Stamp Tax on Land for Construction Under Verba 28 TGIS: CAAD Arbitration 355/2014-T

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 355/2014 – T

I. REPORT

1. A… - SOCIEDADE DE EDIFICAÇÕES, LDA. (hereinafter, abbreviated as "Taxpayer" or "Applicant"), NIPC …, hereby requests, in accordance with the provisions of articles 2, no. 1, paragraph a), 5, no. 3, paragraph a), 6, no. 2, paragraph a), 10, no. 1, paragraph a), all of the Legal Framework for Tax Arbitration (RJAT) and article 102, no. 2, of the CPPT, the CONSTITUTION OF A SINGULAR ARBITRAL TRIBUNAL with a view to the declaration of illegality of the Stamp Tax Assessment relating to the year 2012, item 28.1 of the TGIS, dated 21/03/2013, relating to the urban property registered in the property matrix under article ..., of the parish of ..., municipality of Lisbon, in the amount of € 22,620.20 (twenty-two thousand six hundred and twenty euros and twenty cents)

2. The Applicant requests the annulment of the tax act relating to the assessment of Stamp Tax and briefly bases the request, alleging essentially:

• The Applicant filed a Gracious Complaint against the assessment, which was rejected by decision of 23/10/2013;

• From that decision it filed a Hierarchical Appeal, which, notwithstanding the 60-day period provided for in no. 5 of article 66 of the CPPT having elapsed, has still not obtained any express decision;

• The Hierarchical Appeal was filed on 27/11/2013, whereby it was deemed tacitly rejected on 26/01/2014;

• The Applicant only became aware of the Assessment through Collection Note no. 2013 ..., in the amount of € 7,540.08 (seven thousand five hundred and forty euros and eight cents), that note being intended for collection of the 1st Instalment of the aforementioned Stamp Tax (cf. Document 1 of the Gracious Complaint);

• The present request for arbitral ruling has as its object the entirety of the Stamp Tax – assessed under item 28.1, with reference to the year 2012, in the indicated amount of € 22,620.20 – and not merely the 1st instalment, in the amount of €7,540.08;

• Consequently, the present request for arbitral ruling is valid, for all purposes, also with regard to the Collection Notes subsequently already issued in the name of the Applicant for collection of the 2nd and 3rd instalments of the tax assessed on 21/03/2013 – Collection Note no. 2013 ..., in the amount of €7,540.06 (2nd instalment), and Collection Note no. 2013 ..., in the amount of €7,540.06 (3rd instalment).

• A brief analysis of the Collection Note notified to the Applicant shows that such Note does not contain all the elements that should be mandatorily notified to the taxpayer in accordance with articles 36, nos. 1 and 2, and 39, no. 12, of the CPPT, namely the indication of the author of the act and, in the event that the author acted in the use of delegation or subdelegation of powers, the capacity in which he decided, its tenor and its date (this latter omission determines the nullity of the notification – article 39, no. 12 of the CPPT);

• The certificate that the Applicant received on 12/06/2013 refers as author of the assessment act the "Central Services of the Tax and Customs Authority", but does not identify which of these Central Services actually carried it out;

• An act without an author cannot serve as a tax act, as it lacks one of its essential elements (cf. article 123, no. 1, a) and g) of the Code of Administrative Procedure - CPA);

• Not containing the Assessment the indication of its author and the respective signature, albeit mechanical, such Assessment violates article 123, no. 1, a) and g) of the CPA, being null in accordance with articles 133, no. 1 of the CPA and 99, paragraph d) of the CPPT, nullity whose declaration is hereby requested;

• The aforementioned Assessment is not adequately reasoned;

• Even if it is considered that the Assessment does not require absolute motivation, which is admitted by mere hypothesis of reasoning, it will still be said that it does not contain any motivation of fact or law, and does not present the logical and formal regularity indispensable to the clear, sufficient and congruous comprehension of the reasons for the decision;

• Not containing the assessment act the due reasoning, not even by referral, this violated the provisions of article 36, nos. 1 and 2, of the CPPT and article 77, no. 1, of the LGT, and is therefore voidable in accordance with the provisions of article 99, paragraph c), of the CPPT;

• The Applicant further states that the disputed assessment was not preceded by prior hearing, thus constituting the omission of an essential formality which constitutes a defect and provides grounds for annulment of the assessment act for violation of paragraph a) of no. 1 of article 60 of the LGT;

• By way of challenge, the Applicant defends itself by alleging that the tax act in question is affected by illegality, double collection, and violates the constitutional principles of equality, taxable capacity and progressivity;

• Beginning by alleging that, in the case of the assessment, it is believed that the urban property registered in the property matrix under article ... of the parish of ... was classified as an urban property with residential use, which does not correspond to its legal nature as it is a land for construction where there is no building whatsoever;

• The Applicant's property on which the Assessment fell is a land lot with no. 2001/… located at Rua … and Rua …, in the parish of ..., municipality of Lisbon, registered in the respective property matrix under article ...;

• The Applicant carries out the activity of purchasing buildings and buying and selling real property;

