Summary
Full Decision
ARBITRAL DECISION
REPORT
The Head of the Succession of A…, Tax ID Number …, with domicile at … Street, in …, better identified in the case file, filed a request for arbitral decision, pursuant to Article 2(1) of Decree-Law No. 10/2011, of 20 January (RJAT) and Ministerial Order No. 112-A/2011, of 22 March, for a declaration of illegality and consequent annulment of 14 Stamp Tax assessments (relating to item 28.1 of the respective General Table), for the year 2014, in the total amount of €10,362.20 (ten thousand, three hundred and sixty-two euros and twenty cents).
The Tax and Customs Authority (AT) is the respondent.
The Claimant did not designate an Arbitrator. For this purpose, the President of the Deontological Council of the Administrative Arbitration Center designated the undersigned, who expressly accepted such appointment. The parties were duly notified thereof and did not express any intention to refuse it.
The arbitral tribunal was thus constituted on the eleventh of August of this year.
The AT timely filed its response, raising an exception and contesting the request, thereby arguing for the complete lack of merit thereof, with the consequent dismissal of the respondent.
The AT requested waiver of the attachment of the administrative file and the parties waived the holding of the meeting provided for in Article 18 of the RJAT.
The Tribunal was duly constituted and is substantively competent.
The parties have legal personality and judicial capacity and are legitimate.
The case contains no nullities and, with reservation of the aforementioned exception, no issues have been raised therein that could hinder the examination of the merits of the case.
Object of the Dispute and Statement of Facts
In 2014, the urban property in vertical ownership, located on … and … Streets, No. …, in Lisbon, registered in the property tax registry of the parish of … under article … and to which corresponded a total tax property value (VPT) of €1,036,220.00 (one million, thirty-six thousand, two hundred euros), formed part of the joint succession of A…, in which four heirs were qualified without distinction of share or right.
That property corresponds to a residential building, in full ownership, not constituted therefore in horizontal property regime, composed of 14 units of independent use, intended for residential purposes.
Each of the residential units, which are autonomous and independent of one another, had a separate matricial registration, and the tax property value (VPT) attributed to each of them was much less than €1,000,000 (one million euros), never exceeding €84,110 (eighty-four thousand, one hundred and ten euros).
The assessments in question result from the application of the aforementioned item of Stamp Tax (IS) to the independent units allocated to residential use of the said property, with the total VPT of these amounting to €1,036,220.00.
The assessment acts in question, in the total amount of €10,362.20 (ten thousand, three hundred and sixty-two euros and twenty cents), furthermore the amount indicated as the value of the request, gave rise to collection documents attached to the claim, which correspond to the first installment of the tax, relating to 2014, all with maturity in April 2015.
There are no facts with relevance to the examination of the merits of the case that are not proven.
The proven facts are based on documents provided by the parties, whose correspondence to reality is not disputed.
Matter of Law
The Exception
The AT invoked the exception of non-arbitrability of the request, on the grounds of lack of jurisdiction of the arbitral tribunal. This was allegedly because the Claimant was contesting only one of the tax installments (the first) and not the tax assessment (sole and annual), which would not be subject to examination in arbitral proceedings. In support of the thesis of non-contestability of an installment, the AT cites various case law from arbitral tribunals functioning within the CAAD, specifically the decisions rendered in cases 120/2012-T, 408/2014-T, 138/2015-T, 387/2014-T, 726/2014-T, 736/2014-T and 90/2015-T.
In that sequence, the Claimant filed a Reply, admitted in light of the principles of contradiction and equality of the parties and the autonomy of the arbitral tribunal, provided for in Article 16 of the RJAT, contesting this exception as it understood it had invoked the illegality of the tax acts and not of their first installments. On this matter, it states that it has no need to wait for notification of payment of all other installments (which it states has already occurred), for even if the existence of installment payment were relevant, it should always be concluded that the periods can be brought forward, as follows from the Judgment it cites (Supreme Administrative Court Judgment of 28 October 2009, in case 595/09).
