Stamp Tax on Land for Construction Under Verba 28.1 TGIS: Arbitration Timeliness Ruling (2015)

ARBITRAL DECISION

1. REPORT

CLOSED REAL ESTATE INVESTMENT FUND A…, NIPC …, with registered office at Largo …, no. …, …th floor, …-…, in Lisbon (area of the Tax and Customs Authority Service of Lisbon 3), legally represented by B…, SA, with registered office at the same address and NIPC … (hereinafter referred to as the Claimant), hereby requests, pursuant to article 10, paragraph 2, of Decree-Law no. 10/2011, of January 20th, which approved the Legal Regime for Tax Arbitration ("LRTA") and articles 1 and 2 of Ministerial Order no. 112-A/2011, of March 22nd, the constitution of an Arbitral Tribunal, with the intervention of a sole arbitrator, in which the Tax and Customs Authority (AT) is the respondent, with a view to declaring the illegality of the Stamp Duty assessment for the year 2012, effected pursuant to item 28.1 of the General Table of Stamp Duty (GTSD), in the amount of €23,863.13, relating to the urban property registered under article … of the parish of …, municipality of Lisbon, of which it is the owner, with the consequent annulment of the respective collection documents.

Cumulatively, the Claimant requests condemnation of the Respondent to pay compensation in the amount of €1,582.60 for the provision of undue guarantee with a view to suspending the tax enforcement proceedings instituted due to failure of voluntary payment of each of the three instalments in which the contested assessment was required, assigning to the request an economic value of €25,445.78.

The grounds for the request to annul the Stamp Duty assessment for the year 2012 are as follows:

a. (…) the Claimant intends that the Tribunal declare the illegality of the Stamp Duty assessment issued pursuant to item 28.1 of the GTSD, relating to the year 2012, collected through 3 collection documents, resulting in a total collection of €23,863.13, following the dismissal of a hierarchical appeal (…) and a gracious complaint (…) whereby (…), the Claimant has procedural legitimacy to file the present request for the constitution of an Arbitral Tribunal. (…) the hierarchical appeal and the gracious complaint above identified only refer to the first instalment, the hierarchical appeals relating to the 2nd and 3rd instalments having been filed away by the AT for being understood to concern the same matter as the 1st instalment (…), which is why the constitution of the Arbitral Tribunal is requested to declare the illegality of the assessment and the respective 3 collection notes relating to the Stamp Duty assessment for the year 2012 (…);

b. The subject matter of the request for ruling by the Arbitral Tribunal refers to the following tax acts: – Stamp Duty assessment for the tax year 2012 (…) collected in three instalments: 1st instalment – Document no. 2013 …, dated March 22, 2013, in the amount of €7,954.39 (…); 2nd instalment – Document no. 2013 …, dated March 22, 2013, in the amount of €7,954.37 (…); 3rd instalment – Document no. 2013 …, dated March 22, 2013, in the amount of €7,954.37 (…);

c. The referred acts of assessment/collection documents for Stamp Duty suffer from the defect of illegality, insofar as they violate the provision of article 99, paragraph a) of the Code of Tax Procedure and Process (…);

d. The Claimant is the owner and legitimate proprietor of the land for construction registered in the property register under article …, of the parish of …, municipality and district of Lisbon, with a tax property value of €1,677,130.00 (…);

e. The referred property was subject to Stamp Duty assessment pursuant to item 28.1 of the GTSD, relating to the period of 2012 (…); not accepting these assessments, the Claimant contested the collection documents relating to the Stamp Duty assessment for the year 2012, with the AT dismissing the request for their annulment (…);

f. The Claimant does not agree with the Stamp Duty assessment on the aforementioned property. (…) in the Claimant's understanding, item 28.1 of the GTSD cannot be applied to article … insofar as it is described in the matrix as land for construction and not as a property with residential destination, as the letter of the rule required in the tax year in question (2012);

g. (…) Item 28 of the GTSD, in the version in force until December 31, 2013, does not tax land for construction, but only the: "28. Ownership, usufruct or right of superficies of urban properties whose tax property value stated in the matrix, in accordance with the Municipal Property Tax Code (MPTC), is equal to or greater than €1,000,000 — on the tax property value used for the purpose of Municipal Property Tax:

28.1 — For a property with residential destination — 1%";

h. Now, if it is true that the referred article … has a tax property value exceeding one million euros (…) it does not meet the other essential requirement demanded by item 28.1 of the GTSD to be taxed under Stamp Duty, which is residential destination. In fact (…) it is classified as land for construction and not as an urban property intended for residential use;

i. It is true that the Stamp Duty Code does not clarify what residential destination is for the purposes of this rule of taxation, but neither did it say, in the version in force until December 31, 2013, that the same applied to land for construction;

j. (…) Land for construction only comes to be subsumed under item 28 of the GTSD as from January 1, 2014 (…); article 194 of Law no. 83-C/2013, of December 31, which approved the State Budget for 2014, contemplates an amendment to item 28.1 of the GTSD, with the aim of taxing land for construction, however it only came into force on January 1, 2014;

k. (…) the legislator itself thus recognizes, that the rule of taxation did not permit, until December 31, 2013, the taxation of land for construction under item 28.1 of the GTSD, and alters the rule in order to tax also, from January 1, 2014, "land for construction whose building, authorized or foreseen, is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code";

