Stamp Tax on Building Land (Verba 28.1 TGIS) – CAAD Arbitration 367/2015-T

I - REPORT

A - PARTIES

A, a limited liability company with the unique registration number and collective person number …, with registered office at …, hereinafter referred to as the Claimant or taxpayer.

PORTUGUESE TAX AND CUSTOMS AUTHORITY (which succeeded the General Tax Directorate through Decree-Law no. 118/2011 of 15 December) hereinafter referred to as the Respondent or AT.

The request for constitution of the arbitral tribunal was accepted by the CAAD Chair, and the Arbitral Tribunal was duly constituted on 09-07-2015 to examine and decide on the subject matter of this proceeding, and automatically notified the Portuguese Tax and Customs Authority on 09-07-2015.

The Claimant did not proceed to appoint an arbitrator, whereby, pursuant to the provisions of no. 1 of article 6 and paragraph b) of no. 1 of article 11 of Decree-Law no. 10/2011 of 20 January, as amended by article 228 of Law no. 66-B/2012 of 31 December, the Ethics Council appointed Dr. Paulo Ferreira Alves, the appointment having been accepted in accordance with legal provisions.

On 09-07-2015 the parties were duly notified of such appointment and expressed no desire to challenge the appointment of the arbitrators, in accordance with article 11 no. 1, paragraphs a) and b) of the RJAT and Articles 6 and 7 of the Code of Ethics.

In accordance with the provisions of paragraph c) of no. 1 of article 11 of Decree-Law no. 10/2011 of 20 January, as amended by article 228 of Law no. 66-B/2012 of 31 December, the sole arbitral tribunal is duly constituted on 07-09-2015.

Both parties agreed to dispense with the meeting provided for in article 18 of the RJAT, but presented written submissions.

The arbitral tribunal is duly constituted. It is materially competent pursuant to articles 2, no. 1, paragraph a), and 30, no. 1 of Decree-Law no. 10/2011 of 20 January.

The parties have legal capacity and standing, are legitimate and are duly represented (articles 4 and 10, no. 2 of the same statute and article 1 of Ordinance no. 112-A/2011 of 22 March).

The proceedings contain no defects that would invalidate them.

B – REQUEST

1. The herein Claimant seeks a declaration of illegality of the Stamp Tax Assessment (item 28.1 of the GTST), for the year 2012, which set a total tax payable of € 31,633.69 (thirty-one thousand six hundred thirty-three euros and sixty-nine cents) relating to acts no. 2013 ...84, 2013 ...85 and 2013 ...86.

C – GROUNDS

1. To support its request for an arbitral ruling, the Claimant alleged, with a view to declaring the illegality of the tax assessment acts relating to Stamp Tax, already described in point 1 of this Decision, in summary, the following:

2. The Claimant filed a Request for Administrative Review of this stamp tax assessment with the Finance Department of ... (Administrative Justice Division), to which the number ... was assigned.

3. By office no. 3188 of 11/03/2015, from the Finance Department of ... (Administrative Justice Division), the Claimant was notified of the ruling issued on 10/03/2015 by the Deputy Finance Director, which dismissed the administrative review request.

4. The Claimant argues the illegality of the assessment on the grounds of error in factual presuppositions and error of law concerning the facts, due to the absence of "residential designation" of the property.

5. In the case of the assessment in question in the present request for arbitral ruling, it was considered that the urban property registered in the cadastre under article ..., of the parish of ..., municipality of ..., was an urban property with "residential designation" for the purposes of item 28.1 of the GTST, as amended by Law no. 55-A/2012 of 29 October, which does not correspond to its legal nature as it is a land plot intended for construction where no dwelling exists.

6. The Claimant's property, which was subject to the assessment, is a land plot situated in ..., parish of ..., municipality of ..., registered in the respective cadastre under article ....

7. The land in question is not being used or intended for residential purposes, as it is land intended for construction.

8. The land does not possess, nor could it possess, a licence for residential use.

9. The land in question is intended for construction, being fiscally a property of the type "land for construction".

10. Because the legal status of said urban property is not that of a property with residential designation, but rather a property with construction designation, it could not be taxed pursuant to article 1, no. 1 of the CIS and item 28.1 of the GTST.

11. The claimant contends that on the basis of the legal framework of article 12, no. 1 of the LGT, read together with articles 113, no. 1 of the IMI Code and 8, no. 1 of the IMI Code, by virtue of article 23, no. 7 of the CIS, the GTST is applicable in the case sub judice, as amended on the date of the tax fact, namely as amended by Law no. 55-A/2012 of 29 October, we have that, as to the objective scope of the tax, item 28.1 applies to urban properties with residential designation.

12. However, in accordance with Law no. 55-A/2012 itself, which created this new Item 28 of the GTST, the normative reference framework par excellence of this new scope of stamp tax is that of the IMI Code.

13. Thus, for the interpretation of what constitutes urban properties with residential designation we can and must also consider the IMI Code, in particular articles 2 (which defines property), 4 (which defines urban properties) and 6 (which categorizes urban properties by type), all of the IMI Code.

14. The claimant contends that residential urban properties or those with residential designation are buildings or structures licensed for residential purposes or which, even where they do not have a residential license, have residential purposes as their normal use (article 6, no. 2 of the IMI Code).

