Summary
Full Decision
ARBITRAL DECISION
Report
A…, resident on Rua …, No. … …, …-… and, in Lisbon, with Tax ID No. …, filed a request for an arbitral pronouncement under the provisions of articles 2, No. 1, subparagraph a), article 5, No. 2, subparagraphs a) and b), and article 10, No. 1, subparagraph a), all of the Legal Framework for Tax Arbitration approved by Decree-Law No. 10/2011, of 20 January (RJAT), as subsequently amended, with a view to declaring the illegality and annulment of the Stamp Duty assessment act (concerning item 28.1 of the corresponding General Schedule and the year 2015), with a total value of €12,486.80 (twelve thousand, four hundred and eighty-six euros and eighty cents).
The request was filed with the Administrative Arbitration Centre (CAAD) on 4 July 2016 and was accepted.
The respondent is the Tax and Customs Authority (AT).
The claimant did not proceed with the appointment of an arbitrator. For this purpose, the President of the Deontological Council of the Administrative Arbitration Centre designated the undersigned, who expressly accepted this appointment. The parties were duly notified thereof and did not express any intention to refuse it.
The arbitral tribunal was thus constituted on 21 September 2016.
The AT timely filed its response, sustaining the constitutionality, firstly, and the legality, secondly, of the tax act at issue, stating that no compensation is due for undue guarantee provision, subsidiarily, firstly on the ground of lack of jurisdiction of the arbitral tribunal to determine the "existence of error attributable to the services" (articles 82 to 84 of the Response) and, substantively, on the ground of absence of fault of the services (articles 85 et seq. of the Response), with corresponding total lack of merit of the claim and consequent acquittal of the respondent.
The respondent further understood that in the event of a written pronouncement by the claimant, there should be successive written submissions, but with waiver of the meeting referred to in article 18 of the RJAT, all without opposition from the latter.
By subsequent arbitral order (6/11/2016), indication was given for notification of the claimant to respond to the matter of the exception (which the latter did not submit), exempting the joining of the administrative file and the holding of the aforementioned meeting, while also establishing that there would be successive written submissions.
The claimant responded to the exception and submitted submissions, reiterating the request for annulment of the disputed acts, notably with reference to abundant case law of the Supreme Court of Administrative Courts (STA), and the jurisdiction of the arbitral tribunal operating at CAAD to analyse error attributable to the services for the purposes of compensation for undue guarantee provision.
Finally, the respondent submitted counter-submissions, with punctual reaffirmation of its initial position, having for this purpose cited the Constitutional Court Judgments Nos. 630/2015, of 3/12 and 16/12, respectively.
Due to various circumstances, the conclusion of the case was successively extended and finally the date of 23 June 2017 was set for the pronouncement of the arbitral decision.
The position of the parties is absolutely clear and there are no disputed questions of fact.
The Tribunal was regularly constituted and is materially competent.
The parties have legal personality, judicial capacity, and are legitimate.
The proceedings do not suffer from nullities.
Statement of Facts
The claimant's request is based, firstly, on error in the factual and legal premises of the tax acts (article 12 of PI), considering these to be illegal and, secondly, on the understanding that the interpretation made by AT of the applicable norm is unconstitutional (article 13 of PI).
From this follows the request for annulment of the tax acts at issue and, since bank guarantee was provided for the suspension of the corresponding fiscal execution, the claimant further petitions compensation for undue guarantee provision.
The tax acts correspond to the assessments of item 28.1 of the General Schedule of the Stamp Duty Code for the year 2015, relating to various divisions intended for housing and capable of independent use, and therefore subject to autonomous property registration, but forming part of the urban property in full or vertical ownership (not constituted, therefore, in horizontal condominium), registered in the urban property matrix under article…, of the parish of …, in Lisbon, with a total tax property value (VPT) exceeding one million euros (the property), corresponding to the sum of the individual VPTs of the divisions capable of independent use that comprise it and intended for housing, which thus exceeds the amount of one million euros, but without any of those divisions exceeding that value.
Such property is composed of 4 floors (basement, ground floor, first floor and attic), which correspond to 3 (three) of those divisions intended for housing and constituting divisions with independent use.
Each of these 3 independent divisions allocated to housing has a VPT attributed and separately determined in accordance with subparagraph b) of No. 2 of article 7 of the Code of Municipal Property Tax (CIMI), such that the tax property value of any of the aforesaid independent parts or divisions with housing allocation does not exceed, in any case, the amount of one million euros.
Thus, on 31 December 2015, none of the divisions of the identified property to which the (annual) assessments in question and the aforementioned collection notes correspond (of the first instalment and corresponding fiscal execution), possessed a Tax Property Value (VPT) equal to or greater than the amount of one million euros.