l. (…) Until January 1, 2014, there is no legal basis for taxing land for construction, insofar as the rule only taxed properties with residential destination and the amendment introduced by the State Budget for 2014 cannot have retroactive application;

m. As is referred to in arbitral sentence no. 215/2013-T, of April 21, 2014, "and it should not be said that such legislative amendment assumes the legal nature of an interpretive rule, and, as such retroactive. In fact, as Oliveira Ascensão states, in order for a law to be interpretive it is necessary that (1) there exists a doubt in doctrine and/or case law as to the meaning of the previous law; (2) that the subsequent law comes to opt for one of the interpretations in contention, and that (2) the subsequent law has the purpose of interpreting the old law, and that that purpose must result unequivocally from its text (…). None of the requirements are met in the concrete case (…)" (…) It is therefore, and in the understanding of this Tribunal, in the presence of an innovative amendment to the rule of item 28.1 of the GTSD, which implies that such amendment will only produce its effects from the year 2014 onwards" (emphasis in original);

n. (…) Thus (…), the AT is prevented from applying the new version of item 28.1 of the GTSD to the tax assessed in prior years (…) by force of the principle of non-retroactivity of tax law, based on article 103, paragraph 3 of the Constitution of the Portuguese Republic;

o. (…) Law no. 55-A/2012, of October 29, which added item 28 to the GTSD (…) nowhere clarifies what are properties with residential destination. And adds paragraph 2 to article 67 of the Stamp Duty Code, in which it is stipulated that "to matters not regulated in this Code relating to item 28 of the General Table the provisions of the Municipal Property Tax Code shall apply, subsidiarily";

p. (…) in the Portuguese legal system the classification of properties is only provided for in the MPTC (…). In accordance with article 6 of the MPTC, urban properties are divided into: Residential; Commercial, industrial or for services; Land for construction; Others. Now, as we can see, residential urban properties and land for construction are two different classes of urban properties (…);

q. Article 6, paragraph 2 of the MPTC provides that "Residential, commercial, industrial or for services buildings or constructions are those for such licensed or, in the absence of a license, which have as their normal destination each of these purposes". That is, it requires a building and normal destination which is understood as normal current use and not potential and future use;

r. (…) Now, in the case of land for construction, it cannot be said that they have (…) residential destination, insofar as this destination must be effective and not merely potential and future, under penalty of taxing future and uncertain realities or even of taxing a non-existent tax event;

s. In fact, any tax act always has at its basis a concrete factual situation (occurred in real life), which is provided for in abstract and typically in tax law as generating the right to tax; this factual and concrete situation (of real life) is defined as a tax event (viewed in its objective, material and quantitative element), which only exists from the moment all the legally provided requirements for such are met;

t. (…) the material requirement that leads to applying the rule of taxation is the existence of an urban property with effective residential destination at the moment when the rule of taxation is applied (…), in the case of a building of a property intended for housing, that the works are completed;

u. (…) land for construction falls within the definition of urban property, as is the case with properties intended for housing. However, these are concepts that do not coincide or should not coincide. In fact, land for construction may come to have residential destination or not;

v. Not even the licensing of the work can be an indicator of the destination of the land for housing, either because, in most situations, the authorized construction provides for the same building the use for commercial or services purposes, or because licensing is not in itself a guarantee of construction and, consequently, that effective residential use be verified;

w. (…) the Claimant understands that, even with the obtaining of a building permit, it cannot be said that the property has residential destination (…). Contrary to what the AT has argued, it is not because in the calculation of the tax property value of land for construction it refers (article 40, paragraph 5) to the destination coefficient (housing, services, etc.), as mere potential and future destinations, that the land for construction can be subsumed in the factual basis of item 28.1 of the GTSD as a property with residential destination;

x. (…) As article 9 of the Civil Code states "interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative thought, taking especially 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";

y. Now, from the explanation of reasons of Law no. 55-A/2012, of October 29, the legislative intention not to extend the scope of taxation to land for construction is clear. The Government, upon presenting Bill 96-XII to the Plenary of the National Assembly would have said, by the voice of the Secretary of State for Tax Affairs: "In the first place, the Government proposes the creation of a special tax to tax residential urban properties of higher value. It is the first time that in Portugal a special taxation has been created on high-value properties intended for housing. This tax will be 0.5% to 0.8%, in 2012, and 1% in 2013, and will apply to houses (emphasis ours – in the original) with a value equal to or greater than 1 million euros. With the creation of this additional tax, the tax effort required of these owners will be significantly increased in 2012 and in 2013" (…);

z. It is thus demonstrated that land for construction do not have residential destination, for the purposes of applying item 28.1 of the GTSD (…) in the version in force until December 31, 2013, whereby the Stamp Duty assessments now contested should be annulled as being illegal and the situation prior to their issuance should be restored;

aa. (…) The Claimant did not proceed to pay the Stamp Duty assessed ex officio by the AT, above identified, whereby the Tax Office of Lisbon 3 instituted the respective tax enforcement proceedings, with a view to compulsory collection of the 3 instalments of Stamp Duty for the year 2012;

bb. In order to and with a view to suspending the tax enforcement proceedings (…) nos. … 2014 …, … 2014 … and … 2013 …) the now Claimant provided suitable guarantee (…); article 53 of the General Tax Law provides that in case of error imputable to the services, the now Claimant has the right to be compensated for the losses resulting from the provision of guarantee presented to suspend tax enforcement proceedings, without dependence on the period for which it is maintained;