• The land in question is not being used for residential purposes and there are no buildings or constructions thereon;

• The land in question is intended for construction, being for tax purposes a property of the "land for construction" type or species, as was indeed declared in the deed by which the Applicant acquired it and is also indicated in the respective property record (cf. copy of deed attached as Document 7 of the Gracious Complaint and Document 5 of the Gracious Complaint);

• Article 67, no. 2 of the CIS establishes that to matters not regulated in that Code relating to item no. 28 of the General Table, the provisions of the CIMI shall apply, subsidiarily;

• Having regard to this legal framework, as to the objective scope of the tax, item 28.1 applies to urban properties with residential use;

• The CIS does not directly define what urban properties are and even less what residential use is;

• But it follows the definition used in the CIMI; article 1, no. 6 of the CIS is clear in establishing that, for the purposes of the CIS, the concept of property is defined in the CIMI;

• Thus, for the interpretation of what urban properties with residential use are, we can and should have regard to the CIMI, in particular to articles 2 (which defines property), 4 (which defines urban properties) and 6 (which divides urban properties into species), all of the CIMI;

• It is important to note from the outset that "affect" means to destine to a specific use or purpose, to apply to a determined end;

• Thus urban residential properties or properties with residential use are buildings or constructions licensed for residential use or which, even when they do not have a residential use license, have as their normal purpose residential use (article 6, no. 2, of the CIMI);

• The Applicant alleges that there is only an urban property with residential use when there are buildings or constructions); additionally, that urban residential properties must be licensed for residential use or have residential use as their normal purpose;

• Now, in the case of the property owned by the Applicant, as well as in the case of other land for construction, it is verified, on the one hand, that the same are not by nature buildings or constructions and, on the other hand, that they have construction as their normal purpose;

• In substance, item 28.1 of the TGIS intends to tax the taxable capacity evidenced by taxpayers who are owners, usufructuaries or holders of the right of surface of urban properties for residential use whose taxable property value recorded in the property matrix, in accordance with the CIMI, is equal to or greater than 1 million euros;

• Now a land for construction does not have, having regard to its economic substance, the characteristics and functions of a habitable property, whereby it cannot but be understood that it is not covered by the tax scope norm provided for in item 28.1 of the TGIS;

• In presupposing that the Applicant's land for construction is a property with residential use, the TA makes an erroneous interpretation of article 1, no. 1, of the CIS and of Item 28.1 of the TGIS, as well as article 6, no. 1, paragraph f) (i), of the aforementioned Law no. 55-A/2012, or if we prefer, commits the so-called "error of law regarding facts", which constitutes grounds for annulment of the Assessment in accordance with article 99 of the CPPT;

• Moreover, there are already several pronouncements in tax arbitration proceedings to the effect of the illegality of the taxation of land for construction in light of Item 28 of the TGIS (cf. the various decisions at http://www.caad.org.pt/content/show/id/35/s/3);

• Conclusive proof that the lands were not covered either in the letter or in the spirit of the legislator when creating Item 28 of Stamp Tax is given by the State Budget Law for 2014, which amended the wording of item 28.1 of the TGIS that was previously in force, now reading as follows: "For residential property or for land for construction whose building, authorized or envisaged, is for residential purposes, in accordance with the Property Tax Code";

• The Applicant also bases its request on double collection;

• The Applicant's property is land for construction registered in the urban property matrix of the parish of ..., municipality of Lisbon, under article ..., with a TPV of €2,262,019.75 (two million two hundred and sixty-two thousand and nineteen euros and seventy-five cents);

• As such, the aforementioned property was subject to Property Tax (IMI) for the year 2012, a tax which was assessed to the Applicant and was paid by it – cf. the respective Property Tax Collection Notes, duplicates of two complaints for correction of the Collection Note, Collection Note for partial payment of Property Tax for 2012 and copy of proof of partial payment of Property Tax for 2012, attached as Documents 8 to 12 of the Gracious Complaint;

• That is, the tax fact is the ownership (as owner, usufructuary or right holder of surface) of a property on 31 December, of an urban property with a TPV exceeding € 1,000,000;

• Thus, once again, in the concrete case, the tax fact on which the Stamp Tax fell was the ownership, by the Applicant, as owner, on 31 December 2012, of the property registered in the urban property matrix of the parish of ..., municipality of Lisbon, under article ..., with a TPV of € 2,262,019.75;

• Effectively, in accordance with the provisions of article 205, no. 1 of the CPPT "There will be double collection (…) when, with a tax fully paid, another of equal nature is demanded from the same or a different person, relating to the same tax fact and to the same period of time".