The claimant was notified of the collection documents numbered 2016…, 2016… and 2016…, all of 5 April 2016, and relating to the first instalment of the Stamp Duty provided for in item 28.1 of the corresponding General Schedule, relating to the year 2015 and the said independent divisions, in the amount of €1,534.60, €1,149.38 and €1,478.38, to be paid in April 2016.
These assessments were not paid, giving rise to enforcement proceedings, for which the claimant was served on 5 May 2016 for collection of the first instalments and, consequently, for the provision of bank guarantee issued by B… (on 31 May thereafter), for suspension of execution, which was presented on 2 June of the same year.
The arbitral decisions rendered in proceedings 247/2013-T and 464/2014-T, both of 2014 and, therefore, prior to the 2015 assessment issued in 2016, relate to Stamp Duty owed, for the years 2012 and 2013, under the same norm (28.1 of TGIS) and by reference to the same property, then already owned by the claimant, with the Arbitral Tribunals operating at CAAD having proceeded with the annulment of the tax acts in question (in all respects similar to those of the present proceedings).
There is abundant case law to the same effect, by way of example, the arbitral decision of the year 2013, rendered in proceedings number 50/2013-T.
Summary of Facts Relevant to the Good Decision of the Case
Consequently and in summary, the following factuality is established:
a) In 2014, the claimant owned the identified urban property in vertical ownership, i.e. in full ownership, not constituted in horizontal condominium;
b) To that property corresponded a total VPT exceeding the value of one million euros (€1,248,680.00);
c) The same was composed of three divisions capable of independent use;
d) Such divisions were subject to autonomous property registration;
e) And were intended for housing;
f) To none of those divisions capable of independent use corresponded a VPT equal to or greater than the value of one million euros;
g) In 2016 the AT proceeded with the assessment of Stamp Duty of item 28.1 of TGIS concerning those independent divisions intended for housing and the year 2015;
h) As well as to the notification for payment of the first instalment;
i) The total value of the assessments for 2015 amounts to €12,486.80;
j) This value corresponds to 1% of the sum of the VPT of the said divisions with autonomous property registration;
k) The assessment acts in question gave rise to the collection documents of the corresponding first instalments referred to above;
l) These instalments fell due in April 2016;
m) The same gave rise to fiscal execution for the corresponding coercive collection;
n) Which was suspended by the provision of bank guarantee presented by the claimant on 2 June 2016;
o) Such guarantee was issued on 31 May 2016, by B…, with reference …, in the amount of €5,549.65;
p) The stamp duty assessments for the years 2012 and 2013, issued under the same norm and by reference to the same property had already been annulled, in 2014, by arbitral decisions rendered in proceedings 247/2013-T and 464/2014-T;
q) This in line with extensive case law to the same effect, as occurs with the arbitral decision of the year 2013, rendered in proceedings number 150/2013-T.
There are no other facts relevant to the consideration of the merits of the case that are not established.
The established facts are based on documents provided by the claimant, the correspondence of which to reality is not disputed.
Legal Matter
Position of the Parties
As referred to, the claimant requests the constitution of an Arbitral Tribunal to pronounce itself on the assessments under item 28.1 of the General Schedule of the Stamp Duty Code, added by article 4 of Law No. 55-A/2012, of 29/12, with reference to the year 2015, affecting the divisions capable of independent use of the already identified property.
For this purpose, it invokes, in this order, the illegality of the assessments, on error regarding the factual and legal premises, and the unconstitutionality of the interpretation made by AT of the applicable norm (item 28.1 of TGIS), for which it requests the annulment of the tax acts on those grounds, as well as compensation for damages arising from undue guarantee provision, with the legal limit.
For the AT, the act does not suffer from any defect of unconstitutionality, nor of illegality, nor does the interpretation made of it by AT deserve censure, notably from the perspective of its constitutionality.
Summary of the Disputed Issue
The issue in the proceedings thus corresponds to the application, in situations of so-called vertical ownership, of taxation in Stamp Duty affecting urban properties with housing allocation and VPT equal to or greater than one million euros.
The underlying factuality is not therefore equivalent to that analysed in the case of the Constitutional Court Judgment No. 590/2015, rendered in proceedings No. 542/2014 and cited by the respondent, regarding the constitutionality of the norm of incidence – in effect, the Judgment in question relates to the taxation of residential properties in general, and not to that of urban properties constituted in full or vertical ownership, in particular. For this reason, it does not provide hermeneutical support for the good resolution of the present dispute.
This controversial taxation was introduced in 2012 to reinforce budgetary control measures on the revenue side, within a context 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.).
