Summary
Full Decision
ARBITRAL DECISION
The arbitrator Nuno Cunha Rodrigues, appointed by the Deontological Council of the Administrative Arbitration Center (CAAD) to form the present Arbitral Tribunal, constituted on 19.05.2017, decides as follows:
I. REPORT
A…, S.A., public limited company, with registered office in Porto, at …, registered in the Registry Conservatory under the sole registration and tax identification number…, with share capital of € 3,500,000,000.00, requested the constitution of an arbitral tribunal in tax matters with a view to the declaration of illegality and annulment of the decision dismissing the administrative recourse No. …2015…, presented against the assessment act for the Municipal Tax on Onerous Transfers of Immovable Property (IMT), at the rate of 6.5%, recorded in Collection Document No.…, in the amount of € 9,149.90, which was levied on the acquisition of the property registered under article … of the urban property register of the Union of Parishes of … and …, municipality of Coimbra;
The aforementioned assessment was made on the basis of article 17, paragraph (d) of the IMT Code, with the maximum rate of 6.5% being applied, corresponding to "Acquisition of other urban properties and other onerous acquisitions";
As the basis for the claim, the Claimant alleges, in summary, that the correct rate to be applied should be that indicated in paragraph (b), No. 1 of article 17 of the IMT Code: "Acquisition of urban property or of an autonomous fraction of urban property intended exclusively for housing, not covered by the preceding paragraph";
For its part, the Respondent - the Tax and Customs Authority (AT) - in response to the allegations, contested the Claimant's claim, presenting a defense by way of objection, arguing for the inadmissibility of the claim, that is, for the maintenance of the contested assessment act.
The request for constitution of the arbitral tribunal, submitted on 19 May 2017, was accepted by the President of CAAD and automatically notified to the Respondent AT on 22 May following.
In accordance with paragraph (a) of No. 2 of article 6 and paragraph (b) of No. 1 of article 11 of Decree-Law No. 10/2011, of 20 January, with the wording introduced by article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed the signatory as arbitrator of the singular arbitral tribunal, who communicated acceptance of the assignment within the applicable period, and notified the parties of this appointment on 11 July 2017.
Duly notified of this appointment, the parties did not express any will to refuse the appointment of the arbitrator in accordance with the combined provisions of article 11, No. 1, paragraphs (a) and (b) of RJAT and articles 6 and 7 of the Deontological Code.
Thus, in accordance with the provisions of paragraph (c) of No. 1 of article 11 of RJAT, with the wording introduced by article 228 of Law No. 66-B/2012, of 31 December, the singular arbitral tribunal was constituted on 28 July 2017.
Duly constituted, the arbitral tribunal has material competence, in light of the provisions of articles 2, No. 1, paragraph (a), of RJAT.
The parties have legal personality and capacity and have standing (see articles 4 and 10, No. 2, of RJAT, and article 1 of Order No. 112-A/2011, of 22/03).
The Respondent submitted its response on 3 October 2017;
Having the Arbitral Tribunal verified a lapse in the response submitted by the Respondent, it notified it of such circumstance on 14 October 2017, and consequently the Respondent submitted a response on 16 October 2017, accepted by the Tribunal in light of the provisions of article 19, No. 2 of RJAT;
Given the knowledge derived from the procedural documents comprising the present proceeding, which is deemed sufficient, the Tribunal decided to dispense with the hearing referred to in article 18 of RJAT as well as the production of testimonial evidence.
No written allegations were made as they were deemed unnecessary.
The proceeding does not suffer from any nullities and no other issues were raised that would prevent the examination of the merits of the case, all conditions being met for a final decision to be rendered.
II. FACTUAL MATTERS:
With relevance to the examination of the issues raised, the following factual elements are highlighted, which are deemed fully proven in light of the documents comprising the present proceeding:
1.1. In the year 2010, the Claimant acquired the urban property located at …, …-…, …, registered in the property register of the Union of Parishes of … and … under the number … .