• In an annotation to the aforementioned legal provision, JORGE LOPES DE SOUSA identifies the following cumulative requirements for double collection: "a) unity of tax facts; b) identity of nature between the tax paid and the one newly demanded; c) temporal coincidence of the tax paid and the one now sought to be collected;

• In truth, both taxes are of identical nature, apply to the entirety of the TPV, same fact, same period, same holder, whereby, with Property Tax paid, as is proven by Documents 8 to 12 of the Gracious Complaint,

• And making an exercise of theoretical abstraction in which one would consider a land for construction as a property with residential use – which, as already referred, is pure nonsense -, it would still be said that we would be faced with a situation of double collection, which should be assessed and, consequently, the Stamp Tax assessment in question should be annulled, as well as all legal consequences flowing therefrom;

• Double collection constitutes a defect generating illegality of the tax act, as is moreover clear from article 78, no. 6 of the LGT and, for that reason, can also be invoked through any gracious, judicial or arbitral means;

• Finally, the Applicant bases the illegality of the assessment on the violation of the constitutional principles of equality and taxable capacity;

• Taxation under the terms envisaged with the assessment sub judice constitutes a violation of the principles of equality and taxable capacity, enshrined in articles 13, 103, no. 1 and 104, no. 1 and no. 3, all of the CRP.

• The Applicant concludes by requesting that the assessment be deemed null or annulled based on the violation of the legal and constitutional principles cited.

1. Response of the TA

The Tax Authority defended the maintenance of the tax acts in question, requesting the dismissal of the request with reaffirmation, essentially, of the arguments that grounded the decision to maintain these acts.

In summary, it alleged the following:

• By exception, it alleged that the request for arbitral ruling has as its object the annulment of the Stamp Tax collection note no. 2013 ... in the amount of € 7,540.08.

• Whereas the Applicant came to associate with this request the request for annulment of collection notes no. 2013 ... and no. 2013 ... which it acknowledges have not yet been notified to it.

• Whereby the Applicant's claim should be deemed unmeritorious.

• By way of challenge, the Tax Authority contests all the arguments of the Applicant, maintaining the position that has been consistently followed by the TA in similar cases submitted to the decision of tax arbitral courts, which is briefly sustained in the following argumentation:

• The Tax Administration states "It is the understanding of the tax authority (TA) that urban properties that are land for construction and to which residential use has been attributed in the context of their respective evaluations, with such use recorded in their respective property matrices, are subject to stamp tax (…)."

• With regard to the invoked double collection, the tax administration sustains that the Applicant is also not right, since "(…) the Constitution of the Republic requires that equal treatment be given to that which is necessarily equal and as different treatment to that which is essentially different, not preventing differentiated treatment but only arbitrary, unreasonable discriminations that do not have sufficient material foundation.

• The different aptitude of properties (residential, commercial, services) supports differentiated treatment, having been a choice of the legislator, for political and economic reasons, for the scope of Stamp Tax to apply to properties intended for purposes other than residential.

II. SANATION

1. This Arbitral Tribunal was regularly constituted on 09-07-2014, with the arbitrator appointed by the Deontological Council of the CAAD, with the respective legal and regulatory formalities complied with (cf. articles 11-1/a) and b), of the RJAT and 6 and 7, of the Code of Ethics of the CAAD), and is competent ratione materiae, in accordance with article 2 of the RJAT.

2. The meeting provided for in article 18 of the RJAT was held on 22-01-2015, with only the legal representative of the Applicant present and with the representative of the Respondent communicating that it did not object thereto.

3. The Tribunal set the date of 6 March for the rendering of the decision, which was extended until 9 July.

4. The parties have legal personality and capacity, are entitled to participate and are regularly represented (cf. articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

5. No procedural nullities were identified.

III. GROUNDS

1. In dispute in the present action is the assessment of stamp tax, a tax act embodied in the assessment of Stamp Tax (IS) relating to the year 2012, item 28.1 of the TGIS, dated 21/03/2013, relating to the urban property registered in the property matrix under article ..., of the parish of ..., municipality of Lisbon, in the amount of € 22,620.20 (twenty-two thousand six hundred and twenty euros and twenty cents) – (cf. article 6, no. 1, paragraph f), sub-paragraph i), of Law no. 55-A/2012, of 29 October), as per copies of those assessments (documents attached to the case), with various formal defects attributed to the respective tax act, as well as defects of illegality, double collection and violation of the constitutional principles of equality, taxable capacity and progressivity.

FACTUAL MATTER

Proven Facts

1. For the purposes of assessing these issues, the following proven facts should be taken into account, which are essentially those alleged by the Applicant, considering that they have not been disputed by the TA:

2. The Applicant is a commercial company which, in the context of its activity, is engaged in real estate promotion, namely the execution and development of real estate businesses and projects.

3. The Applicant was the owner, at the date to which the facts relate, i.e., in the year 2012, of the urban property registered in the property matrix under article no. ..., of the parish of ..., municipality of Lisbon, with the taxable property value of € 2,262,019.75 which was composed of land for construction, as per copy of the property record and deed of acquisition thereof, attached to the initial petition [document no. 5 and 7 respectively[1]].

4. At the date of the facts, the identified land had no construction whatsoever and there was no license for residential use.