cc. Now, article 171 of the Tax Procedure and Process Code provides that "compensation in case of an undue bank guarantee or equivalent shall be requested in the proceedings in which the legality of the enforceable debt is contested". Paragraph 2 of the same article states that "compensation must be requested in the complaint, objection or appeal or, if its ground is subsequent, within 30 days after its occurrence";

dd. (…) the annulment of the tax assessment acts in question in the present proceedings should also result, in accordance with the articles mentioned, in compensation for the undue guarantee provided; however, those losses can only be determined with exactness at the moment when it becomes possible to lift the guarantee, since its amount depends on the period of duration of the guarantee. To date the Claimant estimates to have spent the amount of €1,582.65 with these tax enforcement proceedings, values which have been calculated based on the respective proportion of the total of 11 tax enforcement proceedings included in the bank guarantee. Attached (…) an Excel file demonstrating the calculations performed;

ee. As referred to in the arbitral decision in the scope of Process 202/2014-T, of October 16 "as reiterated by arbitral case law the request for constitution of the arbitral tribunal has as its corollary that it will be in the arbitral proceedings that the 'legality of the enforceable debt' will be discussed, whereby, as results from the express content of paragraph 1 of that article 171 of the Tax Procedure and Process Code, it is also the arbitral proceedings that is appropriate to assess the request for compensation for undue guarantee." (…);

ff. (…) The Claimant has the right to compensation corresponding to all costs incurred with the guarantee provided, plus interest at the legal interest rate calculated on those costs and counted from the dates on which they were borne until the date on which authorization is given for lifting the guarantee;

gg. (…) The value of the economic utility of the request is the value corresponding to the undue assessed tax, in the amount of €23,863.13, plus the costs incurred with the bank guarantee (…) Value of the action: €25,445.78 (twenty-five thousand, four hundred and forty-five euros and seventy-eight cents).

Notified in accordance with the terms and purposes provided for in article 17 of the LRTA, the AT submitted a response, defending itself by way of exception and by way of objection.

A. By way of exception

a. "The Claimant (…) identifies (in article 4 of the i. p.) as the tax act subject to the arbitral tribunal's ruling the: 1st "Stamp Duty assessment for the tax year 2012 (…) collected in three instalments: 1st instalment – Document no. 2013 …, dated March 22, 2013, in the amount of €7,954.39 (…); 2nd instalment – Document no. 2013 …, dated March 22, 2013, in the amount of €7,954.37 (…); 3rd instalment – Document no. 2013 …, dated March 22, 2013, in the amount of €7,954.37 (…);

b. The Claimant again reinforces the subject of the present request for ruling, by stating (…) that "it requests that the Tribunal declare the illegality of the Stamp Duty assessment act identified (…) and, in consequence, that the respective collection documents be annulled, in accordance with article 2, paragraph 1, letter a) and 10, paragraph 1, letter a), both of the LRTA."

c. Furthermore, the request itself formulated recognizes and is absolutely consistent with that evidence; the Claimant petitions (only) that the tribunal declare "the illegality of the Stamp Duty assessment act that gave rise to three collection documents";

d. It happens, however, that the legally defined period for objection to the tax act of assessment in arbitral proceedings is clearly exceeded;

e. Article 10 of the LRTA establishes, as to acts of assessment/self-assessment, that the period to present the request for arbitral ruling is 90 (ninety) days, referring, as to the moment of the beginning of the count, to what is provided for in article 102, paragraphs 1 and 2 of the Tax Procedure and Process Code (TPPC);

f. From that provision, and with relevance for the case at hand, it is derived that the stipulated period of 90 (ninety) days would have as its starting point the day following the end of the period for voluntary payment of the tax obligation – cf. article 102, paragraph 1, letter a), of the TPPC;

g. Having regard to the provision provided for in paragraph 2 of article 85 of the TPPC, we have that the deadline for payment of the tax in question in the present proceedings occurred on November 30, 2013; now the request intended for the constitution of the arbitral tribunal was presented on June 1, 2015; therefore, the request formulated is untimely and the tribunal cannot rule on it;

h. (…) having exceeded the period for direct objection (that is, of the primary act), the "timeliness" of the request could only be based on the existence of any gracious means of objection to the assessment act where a decision denying/dismissing, totally or partially, the claims formulated there by the taxpayer was issued (which would constitute a second-level act);

i. (…) The now Claimant objected administratively to the tax assessment act; the Tax Administration dismissed/denied the revision of the act in the manner requested; it happens that, despite having made reference to and identified those circumstances, the Claimant did not formulate/concretize to the Tribunal any request intended for the annulment of what was decided in that forum;

j. Jorge Lopes de Sousa (Guide to Tax Arbitration, Almedina, 2013, page 121 [and page 122]) is peremptory, by stating that: "(…) Although in letter a) of paragraph 1 of article 2 of the LRTA only explicit reference is made to the jurisdiction of arbitral tribunals to declare the illegality of assessment acts, acts defining the amount to be paid by the taxpayer, this jurisdiction also extends to second- and third-level acts which assess the legality of those primary acts, namely acts of dismissal of gracious complaints and acts of dismissal of hierarchical appeals lodged from the decisions of these complaints." (…) Furthermore, it is clear from what has been said regarding the decisions of dismissal of gracious complaints and hierarchical appeals that they are included in the jurisdictions of the arbitral tribunals functioning in the CAAD the cases in which the declaration of illegality of the acts indicated there is made through the declaration of illegality of second-level acts, which are the immediate object of the objection claim (…) assessment of the legality of primary acts through the assessment of the legality of second-level acts is evident from the reference in article 2 of the LRTA to acts of self-assessment, withholding at source and payment on account, because, regarding those acts, gracious complaint is imposed, as a rule, as a requirement in articles 131 to 133 of the TPPC, whereby, in these cases, the subject matter of the objection proceedings is, as a rule, the second-level act which assesses the legality of the assessment act, which act, if it confirms it, must be annulled, to obtain the declaration of illegality of the assessment act";