15. In the case of the property subject to the assessment in question, as well as in other land plots intended for construction, it is verified, on the one hand, that they are not by nature structures, and on the other, that they have construction as their normal purpose.

16. The claimant argues that because they correspond to a reality that cannot be subsumed within residential, commercial, industrial or service urban properties, the legislator created an autonomous category of urban properties: land for construction (article 6, no. 1, paragraph c) and 3 of the IMI Code).

17. A land plot intended for construction does not have, considering its economic substance, the characteristics of a habitable property, whereby it cannot be understood that it is encompassed by the tax scope provision set forth in item 28.1 of the GTST.

18. Moreover, it argues that land for construction was not encompassed either in the letter or in the spirit of the legislator when Item 28 of Stamp Tax was created, which is finally demonstrated by Law no. 83-C/2013 of 31 December (State Budget Law for 2014), which amended the wording of item 28.1 of the GTST previously in force, with the following entering into force as of 01/01/2014: "By residential property or by land for construction whose building, authorized or planned, is for residential purposes, as provided in the IMI Code"

19. This amendment to the tax scope of item 28.1 of the GTST in the 2014 Budget, which aimed to also tax land for construction, clearly demonstrates that previously this situation was not encompassed by the tax scope provision, which in itself is sufficient ground for this request for an arbitral ruling to be decided in favour.

20. For the foregoing reasons, by presupposing that the Claimant's land for construction is a property with residential designation, the AT makes an incorrect interpretation of article 1, no. 1 of the CIS and item 28.1 of the GTST, or if you prefer, commits the so-called "error of law concerning the facts", which constitutes grounds for annulment of the assessment, pursuant to article 99 of the CPTC and article 163 of the CPA, which is hereby requested.

21. The claimant contends the unconstitutionality, firstly, of Law no. 55-A/2012 of 29 October, which added item no. 28 to the GTST, is unconstitutional for violating the principle of equality, provided for in articles 13 and 104 of the CRP, and cannot be applied, in accordance with articles 204 and 266, no. 2 of the CRP. Secondly, even if it were to be understood that Law no. 55-A/2012 of 29 October were not unconstitutional, which is not conceded, it should still be stated that the interpretation that the AT made of item 28.1 of the GTST is in itself unconstitutional, for violating the constitutional principles of legality, justice, equality and impartiality, formulated in no. 2 of article 266, as well as articles 13 and 104, no. 3 of the CRP.

22. For the foregoing reasons, having been issued on the basis of an interpretation of item 28.1 of the GTST which is deemed unconstitutional, for violating the principles of legality, justice, equality and impartiality, formulated in no. 2 of article 266, as well as articles 13 and 104, no. 3 of the CRP, the assessment in question is therefore null, pursuant to article 133, no. 1, paragraph d) of the CPA.

23. Even if this were not to be understood, which is not conceded, the assessment in question would still be voidable, pursuant to article 135 of the CPA.

24. The Claimant concludes by arguing for the voidability of the tax assessment act relating to Municipal Property Tax on the basis of violation of law in the characterization of the tax fact, with item 28.1 of the General Stamp Tax Table being incorrectly applied, as amended in the year 2013, which constitutes grounds for judicial challenge and annulment of the contested acts (article 99 of the CPTC - by virtue of article 10, no. 2, al. c) of the RJAT).

D - RESPONSE OF THE RESPONDENT

1. The Respondent, duly notified for this purpose, timely presented its response in which, in brief summary, it alleged the following:

2. The Respondent contends that the claimant petitions for the annulment of the ruling dismissing the administrative review request no. ... and consequently the annulment of the 1st and 2nd installments of stamp tax for the year 2012, item 28 of the GTST, added by Law no. 55-A/2012 of 29 October, in the amount of 21,089.13 €.

3. The Respondent argues that the ground for the request to constitute the Arbitral Tribunal is constituted by the dismissal of the administrative review request, therefore necessarily the scope of the request must be limited to the object of the administrative review request.

4. Moreover, it argues that the deadline used by the Claimant to file the request to constitute the Arbitral Tribunal was the deadline opened precisely by the dismissal of the administrative review request, by ruling of 10.03.2015, as any other deadline, in particular that counted from the end of the voluntary payment period for the tax in 2013, had long since passed.

5. Accordingly, the respondent considers that the object of the request is exclusively that within the scope of the administrative review process, that is, the annulment of the collection notices for the 1st and 2nd installments of the tax in the amount of 21,089.13 €, and consequently the value of the case should also be reduced and limited to this amount.

6. The Respondent contends that according to the Certification of the Contents of the urban property which is the basis of the present assessment, it is verified that the land for construction is designated for residential purposes, as stated in the PA, and urban properties that are land for construction and to which residential designation has been attributed within the scope of their respective assessments, as shown in the respective cadastres, are subject to Stamp Tax.

7. The Respondent argues that the fact that in the tax scope provision – item 28.1 of the GTST – the property with residential designation has been expressly stated at the expense of the residential property calls upon the designation coefficient, cf. article 41 of the IMI Code, which applies indiscriminately to all urban properties.

8. The Respondent argues that Law no. 55-A/2012 of 29/10/2012 amended article 1 of the CIS, and added item 28 to the GTST, and with this legislative amendment, Stamp Tax would also apply to the ownership, usufruct or right of surface of urban properties whose patrimonial value for tax purposes as shown in the cadastre, pursuant to the IMI Code, was equal to or exceeding € 1,000,000.00.