5. Following the entry into force of Law no. 55-A/2012, of 29 October [which introduced amendments to the Personal Income Tax Code (IRS Code), the Corporate Income Tax Code (IRC Code), the Stamp Tax Code (Stamp Tax Code) and the General Tax Law (LGT)], the Applicant was notified of the Stamp Tax assessment no. 2012 001872172, of 07.11.2012, which calculated Stamp Tax to be paid on the ownership of the identified urban property, in the amount of € 11,310.10, as a result of the application of the transitional rate of 0.5% – "Properties with residential use assessed in accordance with the Property Tax Code" – (cf. article 6, no. 1, paragraph f), sub-paragraph i), of Law no. 55-A/2012, of 29 October) [cf. copy of such assessment - document no. 4].

6. Subsequently, the Applicant was notified of the Stamp Tax assessment, with the total collection amounting to € 22,620.20, as a result of the application of the rate of 1% provided for in item 28.1 – "For property with residential use" – of the TGIS, in the wording given by Law no. 55-A/2012, of 29 October, materialized in the assessment for payment of the first instalment [document no. 1].

7. The Applicant was also notified of the assessment for purposes of payment of the second instalment and of the assessment for payment of the third instalment [docs. attached to the case by the Applicant subsequently to the filing of the initial petition], whereby the legality thereof is necessarily dependent on the assessment for payment of the first instalment (cf. doc. no. 1).

8. This notification for payment of the second and third instalments was made prior to the date of filing of the application for constitution of the arbitral tribunal.

9. The Applicant filed a gracious complaint against the same tax assessment on 23.07.2013 (attached to the administrative case).

10. As grounds for the gracious complaint, it invoked various formal defects in the assessment.

11. Likewise in material terms, the Applicant invoked, in summary, that the urban property in question is classified as land for construction, whereby it does not fall within the category of urban property with actual residential use, and consequently is not subject to Stamp Tax; that the Stamp Tax assessment incurs a defect of double collection and, finally, that the Stamp Tax assessment is manifestly in violation of the principles of equality and taxable capacity, as well as the principle of progressivity, whereby materially unconstitutional is the norm in question provided for in Law no. 55-A/2012, of 29 October.

12. The tax administration rejected all formal defects of the assessment raised by the Applicant.

13. In material terms the tax administration refers in the draft for rejection that "It is the understanding of the tax authority (TA) that urban properties that are land for construction and to which residential use has been attributed in the context of their respective evaluations, with such use recorded in their respective property matrices, are subject to stamp tax (…)."3.1.14 For the tax administration "The fact that residential use has been made positive in the scope norm (item 28.1 of the TGIS) makes appeal to the use coefficient (article 41 of the CIMI), which applies indistinctly to all urban properties." (cf. page 3 of doc. no. 7).

14. Whereas with regard to the invoked unconstitutionalities, the tax administration refers in that draft that "(…) the unconstitutionality of the law is not at the stage of gracious complaint procedure that it could be assessed.

15. The Gracious Complaint was rejected and the rejection was notified on 29.10.2013, with a Hierarchical Appeal being filed against this rejection on 27.11.2013, which was not expressly assessed by the tax administration within the period set by law, whereby the Applicant deemed it tacitly rejected on 26.01.2014 (attached to the administrative case).

Unproven Facts

1. No essential facts, with relevance to the assessment of the merits of the case, were found not to have been proven.

Reasoning

1. The Tribunal based its conviction on the administrative case attached to the proceedings and on the documentary elements attached to the case by the Applicant, namely those indicated above, in conjunction with the absence of dispute between the parties regarding the essential facts deemed proven.

Grounds (cont.)

The Law

1. The impugned tax act is the stamp tax assessment for the year 2012 and relating to a land for construction, owned by the Applicant, made by the TA in accordance with item 28.1 of the TGIS and article 6 of Law no. 55-A/2012, of 29 October.

2. The Applicant points out various formal defects, as well as that such assessment was made in violation of law to the extent that, according to its allegation, in addition to suffering from a defect in its assumptions [lands for construction are not subject to Stamp Tax assessment in accordance with article 28 of the TGIS], the interpretation given by the TA to the cited article 28 violates the constitutional principles of equality, progressivity and taxable capacity.

3. Let us examine each of the issues raised.

4. For purposes of exposition, the main essential legal provisions are transcribed below, in order to subsequently assess the tax act in light of the defects invoked by the applicant

• Law no. 55-A/2012, of 29 October [amends the Personal Income Tax Code, the Corporate Income Tax Code, the Stamp Tax Code and the General Tax Law]:

Article 3

Amendment to the Stamp Tax Code

Articles 1, 2, 3, 4, 5, 7, 22, 23, 44, 46, 49 and 67 of the Stamp Tax Code, approved by Law no. 150/99, of 11 September, shall have the following wording:

(…)

Article 2

[...]

1 - ...

2 - ...

3 - ...

4 - In the situations provided for in item no. 28 of the General Table, the passive subjects of the tax are those referred to in article 8 of the CIMI.

Article 23

[...]

1 - ...

2 - ...

3 - ...

4 - ...

5 - ...

6 - ...

7 - In the case of the tax due for the situations provided for in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI.

Article 67

[...]

1 - (Former body of the article.)

2 - To matters not regulated in the present Code relating to item no. 28 of the General Table, the provisions of the CIMI shall apply, subsidiarily.»