k. Not having done so, there is no support that could establish the timeliness of the request and, consequently, the possibility of the Tribunal assessing the request formulated regarding the assessment act;

l. (…) Based on the provisions of articles 660, paragraph 2 and 661, paragraph 1 of the Code of Civil Procedure (articles 608, paragraph 2 and 609 of the current CCP) Jorge Lopes de Sousa, Tax Procedure and Process Code, Annotated and Commented, Áreas Editora, 6th Edition, Volume II, 2011, page 319/319 states that: "besides questions of official knowledge, the judge cannot rule in the sentence on matters not raised by the parties, nor condemn in object or in quantity greater than what has been requested" (…) and José Lebre de Freitas, Code of Civil Procedure Annotated, Coimbra Editora, Volume 2, 2nd Edition, page 681: "Limited by the requests of the parties, the judge cannot, in the sentence, exceed them: the decision, whether condemnatory or acquittory, cannot pronounce on more than what was requested or on something different from what was requested" [and page 682] "The subject matter of the sentence thus coincides with the subject matter of the proceedings, and the judge can neither fall short of nor go beyond what has been requested";

m. This will mean, in the concrete case at hand, that the Tribunal, in the judgment it comes to issue, cannot condemn on what was not requested;

n. In summary, resulting, clearly and unequivocally from the learned initial petition, the direct objection to the Stamp Duty assessment act, the request formulated (conducive to the declaration of illegality of the act and, consequently to its annulment) should be declared devoid of merit, as untimely and, consequently, the Respondent Entity absolved of the instance – cf. letter e), of paragraph 1, of article 278 of the current Code of Civil Procedure, applicable ex vi article 29, paragraph 1, letter e) of Decree-Law no. 10/2011, of January 20; which is hereby requested.

B. By way of objection:

o. The present request for arbitral ruling has as its object the annulment of the Stamp Duty assessment for the year 2012, in the overall amount of €23,863.13 relating to a property, better identified in the Initial Petition and attached documentation (…) with the tax property value set at €1,677,130.00, with the tax collection in the amount of €23,863.13;

p. Although without specifically referring to the rules it considers violated, it seems the Claimant understands that the assessment in question is illegal by violation of article 1 of the Stamp Duty Code (SDC) and item 28.1 of the General Table of Stamp Duty (GTSD), and of article 6, paragraph 1, letters f), i), of Law no. 55-A/2012, of October 29;

q. The Claimant considers that the concept of land for construction, for tax purposes, cannot be considered a property intended for housing, under the provision of article 1, paragraph 1, of the SDC and the same item 28 (…) the Claimant has no reason whatsoever, and all the arguments put forward by it are disputed from the outset;

r. It is the understanding of the AT that the property in question has the legal nature of a property with residential destination, whereby the assessment act subject to the present request for arbitral ruling should be upheld as embodying a correct interpretation of item 28 of the General Table, added by Law 55-A/2012, of December 29;

s. Law no. 55-A/2012, of October 29, 2012 amended article 1 of the SDC, and added item 28 to the GTSD. With this legislative amendment, Stamp Duty began to apply also to ownership, usufruct or right of superficies of urban properties whose tax property value stated in the matrix, in accordance with the Municipal Property Tax Code (MPTC) is equal to or greater than €1,000,000.00;

t. In the absence of any definition of the concepts of urban property, land for construction and residential destination in the Stamp Duty framework, it is necessary to resort to the MPTC in search of a definition that allows determining the possible subject matter to Stamp Duty, in accordance with the provision of article 67, paragraph 2 of the SDC in the wording given by Law no. 55-A/2012, of October 29; Pursuant to said legal provision, to matters not regulated in the Code, relating to item no. 28 of the GTSD, the provisions of the MPTC shall apply, subsidiarily;

u. (…) article 6, paragraph 1 of the MPTC provides for the types of urban properties existing, integrating in this concept land for construction (…); the notion of destination of the urban property finds support in the part relating to the assessment of the properties, which is well understood because the assessment of the property (purpose) incorporates value to the property, constituting a determining fact of distinction (coefficient) for the purposes of assessment;

v. As results from the expression "…value of authorized buildings", contained in article 45, paragraph 2 of the MPTC, the legislator chose to determine the application of the methodology of assessment of properties in general to the assessment of land for construction, being consequently applicable to them the destination coefficient provided for in article 41 of the MPTC;

w. Article 45, paragraph 2 of the MPTC clarifies that the value of the implantation area varies between 15% and 45% of the value of authorized or foreseen buildings. To that effect, paragraph 3 of article 37 of the MPTC requires the presentation of the subdivision permit or, in the absence thereof, the building license permit, approved project, prior communication, favorable prior information or document evidencing constructive viability;

