assessed by the value of the tax assessments challenged, and in accordance the costs are set, in the respective amount at €612.00 (six hundred twelve Euros), at the charge of the Respondent in accordance with Article 12, no. 2 of the Tax Arbitration Regime, of Article 4 of the RCPAT and of Table I attached to the latter. – no. 10 of Article 35, and nos. 1, 4 and 5 of Article 43 of the LGT, Articles 5, no. 1, subsection a) of the RCPT, 97-A, no. 1, subsection a) of the CPPT and 559 of the CPC).

Notify.

Lisbon, 12 October 2016

The Arbitrator

Dr. Paulo Ferreira Alves