Article 4

Addition to the General Table of Stamp Tax

Item no. 28 is added to the General Table of Stamp Tax, attached to the Stamp Tax Code, approved by Law no. 150/99, of 11 September, with the following wording:

«28 - Ownership, usufruct or right of surface of urban properties whose taxable property value recorded in the property matrix, in accordance with the Property Tax Code (CIMI), is equal to or exceeding (euro) 1,000,000 - on the taxable property value used for purposes of Property Tax:

28.1 - For property with residential use - 1 %;

28.2 - For property, when the passive subjects who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime.

Article 6

Transitional Provisions

1 - In 2012, the following rules shall be observed with reference to the assessment of stamp tax provided for in item no. 28 of the respective General Table:

a) The tax fact occurs on 31 October 2012;

b) The passive subject of the tax is the one mentioned in no. 4 of article 2 of the Stamp Tax Code on the date referred to in the preceding paragraph;

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

d) The assessment of the tax by the Tax and Customs Authority shall be made by the end of November 2012;

e) The tax shall be paid, in a single instalment, by the passive subjects until 20 December 2012;

f) The applicable rates are as follows:

i) Properties with residential use assessed in accordance with the Property Tax Code: 0.5 %;

ii) Properties with residential use not yet assessed in accordance with the Property Tax Code: 0.8 %;

iii) Urban properties when the passive subjects who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, included in the list approved by ordinance of the Minister of Finance: 7.5 %.

2 - In 2013, the assessment of stamp tax provided for in item no. 28 of the respective General Table shall apply to the same taxable property value used for purposes of assessment of property tax to be made in that year.

3 - Non-payment, in whole or in part, within the indicated period, of sums assessed as stamp tax constitutes a tax infraction, punished in accordance with the law.

Article 7

Entry into Force and Production of Effects

1 - The present law shall enter into force on the day following its publication.

2 - The amendments to article 72 of the Personal Income Tax Code and to article 89-A of the General Tax Law shall take effect from 1 January 2012.

1. With regard to the exception presented by the Respondent, it should not be upheld.

2. The TA refers that the request should be deemed unmeritorious once the request has as its object the annulment of the stamp tax collection note identified in the request for arbitral ruling, in the amount of € 7,540.08.

3. And that the Applicant associated with this request the annulment of the collection notes relating to the second and third instalments, which it acknowledges have not yet been notified.

4. However, the Applicant, already when it filed the gracious complaint, directed it with a view to obtaining the annulment of the Stamp Tax assessment, dated 21-03-2013, whose collection would correspond to the total amount of € 22,620.20.

5. With the second and third instalments having been notified in accordance with the law, in June and October 2013, for payment in July and November 2013.

6. Whereby all instalments were duly notified as of the date of filing of the request for arbitral ruling, on 28-04-2014.

7. What the Applicant disputes is the assessment and not the collection of the tax.

8. The procedure for assessment of Property Tax for the year 2012 takes place, in accordance with nos. 1 and 2 of article 113 of the Property Tax Code, during the months of February and March of the present year, based on the taxable property values recorded in the property matrices on 31 December 2012.

9. Whereas the collection of Property Tax shall take place in accordance with the provisions of no. 1 of article 120 of the Property Tax Code, in the wording given by Law no. 66-B/2012, of 31 December 2012, whereby the tax shall be paid:

a. In one instalment, in the month of April, when its amount is equal to or less than (euro) 250;

b. In two instalments, in the months of April and November, when its amount is more than (euro) 250 and equal to or less than (euro) 500;

c. In three instalments, in the months of April, July and November, when its amount is more than (euro) 500.

1. The Applicant requests from the tribunal the declaration of illegality of the act of assessment of Property Tax of 21-03-2013.

2. Whereby the exception alleged by the Respondent should not be deemed meritorious.

3. The Applicant points out in summary the following formal and material defects for requesting the annulment of the Stamp Tax assessment:

a) Lack of knowledge of the author of the act

b) Lack of adequate reasoning.

c) Omission of prior hearing

d) Non-existence of a built property

e) Double collection: for the same tax fact, same period, same holder, there are 2 (two) taxes of the same nature- Property Tax and Stamp Tax

f) Unconstitutionality: the tax act suffers from formal and legal defects, generating illegalities and unconstitutionalities

a) Lack of knowledge of the author of the assessment act

1. The Applicant alleges that the assessment does not contain the indication of its author and the respective signature, whereby such assessment violates article 123, no. 1, a) and g) of the CPA, being null in accordance with articles 133, no. 1, of the CPA and 99, paragraph d), of the CPPT.

2. In accordance with no. 3 of article 11 of Decree-Law no. 191/99, of 5 June, a DUC – Unique Collection Document is issued, which expresses the pecuniary relationship established between the State and the debtor.

