Stamp Tax on Vertical Property: CAAD Annuls Assessments on Independent Units Below €1M Threshold

Arbitration Decision

I – Report

1. On 17 June 2016, the Head of the Undivided Estate of A..., with Tax ID number ..., with domicile in ..., ... Lisbon, came before this tribunal pursuant to the terms and conditions of Article 2(1)(a) and Articles 15 et seq. of the Legal Regime of Tax Arbitration (RJAT), to submit a request for arbitral pronouncement and declaration of illegality and annulment of nine acts of stamp duty tax assessments for the year 2015, in the total amount of €15,062.20 (fifteen thousand and sixty-two euros and twenty cents), and to request that the State be condemned to pay compensatory interest on the stamp duty unlawfully paid.

2. In the Request for arbitral pronouncement, the Claimant opted not to appoint an arbitrator, and accordingly, pursuant to Article 6(1) of the RJAT, by decision of the President of the Deontological Council, the undersigned was appointed as sole arbitrator, and accepted the position within the legally prescribed time limit.

3. The parties were notified of this appointment and did not express any intention to challenge it, and the arbitral tribunal was thereby constituted on 21 September 2016.

4. On 10 October 2016, the Tax and Customs Authority (AT or Respondent) submitted a Reply, requesting exemption from the production of witness evidence, the holding of the meeting provided for in Article 18 of the RJAT, and the submission of written pleadings.

5. With the agreement of the Claimant, the tribunal decided to dispense with the meeting provided for in Article 18 of the RJAT as well as the submission of written pleadings, and set 16 January 2017 as the date for communication of the arbitral decision.

6. The Request for Pronouncement

The Claimant sustains, in summary (our responsibility):

• The undivided estate of A... includes a building composed of a total of ten storeys and units with independent use whose patrimonial values (VPT) determined under the CIMI vary between €18,700.00 and €260,970.00, totalling, in total, €1,524,920.00, with nine of the said ten storeys being allocated to residential use and totalling a total VPT of €1,506,220.00.

• On each of these nine storeys, the AT assessed, for the year 2015, Stamp Duty as provided in item 28.1 of the General Table of Stamp Duty (TGIS) annexed to the Stamp Duty Tax Code, as amended by Article 4 of Law No. 55-A/2012, of 29 October, at the rate of 1%, on the ground that the nine storeys or units have residential allocation and their respective patrimonial tax values total the sum of €1,506,220.00.

• Regarding assessments relating to these storeys for the years 2012, 2013 and 2014, arbitral decisions for the annulment of the tax acts have already been issued.

• Since the subjection to stamp duty under item 28.1 of the TGIS is determined by the combination of residential allocation and VPT shown in the cadastre equal to or greater than €1,000,000, in the case of a building such as that in the present case, which includes storeys or units with independent use, the subjection to stamp duty is determined not by the VPT of the building but by the VPT of those storeys or units.

• The AT itself acknowledges this in the assessment acts by declaring as the total value subject to tax only the VPT relating to the storeys or units with independent use that make up the building, excluding all others.

• In the case of a building such as that in the present case, comprising storeys or units with independent use, the subjection to stamp duty is not determined by the sum of the VPTs of all those storeys or units but by the VPT of each one.

• Under the CIMI, each storey or part of a building susceptible to independent use is considered separately in the cadastral registration (Article 12(3) of the CIMI) and it is precisely to the "VPT shown in the cadastre" that the law directs attention for determining the incidence of stamp duty under item 28 of the TGIS and not to the sum of that VPT and the VPTs of the other storeys and parts existing in the same building.

• Since the VPT of each of the storeys shown in the cadastre, under the CIMI, is less than €1,000,000, stamp duty under item 28.1 of the TGIS, here contested, does not apply, and therefore the assessment acts here contested are unlawful by violation of the incidence rule of item 28.1 of the TGIS.

• The AT's position of considering the subjection of each storey not by its respective VPT but by the sum of the VPTs of all the storeys has no minimal correspondence in the letter of item 28.1 of the TGIS.

• But nor does it have any correspondence with the meaning of item 28.1 of the TGIS because this aims not at buildings as such but at the residences within them, being indifferent as to other buildings without residential allocation.