1.2. On 28.06.2010, IMT assessment No. 2010/… was raised for the acquisition of the aforementioned property (then registered in the register under article … of the parish of …, municipality of Coimbra), for the amount of € 140,760.00.
1.3. The Claimant was exempt from payment of IMT in accordance with article 8 of the IMT Code (CIMT), by order issued by the Director of IMT Services, in the exercise of competencies sub-delegated by the Deputy Director-General.
1.4. The exemption from which the Claimant benefited lapsed in accordance with the provisions of No. 6 of article 11 of CIMT because the property was not sold within the period of five years.
1.5. Which subsequently gave rise to supplementary assessment No. 2015/... to which corresponds Collection Document No.…, in the amount of € 9,149.40 (nine thousand, one hundred and forty-nine euros and forty cents), based on the acquisition value of € 140,760.00 and the application of the rate of 6.5% provided for in No. 1, paragraph (d) of article 17 of CIMT.
1.6. The tax assessed was paid on 21.07.2015.
1.7. The urban property acquired by the Claimant (article No. … of the Union of Parishes of … and …) is considered in the property register as "Other". Thus, in the Urban Property Record Card of article … of the Union of Parishes of … and … appear, with relevance to the present proceedings, the following data:
"Property Description
Type of property: other
Description: Eval. Art. 46, No. 4 – Ruins
Designation: Housing No. of stories: 1 Typology/Divisions: 1
Valuation Data
Year of registration in the register: 1970 Current patrimonial value (CIMI) € 20,906.39
Determined in the year: 2013 Type of valuation: Eval Article 46 No. 4 – Ruins Percentage for calculation of implantation area: 22%00 Land price per m2: € 1.00 Construction cost per m2: € ,00 Type of location coefficient: Housing
Mod 1 of IMI No. … Submitted on: 2007/03/27 Valuation Sheet No. … Valued on: 2008/07/10";
1.8. On 2 September 2016 the Claimant made a request to the Urban Management Division of the Coimbra Municipal Council, requesting that it take the necessary steps to correctly identify the property in the register, through the issuance of a certificate of non-ruined status.
III. ON THE MERITS OF THE CLAIM:
The fundamental question to be determined in the proceeding is whether the rate of 6.5% IMT was duly applied by the Respondent AT to the act of acquisition, by the Claimant, of the property identified in point II.1 above.
The Claimant alleges, in summary, that the IMT assessment challenged in the proceedings suffers from a defect of violation of law, because the property in question is described as "ruins" in the urban property record card, and consequently was classified as the type "other", rather than having been classified as the type "properties intended for housing use", which led to the application of the rate of 6.5% provided for in paragraph (d) of No. 1 of article 17 of CIMT, and not the rate provided for in paragraph (b) of No. 1 of the same article 17.
Let us examine this:
Both parties agree that the immovable property sub judice is subject to IMT.
Indeed, and in accordance with article 1 of the IMT Code, it "(…) applies to the transfers provided for in the following articles (…)", that is, to "(…) transfers, on an onerous basis, of the right of ownership or of fractional rights thereto, over immovable property situated in national territory".
Being the Claimant a credit institution, it benefited, during a period of five years, from the exemption provided for in article 8, number 1 of CIMT, which provides that "exempt from IMT are acquisitions of immovable property by credit institutions (…), in execution proceedings brought by those institutions or by another creditor, as well as those made in bankruptcy or insolvency proceedings, provided that, in any case, they are intended for the realization of credits resulting from loans made or guarantees provided."
However, the IMT exemption from which the Claimant benefited lapsed upon the expiration of the five-year period, since the immovable property sub judice was not transferred, thereby fulfilling the provisions of number 6 of article 11 of the IMT Code.
Attention must be paid to the temporal scope of the IMT assessment that occurred.
As a general rule, IMT must be assessed at the rate in force at the time of the occurrence of the tax event, in accordance with article 18, No. 1 of CIMT.