3. This document shall contain:

a. Identification of the body or processing service;

b. Period to which it relates;

c. Number assigned to the document;

d. Identification of the indebted entity, including the tax identification number;

e. Nature of the receipt;

f. Amount of the receipt;

g. Payment deadline date

1. Now, as can be verified in the document (attached 1), all of these appear in the collection note no. …2013 …:

a. Identification of the body or processing service- TA tax and customs authority;

b. Period to which it relates- Year 2012;

c. Number assigned to the document- 2013 ...

d. Identification of the indebted entity, including tax identification number- …;

e. Nature of the receipt-Stamp Tax

f. Amount of the receipt- 7,540.08€

g. Payment deadline date- April/2013.

1. Also included in the document: the assessment of the tax (identification of the property and its taxable property value (TPV), applicable rate and calculated value, means of defense and periods to react.

2. Furthermore, this defect argued by the Applicant is a defect which, if deemed meritorious, affects not the impugned assessment, but rather the act of notification of the assessment, having, consequently, as a consequence the nullity of the notification act, in accordance with article 39, no. 12, of the CPPT and the ineffectiveness of the underlying tax act.

3. In accordance with jurisprudence (see the Decision of the Supreme Administrative Court in case no. 0251/2012, of 26-09-2012, which determines that "…in cases where notification of the assessment was not made and tax execution was instituted, one is faced with a situation of ineffectiveness of the assessment act, which constitutes grounds for objection classifiable in paragraph i) of no. 1 of article 204 of the Code of Tax Procedure and Process (cf. in this sense, more recent, the decisions of 02.02.2011, appeal 803/10, of 28/09/2011, appeal 473/11, and of 20.06.2012, appeal 378/12, all at www.dgsi.pt).and prevailing doctrine, if the defect argued by the Applicant were demonstrated, the consequence would be the ineffectiveness of the impugned assessment and not its invalidity.

4. The competence of this Arbitral Tribunal is, in accordance with article 2 of the RJAT, limited to the assessment of the following claims:

a. The declaration of illegality of tax assessment acts, self-assessment acts, withholding acts and payment on account acts;

b. The declaration of illegality of acts for determination of taxable matter, acts for determination of taxable base and acts for fixing of taxable property values;

c. The assessment of any question, of fact or law, relating to the draft decision for assessment, whenever the law does not ensure the ability to pursue the claim referred to in the preceding paragraph.

1. Thus, it follows that this Arbitral Tribunal does not have competence to assess questions relating to the ineffectiveness of the impugned assessment.

Lack of adequate reasoning

1. In accordance with the provision of article 77 of the LGT, the decision of procedure shall be reasoned by means of a concise statement of the factual and legal reasons that motivated it, whereby the reasoning may consist of mere declaration of agreement with the grounds of earlier opinions, information or proposals, including those comprising the report of the tax audit.

2. In accordance with no. 2 of such article, the reasoning of tax acts may be made in summary form, and shall always contain the applicable legal provisions, the qualification and quantification of the tax facts and the operations for determining the taxable matter and the tax.

3. In accordance with article 125, no. 1 of the CPA, the reasoning shall be expressed, through a concise statement of the factual and legal grounds of the decision, and may consist of mere declaration of agreement with the grounds of earlier opinions, information or proposals, which shall in this case form an integral part of the respective act, the lack of reasoning being equivalent to the adoption of grounds which, through obscurity, contradiction or insufficiency, do not clarify concretely the motivation of the act.

4. That is, the reasoning is sufficient when it provides to the recipients of the act the reconstitution of the cognitive and evaluative itinerary followed by the authority that performed the act, in such a way as to be able to know clearly the reasons why it decided as it did and not differently.1 [Decision of the Supreme Administrative Court, of 2009.04.15, rendered in appeal no. 065/09, available at www.dgsi.pt]

5. Now, as it is established that the reasoning of the act in question is that contained in the very notification document which corresponds to document 1.

6. From the reasoning all the elements listed above in points 46 and 47 appear.

7. From the review of procedural documents made above, it is inevitable to conclude that there are no doubts that the Applicant had the opportunity to become aware of the factual and legal reasons that underlie the assumptions on which the impugned Stamp Tax assessment was based and also to become aware of the cognitive and evaluative itinerary of whoever made such decision.

8. It had the opportunity to participate, and did participate, in the gracious complaint procedure.

9. There is, therefore, no obscurity, contradiction or insufficiency in the statement of the factual and legal grounds of the impugned act, which does not suffer from lack of reasoning.

10. Thus, it is verified that the cited elements are sufficient for the taxpayer to know the reason for the complained assessment in its extent and nature, whereby it is concluded that compliance was given to the legal requirements for reasoning provided for in article 77 of the General Tax Law (LGT) and article 37 of the CPPT.

Lack of prior hearing

1. As to the alleged lack of prior hearing before the assessment, the tribunal considers that such phase is not mandatory, taking into account that we are faced with an act performed in the exercise of strictly binding powers.

Challenge for legal defects

1. On the application of item 28.1 of the General Table of Stamp Tax to lands for construction, pronouncements have already been made, among others, by the decisions of the CAAD rendered in cases number 53/2013-T, 49/2013-T, 42/2013-T, 180/2013-T, 75/2013-T, 215/2013-T, 240/2013-T, 310/2013-T and 284/2013-T.