x. In this sense, see Court of Appeal South Decision no. 04950/11, of February 14, 2012: "The regime for assessment of the tax property value of land for construction is enshrined in article 45 of the MPTC. The assessment model is equal to that of built buildings, although proceeding from the building to be constructed, taking as its basis the respective project, the value of the land for construction corresponds, fundamentally, to a legal expectation, embodied in a right to build on it a property with determined characteristics and with a determined value. It will be that expectation of production of wealth materialized in a property to be built that increases the value of the assets and the wealth of the owner of the land for construction, from the moment the property in question comes to be considered as land for construction. For that reason, the greater the value of the property to be built, the greater is the value of the land for construction underlying it (cfr. Art. 6, paragraph 3 of the MPTC). "In conclusion, in the assessment of land for construction the legislator wanted the assessment methodology of urban properties in general to be applied, and thus all coefficients should be taken into account, above identified, namely the destination coefficient provided for in article 41 of the MPTC, and such legal imposition results more from paragraph 2 of article 45 of the MPTC, by referring to the value of authorized or foreseen buildings on the same land for construction";

y. Thus, for the purposes of determining the tax property value of land for construction it is clear the application of the destination coefficient in the assessment framework, whereby its consideration for the purposes of applying item 28 of the GTSD cannot be ignored, the following order of considerations being valid: a. In the application of the law to concrete cases it is important to determine the exact meaning and scope of the rule, so as to reveal the rule contained in it, a condition necessary for it to be applied, in accordance with the provision of article 9 of the Civil Code, ex vi article 11 of the General Tax Law. b. Article 67, paragraph 2 of the SDC mandates the application, subsidiarily, of the provisions of the MPTC. c. The destination of the property (aptitude or purpose) is a coefficient that contributes to the assessment of the property, in the determination of the tax property value, applicable to land for construction; d. Item 28 GTSD itself refers to the expression "properties with residential destination", appealing to a classification that overlaps the types provided for in paragraph 1 of article 6 of the MPTC;

z. The AT thus understands that the concept of "properties with residential destination", for the purposes of the provision of item 28 of the GTSD, encompasses both built properties and land for construction, from the start taking into account the literal element of the rule;

aa. (…) the mere constitution of a right of potential construction immediately increases the value of the property in question, hence the rule contained in article 45 of the MPTC which orders the separation of the two parts of the land (…) Thus, the determination of the tax property value of land for construction has as its presupposition the determination of the value of authorized or foreseen constructions, for which regard must be had, in accordance with the provision of article 38 of the MPTC, to the destination of those same buildings;

bb. Finally, and as to all the Claimant's arguments to the effect that the introduction by the State Budget Law for 2014 (Law 83-C/2013, December 31) of express taxation of land for construction had (and has) an innovative character – being thereby a clear and irrefutable indication that, before the year 2014, that taxation had not been intended by the legislator nor was reflected, at all, in the law – it must be stated that it is without merit;

cc. For, although the mentioned Law says nothing about its nature (whether innovative or interpretive), it is certain that the interpretive character results clearly from the use of the legally provided concepts in paragraph 1 of article 6 of the MPTC, in particular in letters a) and c), insofar as they reinforce the understanding that the notion of "properties with residential destination" intended, on the one hand, to encompass not only residential properties, but also another reality, namely land for construction and, on the other, to exclude the remaining urban properties with different destination;

dd. Otherwise, in the reformulation of the rule, the legislator would, certainly, have limited itself to adding land for construction, not altering the previously existing expression by considering it equivalent to the concept of residential properties, which did not occur;

ee. In fact, the intention of that amendment was to determine, unequivocally, the meaning and scope of the preceding rule and to resolve the pre-existing controversy, requiring an application of Law 55-A/2012, of October 29, in conformity with the understanding defended by the AT;

ff. As concerns the request for compensation for undue guarantee, the same should be dismissed entirely, to the exact extent that the main request of the Claimant will be dismissed; otherwise considered, and even if the request for arbitral ruling comes to be upheld, it will still be stated that no amount is due for provision of guarantee, as the Claimant fails to prove the charges actually incurred;

gg. (…) the Claimant "estimates to have spent the amount of €1,582.65" with the three tax enforcement proceedings instituted (… 2014 …; … 2014 …; … 2013 …) due to failure to pay the tax assessment act sub judice, in accordance with the extracts from Caixa Geral de Depósitos (CGD) (document no. 10) and also in accordance with the Excel table made by the party (document no. 11) [but from the documentation attached to the request for arbitral ruling it is not clearly seen, with exactness, the values actually incurred with the bank guarantee, in order to obtain the suspension of the tax enforcement proceedings;

hh. It is the responsibility of the Claimant to prove said values (…); In this regard, the Decision of the Court of Appeal South, process no. 03485/09, of January 26, 2010, states in the summary that: "VI) – In case of error imputable to the services of the Tax Administration the taxpayer will have the right to be compensated for the bank guarantee undue for suspending the enforcement (paragraphs 1 and 2 of article 53 of the General Tax Law) provided that they petition the attribution of that compensation and proof is made of the charges incurred."

ii. In these terms (…): a. The Respondent should be absolved of the present instance, given the dilatory exception of untimeliness, motivated by the late presentation of the request for arbitral ruling, cf. letter e), of paragraph 1, of article 278 of the current Code of Civil Procedure, applicable ex vi article 29, paragraph 1, letter e) of the LRTA; Without prejudice, b. The request for declaration of illegality and consequent annulment of the contested assessment should be judged devoid of merit, as well as the request for compensation for undue guarantee, absolving the Respondent of all requests.".