• In the event that the subjection of each residence to the tax under item 28 of the TGIS were to be determined by the other independent residences existing in the same building, the taxable event would cease to be the value of the residence but the concentration of several residences in a given building, and this is not a cause of incidence of stamp duty under item 28 of the TGIS on each one, just as the concentration of several residential buildings in the ownership of the same person does not constitute a cause of its incidence on a residential building.

• Since it cannot constitute a cause of such incidence, possibly, the failure to constitute in a horizontal property regime a building composed of independent residences, the legal form of property in the building cannot be determinative of such incidence.

• Being a tax on real estate property, stamp duty under item 28 of the TGIS would thus tax differently the ownership of real estate property of equal value held by two different persons, depending on the location of the buildings – centralized or dispersed – but the concentration or dispersal of real estate being a criterion of contributory capacity or any other legitimate criterion of taxation would constitute a violation of the principle of equality (Article 13 of the CRP), which would render unconstitutional item 28 of the TGIS annexed to the CIS.

• The present case cannot have different treatment from that given to storeys or autonomous parts of an identical building constituted in a horizontal property regime, as has been repeatedly reaffirmed in multiple arbitral and state court decisions that address this same problem and which have established the same solution.

• The present arbitral action should be ruled entirely proven and well-founded and the nine stamp duty assessment acts here contested should be declared illegal and annulled, with all legal consequences, namely the condemnation of the State to pay compensatory interest to the claimant on the stamp duty which, as a consequence of those acts, has been unlawfully paid.

1. The Reply

The Respondent replied, in summary (our responsibility):

• Stamp duty under item 28.1 applies to the ownership, usufruct or right of superficies of urban buildings whose patrimonial tax value shown in the cadastre, under the Municipal Tax on Real Estate Code (CIMI), is equal to or greater than €1,000,000.00, the relevant value being the total patrimonial value of the urban building and not the patrimonial value of each one of the parts that compose it, even when they are susceptible to independent use, and the assessments do not violate the literal meaning of item 28.1 of the General Table.

• The patrimonial tax value of all storeys with independent use and residential allocation that make up said urban building was determined separately, pursuant to Article 7(2)(b) of the Municipal Tax on Real Estate Code (CIMI) and the taxable persons for stamp duty (Article 2(4) of the CIS) are the taxable persons for IMI, upon whom the tax burden falls (Article 8 of the CIMI (Article 3(3)(u) of the CIMI)).

• Article 80(2) of the CIMI states that, except as provided in Articles 84 and 92, each building corresponds to a single entry inscribed in the cadastre, and this principle is only excepted with respect to mixed buildings, in which according to Article 84, each distinct part is inscribed in the cadastre in the proportion belonging to it, and with respect to buildings constituted in horizontal property in which, although under Article 2(4) of the CIMI, each autonomous unit is deemed to constitute a building, each building under horizontal property regime corresponds to a single cadastral registration;

• In the present case, the urban building was not constituted under a horizontal property regime on the date of the taxable event for stamp duty (31.12.2015) – in which case each of the autonomous units would be deemed to be an urban building, including for purposes of subjection to stamp duty under item 28.1 of the General Table – but rather under a vertical property regime.

• And as shown in the respective cadastral record of storeys or independent units, assessed pursuant to Article 12(3) of the CIMI (each storey or building susceptible to independent use is considered separately in the cadastral registration, which also distinguishes the respective patrimonial tax value on which IMI is assessed), for purposes of cadastral registration, the autonomy matters which, within the same building, can be attributed to each of its parts, economically and functionally independent.

• In that case, the cadastral registration must make reference to each of the parts and also to the patrimonial value corresponding to each of them, determined separately pursuant to Articles 37 et seq. of the CIMI, but the unity of the urban building in vertical property composed of several storeys or units is not affected by the fact that all or some of those storeys or units are susceptible to independent economic use, and it does not cease to be just one, nor are its distinct parts juridically equivalent to autonomous units under a horizontal property regime.

• In summary, the fact that the IMI was calculated based on the patrimonial tax value of each part of a building with independent economic use does not equally affect the application of Article 28(1) of the General Table, concluding that the assessments contested are legal, and the Claimant's claim should be considered without merit and the Respondent absolved of all claims.