The fact of the matter is that the Claimant attaches the collection documents of the first installment to better identify the tax acts in question, but it is not these that it contests. It does contest the assessment acts of item 28.1 of the GIST for 2014, as clearly appears from the value attributed to the case (which corresponds to the utility sought by the request) and the value of each of the Stamp Tax assessments, as stated at the beginning of the petition (Article 1) and of the rate considered in Article 5 of the same procedural document, which are only compatible with challenging the assessment and not part thereof (which would not be viable).
The Respondent is therefore not correct in seeking to attribute that defect to the request, which would make it non-arbitrable due to lack of jurisdiction of the arbitral tribunals (Article 2 of the RJAT by analogy), and the exception raised is therefore denied, and the merits of the case shall be examined.
Positions of the Parties
The issue in the case concerns the application, in situations of so-called vertical ownership, of the new Stamp Tax taxation on urban properties with residential allocation and VPT equal to or greater than one million euros. This new taxation was introduced in 2012 as a reinforcement of budgetary control measures on the revenue side, within a framework of financial (or economic-financial) necessity, (cf. Sustainability and Solidarity in Times of Crisis, Suzana Tavares da Silva, in Fiscal Sustainability in Times of Crisis, Coord. José Casalta Nabais and Suzana Tavares da Silva, pp. 61 et seq.).
As is well known, that new Stamp Tax taxation has raised strong doubts and considerable challenge. This not only for specific cases of its application (e.g., vertical ownership, co-ownership, land for construction or its application to the year 2012), but also in general terms, for its possible unconstitutionality, whether of its general regime or of its transitional regime (see Luís Menezes Leitão, On the Stamp Tax Taxation of Luxury Real Estate (item 28.1 GIST), in Tax Arbitration No. 1, pp. 44 et seq.).
Claimant
The Claimant thus contests the application of the new item 28.1 of the GIST to urban properties not constituted in horizontal property regime, but which include units susceptible of independent use, in which the minimum value of incidence set by law is reached by the sum of the VPT of the separate matricial registrations (or autonomous) corresponding to those various units, but not by any one of them individually considered.
The Claimant impugns the assessment acts of item 28.1 of Stamp Tax relating to the year 2014, on the grounds that although the property is not divided into autonomous fractions (horizontal property), it is constituted by parts susceptible of independent use (vertical property), whereby the VPT relevant to assess compliance with the requirement on which the incidence of said item depends is not met, since that value is only obtained by adding the VPT of all parts of the property susceptible of independent use and which correspond to a separate registration in the corresponding registry and, therefore, to individualized VPT lower than said minimum limit. And it invokes in support of its thesis the decisions of the Arbitral Tribunals functioning within the scope of the CAAD of 29 October 2013, in case 50/2013-T and of 16 December 2013, in case 132/2013-T.
The Claimant thus sustains that it is not the owner of a property with VPT equal to or greater than said minimum amount, but rather the owner of a property in vertical ownership in which the VPT exceeding that value is only achieved by the sum of the VPT of the units susceptible of independent use allocated to residential purposes, without any of them, individually considered, reaching that minimum amount of tax relevance.
For that reason, according to the Claimant, the assessments in question are defective due to violation of law, which makes them voidable.
The Claimant further alleges that if this is not accepted, the assessments should fail on grounds of unconstitutionality, based on violation of the principle of tax capacity and, it believes, of equality.
Respondent
To the contrary, the Respondent contests that understanding, sustaining the maintenance of the assessments, emphasizing, in summary, that total or vertical property corresponds to a property, this being the reality to be taken into account to determine compliance with the minimum value contained in the rule of incidence. For the Respondent, the VPT relevant for purposes of tax incidence is therefore the VPT of the urban property and not the VPT of each of the parts that compose it (wrongly referred to as being 13 units and including fractions with non-residential purpose, which is not the case), even if these are susceptible of independent use, as they are allocated to residential purposes. In reinforcement of this thesis, it also emphasizes that the unity of the property is not affected, and its distinct parts cannot be legally equated to autonomous fractions of a property constituted in horizontal property regime, especially as their ownership must necessarily be attributed only to a single owner (or more than one, but in cases of co-ownership).
It further adds that a different understanding (i.e., that the VPT relevant to the rule of incidence would correspond to the VPT of each floor or unit susceptible of independent use) would be unconstitutional, as a violation of the principle of tax legality (inherent in Article 103(2) of the Constitution of the Portuguese Republic), by differentiating where the legislator did not distinguish.