9. Stamp tax would thus apply to all acts, contracts, documents, titles, papers and other facts or legal situations provided for in the general table, including gratuitous transfers of property.

10. As there is no definition in Stamp Tax law of what is meant by 'urban property', 'land for construction' and 'residential designation', it is necessary to resort subsidiarily to the IMI Code to obtain a definition that allows assessment of possible liability to Stamp Tax, in accordance with the provisions of article 67, no. 2 of the CIS as amended by Law no. 55-A/2012 of 29/10.

11. The Respondent argues, pursuant to the said legal provision, that for matters not regulated in the Code, relating to item no. 28 of the GTST, the provisions of the IMI Code apply subsidiarily.

12. The notion of designation of urban property is found in the section relating to the assessment of property, which is well understood in that the assessment of property (purpose) incorporates value to the property, constituting a fact of distinction that is determinant (coefficient) for assessment purposes.

13. The respondent argues that the legislator chose to determine the application of the methodology for assessment of properties in general to the assessment of 'land for construction', as results from the expression 'value of authorized structures' referred to in article 45, no. 2 of the IMI Code and thus applying to it the designation coefficient provided for in article 41 of the IMI Code.

14. The Respondent argues that we are faced with a 'land for construction', more specifically, a plot of urban land for construction, with the building footprint and construction areas perfectly defined and identified in the urban property record.

15. And fiscally the properties are land for construction, in that capacity they were acquired and thus they are registered for property purposes, and therefore they are undoubtedly plots of land for construction, more precisely urban properties with residential vocation.

16. And that the property record is very clear in defining for the plot of land for construction in question, the respective building footprint and construction area, thus perfectly defined and identified.

17. There is therefore evident residential designation of the structure.

18. The Respondent maintains that item 28 of the GTST is a general and abstract provision, applicable uniformly to all cases where the factual and legal presuppositions are met.

19. It is the understanding of the AT that the property registered under article U-..., of the parish of ..., municipality of ..., district of ..., has the legal nature of a property with residential designation, whereby the collection notices for the 1st and 2nd installment of the tax, subject of the present request for an arbitral ruling, should be maintained as they embody correct interpretation of Item 28 of the General Table added by Law no. 55-A/2012 of 29/12.

20. The Respondent concludes by supporting its position to the effect that the assessment in question remains entirely valid and lawful, and that the collection notices for the 1st and 2nd installments of stamp tax, item 28 of the GTST, now being contested, are lawful, concluding to the legality thereof.

E - FACTUAL FINDINGS

1. Before proceeding to the examination of these matters, it is necessary to present the factual matter relevant to its understanding and decision, which was done on the basis of documentary evidence and having regard to the alleged facts.

2. As regards relevant factual matters, this tribunal finds the following facts established:

3. The claimant is the owner of the land plot intended for construction situated at I.P.P. 7, zone 2, subzone 2, plot 2, in ..., parish of ..., municipality of ,. Described under no. ... in the Property Registry of ..., and registered only under the cadastral article no. ..., with patrimonial value for tax purposes of € 3,163,368.63.

4. The claimant was notified of the Stamp Tax assessment acts, which set a total tax (collection) payable of €31,633.69 (thirty-one thousand six hundred thirty-three euros and sixty-nine cents).

5. The claimant was notified for payment of Stamp Tax, in three installments, respectively:

a. Stamp Tax Assessment Act no. 2013 ...84, relating to the property registered under article no. ..., with a tax to be assessed of 10,544.57 € (relating to 1st Installment) and a collection of 31,633.69 €.

b. Stamp Tax Assessment Act no. 2013 ...85, relating to the property registered under article no. ..., with a tax to be assessed of 10,544.56 € (relating to 2nd Installment) and a collection of 31,633.69 €.

c. Stamp Tax Assessment Act no. 2013 ...86, relating to the property registered under article no. ...04, with a tax to be assessed of 10,544.56 € (relating to 3rd Installment) and a collection of 31,633.69 €.

1. The claimant proceeded to pay all installments of the assessments in full.

2. The claimant filed an administrative review request of the stamp tax assessment acts.

3. The administrative review request was assigned number ....5, and the procedure no. ....2.

4. The administrative review request was dismissed by ruling on 10/03/2015.

F - UNPROVED FACTS

1. Of the facts with interest for the decision of the case, contained in the challenge, all those subject to concrete analysis, those not contained in the factuality described above were not proved.

G - QUESTIONS TO BE DECIDED

1. Given the positions of the parties assumed in the arguments presented, the central question to be resolved is the following, which must therefore be examined and decided:

a. The preliminary question, raised by the Respondent, as to the jurisdiction of the arbitral tribunal.

b. That alleged by the Claimant, declaration of illegality of the tax assessment acts for additional Stamp Tax no. 2013 ...84, no. 2013 ...85, no. 2013 ...86.

H - PRELIMINARY QUESTION

1. The Respondent argues in its response that the present arbitral request should be limited to the acts encompassed by the dismissal of the administrative review request, respectively the collection notices no. 2013 ...84 and 2013 ...85 relating to the 1st and 2nd installments of stamp tax, item 28, year 2012, in the amount of 21,089.13 €.