2. In the same manner, the Supreme Administrative Court took a position on the issue, namely in the decisions of cases no. 0467/14 of 02-07-2014, no. 0676/14 of 09-07-2014, no. 0395/14 of 28-05-2014, no. 01871/13 of 14-05-2014 and no. 055/14 of 14-05-2014, no. 0425/14 of 28-05-2014, no. 0396/14 of 28-05-2014, no. 0274/14 of 14-05-2014 and no. 046/14 of 14-05-2014.

3. The Tribunal shall follow the orientation supported by these decisions, as follows.

Use of the property: A – The concepts of "property with residential use" and "residential property"

1. The essential issue resides, therefore, in knowing what the scope of application is of the norm of objective scope of item 28.1 of the TGIS, namely as to the determination of the scope of the definition of "urban properties with residential use", given that the issue of TPV equal to or exceeding € 1,000,000 appears to be settled in this case.

2. On the difficulties of the interpretation and application of the concept of "use", specifically within the scope of item 28 of the TGIS, we follow the reasoning and argumentation of the decision of the CAAD in case 66/2014 – T.

3. The word "use", in this context of utilization of a property, has the meaning of "action of destining something to a determined use".

4. "When, as is usually the case, the norms (legislative formulas) admit more than one meaning, then the positive function of the text is expressed in giving stronger support to or suggesting more strongly one of the possible meanings. For among the possible meanings, some shall correspond to the more natural and direct meaning of the expressions used, whereas others shall only fit within the verbal framework of the norm in a forced, artificial manner. Now, in the absence of other elements that would lead to the choice of the less immediate sense of the text, the interpreter should opt in principle for that sense which best and most immediately corresponds to the natural meaning of the verbal expressions used, and in particular to their technical-legal meaning, in the supposition (not always exact) that the legislator knew how to express his thought correctly".

5. The relevance of the text of the law is especially emphasized in the matter of interpretation of norms of scope of Stamp Tax, which are reduced to an amalgam, under a common denomination, of an incongruous set of taxes of completely distinct natures (on income, on expenditure, on patrimony, on acts, etc.), which leaves no appreciable margin for application of the principal interpretive criterion, which is the unity of the legal system, which requires its overall coherence.

6. The recognized lack of coherence of Stamp Tax is particularly exuberant in the case of this item no. 28.1, hastily included at the margin of the General State Budget, by a fiscal legislator without perceptible overall fiscal orientation, which is successively implementing fiscal tightening norms at the pace of the setbacks in budget execution, the impositions of international institutional creditors (represented by the "troika") and the supervision of the Constitutional Court.

7. In truth, although in the "Explanatory Statement" of Bill no. 96/XII/2.ª, on which Law no. 55-A/2012 was based, reference is made to the commendable concern of the Government to "reinforce the principle of social equity in austerity, guaranteeing an effective distribution of the necessary sacrifices for compliance with the adjustment program" and to its commitment "to ensure that the distribution of these sacrifices will be made by all and not just by those who live on the income from their work", it is manifest, on one hand, that those reasons of equity, certainly existing, did not begin to apply in mid-2012, already existing at the beginning of the year, when the General State Budget entered into force, and on the other hand, that the scope of item no. 28.1, in taxing additionally properties with residential use and not also properties that do not have it, allows one to discern that the concerns of social equity and the proclaimed intention to distribute sacrifices among all, reaches much more some than properly all.

8. In this context, in the absence of sure interpretive elements that would allow one to detect legislative coherence in the solution adopted in the aforementioned item no. 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretive effects in the face of no. 3 of article 9 of the Civil Code), the tenor of the legal text must be the principal element of interpretation, in accordance with the presumption, imposed by the same no. 3 of article 9, that the legislator knew how to express his thought in adequate terms.

9. In light of those meanings of the words "use" and "affect", which are "to give destination" or "to apply", the formula used in that item no. 28.1 of the TGIS manifestly covers properties that are already applied to residential purposes, whereby it is important to inquire whether it shall also cover properties that, although not yet applied to residential purposes, are destined to these and those whose purpose is unknown.

10. In light of the literal tenor of item no. 28.1, it is to be excluded from the scope of the Stamp Tax envisaged therein the lands for construction of some applicants that still do not have any type of utilization defined, for they are not yet applied nor destined to residential purposes. That is, lands for construction that do not have defined utilization cannot be considered properties with residential use, for they do not yet have any use nor any other purpose than the construction of unknown type. An interpretation to the effect that item no. 28.1 refers to properties whose use is unknown has the minimum of verbal correspondence in the letter of that norm, whereby a hypothetical legislative thought of that type cannot be considered by the interpreter of the law, in the face of the prohibition contained in no. 2 of article 9 of the Civil Code.

11. But this is not sufficient to clarify the situation of those lands for construction that, while not yet applied to residential purposes, already have a determined purpose.

12. Therefore, it shall be necessary to clarify when it can be understood that a property is affected to a residential purpose, namely whether it is when such purpose is fixed in a licensing act or similar, or only when the effective attribution of that purpose is concretized.