1. Question to be Decided

The fundamental legal question to be decided consists in determining whether the scope of the incidence of Stamp Duty provided for in Item 28 of the TGIS includes urban buildings not constituted under a horizontal property regime but composed of storeys or units susceptible to independent use with residential allocation, when the patrimonial tax value attributed to each of these distinct parts is less than the value of €1,000,000.00, even though the aggregate of the independent residential units reaches a total VPT equal to or greater than that amount.

1. Preliminary Matters

The arbitral tribunal is materially competent, pursuant to the provisions of Articles 2(1)(a) of the Legal Regime of Tax Arbitration.

The parties have legal personality and capacity and have standing pursuant to Articles 4 and 10(2) of the Legal Regime of Tax Arbitration (RJAT) and Article 1 of Ordinance No. 112-A/2011, of 22 March.

The case does not suffer from any nullity and the parties have not raised any exceptions that would prevent the examination of the merits of the case, and therefore the conditions are present for the issuance of the arbitral decision.

II – Reasoning

1. Established Facts

It is considered established that:

10.1. The undivided estate of A... includes the building composed of ten storeys and units with independent use located at ..., Sítio do ..., registered in the urban land cadastre under article ...-U of the parish of ..., Lisbon (Article 3 of the Request for pronouncement and Article 1 of the Reply).

10.2. The building that is the subject of the present case is composed of ten (10) storeys or units susceptible to independent use, nine (9) of which are intended for residential use (Article 1 of the Reply and Document No. 3 attached with the Request, the contents of which are considered reproduced).

10.3. The sum of the patrimonial values of the ten units referred to in the previous number is €1,524,220.00 and the storeys or units classified as allocated to residential use, numbering nine, total a patrimonial value of €1,506,220.00 (Articles 3 and 4 of the Request and Article 3 of the Reply).

10.4. The patrimonial tax values of each of the units with independent use and allocated to residential use, determined according to the CIMI, in the year 2015, are: €214,910.00 (U-… -C.NAS); €173,020.00 (U…– C.PAT); €117,790.00 (U-…-POE); €231,510.00 (U-…-C.POT); €181,010.00 (U-…-C.SUL); €260,970.00 (U-…-MOINH) and €98,420.00 (U-…-R/C); €112,560.00 (U-… -1º); €116,030.00 (U-…-2º) (Documents 1 and 3 attached with the Request).

10.5. The Claimant was notified of assessments, dated 5 April 2016, of Stamp Duty as provided in item 28.1 of the TGIS, relating to the year 2015, regarding the units allocated to residential use, to be paid in three installments, according to Article 120 of the CIMI (Collection documents contained in Document No. 1, attached with the Request).

10.6. The notifications of the assessments referred to in the preceding number identify the amounts corresponding to the 1st installment of the tax assessed, for payment in April 2016, in the amounts, respectively, of €716.38, €576.79, €392.64, €771.70, €603.38, €869.90, €328.08, €375.20 and €386.78. (documents with the numbers 2016…; 2016…; 2016…; 2016…; 2016…; 2016…; 2016…; 2016… and 2016…) (Collection documents attached to the case with the Request).

10.7. The collection documents indicate as the patrimonial value of the building subject to tax €1,506,220.00 corresponding to the total value of the nine units allocated to residential use and that the assessment of Stamp Duty, made on 5 April 2015, was based on item 28.1 of the General Table of Stamp Duty, applying the rate of 1% to the VPT value of each of the units, which results in collection amounts of €2,149.10 €1,730.20 €1,177.90, €2,315.10, €1,810.10, €2,609.70, €984.20, €1,125.60; €1,160.30 (Collection documents attached with the Request).

1. Unestablished Facts

There are no unestablished facts relevant to the decision of the present case.

1. Basis of the Evidence

The evidence was based on the documents submitted by the Claimant – the Request for arbitral pronouncement and the documents attached to the request – and on the Reply of the Respondent, which did not submit the administrative file, accepting and citing the documentation submitted by the Claimant.