The request for constitution of the Arbitral Tribunal was received at the CAAD on June 1, 2015, having been accepted by His Excellency the President of the CAAD and notified to the AT on June 2, 2015.

The Claimant stated that it did not intend to appoint an arbitrator, whereby, pursuant to the provision of paragraph 1 of article 6 of the LRTA, the undersigned was appointed arbitrator by His Excellency the President of the Deontological Council of the CAAD, a position which was accepted within the legally provided period, without opposition from the Parties.

The Singular Arbitral Tribunal was duly constituted on August 12, 2015 and is materially competent to decide the dispute.

The Parties have legal standing and legal capacity, are legitimate and are duly represented (articles 4 and 10, paragraph 2, of the LRTA and article 1 of Ministerial Order no. 112-A/2011, of March 22).

By arbitral order of September 28, 2015, the dispensing with the holding of the meeting referred to in article 18 of the LRTA was determined and the proceedings continued with successive written submissions, for a period of 10 days.

In its submissions, the Claimant defended the timeliness of the request for constitution of the arbitral tribunal, in that it was submitted within the period of 90 days counting from the date of notification of the dismissal of the hierarchical appeal, as provided for in article 10, paragraph 1, letter a), of the LRTA, and that the request for annulment of the order dismissing the hierarchical appeal would not be necessary, in that the object of the proceedings is, indirectly, the assessment act, and one is not, in the case at hand, in the presence of a situation of necessary complaint.

The submissions produced by the AT reiterate the arguments already expressed in the response.

2. STATEMENT OF FACTS

2.1. Facts deemed to be proven:

2.1.1. The Claimant is the owner of the urban property registered under article … of the parish …, municipality of Lisbon, described in the matrix as "land for construction";

2.1.2. According to the urban property record book issued on February 4, 2015 by the Tax Office of Lisbon 5, the tax property value of the identified property is currently €1,677,130.00, assigned in the assessment made on February 11, 2013 (assessment record no. …), based on the Municipal Property Tax declaration model 1 no. …, submitted on December 17, 2012;

2.1.3. The Stamp Duty assessment for the year 2012, issued on March 22, 2013, for the amount of €23,863.13, for voluntary payment in three annual instalments, up to April 30, 2013, July 31, 2013 and November 30, 2013, in the amounts of €7,954.39, €7,954.37 and €7,954.37, respectively, was assessed on the previous tax property value of the property, of €2,386,313.34, as appears in the collection documents;

2.1.4. On August 28, 2013, the Claimant filed two requests which would give rise to the opening of gracious complaint proceedings no. … 2013 … and no. … 2013 …, in which it requested, respectively, the annulment of the 1st instalment of the Stamp Duty assessment for the year 2012, in the amount of €7,954.39 (collection note no. 2013 …) and the annulment of the 2nd instalment of the Stamp Duty assessment for the year 2012, in the amount of €7,954.37 (collection note no. 2013 …);

2.1.5. Both gracious complaints were dismissed, by orders of November 27, 2013; from the decision of dismissal of the gracious complaint proceedings no. … 2013 …, notified to the Claimant through office no. … of the Finance Board of Lisbon, of December 2, 2013 and received by it on the following day, it expressly states that "It is further clarified that, following the update of the tax property value, the assessment now complained of is already replaced, for the amount to be paid of €16,771.30 (in accordance with what was petitioned), with the respective collection documents being consequently corrected";

2.1.6. In reaction against the decisions of dismissal of the identified gracious complaints, the Claimant filed, on December 27, 2013, the hierarchical appeal petitions that would give rise to proceedings no.s … 2014… (gracious complaint no. … 2013 …), relating to the 1st instalment of the Stamp Duty assessment for the year 2012, and … 2014 … (gracious complaint no. … 2013 …), relating to the 2nd instalment of the same Stamp Duty assessment;

2.1.7. The hierarchical appeal no. … 2014 …, relating to the 1st instalment of the Stamp Duty assessment for the year 2012, in the amount of €7,954.39, was dismissed by order of the Lady Director of Services of the Land and Mortgage Institute, of February 20, 2015, notified to the Claimant by office no. … of the Finance Board of Lisbon, of March 10, 2015, remitted by registered mail with return receipt (registration RD … PT);

2.1.8. From the information no. …, of the Land and Mortgage Institute Directorate, on which the decision of dismissal of hierarchical appeal no. … 2014… was based, it appears that "15. (…) although the Appellant has, by administrative means, attacked the 1st collection note what is at issue here is the assessment of an alleged illegality of the assessment that was the origin of that document and the remaining two that followed it (…). 16. Being the act of assessment of stamp duty (item 28.1) a sole and indivisible act, the decision taken in this forum with respect to this 1st instalment will inevitably affect the assessment that gave rise to it and consequently the two remaining instalments. In fact, there is a single assessment whose payment method, by legal choice, is divided into three instalments; 17. Now, what is the basis for the institution of a gracious complaint proceeding is an alleged illegality of the tax assessment act deriving from item 28 of the GTSD and not the collection notes that derived from it" (emphasis ours);