2. The Respondent further argues that the deadline used by the Claimant to file the request to constitute the Arbitral Tribunal was the deadline opened precisely by the dismissal of the administrative review request, by ruling of 10.03.2015, and not any other. As any other deadline, in particular that counted from the end of the voluntary payment period for the tax in 2013, had long since passed.

3. The Respondent's argument is without merit. Let us see why.

4. Firstly, given the formulation of the Claimant's request, it seeks the annulment of the stamp tax assessment act determined within item 28, year 2012, which set a total tax payable of 31,633.69€.

5. The Claimant in the present request for an arbitral ruling requests the annulment of the assessed tax of € 31,633.69.

6. The tax act in question here is the stamp tax assessment act determined within item 28, year 2012, which set a total tax payable of 31,633.69€.

7. It is an indivisible act of a Stamp Tax Assessment, pursuant to the combined provisions of articles 120 and 113, no. 1, both of the IMI Code, applicable by reference from no. 7 of article 23 of the Stamp Tax Code, as amended by Law no. 55-A/2012 of 29 October, it follows that in the situations to which item 28 of the GTST applies, an annual assessment is made, payment in installments being nothing more than a collection technique for the tax and not a partial payment thereof.

8. Since this is not a divisible tax act, in the sense of "if partial annulment of a tax act is requested, the tribunal generally cannot annul it entirely", therefore the request for annulment of the Stamp Tax assessment act of any of the three installments shall be impugnable exclusively as to the act of determination of the collection and not as to the tax payable in that installment.

9. Thus the request for annulment of the act may be requested at any time from the date of notification of one of the installments or the dismissal of the administrative review request.

10. Since the stamp tax assessment act that may be voidable and impugnable is the act of determination of the collection, it cannot be divisible and impugnable autonomously, its annulment implies the annulment of the payment acts, respectively the three installments.

11. On the question of the indivisibility of a Stamp Tax Assessment (item 28 of the GTST), the CAAD has already pronounced itself in process no. 205/2013-T (available at https://caad.org.pt/tributario/decisoes/), in accordance with the extract transcribed below:

"11. The Respondent further challenges the value of the case, contending that it is € 8,940.94 and not € 28,822.80, as indicated by the claimant. The claimant contends that 'the act challenged in these proceedings is the assessment act no. ... of 22/02/2013, relating to the first installment of stamp tax for the year 2012, in the amount of € 8,940.94, attached by the claimant to the request for an arbitral ruling as Doc. 1'. However, the value of the assessment no. ... of 22/02/2013, as shown in the said document, is actually € 26,822.00 and not € 8,940.94.

Note that there is no assessment of € 8,940.94. This value is only the first installment of an assessment that was made from the outset and in the amount indicated by the Claimant. From the fact that the value of the assessment can be paid in various installments does not follow that there are three assessments. It is, differently, an assessment that can be paid in various installments (our emphasis), the taxpayer not being prevented from challenging it due to the fact that the payment period for only one of them has elapsed."

1. The payment installments of a Stamp Tax Assessment, pursuant to Item 28 of the GTST, are not independently challengeable, as they arise from a single annual obligation, in accordance with the teaching of Braz Teixeira: "It is necessary not to confuse periodic payments, which, although made by successive acts at different times, originate from the same obligation and constitute the various portions of the same payment that was divided, with payments that must be made periodically, not owing to a division of the total payment, but rather to the birth, also periodic, of new obligations due to the permanence of the factual presuppositions of taxation."

2. Now, in cases where the tax must be paid in installments, the assessment is notified to the taxpayer together with the notification for payment of each of the installments, and can only be challenged in its entirety and not installment by installment.

3. On the incompetence of the arbitral tribunal to annul an installment of a Stamp Tax Assessment, the Collective Arbitral Tribunal constituted in process no. 442/2014-T recently pronounced itself, in accordance with the excerpt transcribed below (decision available at https://caad.org.pt/):

"(…) the Claimant is correct in arguing that the value of the case should be that of the assessments for which it seeks a declaration of illegality and not the value of the 1st installment of each of the properties mentioned, as it is the illegality of the annual assessments that the Claimant seeks. Moreover, the competence of arbitral tribunals operating in CAAD covers requests for declarations of illegality of assessment acts and not the installments through which the collection of the assessed amounts is made."

1. It is the illegality of the annual assessment that the claimant seeks the annulment of.

2. Since the three installments are not issued simultaneously, and since the act to be annulled is not divisible, it cannot be considered that the failure to challenge, by the administrative route, one of the installments means that the taxpayer has lost the right to defend itself as to it.

3. Thus the invocation by the respondent is without merit, that the request should be limited to the annulment of the collection notices for the 1st and 2nd installments of the tax, and that the deadline for voluntary payment of the 3rd installment tax in 2013 had long since passed, the claimant could not request its annulment in the present request.

4. As we have verified, the present tax is indivisible, therefore its challenge means the annulment of all three installments, and not the contrary.

5. Therefore the respondent's request that the present arbitral decision be limited to the first two installments cannot be granted, for the reasons set forth above.