More extensively, the AT sustains that the property value relevant for purposes of the incidence of the tax is the total property value of the urban property and not the property value of each of the parts that compose it, even if susceptible of independent use, recalling that Article 80(2) of the Property Tax Code declares that, except as provided in Articles 84 and 92, each property corresponds to a single registration in the registry.
This notwithstanding, it acknowledges that, as appears in the respective property registry, the floors or independent units are valued pursuant to Article 12(3) of the Property Tax Code, according to which each floor or property susceptible of independent use is considered separately in the matricial registration, which shall also discriminate the respective tax property value, on which the Municipal Property Tax will be assessed.
And it further acknowledges that such rule is not unprecedented, having a counterpart in Article 232, Rule 1, of the Property Tax Code and Agricultural Income Tax Code, which already provided that each residential unit or part of property should be taken automatically for purposes of determining the collectible income on which the assessment would be levied. It likewise emphasizes that the same occurs now, with Articles 37 et seq. of the Property Tax Code.
Nevertheless, in the Respondent's view, the tax property value on which the incidence of Stamp Tax of item 28.1 of the General Table depends must be, as it was, the total property value of the property and not the value of each of its independent parts.
This is because the unity of the urban property in vertical ownership composed of several floors or units would not be affected by the fact that all or some of those floors or units are susceptible of independent economic use. In this context, it states that the property in vertical ownership does not cease to be only one, and thus its distinct parts are not legally equated to autonomous fractions in horizontal property regime, being the property of only a single owner, without prejudice to the co-ownership regime, when applicable. In this context, the separate registration in the property registry of each of the parts, economically and functionally independent, of the same property, with indication of the corresponding property value of each, ascertained separately pursuant to Articles 37 et seq. of the Property Tax Code, would be irrelevant for purposes of interpreting the new item of the GIST. That is, the fact that the Municipal Property Tax is calculated based on the tax property value of each part of property with independent economic use would not affect the application of Article 28(1) of the General Table.
According to the Respondent, any other interpretation would violate, rather, the letter and spirit of item 28.1 of the General Table and also the principle of legality regarding the essential elements of taxes, provided for in Article 103(2) of the Constitution of the Portuguese Republic. For that reason, an interpretation of item 28.1 of the General Table to the effect that the property value on which the incidence of this item depends should not be calculated globally, but rather unit by unit, would be unconstitutional as offensive to the principle of tax legality.
For the Respondent, the legislator could have intended to favor a legally more developed regime (horizontal property), subjecting it to a different, and thus discriminatory, legal tax framework, without such discrimination being necessarily regarded as arbitrary.
Summary of Contested Issues
In summary, in the present case, there are thus three contested legal issues:
- What VPT is relevant in cases of vertical property;
- Possible conformity of the interpretation obtained with the principle of equality;
- Possible conformity thereof with the principle of legality.
Matter of Law
Vertical Property
As is noted, Law No. 55-A/2012, of 29 October, amended the Stamp Tax Code, adding a new item to the General Table of the Stamp Tax Code.
On the issue of determining the VPT (minimum) relevant for the application of item 28.1 of the General Table in cases of vertical property, the CAAD decisions in cases numbered 50/2013-T, 132/2013, 181/2013-T, 183/2013-T, 272/2013-T, 280/2013-T, 26/2014-T, 30/2014-T, 88/2014-T, 177/2014-T and 206/2014-T have already pronounced, among others, which were subsequently confirmed by various other arbitral decisions.
In all of them, the issue was, as in the present case, whether the VPT relevant to the rule of incidence (28.1 of the GIST) is the VPT corresponding to each of the units susceptible of independent use separately considered in the registry or whether, on the contrary, the relevant VPT should correspond to the sum of all such units susceptible of independent use but forming part of the same property and allocated to residential purposes.
And the answer in those decisions was always for the first option and it is believed to be correct. Let us now examine the reasons underlying such case law and the interpretation followed here.