1. Legal Evaluation

13.1. Item 28 of the General Table of Stamp Duty (TGIS)

13.1.1. Regime Approved by Law No. 55-A/2012, of 29 October

The fundamental legal question, which is disputed in the present case, consists in determining whether in the case of buildings in full ownership, with storeys or units of independent use but not constituted under a horizontal property regime, the VPT to be considered for purposes of the incidence of Stamp Duty provided for in item 28.1 of the TGIS should correspond to the VPT of each storey or unit with residential allocation and independent use or to the sum of the VPTs corresponding to the storeys or units of independent use with residential allocation.

That is to say, it must be determined whether the VPT relevant as the criterion of incidence of the tax is the VPT attributed to each one of the parts or residential storeys or corresponding to the sum of the patrimonial tax value attributed to each of the different parts or storeys (global VPT).

This question has already been examined in many cases within Tax Arbitration, and so far no arguments have been identified that would break the unanimity that has been achieved regarding the conclusion of the decisions rendered.

Item 28 of the General Table of Stamp Duty, annexed to the Stamp Duty Tax Code (CIS), was added by Article 4 of Law No. 55-A/2012, of 29 October, with the following content:

"28 – Ownership, usufruct or right of superficies of urban buildings whose patrimonial tax value shown in the cadastre, under the Municipal Tax on Real Estate Code (CIMI), is equal to or greater than €1,000,000 – on the patrimonial tax value for purposes of IMI:

28-1 – Per building with residential allocation – 1%;

28.2 – Per building, when the taxable persons who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, shown in the list approved by ordinance of the Minister of Finance – 7.5%."

As results from the amendments to the Stamp Duty Code introduced by Article 3 of Law No. 55-A/2012, of 29/10, Stamp Duty provided for in item 28 of the TGIS applies to a legal situation (Article 1(1) and Article 2(4) of the CIS), in which the respective taxable persons are those referred to in Article 8 of the CIMI (Article 2(4) of the CIS), upon whom the tax burden falls (Article 3(3)(u) of the CIS).

The CIS, as amended by Law No. 55-A/2012, whether in Article 4(6) ("In the situations provided for in item 28 of the General Table, the tax is due whenever the buildings are located in Portuguese territory"), or in Article 23(7) ("Regarding tax due for situations provided for in item 28 of the General Table, the tax is assessed annually, in relation to each urban building, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI"), in conjunction with Article 1 of the CIMI, considers the building itself as the taxable event (the situation that triggers taxation) provided it reaches the value provided for in item 28 of the General Table of Stamp Duty, regardless of the number of taxable persons, holders (as owners, usufructuaries or holders of surface rights) of the goods in question.

The provisions of Law No. 55-A/2012, of 29 October, regarding the new item 28 of the General Table of Stamp Duty, entered into force on the day following the publication of the law, that is to say, 30 October 2012.

At the time of the situation under examination, the amendment introduced by Law No. 83-C/2013, of 31 December (Budget for 2014), was already in effect, which amended item 28.1 to read: "Per residential building or per building land for construction whose development, authorized or planned, is for residential use, as provided in the Real Estate Tax Code".

That is to say, the relevant concept in a case such as the present one – assessment relating to 2015 – changed from "building with residential allocation" to "residential building", and it seems to us that this amendment is not susceptible to altering the interpretation that we have been defending in situations relating to years prior to 2014.

13.1.2. The Concept of Building Used in Item 28 of the TGIS

Neither the concept of "buildings with residential allocation" in the original version of item 28.1 nor that of "residential building" in the later version are expressly defined in any provision of the CIS nor in the CIMI, the instrument to which Article 67(2) of the CIS refers.

In the present case, the building in full ownership is composed of ten (10) units or parts susceptible to independent use, nine (9) of which are intended for residential use. The patrimonial tax values of these nine units allocated to residential use range between €18,700.00 and €260,970.00, totalling the amount of €1,506,220.00.

At issue is the exact meaning of the segment of the tax incidence rule of stamp duty in the body of item 28 of the TGIS that refers to the patrimonial tax value under the CIMI: in the case of buildings in full ownership but with storeys or units susceptible to independent use, with residential allocation, the VPT relevant to consider corresponds to the sum of the VPT of the various units/storeys with residential allocation, the group being considered a single building, as the AT contends, or what must be taken into account is the VPT of each of the respective autonomous storeys or units with said residential allocation, as the Claimant contends?