It is well known that this new Stamp Duty taxation has raised strong doubts, considerable contestation, and numerous case law. This not only for specific cases of its application (e.g., vertical ownership, joint ownership, building land 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 Taxation in Stamp Duty of Luxury Real Property (item 28.1 TGIS), in Tax Arbitration No. 1, pp. 44 et seq.).
Claimant
Now, the claimant comes, precisely, to contest the application of the new item 28.1 of TGIS to urban properties not constituted in horizontal condominium, but which include divisions capable of independent use, in which the minimum amount of incidence fixed in law is reached by the sum of the VPTs of the separate (or autonomous) property registrations corresponding to those various divisions, but not by any one of them individually considered.
The claimant sustains that it is not the owner of a property with VPT equal to or greater than the aforementioned minimum amount, but rather the owner of a property in vertical ownership in which the VPT greater than that value is only reached by the sum of the VPTs of the divisions capable of independent use allocated to housing, without any of them, individually considered, reaching that minimum amount of tax relevance.
For this reason, according to the claimant, the assessments at issue suffer from error in their premises, which would render them voidable (for error in their factual and legal premises).
The claimant further disagrees with the interpretation that AT makes of the scope of the cited item 28.1 of the General Schedule attached to the Stamp Duty Code, which it considers illegal and unconstitutional, for violation of the principles of equality and contributory capacity.
Under article 53 of the General Tax Law (LGT) and in accordance with article 171 of the Code of Tax Procedure (CPPT), the claimant further petitions compensation for undue guarantee, for the costs borne with the provision and maintenance of the same, given that although it was maintained for less than three years (No. 1 of the aforementioned article 53, in fine), it should be recognised that the error is attributable to the services (No. 2 of the same article), with the limit of [legal interest rate] (No. 3 of the same article) – also alluding to articles 100 of LGT, 24, subparagraph b) of RJAT and 173, No. 1, of the Code of Administrative Procedure (CPPA), by virtue of article 202, No. 1 of the General Tax Code (CGT).
Respondent
For its part, the respondent contests that understanding, instead sustaining the maintenance in the legal order of the assessments at issue.
The AT begins by noting that the norm was already judged to be in conformity with the Constitution and reiterates the arguments included in the aforementioned Judgment. It happens that this refers to the principle of equality and contributory capacity in the context of the taxation (only) of residential properties and not of the comparison of the taxation of so-called vertical ownership when compared with horizontal ownership. That is, it does not address the (relevant) issue raised by the claimant.
On the other hand, it emphasises the mandatory adherence of AT to the Law (principle of legality), it not being for it to make judgments of constitutionality. Regardless of the position assumed on that possibility, the fact is that it falls to the Courts to assess the validity of tax acts in the legal order, having regard not only to ordinary commands, but also to constitutional ones.
On the incidence of the new item to properties with (total or partial) allocation to housing purposes, constituted in vertical ownership, the AT argues, in summary, that:
a) In the Stamp Duty Code there is no definition of the concepts of urban property, so the provisions of CIMI must be applied to assess the possible subjection to Stamp Duty (see article 67, No. 2 of the Stamp Duty Code as amended by Law No. 55-A/2012);
b) Article 2, No. 1 of CIMI defines the concept of property;
c) Article 2, No. 4 of CIMI only considers as properties the autonomous units of properties constituted under the horizontal condominium regime;
d) In cases of full (vertical) ownership, there are no autonomous units;
e) Being a property constituted in full ownership with parts or divisions capable of independent use, it is the property as a whole, and no longer each of those parts, that integrates the concept of "property", for purposes of IMI and Stamp Duty, by reference of article 1, No. 6 of the Stamp Duty Code;
f) The claimant is thus the owner of "one" property;
g) There is no legal gap that justifies the analogical application of horizontal ownership to vertical ownership;
h) Since they are two different legal regimes;
i) Whose assimilation for tax purposes would violate article 11, No. 2 of LGT;
j) As well as article 10 of the Civil Code, by virtue of article 11, No. 1 of LGT, due to the absence of a gap;
k) Indeed in line with the Constitutional Court Case Law (article 232, body, rule 1);
l) As also follows from articles 37 et seq. 2 of CIMI;
m) For which reason the concept of unity of property in vertical ownership must be valued, under penalty of violation of article 103, No. 2 of the Constitution (essential elements of taxes – such that the alteration advocated by the claimant would modify one of them: the taxable value);
n) All the more so as the Circular Notice of 11/8/00 of the then Tax Directorate recognises that the constitution of horizontal condominium is a legal alteration of the property, with no place for a new appraisal;
o) That the legislator may positively discriminate horizontal ownership in relation to vertical;
p) Namely, because it is more evolved;
q) This discrimination not having an arbitrary character;
r) Being that, finally, importance must be given to the lack of autonomy of the part in the matrix.