The Stamp Tax Code
The new item was inserted in the Stamp Tax Code, an option which does not offer significant contribution for systematically framing the new tax, since that tax "is levied on a heterogeneous multiplicity of facts or acts … without a common feature conferring identity upon them", which was, moreover, aggravated by the Patrimony Taxation Reform of 2003/2014, making even more complex "the problem of classifying this tax" (cf. José Maria Fernandes Pires, Op. Cit., p. 422).
But it is known that this new item was introduced as a means of reinforcing budgetary control measures on the revenue side, within a framework of financial (or economic-financial) necessity (cf. Sustainability and Solidarity in Times of Crisis, Suzana Tavares da Silva, in Fiscal Sustainability in Times of Crisis, Coord. José Casalta Nabais and Suzana Tavares da Silva, pp. 61 et seq.), with the purpose of identifying new forms of externalization of tax capacity that could be called upon to support the purpose of reducing the negative budgetary balance.
And it did so by opting to make the new taxation apply exclusively to certain assets, thus implying a strong negative discrimination thereof, which calls for a reinforced explanation of that choice, so as not to call the principle of equality into question, or equity in the terminology of Glória Teixeira, whether in its sense of horizontal equity or vertical equity (Glória Teixeira, Manual of Tax Law, p. 56, 2nd ed., Almedina).
Now, it seems to be seen in the legislator's thinking the intention to identify in properties with VPT equal to or greater than one million euros and intended for residential purposes ("luxury"), a referential, not arbitrary, of an additional tax capacity, capable of expanding the spectrum of contributions to the desired and necessary budgetary balance.
Within this framework, the question to be decided is whether a property constituted in total or vertical ownership, but with floors or units with independent uses, is a "property with residential allocation" for purposes of applying Article 1 of the Stamp Tax Code and item 28.1 of the GIST, added by Article 4 of Law No. 55-A/2012, of 29 October (even if, as in the present case, it may have areas allocated to non-residential purposes), or whether by "property" should instead be understood the units separately considered in the property registry and, further, what VPT is relevant (if the VPT relating to the property, if the VPT inherent in the sum of its parts with residential allocation, or if rather the VPT relating, autonomously, to each of these).
For this purpose, it is important to bear in mind that each floor or part of property susceptible of independent use is considered separately in the property registration of the total property, which also discriminates the tax property value thereof (Article 12(2) of the Property Tax Code), and the Municipal Property Tax is assessed individually with respect to each floor or part of property susceptible of independent use (Article 119(1) of the Property Tax Code).
And if such is the case in Municipal Property Tax, it should also be so in Stamp Tax. Let us see why.
Literal Interpretation
As stated in the decision rendered in case 206/2014-T: "Given that the Stamp Tax Code refers to the Property Tax Code, it must be concluded that registration in the registry of properties in vertical ownership, constituted by different parts, floors or units with independent use, obeys the same registration rules as horizontal property."
Since the Municipal Property Tax and the Stamp Tax "are assessed individually with respect to each of the parts", the "legal criterion for defining the incidence of the new tax must also be the same." Consequently, there will be incidence of item 28.1 of the GIST (only) if any of those parts, floors or units with independent use present a VPT, at least equal to the amount provided for in the rule of incidence.
Thus, the property will be the independent area, considered separately and autonomously in the registry, and will be subject to Stamp Tax if two requirements are met: being intended for residential purposes and having a VPT equal to or greater than one million euros, the criterion for assessing "luxury" residential properties. Otherwise, an unforeseen reality would be created: that of a, so to speak, "residential property", possibly inserted within a larger property with various purposes (which is not the case in the present case), in which the VPT thereof, spurious to the matricial registrations, would consist in the fiction of a VPT given by the addition of the autonomous VPT of each independent unit (with residential purpose) considered in the property registration. That is, where the legislator considered two realities, the interpreter would now, without support in the legislative text, have to fictionally create a third reality, hybrid, halfway between the urban property and its independent units to which the legislator of the Municipal Property Tax, and of Stamp Tax by reference to the Property Tax Code, understood to grant tax relevance.