Now the said segment (value for purposes of IMI) is integrated into a text that defines as the object of incidence of stamp duty the "Ownership, usufruct or right of superficies of urban buildings whose patrimonial tax value shown in the cadastre, under the Municipal Tax on Real Estate Code (CIMI), is equal to or greater than €1,000,000 - (...)" (emphasis added).

As has been repeatedly invoked and admitted, the Real Estate Tax Code consecrates, both as regards cadastral registration and discrimination of the respective patrimonial tax value and as regards the assessment of the tax, the autonomization of the parts of urban buildings susceptible to independent use and the segregation/individualization of the VPT relating to each storey or part of a building susceptible to independent use.

Thus, each building (edifice) corresponds to a single entry in the cadastre (Article 82(2) of the CIMI) but, according to Article 12(3) of the same Code, relating to the concept of the property cadastre (registration of the building, its characterization, location, VPT and ownership), "each storey or part of a building susceptible to independent use is considered separately in the cadastral registration, which distinguishes the respective patrimonial tax value", and the reference is not the sum of the patrimonial values attributed to the autonomous parts of the same building but the value attributed to each of them individually.

As regards the assessment of IMI – application of the rate to the taxable base – Article 119(1) of the CIMT provides that "the competent collection document" contains the "discrimination of buildings, their parts susceptible to independent use, respective patrimonial tax value and the collection amount (...)".

That is to say, for tax purposes, the rule is autonomization, the qualification also as a "building" of each part of an edifice, provided it is functionally and economically independent, susceptible to independent use, in accordance with the concept of building defined at the outset in Article 2(1) of the CIMI: a building is any plot (of land, comprising waters, plantations, buildings and constructions of any nature incorporated therein or built thereon, with a permanent character) provided that it forms 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 circumstances above, endowed with economic autonomy (presentation and emphasis ours).

Thus, when Article 2(4) provides that "For purposes of this tax, each autonomous unit, under a horizontal property regime, is deemed to constitute a building", it does not establish a genuinely exceptional or special regime for buildings in horizontal property.

Indeed, each building in horizontal property (Article 92) has only a single cadastral registration (No. 1), generically describing the building and mentioning the fact that it is under a horizontal property regime (No. 2) and cadastral autonomy is realized through the attribution to each of the autonomous units, detailed and individualized, of a capital letter, in alphabetical order (No. 3). This appears to be the specificity of buildings in horizontal property.

But in other cases, of buildings in vertical or full property, units or storeys with independent use and autonomy but without the status of horizontal property, the cadastre also establishes autonomy from a fiscal perspective by showing the different units with indication of the type of floor/storey.

Thus, the Respondent's thesis that "the unity of the urban building in vertical property composed of several storeys or units is not, however, affected by the fact that all or some of those storeys or units are susceptible to independent economic use" (Article 20 of the Reply), is not sufficient to render irrelevant the economic and fiscal autonomy that we found above to be established in the CIMI in the case of units or storeys susceptible to independent use, without horizontal property status, comprised in buildings in full ownership.

Nor does the defense appear convincing that "Such a building is still only one, and thus its distinct parts are not juridically equivalent to autonomous units under a horizontal property regime" (Article 21 of the Reply).

Indeed, the defense of an interpretation based on an institutional difference between the two property situations – and in which the AT has frequently perceived in item 28 of the TGIS a legislative intent to promote the figure of horizontal property – does not appear to us to result either from the letter of the provision or from its comparison with other norms of the legal system, from which no justification results for, in the matter of the incidence of Stamp Duty provided for in item 28.1 of the TGIS, giving to units of buildings in "vertical property", endowed with autonomy, treatment different from that afforded to buildings in horizontal property, when in either of those situations the IMI is applied to the patrimonial value shown in the cadastre for each of the autonomous units.

And there is no element in the legislative process that led to the approval of Law No. 55-A/2012, of 29 October, that would make it possible to identify and legitimize a purpose (extra-fiscal or fiscal) in the sense of the difference sustained by the Respondent between the two situations: ownership of a building in full property or its division into units with horizontal property status.