Summary of Disputed Issues
In summary, in the present case, the relevant issue is to determine what VPT to consider in cases of vertical ownership and, on the basis of this, the jurisdiction to analyse the compensation request and, if applicable, that same request.
The legal matter will thus, initially, concern that issue, beginning with a brief framing of the circumstance of the new taxation and its insertion in the Stamp Duty Code.
Legal Matter
Vertical Ownership
As referred to, Law No. 55-A/2012, of 29 October, amended the Stamp Duty Code, adding a new item to the corresponding General Schedule.
On the problematic question of determining the (minimum) VPT relevant for the application of item 28.1 of the General Schedule in cases of vertical ownership, pronouncements have already been made, among others, besides those referred to above, in the CAAD decisions taken in proceedings Nos. 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, which were subsequently confirmed by various other decisions, not only arbitral, notably the STA Judgment of 9/9/15, rendered in proceedings 47/15 and cited by the claimant, as well as the STA Judgments in proceedings 1354/15 of 2/3/16, 1534/15 of 27/3/16, 1504/15 and 172/16, of 4/5/16, 1352/15 of 24/5/16, 498/16 of 29/6/16, 1097/16 of 30/11/16 and 71/16 of 17/2/17, which the claimant further refers to in its submissions.
In all of them, the issue resided, as in the present case, in determining whether the VPT relevant for the norm of incidence (28.1 of TGIS) is the VPT corresponding to each of the divisions capable of independent use separately considered in the matrix or whether, on the contrary, the VPT relevant should correspond to the sum of all those divisions capable of independent use but forming part of the same property and which are allocated to housing.
And the answer, in those decisions, was always for the first option and it is understood that rightly so.
In the context of its counter-submissions, the AT cites the Constitutional Court Judgments Nos. 620/2015 and 692/2015, respectively, of 3 and 16 December, which conclude for the absence of material unconstitutionality in the different treatment, in this regard, between vertical and horizontal ownership.
However, it is to be understood that the question of the constitutionality of the norm does not arise and that adherence is given to the cited Case Law. Let us now examine the reasons underlying such Case Law and the interpretation followed here.
The Stamp Duty Code
The new item was inserted in the Stamp Duty Code, an option that does not offer significant contribution to systematically frame the new tax, since that tax "affects a heterogeneous multiplicity of facts or acts… without a common feature that gives them identity", which was, moreover, aggravated by the Taxation of Heritage Reform of 2003/2004, making "the problem of classifying this tax" even more complex (cf. José Maria Fernandes Pires, Op. Cit., p. 422).
But it is known that this new item was introduced as a way of reinforcing budgetary control measures on the revenue side, within a context 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 exteriorisation of contributory capacity that could be called upon to support the purpose of reducing the negative budgetary balance.
And it did so by choosing to apply the new taxation exclusively to certain goods, thus implying a strong negative discrimination of these, which postulates a reinforced explanation of this choice, so as not to put in crisis the principle of equality, or equity in the terminology of Glória Teixeira, either in its sense of horizontal equity or in that of vertical equity (Glória Teixeira, Manual of Tax Law, p. 56, 2nd ed., Almedina).
Now, it seems that in the thinking of the legislator the intention can be glimpsed to identify in properties with VPT equal to or greater than one million euros intended for housing ("luxury"), a referential, not arbitrary, of an additional contributory capacity, capable of expanding the spectrum of contributions to the desired and necessary budgetary equilibrium.
In this context, the issue to be decided is whether a property constituted in full or vertical ownership, but with storeys or divisions with independent uses, is a "property with housing allocation" for purposes of the application of article 1 of the Stamp Duty Code and of item 28.1 of TGIS, added by article 4 of Law No. 55-A/2012, of 29 October (all the more so as, as in the case of the present proceedings, it may have areas allocated to non-housing purposes) or whether by "property" should instead be considered the divisions separately considered in the property matrix and, further, what the relevant VPT is (whether the VPT relating to the property, whether the VPT inherent to the sum of its parts with housing allocation, or whether instead the VPT, autonomous, relating to each of those parts).
For this purpose, it is important to bear in mind that each storey or part of property capable of independent use is considered separately in the property registration of the total property, which also discriminates its tax property value (No. 2 of article 12 of CIMI), with IMI being assessed individually in relation to each storey or part of property capable of independent use (article 119, No. 1 of CIMI).
And, if this is so in IMI, it should also be so in Stamp Duty. Let us see why.