However, and in the case where exemptions lapse – as occurred in the case sub judice – No. 2 of article 18 of CIMT provides that "(…) the rate and the value to be considered in the assessment shall be those in force on the date of assessment."
As was proven, the Respondent proceeded to assess the IMT on the immovable property in question on 21 July 2015.
It is therefore necessary to verify the theoretical framework of IMT in force on that date as well as the urban property register of the property in question in force on that date.
The central question in the present proceeding concerns the determination of the classification, for the purposes of the IMT Code, of an urban property that is demonstrably in ruins, with the designation "housing".
At issue is therefore the classification of the property, and we may, for this purpose, rely on the jurisprudence established in proceeding No. 394/2015-T, which was conducted in CAAD.
Let us see.
The CIMT does not contain a definition of property nor does it address this concept, and therefore the legislator wisely elected from the outset the regime of CIMI to regulate this matter (see article 1, No. 2 of CIMT).
It is natural that this be so because it is precisely in CIMI that the basic concepts are enshrined that tax law uses for the taxation of patrimony, as is understood from the provision in the same sense made by article 1, No. 6 of the Code of Stamp Tax.
Tax law did not entirely adopt the dichotomous classification that civil law makes of properties, as objects of legal relations, adapting it to the needs of this branch of law.
For the taxation of patrimony, and based on the referrals described, the concepts of property are the same, with its regulation residing in CIMI.
In accordance with CIMI, property is any fraction of territory, including waters, plantations and constructions of any nature incorporated therein or based thereon, having a permanent character, provided that it forms part of the patrimony of a person and has economic value (see article 2 of CIMI).
In turn, properties can be rural or urban.
The law does not name this division; it merely tells us that properties may assume one of two different designations – rural or urban – and also does not enumerate the criterion for division, opting to specify in concrete terms which properties have one designation and which properties have the other.
Rural properties are tracts of land situated outside urban agglomerations that are not land for construction, intended or suitable for agricultural activities, including constructions directly related to that activity, their waters and plantations (see article 3 of CIMI).
Urban properties, on the other hand, which are all others, are divided into several types, namely (i) residential properties; (ii) commercial, industrial or service properties; (iii) land for construction; and (iv) other (see article 6, No. 1 of CIMI).
The specification of urban properties is made according to their purpose, or because they are licensed for the purpose in question or because that is the purpose to which they are normally intended (see article 6, No. 3).
In turn, land for construction is qualified as including (i) that for which a building or construction license or authorization has been granted, prior communication has been admitted or a favorable prior information statement has been issued for a subdivision or construction operation; (ii) those that have been declared as such in the acquisition title (see article 6, No. 3 of CIMI).
In turn, they are classified as "other" urban properties (i) lands within the limits of urban agglomerations in which the competent entities or territorial planning instruments forbid subdivision or construction (ii) lands within an urban agglomeration that cannot have use generating any income and are not affected by use generating agricultural income; (iii) buildings and constructions licensed or, in the absence of a license, having as their normal purpose ends other than residential, commercial, industrial or service purposes (see article 6, No. 4 of CIMI).
Mixed property classification is also permitted, when the same property has a rural part and an urban part and neither can be classified as principal relative to the other (see article 5, Nos. 1 and 2 of CIMI).
It is believed that the conceptual constructions of CIMI should be understood as structuring the taxation of patrimony, for several reasons.
First because the very provisions of tax laws in this area of taxation are expressed to that effect.
Second because CIMI is a true code in its legal sense, that is, it contains the nuclear regime of rules relating to a given matter; it contains the fundamental discipline, treating it in a systematic and scientific manner.
Third, the provisions of CIMI in question were elaborated within the framework of the reform of property taxation, considered in the complex normative framework in which they are integrated and have the function of "establishing the precise contours of the reality to be taxed" (see preamble of CIMI).