2.1.9. The hierarchical appeal no. … 2014 …, relating to the 2nd instalment of the Stamp Duty assessment for the year 2012, in the amount of €7,954.37, was filed away as a matter of futility, pursuant to article 112 of the Administrative Procedure Code, for the reason that "(…) the assessment act here in question has already been subject to ruling and decision in the hierarchical appeal proceeding no. … 2014 … (…)", decision notified to the Claimant by office no. … of the Finance Board of Lisbon, of March 10, 2015, remitted by registered mail with return receipt (registration RD … PT);

2.1.10. On January 30, 2014, the Claimant filed a gracious complaint which gave rise to the opening of proceeding no. … 2014 …;

2.1.11. From the decision of dismissal of gracious complaint no. … 2014 … (order of September 16, 2014) a hierarchical appeal was lodged, on October 20, 2014, registered under no. … 2014 …;

2.1.12. The information no. I2015 …, of the Land and Mortgage Institute Directorate, which served as the basis for the decision of filing away hierarchical appeal no. … 2014 …, as a matter of futility (order of the Lady Director of Services of the Land and Mortgage Institute, of February 26, 2015), notified to the Claimant by office no. … of the Finance Board of Lisbon, of March 10, 2015, remitted by registered mail with return receipt (registration RD … PT), contains the following references: "(…) 3. It requests the revocation of the order of dismissal of the gracious complaint (…); (…) 16. This new assessment would set the tax to be paid at €16,771.30; 21. Pursuant to letter b), of paragraph 1, of article 115 of the MPTC there is occasion for official revision of the assessment as a result of the new assessment (…) implied that the AT proceed, officially, to the issuance of a new assessment, corrective of the previous one, reducing the amount to be paid; 26. (…) In practice, the assessment in question operates the cure, by reform of the initial assessment, retroacting its effects to the date of the reformed act (…); 31 (…) comparing the petitions of the first hierarchical appeal presented (…) and of what is now assessed (…), it is clear that (…) the Appellant intends to obtain the same legal effect (…)";

2.1.13. The contested assessment is in the phase of compulsory collection.

2.2. Substantiation of the facts deemed to be proven:

The Tribunal's conviction regarding the facts deemed to be proven resulted from the analysis of the documentary evidence attached to the request for arbitral ruling, as well as from the response given by the Respondent and the procedural file attached thereto.

2.3. Facts not proven

There are no facts relevant to the decision of the case that should be considered as not proven.

3. LEGAL REASONING – SUBSTANTIATION

3.1. ON THE UNTIMELINESS OF THE REQUEST

In translating the untimeliness of the request for arbitral ruling, invoked by the Respondent, into a dilatory exception, which obstructs the continuation of the proceedings (article 89, paragraph 1, letter h), of the Administrative Court Procedure Code, of subsidiary application, pursuant to article 29, paragraph 1, letter c), of the LRTA and article 576, paragraph 2, of the Code of Civil Procedure, subsidiarily applicable to tax arbitral proceedings, in accordance with the provision of article 29, paragraph 1, letter e), of the LRTA), the same must be assessed as a priority, by force of the provision of paragraph 1 of article 608 of the Code of Civil Procedure.

The illegality of an assessment act may be examined through the administrative and/or judicial means of objection legally provided, with a view to its total or partial annulment.

Because tax acts performed by tax authority competent in matter are definitive (article 60 of the TPPC), they may be directly examined by judicial means, there being occasion for necessary complaint only in those cases where there is as it were an "administrativization" of the acts of private parties as happens, in certain circumstances, with self-assessment (article 131 of the TPPC), with withholding at source (article 132 of the TPPC) with payments on account (article 133 of the TPPC), besides the cases of objection based on matter of tariff classification, origin or customs value of the goods (article 133-A of the TPPC) and of objection of property values (article 134 of the TPPC).

Outside the cases of obligation of prior complaint, the taxpayer may obtain the total or partial annulment of the assessment act by administrative means, by means of a gracious complaint (articles 68 et seq., of the TPPC) or a request for revision (article 78 of the General Tax Law) and, from the decision of its dismissal, through a facultative hierarchical appeal (articles 80 of the General Tax Law and 66, 67 and 76 of the TPPC) or, alternatively, by judicial objection (articles 95, paragraph 1, letter d), of the General Tax Law and 102, paragraph 1, letter e), of the TPPC).

If the taxpayer opts for the hierarchical appeal from the decision of dismissal of the gracious complaint or the request for revision of the tax act and, if the hierarchical appeal is dismissed, from the decision of the hierarchical appeal which includes the assessment of the legality of the assessment act, judicial objection is available, pursuant to article 102, paragraph 1, letter e), of the TPPC.[1]

Similarly, article 10, paragraph 1, letter a), of the LRTA, in establishing the periods for presentation of the request for constitution of the arbitral tribunal, makes reference to the request which has as its object the decision of the hierarchical appeal, but it must be the hierarchical appeal in which the legality of the act which, in concreto, is objected to in the request for arbitral ruling was assessed and not of a tax act that has not been previously examined by administrative means.

The request for arbitral ruling presented following the dismissal, express or tacit, of the hierarchical appeal, although it has as its immediate object the decision of dismissal, always has as its mediate object the tax act whose declaration of illegality is intended and was previously raised before the competent AT organ for decision.

It thus falls to the concrete case at hand to determine whether the tax act here objected to was previously examined by administrative means and whether, if it was not, the request for arbitral ruling in which the declaration of its illegality is requested is still timely, having regard to the deadline for voluntary payment.