Literal Interpretation
As is referred to in the decision taken in proceedings 206/2014-T: "Given that the Stamp Duty Code refers to CIMI, it must be concluded that the registration in the property matrix of properties in vertical ownership, constituted by different parts, storeys or divisions with independent use, follows the same rules of registration as horizontal ownership".
With both IMI and Stamp Duty "assessed individually in relation to each of the parts", the "legal criterion for defining the incidence of the new tax must also be the same". In consequence, there will be incidence of item 28.1 of TGIS (only) if any of those parts, storeys or divisions with independent use presents a VPT, at least, equal to the amount provided for in the norm of incidence.
Thus, for this purpose, "property" will be the independent area, separately and autonomously considered in the matrix, being subject to tax if two requirements are met: being intended for housing purposes and having a VPT equal to or greater than one million euros, criterion for assessing "luxury" residential properties.
Otherwise, a reality not foreseen by the legislator would be created: that of a, so to speak, "residential property", possibly inserted within a larger property with various purposes, in which the VPT of that, extraneous to the property registrations, would consist of the fiction of a VPT given by the addition of the autonomous VPT of each (independent and with housing purpose) division considered in the property registration. That is, where the legislator considered two realities, the interpreter would now, without support in the legislative text, as occurs in the assessments now at issue, need to create a third reality, hybrid, midway between the totality of the urban property and each of its independent housing divisions. Divisions to which the legislator of IMI, and of Stamp Duty by reference to CIMI, understood to give tax relevance.
Also in the decision rendered in proceedings 272/2013-T (CAAD) it is referred that "considering that the registration in the property matrix of properties in vertical ownership, constituted by different parts, storeys or divisions with independent use, in accordance with CIMI, follows the same rules of registration of properties constituted in horizontal ownership, with their respective IMI, as well as the new Stamp Duty, assessed individually in relation to each of the parts, it leaves no doubt that the legal criterion for defining the incidence of the new tax must be the same". Indeed, it is further stated in that same decision that the AT's position "finds no legal support and is contrary to the criterion applicable under CIMI and, by reference, under Stamp Duty", for which reason "the adoption of the criterion defended by AT violates the principles of legality and fiscal equality, as well as that of the prevalence of material truth over legal-formal reality".
In this same sense, the arbitral decision rendered in proceedings 30/2014-T (CAAD) emphasises finding in AT's doctrine a "non-conformity with the literal element of the final part of the norm of incidence (item 28 of TGIS) which states that the tax affects "the tax property value used for IMI purposes" and therefore should not affect the sum of tax property values of properties, parts of properties or storeys, with no legal support for the operation of adding tax property values of storeys or parts of property capable of independent use, with housing allocation, separated from the VPT of others with different purposes, so as to reach the tax-eligible threshold of 1,000,000.00 euros or more".
As is also referred to in the arbitral decision taken in proceedings 30/2014-T (CAAD), what happens with respect to urban properties with housing allocation, in vertical ownership, with storeys or divisions capable of independent use, is that AT proceeds, in Stamp Duty assessment operations, as it did in the present case, in the adaptation of CIMI rules (adding the tax property values of one property, without considering those corresponding to parts of the property with non-housing purposes, thus giving rise to a new and hybrid VPT). Indeed, such "adaptation" corresponds to "summing the VPTs of each storey or independent division allocated to housing purposes (separated from the VPT of storeys or divisions intended for other purposes), creating a new legal reality, without legal support, which is a global VPT of urban properties in vertical ownership, with housing allocation", which affects "the literal element of the norm of incidence" (incidence on "the tax property value used for IMI purposes"). Thus, "in urban properties with housing allocation, in vertical ownership, with storeys or divisions capable of independent use", the tax property value should be considered "as results exclusively from No. 3 of article 12 of CIMI. Both for IMI and for this Stamp Duty".
Indeed, especially in cases of property with divisions capable of independent use and with diverse uses, housing and others, an innovative VPT would have to be obtained, given by the sum of the independent divisions intended for housing, but not the others, so as to ascertain the minimum value externalising special contributory capacity (or, what amounts to the same, to subtract from the VPT of the property in vertical ownership the VPT of the independent divisions not intended for housing, to then confirm that even so a total VPT equal to or greater than one million euros was maintained). And, this clearly, without any support, as will be seen, in the letter or the ratio of the law.
Specifically, as was concluded in the decision rendered in proceedings 26/2014-T of CAAD, "for purposes of application of item 28 of TGIS to properties in vertical ownership, the same CIMI rules applicable to horizontal ownership properties are applied, and in the same sense the VPT for purposes of application of the item is the individual VPT of each independent housing fraction, such that in the present case none of the fractions exceeds the criterion of incidence of 1,000,000.00 €", as precisely also occurs in the case of the present proceedings.