The entire system of organization of immovable property embodied in CIMI thus has as its purpose the rigorous characterization of immovable patrimony that is the object of taxation and uses for this a multi-dimensional criterion – the economic perspective.
It is the economic perspective that makes it possible to assert that only fractions of territory that are capable of forming part of the patrimony of persons and that have economic value are properties (see article 2 of CIMI); it is the characteristic of having economic autonomy that allows the concept of property to encompass waters, plantations, buildings and constructions (see article 2 of CIMI); it is the use generating agricultural income that makes it possible to qualify properties as rural (see article 3, No. 1 of CIMI); it is believed to be the same lens of economic, rather than legal, individuality that requires treating as one property each autonomous fraction of buildings in horizontal co-ownership (see article 2, No. 4 of CIMI), although for civil law it is only an independent unit of urban property (see article 1414 of the Civil Code); they also appear to be reasons of an economic nature that lead each part of property capable of independent use to be considered separately in the property registration, so as to allow discrimination of the respective taxable patrimonial value (see article 12, No. 3 of CIMI).
The concern with individualization following criteria of an economic nature is well understood; it seeks to characterize each thing in accordance with its aptitude and to tax it accordingly.
To this end there is a permanent concern to ensure that the value of each part that may be subject to differentiated use is recorded (e.g. article 12, No. 3 of CIMI).
The conceptual organization is thus based at the highest level on two groups, filled in accordance with the exhaustive description of the characteristics that lead to their grouping into (i) rural properties and (ii) urban properties.
The law provides for no subdivision of rural properties but does so with respect to urban properties.
Urban properties are divided into types in accordance with their purpose or designation.
In this conceptual organization of properties for tax purposes, there is never any reference to the division of properties according to their nature.
It thus appears that the nature of properties is not considered a criterion for classification in any of the divisions in which properties are organized.
A search through the codes that regulate the taxation of patrimony allows one to locate the use of the term "nature" by reference to properties or connected realities, as a synonym for essence or pure state (see article 2, No. 1, 24, No. 1 and 25, paragraph (b) of CIMI) but especially with the sense of general characteristic of the group that is intended to be referenced (see articles 2, No. 1; 26, No. 4; 51, No. 2, paragraph (c) of CIMI and article 14, Nos. 2 and 3 of CIMT).
This latter sense is used specifically in the expression according to the nature of the goods, analogous to that used in article 18, No. 3 of CIMT, in the provision of article 47, No. 1 of CIS, undoubtedly to make the distinction between immovable and movable goods.
It thus appears that the term "nature" does not form part of the "tax taxonomy", as it does not correspond to any classification or conceptual division of properties; it is rather merely a term that the legislator uses to reference a certain group of properties, which it has organized with a specific criterion for a specific purpose.
The regime at issue in the present proceeding – which concerns the temporal application and the specific IMT rates – must be interpreted in obedience to the principle of unity of the legal system (see article 9, No. 1 of the Civil Code).
The understanding on this matter in general tax law has already been seen.
Let us now examine it in the particular case of IMT rates.
For the application of IMT rates the legislator did not resort to the purity of the grouping of properties into types, as these appear organized in article 6, No. 1 of CIMI, opting instead to create its own grouping, with an objective criterion namely:
I. Group formed by the type of urban properties that are intended exclusively for primary and permanent residence (see article 17, No. 1, paragraph (a));
II. Group formed by the type of urban properties intended exclusively for housing, not covered by the preceding paragraph, which broadly comprises properties that do not constitute the primary residence of the owner or that, even if they do, are not so on a permanent basis (see article 17, No. 1, paragraph (b));
III. Group formed by the other types of urban properties (see article 17, No. 1, paragraph (d));
IV. Group formed by rural properties (see article 17, No. 1, paragraph (c)).
Properties thus organized for the purposes of IMT taxation, each property must be classified in accordance with its own nature, that is, in accordance with the criterion of belonging to one of the groups.
The property in the proceedings is an urban property classified as "other" because it is in a state of ruins.