6. The decision must address the act in its entirety, its annulment implies its total annulment.

I - MATTER OF LAW

1. Given the positions of the parties assumed in the pleadings presented, the central question to be resolved by this arbitral tribunal consists in deciding whether the stamp tax assessment acts in the amount of € 31,633.69 relating to the land plot intended for construction situated at I.P.P. 7, zone 2, subzone 2, plot 2, in ..., parish of ..., municipality of ,. Described under no. ... in the Property Registry of ..., and registered only under the cadastral article no. ..., with patrimonial value for tax purposes of € 3,163,368.63, suffers from formal defects, specifically that raised by the respondent as to lack of reasoning, and violation of law, by erroneous interpretation and application of item 28.1 of the GTST and article 6, no. 1, paragraph f), i) of the aforementioned Law no. 55-A/2012 of 29 October.

2. The factual matter is established and proved, which is why we now proceed to determine the law applicable to the disputed facts, as we are faced with established factual matter, three land plots intended for construction without any structure erected or built, the same regime and the same legal matter thus applies to all.

3. The legal defects from error in the presuppositions of the law on assessment, concerning the question of the classification of land for construction within the scope of article 28, no. 1 of the GTST, introduced by the Regime of Law no. 55-A/2012 of 29 October.

4. The amendment to the regime concerning the subjection to stamp tax of properties with residential designation by the addition of item 28 of the General Stamp Tax Table, effected by article 4 of Law 55-A/2012 of 29/10, came to typify the following tax facts, through the following wording:

"28 – Ownership, usufruct or right of surface of urban properties whose patrimonial value for tax purposes as shown in the cadastre, pursuant to the IMI Code, equals or exceeds € 1,000,000 – on the patrimonial value for tax purposes used for IMI purposes:

28.1 – By property with residential designation – 1%;

28.2 – By property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, included in the list approved by ordinance of the Minister of Finance – 7.5%."

1. Article 6 of Law no. 55-A/2012 contains the transitional provisions which established the rules relating to the assessment of the tax provided for in that item:

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

The tax fact occurs on 31 October 2012;

The taxpayer 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;

The patrimonial value for tax purposes to be used in the assessment of the tax corresponds to that resulting from the rules provided for in the IMI Code by reference to the year 2011;

The assessment of the tax by the Portuguese Tax and Customs Authority must be made by the end of November 2012;

The tax shall be paid, in a single installment, by the taxpayers by 20 December 2012;

The applicable rates are as follows:

Properties with residential designation assessed pursuant to the IMI Code: 0.5%;

ii) Properties with residential designation not yet assessed pursuant to the IMI Code: 0.8%;

iii) Urban properties when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favourable 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 patrimonial value for tax purposes used for the purposes of assessment of municipal property tax to be made in that year.

3 – The failure to deliver, in whole or in part, within the deadline indicated, of the amounts assessed as stamp tax constitutes a tax infraction, punished in accordance with the law."

1. On the interpretation of this statute, decision 53/2013-T has already pronounced itself, which states: "In the said item 28.1 and in sub-paragraphs i) and ii) of paragraph f) of no. 1 of article 6 of Law 55-A/2012, a concept was used that is not used in any other tax legislation in these precise terms, which is 'property with residential designation'. Specifically in the IMI Code, which in several provisions of the CIS in the amendments introduced by that Law is indicated as the statute for subsidiary application with respect to the tax provided for in the said item no. 28 [articles 2, no. 4, 3, no. 3, paragraph u), 5, paragraph u), 23, no. 7, and 46 and 67 of the CIS], such a concept defined in those terms is not used." On this matter, decisions of the CAAD Arbitral Tribunal, nos. 42/2013-T, 48/2013-T, 49/2013-T, 189/2013-T, 207/2013-T, 247/2013, 284/2013-T, 288/2013-T, 308/2013-T, 31/2014-T, 202/2014-T, 310/2014-T have already decided.

2. As to the concept of "properties", it is necessary for this purpose to resort to the concepts of "properties" used in the IMI Code, in which the types of properties are enumerated in its articles 2 to 6, which is transcribed:

Article 2

Concept of property

1. For the purposes of this Code, property is any fraction of territory, including waters, plantations, buildings and structures of any kind incorporated or situated thereon, with a character of permanence, provided it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or structures, in the circumstances above mentioned, endowed with economic autonomy in relation to the land on which they are situated, although situated in a fraction of territory which forms an integral part of a different patrimony or does not have patrimonial nature.

2. Buildings or structures, even though movable by nature, are deemed to have a character of permanence when devoted to non-transitory purposes.

3. Permanence is presumed when buildings or structures are situated in the same location for a period exceeding one year.

4. For the purposes of this tax, each autonomous fraction, under a regime of horizontal property, is deemed to constitute one property.

Article 3

Rural properties

1 – Rural properties are land situated outside an urban area that are not to be classified as land for construction pursuant to no. 3 of article 6, provided that:

They are devoted to or, in the absence of concrete devotion, have as their normal purpose a use generating agricultural income, such as are considered for the purposes of income tax on natural persons (IRS);

Not having the devotion indicated in the preceding paragraph, they are not built upon or have only buildings or structures of an accessory nature, without economic autonomy and of reduced value.

2 – Rural properties are also land situated within an urban area, provided that by virtue of a legally approved provision they cannot have a use generating any income or can only have a use generating agricultural income and are factually having this devotion.