It is thus concluded, in summary, as clearly follows from the cited decisions, that the literal interpretation of the new item of TGIS cannot but be opposed to that sustained by AT, given the clear and indisputable reference made regarding the new item of TGIS to the rules of CIMI, the interpreter of the norm not being able to "create" a new concept of property so as to obtain a hybrid VPT, namely in cases of properties with housing and non-housing use, not recognised in the matrix and without any support in the text of the law. Which must also apply to properties in vertical ownership whose divisions are intended, all, for housing purposes and, with greater reason or identity of reasons, for properties where this is not the case.
Economic Substance
Moreover, as is well referred to in Judgment 117/2013-T of CAAD, "the interpretation based exclusively on the literal tenor.... cannot be accepted, since in the interpretation of tax norms the general rules and principles of interpretation and application of laws are observed (article 11, No. 1 of LGT) and article 9, No. 1, expressly prohibits interpretations based exclusively on the literal tenor of norms by stating that 'interpretation should not be limited to the letter of the law', rather, 'reconstructing from the texts the legislative thinking, 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'. In order to verify a correspondence between the interpretation and the letter of the law, it will be sufficient 'a minimum of verbal correspondence, even if imperfectly expressed' (article 9, No. 3, of the Civil Code), which will only prevent the adoption of interpretations that cannot at all be reconciled with the letter of the law, even acknowledging therein imperfection in the expression of legislative intent".
And if we now look at the economic substance of the tax facts, in compliance with article 11, No. 3 of LGT, without adherence to an economic interpretation of tax law norms, today condemned by Doctrine (cf. Taxes, General Theory, Américo Fernando Brás Carlos, p. 196, 2014, 4th ed. Almedina), we will equally have to recognise that the expression "each urban property" used in No. 7 of article 23, for identity of reasons, encompasses not only urban properties in horizontal ownership, but also storeys, divisions or parts of urban properties in vertical ownership, provided they are allocated to housing purposes, always starting, in any case, from a single taxable base for all legal purposes: the tax property value used for IMI purposes (final part of item 28 of TGIS), as was concluded in the arbitral decision of proceedings 177/2014-T (CAAD).
Or, as is emphasised in the decision rendered in proceedings 272/2014-T of CAAD, "in the perspective of the legislator, what matters is not the legal-formal rigour of the concrete situation of the property but rather its normal use, the purpose for which the property is intended", for which reason "for the legislator the situation of property in vertical or horizontal ownership did not matter, since no reference or distinction is made between one and the other. What matters is the material truth underlying its existence as an urban property and its use".
That is, what matters is the economic reality of the holding of independent parts, e.g. capable of independent use or rental, just as autonomous fractions in the case of horizontal ownership, and therefore capable of permitting use or the obtaining of income in a similar manner and thus externalising equal contributory capacity (as would be externalised by the sum of the VPT of several autonomous fractions of the same property in horizontal ownership or of several properties whose VPTs, together, exceeded the value of one million euros, without this being considered by the legislator as an externalisation of contributory capacity relevant for purposes of Stamp Duty).
System Coherence
If we now consider the entirety of the tax system, we will also find no indications that would refute the conclusion drawn up to now.
As is referred to in the Judgment rendered in proceedings 26/2014-T of CAAD, no censure of the legislator regarding vertical ownership is discerned. Indeed, "it will be said, not without reasonableness, that the legislator, for purposes of IMI taxation, chose to confer autonomy, independence, to each of the parts or to each of the storeys of a single property, provided they show independent use, to the point of providing for individualised registration in the matrix of each of those independent parts and of imposing on IMI taxation a collection also on an autonomous basis. Despite the legal existence of a single property, it is the legislator itself that not only recommends but imposes the autonomous consideration of each of the independent parts, for purposes of wealth taxation". Indeed, as follows from an economic interpretation of the fact, with prevalence of its substance over its form, as above was seen.
And if this is so in IMI, it would not be understood why it would not also be, in Stamp Duty, namely in the case of the new taxation on "luxury" properties (in the sense used in Parliament by the then State Secretary for Tax Affairs and further referred to).
Indeed, if the legislator is indifferent to one or another form of structuring the ownership of urban properties in CIMI, it would not be understood what it intended to now favour one to the detriment of the other, namely by considering one form of structuring more advanced than the other. As was decided in proceedings 26/2014-T and 272/2014-T of CAAD, "the current legal regime does not impose the obligation to constitute horizontal ownership", for which reason "the discrimination operated by AT translates into arbitrary and illegal discrimination", since "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, No. 2 of the Constitution, and further the principles of justice, equality and fiscal proportionality."