Now the IMI Code provides, in article 46, that, in the case of patrimonial taxable value of properties of the type "Other", the patrimonial taxable value of urban properties in ruins is determined as if it were land for construction, in accordance with a resolution of the municipal council (see article 46, No. 4 of CIMI).
This circumstance is moreover reflected in the urban property register of the property sub judice where "Description: Eval. Art. 46, No. 4 – Ruins" is noted, as was proven.
What is equivalent to saying that CIMI sought to equate urban properties in ruins with land for construction, even though the ruin has the capacity to, once reconstructed, come to be used for housing.
Still in accordance with No. 2 of article 6 of CIMI, it is by reference to the purpose of the building or construction resulting from licensing, or to the normal purpose, in case such licensing does not exist, that properties must be classified as residential, commercial, industrial or for services.
On the other hand, it results from No. 4 of the said article 6, as regards properties classified as "other", that the legislator defined a residual criterion by reference to the purposes enumerated in No. 2, thus excluding from this category all buildings and constructions that have as their normal purpose ends other than those referred to in No. 2, in addition to those mentioned in No. 3 of the said provision.
The fact that the property is in ruins, regardless of its potential designation provided in the property registration, is determinative for classification in the residual category of "Other" and for the application of the rate in the IMT assessment.
The (potential) designation for housing, commerce, industry or services will be irrelevant for a property that is in ruins.
In fact, it is an objective fact that a property in ruins does not have the capacity to be immediately used for housing. It does not, naturally, have the capacity to be intended immediately for primary and permanent residence (see article 17, No. 1, paragraph (a) of CIMT) or even for non-permanent housing (in light of situations that can be framed in article 17, No. 1, paragraph (b) of CIMT).
This (potential) designation, which will be strictly applicable at a moment subsequent to the (eventual) reconstruction of the ruin, will equally imply the subsequent correction and alteration of the property register, so that the urban property will cease, at that time, to be classified as "other".
Consequently, the reference to the housing designation in the property register should not displace or override the classification of the property in the type "Other" and the description of the property as a property in ruins.
A property classified as "other" because it is in ruins cannot, therefore, be deemed equivalent to a property for housing or for primary and permanent residence, for the purposes of article 17, No. 1, paragraphs (a) and (b) of CIMT.
It should be emphasized that, in the case sub judice, the factual prerequisites of the contested IMT assessment are in conformity with the Type and Description of the property registered in the Property Register and the Valuation Sheet No.…, prepared on 10.07.2008, which is proven.
Moreover, the Claimant did not claim or promote any update of the register, as provided for in articles 13 and 130 of CIMI, up to the moment of assessment. The Claimant moreover notes, in the initial petition, that the CPU still maintains, at the present time, the discrepancy between the description of the property and the supposed actual reality.
As such, the rate and the value to be considered in the assessment must be those in force on the date of assessment, as determined by No. 2 of article 18 of CIMT.
Accordingly, the provisions of article 17, No. 1, paragraph (d) of the IMT Code should be applied at the time of the IMT assessment made on the urban property sub judice, described as "other" and effected on 21 July 2015.
The Claimant's claim must therefore be dismissed.
IV - DECISION:
Accordingly, and on the bases set forth, it is decided that the request for arbitral pronouncement is dismissed.
V - PROCESS VALUE:
It is fixed at 6,828.46€ (six thousand eight hundred and twenty-eight euros and forty-six cents), in accordance with article 97-A, No. 1, paragraph (a) of CPPT, applicable by referral from article 29, No. 1, paragraphs (a) and (b), of RJAT and article 3, No. 2, of the Rules of Costs in Tax Arbitration Proceedings.
VI - COSTS:
Under article 22, No. 4, of RJAT, and in accordance with Table I annexed to the Rules of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 612 (six hundred and twelve euros), entirely charged to the Claimant.
Notify.
Lisbon, 24 October 2017
The Arbitrator
Nuno Cunha Rodrigues
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