Also in the decision rendered in case 272/2013-T (CAAD) it is stated that "considering that registration in the registry of properties in vertical ownership, constituted by different parts, floors or units with independent use, pursuant to the Property Tax Code, obeys the same registration rules as properties constituted in horizontal property regime, and given that the respective Municipal Property Tax, as well as the new Stamp Tax, are assessed individually with respect to each of the parts, there can be no doubt that the legal criterion for defining the incidence of the new tax must be the same". In fact, it is further stated in that same decision that the AT's position "finds no legal support and is contrary to the criterion applicable in Municipal Property Tax matters and, by reference, in Stamp Tax", reason for which "the adoption of the criterion defended by the AT violates the principles of legality and fiscal equality, as well as that of the prevalence of material truth over legal-formal reality".
And in the same sense it is stated in the arbitral decision of case 30/2014-T (CAAD) that there is found in the AT's doctrine a "non-conformity with the literal element of the latter part of the rule of incidence (item 28 of the GIST) which states that the tax is levied on "the tax property value used for purposes of Municipal Property Tax" and therefore, should not be levied on the sum of tax property values of properties, parts of properties or floors, having no legal basis the operation of adding tax property values of floors or parts of property susceptible of independent use, of residential allocation, severed from the VPT of the others with different purposes, so as to reach the taxation threshold eligible of 1,000,000.00 euros or more".
As is also stated in the arbitral decision rendered in case 30/2014-T (CAAD), what occurs with respect to urban properties with residential allocation, in vertical ownership, with floors or units susceptible of independent use, is that the AT proceeds, in Stamp Tax assessment operations, to the adaptation of the Property Tax Code rules (by adding the tax property values of the same property, without considering those corresponding to parts of the property with non-residential purpose, thus giving rise to a new and hybrid VPT). In fact, that "adaptation" corresponds to "adding the VPT of each floor or independent unit allocated to residential purposes (severed from the VPT of floors or units intended for other purposes), creating a new legal reality, without legal basis, which is a global VPT of urban properties in vertical ownership, with residential allocation", which runs counter to "the literal element of the rule of incidence" (incidence on "the tax property value used for purposes of Municipal Property Tax").
And that possibility of allocating the parts susceptible of independent use of the same property to various purposes, beyond the residential purpose, even if it does not occur in the present case, in which the total VPT of the property corresponds to the basis of incidence of the tax because all independent parts are for residential purposes, cannot fail to be relevant to the interpretation of the item in question.
Thus, "in urban properties with residential allocation, in vertical ownership, with floors or units susceptible of independent use", the tax property value "that results exclusively from Article 12(3) of the Property Tax Code should be considered. Whether for Municipal Property Tax or for this Stamp Tax".
To be specific, as was concluded in the decision rendered in case 26/2014-T of the CAAD, "for purposes of applying item 28 of the GIST to properties in vertical ownership, the same Property Tax Code rules apply as to properties in horizontal property regime, and in the same sense the VPT for purposes of applying the item is the individual VPT of each independent residential fraction, and since in the present case none of the fractions exceeds the criterion of incidence of 1,000,000.00€", the same occurring in the present case.
Thus, it is concluded, in summary, as clearly appears from the cited decisions, that the literal interpretation of the new item of the GIST cannot fail to be different from that sustained by the AT, moreover the opposite thereof, given the clear and indisputable reference made regarding the new item of the GIST to the rules of the Property Tax Code, and the interpreter cannot "create" a new concept of property so as to obtain a hybrid VPT, not recognized in the registry and without any support in the text of the law.
Economic Substance
But as is well stated in Judgment 117/2013 T of the CAAD, "interpretation based exclusively on the literal wording ... cannot be accepted, since in the interpretation of tax rules the general rules and principles of interpretation and application of laws are observed (Article 11(1) of the General Tax Law) and Article 9(1) expressly prohibits interpretations based exclusively on the literal wording of the rules by providing that «interpretation should not be limited to the letter of the law», but should rather «reconstruct from the texts the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied». Since for correspondence between interpretation and the letter of the law it will be sufficient «a minimum of verbal correspondence, even if imperfectly expressed» (Article 9(3) of the Civil Code), which will only prevent the adoption of interpretations that cannot in any way be reconciled with the letter of the law, even acknowledging therein imperfection in the expression of legislative intent".