13.2. The Ratio Legis of Items 28 and 28.1 of the TGIS

The interpretation sustained above, resulting from the analysis of the letter of the law and its incorporation into the body of other applicable tax norms, is also the most consistent with the spirit of the legislative amendments introduced by Law No. 55-A/2012, of 29 October.

As has already been evidenced in other arbitral decisions, "the legislator, in introducing this legislative innovation, considered as the determining element of contributory capacity urban buildings, with residential allocation, of high value (luxury), more precisely, of value equal to or greater than €1,000,000.00, on which a special rate of stamp duty began to apply, intending to introduce a principle of taxation on the wealth manifested in the ownership, usufruct or right of superficies of high-value urban buildings with residential allocation. For that reason, the criterion was the application of the new rate to urban buildings with residential allocation, whose VPT is equal to or greater than €1,000,000.00" (...). "The justification for the measure designated as 'special tax on high-value residential urban buildings' is based on the invocation of the principles of social equity and tax justice, calling upon the holders of properties of high value intended for residential use to contribute in a more intensive manner, applying the new special rate to 'houses valued at equal to or greater than 1 million euros. Clearly the legislator understood that this value, when attributed to a residence (house, autonomous unit or storey with independent use) expresses a contributory capacity above average and, as such, is capable of determining a special contribution to ensure the fair apportionment of the tax burden."

In light of the legislative purpose, it can be further concluded that the holding of units in full or vertical property does not reveal greater contributory capacity than if they were constituted under the form of horizontal property.

On the contrary, in most cases, as evidenced by Arbitral Decision No. 50/2013, "many of the buildings existing in vertical property are old, with undeniable social utility, as in many cases they house residents with modest and more accessible rents, factors that must necessarily be taken into account."

This analysis from this perspective also confirms the correctness of the interpretation that item 28 of the TGIS does not encompass each of the storeys, units or parts susceptible to independent use when only from the sum of their respective patrimonial tax values does a VPT greater than that provided for in said item result.

As decided in other arbitral cases, this tribunal understands that regarding the date of constitution of the tax obligation, tax connection, determination of the taxable base, assessment and payment of the stamp duty in question, the corresponding rules of the CIMI are applicable, by express referral of Articles 5(1)(u), 4(6), 23(7), 44(5), 46(5) and 49(3) of the CIS.

Thus, and even without understanding that item 28 would be vitiated by unconstitutionality due to different treatment of situations that are tax-wise identical, it is considered that "The justification for the measure designated as 'special tax on high-value residential urban buildings' was based on the invocation of the principles of social equity and tax justice, calling upon the holders of properties of high value intended for residential use to contribute in a more intensive manner, applying the new special rate to 'houses valued at equal to or greater than 1 million euros. Clearly the legislator understood that this value, when attributed to a residence (house, autonomous unit or storey with independent use) expresses a contributory capacity above average and, as such, is capable of determining a special contribution to ensure the fair apportionment of the tax burden."

That is to say, item 28 will have intended to target buildings which, individually, have a value greater than one million because it was understood that this value would be the threshold of expression of "luxury residence", not intending, from that perspective, to target buildings which only when combined with others of the same holder (regardless of whether or not they have the legal form of horizontal property) reach that value.

This legislative choice may or may not merit agreement, and is moreover confronted with the alternative (and their respective advantages and real possibilities) of global taxation of property or, at least, of the aggregate of all real estate of the same holder. But it cannot be overlooked that it was the choice affirmed by the legislator which in the letter of the law left no indication to the contrary.

Thus, the present arbitral tribunal concludes that the assessments of Stamp Duty, made on the basis of item 28/28.1 of the TGIS, relating to each of the storeys or parts susceptible to independent use, property of the Claimant, subject of the present case, are vitiated by illegality, because the said legal provisions cannot be interpreted in the sense of their application to storeys or parts susceptible to independent use of a building in vertical property when only from the sum of each of these storeys or parts can a VPT equal to or greater than €1,000,000.00 (one million Euros) be obtained, not reaching the VPT of each of the said storeys or parts that amount.