That is, the literal interpretation initially reached continues to be valid.
Legislative Intent
And the fact is that nothing induces the interpreter to the conclusion that the concrete legislator of the new item of TGIS, contrary to the legislator of IMI, which moreover remains unchanged, intended to discriminate vertical ownership in relation to horizontal. As is well recalled in the Judgment rendered in the already referred proceedings 26/2014-T of CAAD, "when presenting and discussing, in Parliament, bill 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 special taxation on properties of high value intended for housing. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will affect homes with a value equal to or exceeding 1 million euros' (cf. DAR I Series No. 9/XII-2, of 11 October, p. 32). Now, as is emphasised in that Judgment, 'the State Secretary for Tax Affairs presents this bill referring unequivocally to the expression "homes"… with a value equal to or exceeding 1 million euros', for which reason 'it follows with meridian clarity that item 28.1 of TGIS cannot be interpreted to the effect that each of the storeys, divisions or parts capable of independent use is encompassed therein when only from their sum results a VPT greater than that provided for in the same item'. This inasmuch as, in that case, 'none of the "homes"… presents, of itself, "value equal to or exceeding 1 million euros"'.
Being, therefore, clear, as is stated in the referred decision 272/2014-T, that for the legislator only that value of one million euros, provided it is allocated "to a home (house, autonomous fraction or storey with independent use) translates a contributory capacity above average and, as such, capable of determining a special contribution to ensure the just distribution of the tax burden".
And if this is so, we must then attend to the concept of "home" as a physical reality that enables a housing purpose, a unit capable of independent use, including its rental, since it is in this economic reality that we will find the externalisation of the contributory capacity associated with "luxury homes" that the legislator considered relevant. Moreover, if this were not the case, the legislator would proceed to a discrimination that would not be justified, since as has already been seen, such discrimination is not found in the system when vertical ownership is compared with horizontal. Moreover, this distinction would clash with a necessary equity between identical externalisations of the same contributory capacity.
Contributory Capacity and Constitutional Interpretation
The interpretation of the norm within the framework of ordinary law has already been ensured. For the sake of argument, the issue may now be analysed with a view to greater compatibility with the constitutional normative, without this issue being already relevant to the good decision of the case and, therefore, without arriving at the analysis of the concrete theme on which the Constitutional Court Judgments referred to above dwell. That is, the recourse to constitutional principles aims solely to reinforce the interpretation of ordinary law rules already reached without recourse to hierarchically superior norms.
It is held to be certain that the tax legislator is subordinated to the principle of equality, which, as is well referred to by Sérgio Vasques (Manual of Tax Law, pp. 249 et seq., 2011, Almedina), is more than a mere negative limit and imposes more than the mere prohibition of arbitrariness, rather postulating a distribution of taxes in accordance with the criterion of contributory capacity. Thus, the legislator will have to anchor taxation in reasonable and non-arbitrary economic elements, capable of justifying the tax claim in a contributory capacity concretely externalised by the taxpayer.
In this way, it is imperative to seek in the text of the new item a reading that gives effect to those principles. Or, what amounts to the same, not to extract from that text a meaning that is shown to be contrary to those same principles.
Now, the contributory capacities externalised by the ownership of a property composed of a set of autonomous fractions in horizontal ownership or by a set of divisions of independent use under vertical ownership, cannot but be considered identical, if not even, possibly, smaller in the case of the second hypothesis. That is, a property does not, surely, have a larger market value by being organised as vertical ownership. It is the same (permitting equal benefit from its use or equal income through its rental, as above was referred to), or will even have a smaller value, since the transmission alternatives will possibly be fewer. And we know that VPT intends to be an approximation, precisely, to the market value of properties and will therefore be the measure and limit of the contributory capacity relevant for the new item of TGIS.
Thus, the interpretation advocated by AT, finding no hermeneutical justification, as has been seen so far, would still lead to a manifest inequality between owners of properties in horizontal and vertical ownership (and it has also been seen that no penalising intention toward the latter is discerned, even if one admitted that such would be constitutionally permissible). In that same sense, as is well emphasised in the decision of proceedings 272/2014-T of CAAD, the "existence of a property in vertical or horizontal ownership cannot by itself be an indicator of contributory capacity. On the contrary, the law provides that both must receive the same tax treatment in obedience to the principles of justice, fiscal equality and material truth".
The claimant thus has reason when it subsidiarily sustains that the interpretation advocated by AT would violate constitutional principles.