And if we now look to the economic substance of the tax facts, in compliance with Article 11(3) of the General Tax Law, without adhering to an economic interpretation of tax law norms, which is today condemned by Doctrine (cf. Taxes, General Theory, Américo Fernando Brás Carlos, p. 196, 2014, 4th ed. Almedina), we must equally recognize that the expression "each urban property" used in Article 23(7), for reasons of identity, encompasses not only urban properties in horizontal property regime, but also floors, units or parts of urban properties in vertical property regime, as long as allocated to residential purposes, always proceeding, in either case, from a single tax basis for all legal purposes: the tax property value used for purposes of Municipal Property Tax (latter part of item 28 of the GIST), as was concluded in the arbitral decision of case 177/2014-T (CAAD).
Or, as is emphasized in the decision rendered in case 272/2014-T of the CAAD, "from the legislator's perspective, what matters is not the legal-formal rigor of the concrete situation of the property but rather its normal use, the purpose to which the property is intended", whereby "for the legislator the situation of the property in vertical ownership or in horizontal property regime was not relevant, since no reference or distinction is made between them. What is relevant is the material truth underlying its existence as an urban property and its use", that is the economic reality of the ownership of independent parts, e.g., susceptible of independent use or independent leasing, just as autonomous fractions in the case of horizontal property, and therefore susceptible of permitting use or obtaining income in a similar way and thus externalizing, by that, equal tax capacity (as would be externalized by the sum of the VPT of various autonomous fractions of the same property in horizontal property regime or of several properties which together would exceed the value of one million euros, without such having been considered by the legislator as an externalization of tax capacity relevant for purposes of Stamp Tax).
Coherence of the System
And if we look at the entirety of the tax system, we will find no indications that would invalidate the conclusion drawn up to now.
As stated in the Judgment rendered in case 26/2014-T of the CAAD, there is no visible censure of the legislator toward vertical property. Indeed, "it could be said, not without reasonableness, that the legislator, for purposes of taxation under Municipal Property Tax, chose to confer autonomy, independence, to each of the parts or each of the floors of a single property, as long as these and others show independent use, to the point of foreseeing the individualized registration in the registry of each of these independent parts and imposing on taxation under Municipal Property Tax collection also autonomous thereto. In spite of the legal existence of a single property, it is the legislator itself who not only recommends but imposes the autonomous consideration of each of the independent parts, for purposes of taxation of patrimony". Indeed, as follows from an economic interpretation of the fact, with prevalence of its substance over its form, as stated above. And if such is the case in Municipal Property Tax, it would not be understood why such should not also be the case in Stamp Tax, namely in the case of the new taxation on "luxury" properties (homes, more precisely).
In fact, if the legislator is indifferent to one or another form of structuring the ownership of urban properties in the Property Tax Code, it would not be understood that the legislator now intended to favor one to the detriment of the other, namely by considering one form of structuring more advanced than the other. Indeed, as was decided in cases 26/2014-T and 272/2014-T of the CAAD, "the current legal regime does not impose the obligation to constitute horizontal property", reason for which "the discrimination operated by the AT translates into an arbitrary and illegal discrimination", for "the AT cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the tax system, as well as the principle of fiscal legality provided for in Article 103(2) of the Constitution, and also the principles of justice, fiscal equality and proportionality."
That is, the literal interpretation initially obtained remains valid.
Legislative Intent
And the fact is that nothing also induces the interpreter to the conclusion that the concrete legislator of the new item of the GIST, contrary to the legislator of the Municipal Property Tax, which moreover remains unchanged, intended to discriminate vertical property in relation to horizontal property. As is well recalled in the Judgment rendered in the aforementioned case 26/2014-T of the CAAD, "when presenting and discussing in Parliament, Proposal for Law No. 96/XII (2nd), the State Secretary for Tax Affairs expressly stated: 'The Government proposes the creation of a special rate on urban residential properties of higher value. It is the first time that Portugal has created a special taxation on properties of high value intended for residential use. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will be levied on homes with a value equal to or greater than 1 million euros' (cf. Parliamentary Record Series I No. 9/XII -2, of 11 October, p. 32). Now, as is emphasized in that Judgment, "the State Secretary for Tax Affairs presents this bill of law by expressly referring without hesitation to the word 'homes'… of value equal to or greater than 1 million euros", whereby "it results with meridian clarity that item 28.1 of the GIST cannot be interpreted to mean that it encompasses each one of the floors, units or parts susceptible of independent use when only from the sum thereof results a VPT exceeding that provided for in the same item". This is because, in that case, "none of the 'homes' … has, by itself, 'value equal to or greater than 1 million euros'".