This was also decided recently by the STA [Supreme Administrative Court], which has been reiterating positions previously held. By way of example, reference is made to Decision 0166/16, of 4 May 2016, which concluded: "I - Item 28 of the General Table of Stamp Duty (TGIS) added by Article 4 of Law No. 55-A/2012, of 29/10, does not apply to urban buildings, with a single cadastral entry but composed of parts with allocation and independent use to which independent VPTs were attributed, each of which has a value less than one million euros. II - Since item 28 of the General Table has not made any distinction between buildings under a horizontal property regime and full/vertical property and refers to the patrimonial tax value used for purposes of IMI, it will not be incumbent on the party applying it to introduce any distinction, especially since it is a rule of incidence. III - If it were the legislator's intention to tax real estate which, having a single cadastral entry, because they are composed of parts susceptible to independent use, have assigned different patrimonial tax values, and it intended that for purposes of taxation in the context of stamp duty, in this case, attention be paid to the sum of these different patrimonial tax values, it would not have added the final part of the provision: on the patrimonial tax value used for purposes of IMI. IV - Nothing in the law imposing consideration of any summing of all or some of the VPTs attributed to the various parts of a building with a single cadastral entry, it is also shown to be contrary to law to perform such an arithmetic operation only for the purpose of the taxation established in item 28 of the General Table of Stamp Duty".

And as evidenced, in an identical situation, by the Decision rendered by the STA, on 24 May 2016, in case 01344/15, there is no need for examination of item 28 of the TGIS, "in light of constitutional principles and parameters, but rather a teleological and systematic interpretation of the same is required, and therefore, the legal interpretation that has been followed by the common courts, and which will now be followed, does not violate the good doctrine imposed by that Constitutional Court."

In the present case, it results from the facts established that none of the storeys intended for residential use, of the building in vertical property that is the subject of this case, has a patrimonial value equal to or greater than €1,000,000.00, and therefore it is concluded that the legal requirement for the incidence of IS provided for in Item 28 of the TGIS is not met, with the consequent illegality of the tax acts under examination.

In the event that the tax has, in the meantime, been paid – evidence not produced in the case – there will still be grounds, as has been peacefully understood, by application of Article 24(5) of the RJAT, when there is an erroneous interpretation and application by the Respondent of a rule of tax incidence, for payment of compensatory interest pursuant to Articles 43 and 100 of the LGT [General Tax Law].

1. Decision

Based on the grounds set out above, the arbitral tribunal decides:

a) To find the request for arbitral pronouncement well-founded and, in consequence, to declare illegal the tax acts of assessment of Stamp Duty (items 28 and 28.1 of the General Table of Stamp Duty) applying to the buildings identified in the present case, and relating to 2015, as expressed in the collection documents identified with assessment note numbers 2016…; 2016…; 2016…; 2016…; 2016…; 2016…; 2016…; 2016… and 2016…, ordering the annulment of the Stamp Duty assessed regarding the year in question, in the total amount of €15,062.20 (fifteen thousand and sixty-two euros and twenty cents), as requested, and with all legal consequences, including the reimbursement of tax that may have been paid in the meantime and, in that case, payment of compensatory interest due.

b) To condemn the Respondent in costs.

1. Value of the Case

In accordance with the provisions of Article 315(2) of the CPC, Article 97-A(1)(a) of the CPPT and also Article 3(2) of the Regulation of Costs in Tax Arbitration Cases, the value of the case is fixed at €15,062.20 (fifteen thousand and sixty-two euros and twenty cents).

1. Costs

For the purposes of the provisions of Article 12(2) and Article 22(4) of the RJAT and Article 4(4) of the Regulation of Costs in Tax Arbitration Cases, the amount of costs is fixed at €918.00 (nine hundred and eighteen euros), pursuant to Table I annexed to said Regulation, to be borne entirely by the Respondent.

Lisbon, 16 January 2017.

The Arbitrator

Manuela Roseiro

[1] Regarding the application of item 28 of the TGIS in the case of buildings in full/vertical property, a very high number (hundreds) of decisions are already published on the CAAD tax jurisprudence website.