However, it is the Claimant itself who, in requesting from the arbitral tribunal the declaration of the illegality of the Stamp Duty assessment for the year 2012, refers to "assessment acts/collection documents" (point 6 of i. p.), requests that "the collection documents be annulled" (point 5 of i. p.) and informs having presented a gracious complaint and a hierarchical appeal for each of the instalments in which the tax debt was required (point 3 of i. p.), attaching copies of the decisions of dismissal of the gracious complaint and the hierarchical appeal relating to the first instalment into which that assessment was subdivided.

Now, in accordance with paragraph 1 of article 68 of the TPPC, "The procedure of gracious complaint aims at the total or partial annulment of tax acts by initiative of the taxpayer, including, in accordance with the law, substitutes and responsible parties" and not the annulment of each of the instalments in which the collection of the tax is effected.

The tax legal relationship was molded on the obligational legal relationship and has as its immediate object a pecuniary obligation (cf. article 40, paragraph 1, of the General Tax Law), whose value, as a rule, equals the value of the tax assessment (of the tax act). In that sense is that term used in article 102, paragraph 1, letter a), of the TPPC, in which it is determined that the period for presentation of judicial objection is three months counted from the "End of the deadline for voluntary payment of tax obligations legally notified to the taxpayer", as is concluded from the reference contained in article 70, paragraph 1, of the same Code, according to which "1 - The gracious complaint may be lodged on the same grounds provided for judicial objection and shall be presented within 120 days counted from the dates provided for in paragraph 1 of article 102", which includes the end of the deadline for payment of the assessment whose total or partial annulment is requested.

The term "obligation" or "pecuniary obligation" is, in the words of Antunes Varela, "the means that satisfies the interest of the creditor, that provides him the advantage to which he is entitled", being "the fulcrum of the obligation, its practical goal"[2]

However, according to the teaching of Braz Teixeira, in tax matters, "It is necessary not to confuse periodic obligations, which, although performed by successive acts, at different moments, have origin in the same obligation and constitute the various portions of the same obligation that was divided, with obligations that must be performed periodically, not due to a division of the overall obligation, but rather to the birth, also periodic, of new obligations, by the permanence of the presuppositions of fact of taxation."[3] (emphasis ours).

The instalments in which a Stamp Duty assessment is divided are in that first situation: from the terms of the conjugated provisions of articles 113, paragraph 1 and 120, both of the Municipal Property Tax Code, applicable by reference from paragraph 7 of article 23 of the Stamp Duty Code, in the wording given by Law no. 55-A/2012, of October 29, it results that, in the situations referred to in item 28 of the GTSD, a sole annual assessment is effected, payment in instalments being nothing more than a tax collection technique and not its partial payment.

It is thus to be concluded that, as the gracious complaints nor the hierarchical appeals filed by the Claimant had as their object the act of assessment of Stamp Duty now examined, but rather each of the instalments in which the assessment was subdivided, which are not autonomously annullable, the present request for arbitral ruling translates into a direct objection to that tax act, which should have been presented within the period of 90 days counting from the "End of the deadline for voluntary payment of tax obligations legally notified to the taxpayer", pursuant to article 102, paragraph 1, letter a), of the TPPC, by reference from article 10, paragraph 1, letter a), of the LRTA.

Thus, it cannot be taken into account the period of 90 days counted from the notification of the decision of a hierarchical appeal whose object is different from that on which the present request for arbitral ruling is based, which is thereby shown to be untimely.

3.2. THE ECONOMIC VALUE OF THE REQUEST

In accordance with the provision of paragraph 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), the value of the case is determined in accordance with article 97-A of the TPPC. And, in the terms of letter a) of paragraph 1 of article 97-A of the TPPC, the value of the case is "When the assessment is objected to, [is] that of the amount whose annulment is sought".

The value of the case is thus set at €23,863.13 (twenty-three thousand, eight hundred and sixty-three euros and thirteen cents), as this is the value of the Stamp Duty assessment objected to.

4. DECISION

Based on the facts and legal grounds set out above, it is decided, deeming the request for arbitral ruling untimely, by lapse of the right of action, that the AT be absolved of the instance.

VALUE OF THE PROCEEDINGS: In accordance with the provision of article 306, paragraphs 1 and 2, of the Code of Civil Procedure, 97-A, paragraph 1, letter a), of the TPPC and 3, paragraph 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is set at €23,863.13 (twenty-three thousand, eight hundred and sixty-three euros and thirteen cents).

COSTS: Calculated in accordance with article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached thereto, in the amount of €1,224.00 (one thousand two hundred and twenty-four euros), to be borne by the Claimant.

Lisbon, October 30, 2015.

The Arbitrator,

/Mariana Vargas/

Text elaborated by computer, pursuant to paragraph 5 of article 131 of the Code of Civil Procedure, applicable by reference from letter e) of paragraph 1 of Decree-Law 10/2011, of January 20.

The wording of this decision is governed by the 1990 Orthographic Agreement.

[1] In this sense, cf. SOUSA, Jorge Lopes de, "Tax Procedure and Process Code", 6th Edition 2011, annotated and commented, Áreas Editora, Lisbon, page 153.

[2] VARELA, Antunes, "On Obligations in General", Vol. I, 9th Edition, Almedina, Coimbra, 1996, pages 80/81.

[3] TEIXEIRA, António Braz, "Principles of Tax Law", Vol. I, 3rd Edition, Almedina, Coimbra, 1995, pages 243 and 244.