3 – Rural properties also include:

Buildings and structures directly devoted to the production of agricultural income, when situated on the land referred to in the preceding numbers;

Waters and plantations in the situations to which no. 1 of article 2 refers.

4 – For the purposes of this Code, urban concentrations are considered, in addition to those situated within legally fixed perimeters, clusters with a minimum of 10 dwellings served by public roads, with their perimeter delimited by points at a distance of 50 m from the axis of the roads in the transverse direction and 20 m from the last structure in the direction of the roads.

Article 4

Urban properties

Urban properties are all those that are not to be classified as rural, without prejudice to the provisions of the following article.

Article 5

Mixed properties

1 – Whenever a property has rural and urban parts it is classified, in its entirety, according to the main part.

2 – If neither part can be classified as main, the property is deemed mixed.

Article 6

Types of urban properties

1 – Urban properties are divided into:

Residential;

Commercial, industrial or for services;

Land for construction;

Others.

2 – Residential, commercial, industrial or for services are buildings or structures licensed for such purposes or, in the absence of a licence, which have such purposes as their normal use.

3 – Land for construction shall be considered land situated within or outside an urban area, for which a licence or authorization for a subdivision or construction operation has been granted, prior notification has been admitted or favorable preliminary information issued, and also those so declared in the acquisition deed, with the exception of land in respect of which the competent entities prohibit any of those operations, in particular land located in green areas, protected areas or which, in accordance with municipal land management plans, are devoted to spaces, infrastructure or public facilities. (As amended by Law no. 64-A/08 of 31-12)

4 – The provision of paragraph d) of no. 1 encompasses land situated within an urban area that are not land for construction nor are covered by the provisions of no. 2 of article 3 and also buildings and structures licensed or, in the absence of a licence, which have as their normal purpose purposes other than those referred to in no. 2 and also those in the exception of no. 3.

1. On the interpretation of tax provisions, for the case sub judice, article 11 of the General Tax Law tells us, which establishes the essential rules for the interpretation of tax laws, as follows:

Article 11

Interpretation

In determining the meaning of tax provisions and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

Whenever in tax provisions terms peculiar to other branches of law are used, they must be interpreted in the same sense that they have there, unless something else follows directly from the law.

If doubt persists as to the meaning of the applicable tax scope provisions, regard must be had to the economic substance of the tax facts.

Gaps resulting from tax provisions covered by the reservation of law of the Assembly of the Republic are not susceptible to analogy integration.

1. To this provision, it is also necessary to resort to the general principles of interpretation of laws, to which no. 1 of article 11 of the LGT refers, which are established in article 9 of the Civil Code, which establishes the following:

Article 9

Interpretation of the law

Interpretation must not be confined to the letter of the law, but must reconstruct from the texts the legislative thinking, having especially in mind the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

However, the legislative thinking that does not have in the letter of the law a minimum of verbal correspondence, however imperfectly expressed, cannot be considered by the interpreter.

In fixing the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and knew how to express his thinking in adequate terms.

1. Given the legal reasoning already presented, and having regard to the articles transcribed and mentioned, the following hypotheses for interpretation of the concept of "property with residential designation" arise, as to the Concept of "property with residential designation" as referring to residential properties, and as to the Concept of "property with residential designation" as a concept distinct from "residential properties".

2. Articles 2 to 6 of the IMI Code transcribed above, are not used by the legislator in the classification of properties to designate the concept of "property with residential designation". Nor is this concept found, with this terminology, in any other statute.

3. The lack of exact terminological correspondence of the concept of "property with residential designation" with any other used in other statutes can give rise to various interpretative hypotheses.

4. The text of the law, being the starting point for the interpretation of the expression "properties with residential designation", being on the basis of it that the "legislative thinking" must be reconstructed, as the no. 1 of article 9 of the Civil Code imposes, applicable by virtue of article 11, no. 1 of the LGT, already transcribed.

5. On the interpretation of the concept of "property with residential designation", it is important to cite decision 53/2013-T which has already pronounced itself on this matter. That decision also supports two interpretative hypotheses for the concept of "property with residential designation", respectively in the same sense as the present decision, as to the concept of "property with residential designation" as referring to residential properties, and as to the Concept of "property with residential designation" as a concept distinct from "residential properties".

6. Decision 53/2013-T writes, on the concept of "property with residential designation" as referring to residential properties:

7. "The concept most closely matching the literal tenor of this used expression is manifestly that of 'residential properties', defined in no. 2 of article 6 of the IMI Code as encompassing 'buildings or structures' licensed for residential purposes or, in the absence of a licence, which have residential purposes as their normal use.

8. If the expression 'property with residential designation' is understood to coincide with 'residential properties', it is manifest that the assessments will suffer from error in the factual and legal presuppositions, as all properties in respect of which Stamp Tax was assessed pursuant to the said item 28.1 are land for construction, without any building or structure required to meet that concept of 'residential properties'.

9. For this reason, if the interpretation is adopted that 'property with residential designation' means 'residential property', the assessments for which declaration of illegality is sought will be illegal, as there is no building or structure on any of the land.

10. However, the non-coincidence of the terms of the expression used in item 28.1 of the GTST with that derived from no. 2 of article 6 of the IMI Code suggests that the same concept was not intended to be used."