[2] It being provided (Article 6 of Law No. 55-A/2012) transitional provisions regarding the application in that first year of effectiveness which are irrelevant in the present case (assessments relating to 2015).

[3] "Another aspect that should be highlighted in the cadastre concerns the need to show the autonomy which, within the same building, can be attributed to each of its parts, functionally and economically independent. In these cases, the cadastral registration must not only make reference to each of the parts but must make express reference to the patrimonial value corresponding to each of them" (Silvério Mateus and Freitas Corvelo, "Real Estate Property Taxes and Stamp Duty, Commented and Annotated", Engifisco, Lisbon 2005, pages 159 and 160). And the same authors further stated (ibid., p. 160): "This autonomization of the autonomous parts of a building, applicable above all to urban buildings, was justified in the context of the former Property Tax in which the collectible income corresponded to the rent or rental value of each of these components, continued to be justified in the case of Municipal Tax in which the patrimonial value had underlying effective or potential rent and continues to be relevant in the context of IMI, given that the valuation factors provided for in Articles 38 et seq. may not be the same for all these components (...) the fact of whether a building is or is not rented continues to have relevance for purposes of determining the patrimonial tax value both for purposes of IMI and for IMT (see Article 17 of DL 287/2003)" (they referred to the original version "transitional regime for rented urban buildings", a norm to be reviewed, according to its No. 5, when the law of urban rental was revised, which happened with Law No. 6/2006, of 27/02).

[4] On this point, and in line with the commentary cited in the preceding note, see the reasoning contained in the decision of case No. 248/2013-T: "The autonomization in the cadastre of the parts functionally and economically independent of a building in full property is related to reasons of a fiscal and extrafiscal nature. On the fiscal level, this autonomization concerns the very determination of the patrimonial tax value, which constitutes the taxable base of the IMI, given that the formula for determining this value, provided for in Article 38 of the same Code, includes factors that vary depending on the use assigned to each of these parts. On the extrafiscal level, this autonomization continues to find justification in the relevance attributed to the patrimonial tax value of buildings and their autonomous parts in urban rental legislation." It also mentions Article 15-O(1) of Decree-Law No. 287/2003, of 12/11, amended by Law No. 60-A/2011, of 30/11 (providing that the safeguard clause relating to the increase of taxation in IMI resulting from the general assessment of urban buildings, is applicable per building or part of an urban building that is subject to such assessment) as confirming the individualization, for tax purposes, of the autonomous parts of urban buildings.

[5] As observed in the decision of arbitral case No. 132/2013-T: "The provisions (...) listed establish the principle of autonomization of the independent parts of an urban building, even when it is not constituted under a horizontal property regime. That is to say, each part susceptible to independent use must be, for purposes of IMI, valued in light of its specificities and allocation, resulting in an autonomous VPT, individualizable and corresponding to each part susceptible to independent use."

[6] Excerpts from the Decision in case No. 50/2014-T, also referring to Arbitral Decision in case No. 48/2013-T, regarding the analysis of the discussion of the legislative proposal in the National Assembly.

[7] Several decisions of the Constitutional Court have deemed the invocation of unconstitutionality of item 28 of the TGIS without merit on that basis.

[8] Excerpts from the Decision in case No. 50/2014-T, also referring to Arbitral Decision in case No. 48/2013-T, regarding the analysis of the discussion of the legislative proposal in the National Assembly.

[9] On this point we made some considerations in the arbitral decision of 4 May 2014, in case No. 219/2013-T, where, as it was a single undivided building not in horizontal property or in independent units, the Request was deemed without merit regarding the legality of the assessment, not accepting the thesis of unconstitutionality of item 28 of the TGIS.

[10] It expressly refers to the pronouncement of the Constitutional Court (Decision 247/2016, of 04.05.2016 is cited) regarding the constitutional dimension of items 28 and 28.1 of the General Table of Stamp Duty, added by Article 4 of Law No. 55-A/2012, of 29 October, in light of the principles of tax equality, contributory capacity and proportionality, in which it was concluded that the provision contained in said item, insofar as it imposes annual taxation on the ownership of urban buildings with residential allocation, whose patrimonial tax value is equal to or greater than €1,000,000.00, is not unconstitutional.