It is thus clear, as is stated in said decision 272/2014-T, that for the legislator only that value of one million euros, as long as allocated "to a residential unit (home, autonomous fraction or floor with independent use) translates a tax capacity above the average and, as such, susceptible of determining a special contribution to ensure fair distribution of the tax burden".
And if such is the case, we must then pay heed to the concept of "home" as a physical reality that enables a residential purpose, a unit susceptible of independent use, including its leasing, for it is in that economic reality that we will find the externalization of the tax capacity associated with "luxury homes" that the legislator considered relevant. More, if such were not the case, the legislator would proceed to a discrimination that could not be found to be justified, for as has already been seen there is found in the system no censure of vertical property when compared with horizontal property. More, that distinction would clash with a necessary equity between identical externalizations of the same tax capacity.
Tax Capacity and Interpretation in Conformity with the Constitution
It is certain that the tax legislator is subordinated to the principles of equality, which, as is well stated by Sérgio Vasques (Manual of Tax Law, pp. 249 et seq., 2011, Almedina), is more than a mere negative limit and imposes something more than the mere prohibition of arbitrariness, rather postulating a distribution of taxes according to the criterion of tax capacity, whereby the legislator must anchor taxation in reasonable economic elements and not arbitrary, susceptible of justifying the tax claim in a tax capacity concretely externalized by the taxpayer.
In this way, it is imperative to seek in the text of the new item a reading that complies with those principles. Or, which amounts to the same thing, not to seek to obtain from that text a meaning that violates such principles.
Now, the tax capacities externalized by the ownership of a property composed of a set of autonomous fractions in horizontal property regime or by a set of units of independent use in vertical property regime cannot fail to be considered identical, if not indeed, possibly, lesser in the case of the second hypothesis. That is, a property certainly does not have a greater market value because it is organized as vertical property. It is worth the same (permitting equal benefit from its use or equal income via its leasing, as stated above), or will indeed have a lesser value, since the alternatives of transmissibility will possibly be lesser. And we know that VPT intends to be an approximation, precisely, to the market value of properties and will therefore be the measure and the limit of the tax capacity relevant for the new item of the GIST.
Thus, the interpretation championed by the AT, not finding hermeneutic justification, as has been seen up to now, would further lead to a manifest inequality between owners of properties in horizontal property regime and in vertical property regime (and it has also been seen that there is found no intention whatsoever on the legislator's part to penalize the latter, even if it were admitted that such was constitutionally permissible). In that same sense, as is well emphasized in the decision of case 272/2014-T of the CAAD, the "existence of a property in vertical property regime or horizontal property regime cannot be, by itself, an indicator of tax capacity. On the contrary, the law provides that one and the other should receive the same tax treatment in obedience to the principles of justice, fiscal equality and material truth".
Concluding, "material truth is what imposes itself as the determining criterion of tax capacity and not the mere legal-formal reality of the property, since the constitution of horizontal property implies a mere legal alteration of the property not even imposing a new valuation" (as stated in the decision rendered in case 26/2014-T of the CAAD). And that fact "does not appear coherent with the decision of the AT to tax the residential parts of a property in vertical property regime, based on the global VPT of the property and not that which is effectively attributed to each part." Thus, "the AT cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the tax system, as well as the principle of fiscal legality … and also the principles of justice, fiscal equality and proportionality", as was stated by the creation ex novo of an innovative concept and of a hybrid VPT, frequently corresponding to part of a property.
Conclusion
In these terms, the tax acts in question are defective due to violation of law, by error in the legal and factual presuppositions, since no part of the property possesses a VPT of value equal to or greater than the threshold resulting from the applied rule, which makes said tax acts voidable.
Unconstitutionality
The analysis of the unconstitutionality of the rule is thus prejudiced, whether based on the principle of equality or further on the principle of legality (grounds which would lead to opposite conclusions), because the interpretation championed follows, precisely, from the text of the law, and not from an application divergent from its immediate normative command, by mediate and subsequent intervention of any constitutional principle, or by innovative intervention of the interpreter.