11. On the interpretation of the second hypothesis: Concept of "property with residential designation" as a concept distinct from "residential properties", decision 53/2013-T is cited again, in which it states:

"The word 'designation', in this context of the use of a property, has the meaning of 'the act of assigning something to a certain use'. ( [2] )

'When, as is the rule, the norms (legislative formulas) have more than one meaning, the positive function of the text is expressed in giving stronger support to or more strongly suggesting one of the possible meanings. That is because, among the possible meanings, some will correspond to the most natural and direct meaning of the expressions used, whereas others will only fit within the verbal framework of the norm in a forced, artificial way. Now, in the absence of other elements that induce the choice of the less immediate meaning of the text, the interpreter should opt in principle for that meaning which best and most immediately corresponds to the natural meaning of the verbal expressions used, and in particular its technical-legal meaning, assuming (not always accurate) that the legislator knew how to express its thinking correctly'. ( [3] )

The relevance of the text of the law is especially emphasized in the matter of interpretation of tax scope provisions of Stamp Tax, which are reduced to a heterogeneous 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 the application of the primary interpretative criterion, which is the unity of the legal system, which demands its overall coherence.

The recognized lack of coherence of Stamp Tax is particularly exuberant in the case of this item 28.1, hastily included outside the General State Budget, by a tax legislator without a perceptible overall fiscal orientation, successively implementing fiscal aggravation norms as budgetary setbacks occur, institutional impositions of international creditors (represented by the 'troika') and the oversight of the Constitutional Court.

In fact, although in the 'Explanatory Memorandum' of the Bill no. 96/XII/2nd ( [4] ), on which Law no. 55-A/2012 was based, reference is made to the government's laudable concern to 'strengthen the principle of social equity in austerity, ensuring an effective distribution of the necessary sacrifices to meet the adjustment program' and its commitment 'to ensure that the distribution of these sacrifices will be made by all and not only by those who live from income from their work', it is manifest, on the one hand, that these 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 28.1, by additionally taxing properties with residential designation and not also properties without it, suggests that concerns about social equity and the proclaimed intention of distributing sacrifices among all reaches much more some than properly all.

In this context, as there are no secure interpretative elements that make it possible to detect legislative coherence in the solution adopted in the said item 28.1 or the correctness or incorrectness of the adopted solution (relevant for interpretative purposes in light of no. 3 of article 9 of the Civil Code), the text of the law must be the primary element of interpretation, in accordance with the presumption imposed by the same no. 3 of article 9, that the legislator knew how to express its thinking in adequate terms.

In light of those meanings of the words 'designation' and 'designate', which are 'to give purpose' or 'to apply', the formula used in that item 28.1 of the GTST manifestly encompasses properties that are already applied to residential purposes, so it is important to ascertain whether it will also encompass properties that, although not yet applied to residential purposes, are destined for such purposes and those whose purpose is unknown.

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

But this is not enough to clarify the situation of that land for construction which, although not yet applied for residential purposes, already has a determined purpose, in particular in the licensing deed, which is the case of the properties referred to in sub-paragraphs z) to dd) of the established factual matter.

Therefore, it will be necessary to clarify when it can be understood that a property is designated for residential purposes, in particular whether it is when such purpose is fixed in a licensing act or similar, or only when the effective attribution of that purpose is materialized.

From the outset, the comparison of item 28.1 of the GTST with no. 2 of article 6 of the IMI Code, which defines the concept of residential properties, manifestly points in the direction of a need for an actual designation.

In fact, a building or structure licensed for residential purposes or even, without a licence, but having residential purposes as its normal use, is, in light of no. 2 of that article 6, a residential property.

For this reason, presupposing that the legislator of Law no. 55-A/2012 knew how to express its thinking in adequate terms (as article 9, no. 3 of the Civil Code presumes), if it intended to refer to those properties already licensed for residential purposes or which have residential purposes as their normal purpose, it would certainly have used the concept of 'residential properties', which would express perfectly and clearly its thinking, in light of the definition given by that no. 2 of article 6 of the IMI Code.

Consequently, it must be presumed that the use of a different expression is intended to refer to a different reality, so, in good hermeneutics, 'property with residential designation' cannot be a property merely licensed for residential purposes or destined for that purpose (that is, it is not enough that it be a 'residential property'), having to be a property that already has actual designation for that purpose.

That this is the meaning of the expression 'designation', in the same context of classification of properties which the IMI Code makes, is confirmed by article 3 in which, with respect to rural properties, reference is made to those 'devoted to or, in the absence of concrete devotion, have as their normal purpose a use generating agricultural income', which shows that the designation is concrete, actual. In fact, as seen from the final part of this text, a property may have a determined purpose and be or not be devoted to it, which shows that the devotion is, at the level of the connection of a property to a determined use, something more intense than mere purpose and which may or may not occur downstream of this and not upstream. ( [5] )

Furthermore, the text of the law by adopting the formula 'property with residential designation', rather than 'urban properties of residential designation', which appears in the said 'Explanatory Memorandum', strongly suggests that the residential designation must already be materialized, as only then will the property be with that designation.

With respect to article 45 of the IMI Code, it has no relationship with the classification of properties and only indicates the factors to be considered in the assessment of land for construction. What is considered there, by making reference to the 'building to be constructed' is the consideration of the purpose of the land, which, as we have seen, is something that, in the context of the IMI Code, does not imply designation and occurs before this.