13. Immediately, the comparison of item no. 28.1 of the TGIS with no. 2 of article 6 of the CIMI, which defines the concept of residential properties, points manifestly in the direction that an actual use is necessary.

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

15. Therefore, in the assumption that the legislator of Law no. 55-A/2012 knew how to express his thought in adequate terms (as article 9, no. 3, of the Civil Code imposes one to presume), if he intended to refer to those properties already licensed for residential use or which have residential use as their normal purpose, he would certainly have used the concept of "residential properties", which would express perfectly and clearly his thought, in light of the definition given by that no. 2 of article 6 of the CIMI.

16. Consequently, it should be presumed that the use of a different expression is intended to have a distinct reality, whereby, in good hermeneutics, "property with residential use", cannot be a property merely licensed for residential use or intended for that purpose (that is, it shall not suffice that it be a "residential property"), but must be a property that already has actual use for that purpose. (In this sense see also the decision of the CAAD no. 53/2013-T, in which the reporters are Justice Counselor Jorge Lopes de Sousa, Dr. Conceição Pinto Rosa and Dr. Alberto Amorim Pereira).

17. On the other hand, in the decision of the Supreme Administrative Court of 09-07-2014, rendered in case no. 0676/14, in which Counselor Dulce Neto is the reporter, it is stated that "residential use always appears in the Property Tax Code referred to 'buildings' or 'constructions', existing, authorized or envisaged, for only these can be inhabited, which is not the case with lands for construction, which do not, in themselves, have conditions for such, and are not susceptible of being used for residential purposes unless and when a construction authorized and envisaged for them is erected on them (but in that case they would no longer be 'lands for construction' but another species of urban properties – 'residential', 'commercial, industrial or for services' or 'others' – article 6 of the CIMI)."

18. Moreover, the text of the law in adopting the formula "property with residential use", instead of "urban properties of residential use", which appears in the aforementioned "Explanatory Statement", points strongly in the direction that the residential use already needs to be concretized, for only thus shall the property have that use.

19. With regard to article 45 of the CIMI, it has no relation whatever to the classification of properties, only indicating the factors to be weighed in the valuation of lands for construction. What is weighed there, in making reference to the "building to be constructed" is the weighing of the purpose of the land, which, as has been seen, in the context of the CIMI, does not imply use and occurs before this.

20. Therefore, it is to be concluded that the interpretive elements available, including the "circumstances in which the law was made and the specific conditions of the time in which it is applied", point clearly in the direction of not having been intended to encompass within the scope of item no. 28.1 the situations – like those in the present case - of properties that are not yet affected to residential use, namely lands for construction held by companies.

21. See also in this regard the decision of the Supreme Administrative Court, of 14-05-2014, case no. 046/14, in which Justice Ascenção Lopes is the Reporter, where it states that "not having the legislator defined the concept of 'properties (urban) with residential use', and as it results from article 6 of the Property Tax Code - subsidiarily applicable to the Stamp Tax provided for in the new item no. 28 of the General Table - a clear distinction between 'urban residential properties' and 'lands for construction', these cannot be considered, for purposes of the scope of Stamp Tax (Item 28.1 of the TGIS, in the wording of Law no. 55-A/2012, of 29 October), as urban properties with residential use."

22. Based on the above, it is considered that the expression "urban property with residential use" provided for in Item 28.1 of the TGIS corresponds to that of residential urban property, provided for in article 6, no. 1, paragraph a), of the CIMI.

23. In that measure, the urban property in question being a land for construction, the same does not fall within the scope of the norm of objective scope of Item 28.1 of the TGIS, which strikes the assessment in question with illegality, and makes the Applicant's request meritorious.

24. The Applicant raised questions of double collection and questions of unconstitutionality of item 28.1 of the TGIS, in the supposition that it includes "lands for construction". This having not been the interpretation of that norm in the present Arbitral Decision, it no longer makes sense, and has no utility, to assess the other legal defects or the (un)constitutionality of the norm.

IV. DECISION

In accordance with the above, this Singular Tribunal decides:

To declare the illegality of the assessment that is the object of these proceedings, for lack of legal basis and violation of articles 4 and 6 of Law no. 55-A/2012, of 29 October and of item 28 of the TGIS and, in consequence, judging the request meritorious on that ground, it decides to annul the assessment act based on that same norm;

V. CASE VALUE

In accordance with the provisions of article 306, nos. 1 and 2, of the CPC and 97-A, no. 1, paragraph a), of the CPPT and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the case is valued at € 22,620.20 (twenty-two thousand, six hundred and twenty euros and twenty cents.).

VI. COSTS

In accordance with article 22, no. 4, of the RJAT, the amount of costs is fixed at € 1,224.00 (one thousand two hundred and twenty-four euros), in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, entirely to the charge of the Tax and Customs Authority.

Let notification be made.

Lisbon, 9 July 2015

The Arbitrator of the Singular Arbitral Tribunal

(Ana Teixeira de Sousa)

[1] The reference to documents without mention of the articles refers to documents attached with the Gracious Complaint filed by the Applicant and which form part of the administrative case sent by the Respondent.