It is not overlooked the content of Constitutional Court Judgment No. 692/2015 of 16 December 2015, rendered in Case No. 51/14 (cf. the page http://www.tribunalconstitucional.pt/tc//tc/acordaos/20150692.html) and which, like Judgment No. 620/2015 of the Constitutional Court of 3 December (available at www.tribunalconstitucional.pt/tc/acordaos/), regarding the assessment of the possible unconstitutionality of the rule in question, concluded with the conformity with the Constitution in force of differentiated treatment between vertical property and horizontal property, for purposes of the item in question of the General Table of Stamp Tax. This because it was understood to constitute "realities with a distinct legal status, in which the ownership of the real rights referred to in item 28.1 of the General Table of Stamp Tax that are levied on the fractions of a property constituted in horizontal property regime may belong to different people, whereas in a property constituted by units susceptible of independent use, but which is not constituted in horizontal property regime, such ownership necessarily belongs to the same person(s)", reason for which the "differences resulting from the different ownership regimes constitute sufficient ground for, with respect to the incidence of stamp tax in the case of buildings in horizontal property regime, account being taken of the individualized tax property value of each of the fractions, which is not already the case in the case of urban residential properties in total property composed of parts susceptible of independent use and considered separately in the property registration".
In fact, viewed the issue from the constitutional perspective, the principle of equality could only prevent an arbitrary distinction, that is, not based on a rational reason, it being certain that the difference in property structure could be, by itself, sufficient cause for non-arbitrary differentiation (regardless of its merit, an assessment that, of course, would always be the responsibility of the legislator and not the interpreter).
Thus, the assessment of the observance of the principle of equality, understood as the prohibition of arbitrariness and, therefore, sufficing itself with merely a rational cause of foundation, is based on the assumption that the law requires differentiated treatment to two identical realities (that is, the immediate command of the rule would lead to a tax differentiation between vertical property and horizontal property) and that only mediately, by application of the principle of equality, an opposite interpretation would be obtained, due to unconstitutionality of the rule or the interpretation made thereof.
Now, it happens that in the present case regarding the taxation of properties constituted in vertical property and in horizontal property regime, it is concluded, without recourse to constitutional principles, but rather only by reference to elements of infra-constitutional hermeneutics, that the law (the item in question) treats these two realities equally.
Thus, the illegality of the acts results from the rule invoked not being applicable to the situation in question, since none of the assessments concerns the minimum threshold required by said item No. 28, and must thus be annulled on that ground, which constitutes a conclusion prior to the analysis of the constitutionality of the rule or the interpretation made thereof, pursuant to the Constitutional Court Judgment No. 693/2015 of 16 December 2015 in Case No. 304/15 (cf. the page http://www.tribunalconstitucional.pt/tc//tc/acordaos/20150693.html), in review of the arbitral decision rendered in case 205/2014-T of the CAAD.
And, on the other hand, it corresponds to the choice of the legislator, not to the interpreter who would substitute himself for the former with a different interpretation, whereby it is equally not in question the observance of the principle of legality.
Operative Part
As a result of the foregoing, this Singular Tribunal decides to rule that the exception of non-arbitrability raised by the Respondent is unfounded and the Claimant's request is fully grounded and, in consequence, annuls the assessment acts in question, on the ground of violation of law, resulting from error in the presuppositions.
Value
In accordance with the provisions of Article 306(1) and (2) of the Civil Procedure Code and Article 97-A(1)(a) of the Tax Procedure Code and Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €10,362.20 (ten thousand, three hundred and sixty-two euros and twenty cents).
Costs
Pursuant to Article 22(4) of the Legal Regime of Tax Arbitration, the amount of costs is fixed at €918.00 (nine hundred and eighteen euros), pursuant to Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.
Lisbon, 28-12-2015
Text drafted by computer, pursuant to the Civil Procedure Code (CPC), applicable by reference from Article 29(1)(e) of the Legal Regime of Tax Arbitration, with blank verses, reviewed and signed by the undersigned arbitrator.
The Arbitrator
(Jaime Carvalho Esteves)
Frequently Asked Questions
Automatically Created