Concluding, "material truth is what is imposed as the determining criterion of contributory capacity and not the mere legal-formal reality of the property, since the constitution of horizontal ownership implies a mere legal alteration of the property, not even imposing a new appraisal" (as is referred to in the decision rendered in proceedings 26/2014-T of CAAD). And this fact "does not appear consistent with the AT's decision to tax the housing parts of a property in vertical ownership, based on the property's global VPT and not on what is effectively attributed to each part". Thus, "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 further the principles of justice, equality and fiscal proportionality", as was stated, by the creation ex novo of an innovative concept and a hybrid VPT, frequently corresponding to only part of a property.
Conclusion Regarding the Disputed Assessment
In these terms, the tax acts at issue suffer from a defect of violation of law, due to error in the legal and factual premises, as the claimant sustains, since none of the parts capable of independent use and intended for housing that compose the aforementioned property, possesses a VPT with a value equal to or greater than the threshold resulting from the applied norm, which renders the said tax acts voidable and must thus be declared, as is now done.
Compensation for Undue Guarantee Provision
The claimant further requests compensation for the costs borne with the issuance and maintenance of the bank guarantee provided for suspension of the execution of the assessments of the year in question, in accordance with article 53, No. 1 of LGT and in compliance with article 171, No. 1 of CPPT.
Jurisdiction
The AT sustains that the Arbitral Tribunal lacks jurisdiction ratione materiae to assess the right to compensation, since it is incumbent upon it only a "mere control of the legality of the assessment challenged", it not being for it to analyse the existence of "error attributable to the services".
Without reason, however! As is, moreover, amicably settled and amply recognised in the matter of interest in favour of the taxpayer.
In this sense, the arbitral decision rendered in proceedings 48/2013-T, cited by the claimant to which adherence is given here.
On the Right to Compensation
Notwithstanding the guarantee having been provided for a period of less than three years, the annulled assessment stems from manifest error attributable to AT, since the interpretation to which it proceeded suffers from error in the subsumption of facts to law, when there were already two arbitral decisions regarding the same property to the effect of non-incidence of the tax. Which were known to AT, since they had been rendered in the civil year prior to that of the assessments here at issue. This, together with extensive concordant case law, which AT could not but be aware of.
There is, thus, error attributable to AT in the disputed assessment, in accordance with and for the purposes of No. 2 of article 53 of LGT.
It is demonstrated in the proceedings the provision of guarantee for the suspension of the execution of the amount relating to the first instalments, it being plausible that bank guarantees were provided for suspension of the second and third instalments of the same assessment, a fact that AT will be aware of.
The claimant should thus be recompensed for the costs effectively borne and to be borne with the guarantee or guarantees that were provided for the suspension of fiscal execution of the assessments relating to the year here at issue, with the maximum limit that would result from the application of the rate of compensatory interest provided for in the Law to the guaranteed amount (article 53, No. 3 of LGT).
Conclusion Regarding Compensation for Undue Guarantee Provision
It is thus decided to condemn the AT to reimburse the claimant for the costs with the provision of guarantee, or guarantees, bank, which it has effectively borne and will bear, for the suspension of fiscal execution of the stamp duty assessments relating to the year 2015 and to the property here identified, with the maximum limit that would result from the application to the guaranteed amount of the rate of compensatory interest provided for in the Law.
Operative Part
As a result of the foregoing, it is decided to render the claimant's claim entirely successful and, in consequence, to annul the assessment acts at issue, on the ground of violation of law, arising from error in the premises.
Having been provided a bank guarantee for suspension of the execution of the identified assessment acts, the claimant must be reimbursed for the costs borne and to be borne with the issuance and maintenance of the bank guarantees provided for this purpose, with the maximum limit corresponding to the compensatory interest that would be calculated in accordance with the law on the guaranteed amount with the bank guarantees provided.
Amount
As referred to above, the assessments subject to the claim and annulment amount to the total value of €12,486.80 (twelve thousand, four hundred and eighty-six euros and eighty cents), this being the value of the tax illegally assessed and, therefore, the value of the claim and its economic utility.
Thus and in accordance with the provisions of article 306, Nos. 1 and 2, of the Code of Civil Procedure and article 97-A, No. 1, subparagraph a), of CPPT and article 3, No. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of €12,486.80 is fixed for the proceedings.
Costs
In accordance with article 22, No. 4, of RJAT, the amount of costs is fixed at €918.00 (nine hundred and eighteen euros), in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, entirely at the expense of the Tax and Customs Authority, here the respondent.
Lisbon, 23 June 2017
Text prepared on computer, in accordance with the Code of Civil Procedure (CPC), applicable by reference of article 29, No. 1, subparagraph e) of RJAT, with blank verses, reviewed and signed by the undersigned arbitrator.
The Arbitrator
(Jaime Carvalho Esteves)
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