The correctness of this interpretation to the effect that only properties that are actually designated for residential purposes are within the scope of item 28.1 of the GTST is also confirmed by the ratio legis perceptible from the restriction of the field of application of the norm to properties with residential designation in the context of the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', which article 9, no. 1 of the Civil Code also establishes as interpretative elements. ( [6] ).

From the outset, the limitation of taxation in Stamp Tax to 'properties with residential designation' makes it perceivable that it was not intended to encompass within the scope of the tax properties designated for services, industry or commerce, that is, properties devoted to economic activity, which is understandable in a context in which, as is notorious, the economy is in a recessionary spiral, publicly proclaimed at the highest level, with unemployment rates reaching historical maximum levels, with an avalanche of business closures resulting from economic unsustainability.

Bearing in mind this situation and being well-known and public that the reanimation of economic activity and increase of exports are the ways out of the crisis, it is understandable that no legislative measures were taken which would hinder economic activity, in particular the aggravation of the tax burden which hinders it and affects competitiveness in international terms.

For this reason, it is to be concluded that the available interpretative elements, including the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', clearly point in the direction that it was not intended to encompass within the scope of item 28.1 situations of properties that are not yet designated for residential purposes, in particular land for construction held by companies. ( [7] )"

1. It follows from the foregoing that the application of the regime to the situation of the Claimant, regarding an urban property corresponding to 'land for construction', which does not verify in the present case, faced with a property with current residential designation, whereby Stamp Tax provided for in item 28.1 of the GTST does not apply to those properties.

2. In this way, the assessment sub judice, for which declaration of illegality is sought suffers from the defect of violation of that item 28.1, by error in the legal presuppositions, which justifies the declaration of its illegality and annulment (article 135 of the CPA).

J - QUESTION OF UNCONSTITUTIONALITY

1. As to the question of the unconstitutionality of the tax scope provision contained in item 28.1 of the GTST, if interpreted to encompass land for construction, in light of the constitutional principle

2. Considering the plea of illegality of the assessments being challenged to be upheld on the grounds of errors in the legal presuppositions of the application of item 28.1 of the GTST, it becomes unnecessary to analyze the question of the unconstitutionality of the same provision when interpreted to encompass land for construction.

L - INDEMNITY INTEREST

1. The claimant further petitions for payment of indemnity interest.

2. Given the foregoing, the Stamp Tax assessment, in the part encompassed by the annulment, which will be decreed, result from errors of fact and law attributable solely to the Tax Administration, to the extent that the Claimant fulfilled its declaration obligation and they were committed by the latter and it could not be unaware of different understandings.

3. In fact, with it being demonstrated that the claimant paid the assessed tax in an amount exceeding that which is due, by virtue of articles 61 of the CPTC and 43 of the LGT, the Claimant has the right to indemnity interest due, such interest to be calculated from the date of payment of the undue (annulled) tax until the date of issuance of the respective credit note, with the deadline for such payment calculated from the beginning of the deadline for voluntary compliance with the present decision (article 61, nos. 2 to 5 of the CPPTAX), all at the rate determined in accordance with the provisions of no. 4 of article 43 of the LGT.

4. The claimant's petition is granted.

M - DECISION

1. Therefore, given all the foregoing, the present Arbitral Tribunal decides:

To declare the petition for declaration of illegality of the tax assessment act relating to Stamp Tax, which set a collection payable of €31,633.69, and the consequent annulment of the assessment notices corresponding to the three payment installments, respectively no. 2013 ...84, no. 2013 ...85, no. 2013 ...86, for the defect of violation of law as to the provision contained in item 28, no. 1, by error in the legal presuppositions, which justifies the declaration of its illegality and annulment. Set a total tax payable of €31,633.69 (thirty-one thousand six hundred thirty-three euros and sixty-nine cents), for the defect of violation of law as to the provision contained in item 28, no. 1, by error in the legal presuppositions, which justifies the declaration of its illegality and annulment.

To condemn the Respondent to reimburse to the Claimant this amount wrongfully assessed and paid, increased by the payment of indemnity interest already accrued relating to the period between 30/04/2013 (Collection Notice no. 2013 ...84), to be calculated on the amount of € 10,544.57, between 23/08/2013 (Collection Notice no. 2013 ...85) to be calculated on the amount of € 10,544.56 and between 31/10/2014 (collection notice no. ...) to be calculated on the amount of € 11,184.79, as well as in the payment of accrued indemnity interest from such last date, all in accordance with nos. 2 to 5 of article 61 of the CPTC and at the rate determined in accordance with the provisions of no. 4 of article 43 of the LGT until full reimbursement.

The value of the case is set at € 31,633.69 of the value of the assessment having regard to the economic value of the case as assessed by the value of the tax assessments being challenged, and accordingly the costs are set at 1,836.00€ (one thousand eight hundred thirty-six euros), to be borne by the respondent in accordance with article 12, no. 2 of the Tax Arbitration Regime, article 4 of the RCPAT and Table I attached thereto. – no. 10 of article 35, and nos. 1, 4 and 5 of article 43 of the LGT, articles 5, no. 1, al. a) of the RCPT, 97-A, no. 1, al. a) of the CPTC and 559 of the CPC).

Notify.

Lisbon, 13 November 2015

The Arbitrator

Paulo Ferreira Alves