Stamp Tax on Building Land – Verba 28 TGIS – CAAD Arbitration 374/2014-T

ARBITRAL DECISION

CAAD: Tax Arbitration
Case No. 374/2014 – T
Subject: Stamp Duty – Building Land – Item 28 of the General Stamp Duty Table

I – REPORT

A – PARTIES

A. CONSTRUÇÕES, LDA., with head office at …, …, hereinafter referred to as the Claimant or taxpayer.

THE TAX AND CUSTOMS AUTHORITY (which succeeded the General Directorate of Taxes, by means of Decree-Law No. 118/2011, of 15 December) hereinafter referred to as the Respondent or AT.

The request for the constitution of the arbitral tribunal was accepted by the President of CAAD, and the Arbitral Tribunal was duly constituted on 14-05-2014, to examine and decide on the subject matter of this case, and automatically notified the Tax and Customs Authority on 14-05-2014, as recorded in the respective minutes.

The Claimant did not proceed to appoint an arbitrator, and therefore, pursuant to Article 6.1 and Article 11.1(b) of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed His Honour Dr Paulo Ferreira Alves, the appointment being accepted in accordance with legal provisions.

On 01-07-2014 the parties were duly notified of this appointment, and expressed no intention to challenge the appointment of the arbitrators, in accordance with Article 11.1(a) and (b) of the Tax Arbitration Regime and Articles 6 and 7 of the Deontological Code.

In accordance with the provisions of Article 11.1(c) 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 16-07-2014.

The arbitral tribunal is duly constituted. It is materially competent, pursuant to Articles 2.1(a) and 30.1 of Decree-Law No. 10/2011, of 20 January.

Both parties agree to the waiver of the hearing provided for in Article 18 of the Tax Arbitration Regime.

The parties have legal personality and capacity, are legitimate and are properly represented (Articles 4 and 10.2 of the same Decree-Law and Article 1 of Ordinance No. 112-A/2011, of 22 March).

The case does not suffer from defects that would invalidate it.

B – CLAIM

1. The herein Claimant seeks a declaration of illegality of the tax assessment act for additional Stamp Duty No. …, which set a total tax payable of €4,053.26 (four thousand and fifty-three euros and twenty-six cents).

C – GROUNDS FOR CLAIM

1. To support its request for arbitral pronouncement, the Claimant alleged, with a view to declaring the tax assessment act for additional Stamp Duty No. … illegal, in summary, the following:

2. The claimant is the owner of an urban property consisting of building land, registered in the property register of the Parish of Union of Parishes …, municipality of … under property item …, to which the Tax Administration assigned a tax equity value (TEV) of €1,215,974.30.

3. Through Law No. 55-A/2012, of 29/10, Item 28 was added to the General Stamp Duty Table, subjecting this tax to urban properties whose tax equity value recorded in the register, in accordance with the Property Tax Code (CIMI), is equal to or greater than €1,000,000.

4. As the provision on the tax incidence of stamp duty refers to urban properties, it is important to note that the relevant concept is that contained in Article 2 of the CIMI.

5. Furthermore, the respondent sustains that, for purposes of the Property Tax (IMI), properties are classified as rural, urban or mixed. This classification is particularly relevant both for the application of the rules for determining their respective tax equity value and for the application of tax rates. For this reason, the Property Tax establishes precise rules for its classification.

6. The respondent argues that a "building land" of an urban property, since it meets the requirements comprising the concept of property – physical, patrimonial reality and economic value – and, whatever its current use or destination, in the case of vacant land, is expressly excluded from the concept of rural property.

7. From the above it follows that a property is classified as "building land" whenever a set of circumstances occurs, usually corresponding to the application of relevant rules of the legal regime governing urban buildings or the subdivision of rural properties, which, in any case, indicate the intention to build on it, unless, by force of applicable legislation, such intention is not capable of effective implementation.

8. In these terms, the claimant concludes by alleging that pursuant to Article 6 of the Property Transfer Tax (IMT) there is a clear distinction between urban properties "residential" and "building land", and these cannot be considered, for purposes of stamp duty incidence, as "properties with the intended use, which is required to be residential", for which reason the cancellation of the assessments is required.

D – RESPONSE OF THE RESPONDENT

1. The Respondent, duly notified to do so, submitted its response in due time in which, in brief summary, alleged the following:

2. Law No. 55-A/2012, of 29/10/2012 amended Article 1 of the Stamp Duty Code and added Item 28 to the General Stamp Duty Table. With this legislative amendment, Stamp Duty would now also apply to the ownership, usufruct or right of superficies of urban properties whose tax equity value recorded in the register, in accordance with the Property Tax Code (CIMI), is equal to or greater than €1,000,000.00.

3. Stamp duty would therefore 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.

4. In the absence of any definition regarding the concepts of urban property, building land and residential use, under Stamp Duty law, one must resort to the CIMI in search of a definition that allows ascertaining the possible subjection to Stamp Duty, in accordance with Article 67.2 of the Stamp Duty Code as amended by Law No. 55-A/2012, of 29/10.

5. The respondent argues, pursuant to the said legal provision, that for matters not regulated in the Code, relating to Item 28 of the General Stamp Duty Table, the provisions of the Property Tax Code apply subsidiarily.

6. The notion of use of urban property is found in the part relating to the valuation of real estate, which is well understood since the valuation of the property (purpose) incorporates value to the property, constituting a determining fact of distinction (coefficient) for purposes of valuation.

7. Thus, for purposes of determining the tax equity value of building land, the application of the use coefficient in the context of valuation is clear, and therefore its consideration for purposes of applying Item 28 of the General Stamp Duty Table cannot be ignored.

8. The AT (Tax Authority) understands that the provision of Item 28 of the General Stamp Duty Table does not constitute a violation of any constitutional requirement.

9. Item 28 of the General Stamp Duty Table applies to the ownership, usufruct or right of superficies of urban properties with residential use, whose tax equity value recorded in the register, in accordance with the CIMI, is equal to or greater than €1,000,000.00, that is, it applies to the value of the property.

10. The respondent concludes by supporting its position in the sense that the assessment in question constitutes a correct interpretation and application of law to the facts, not suffering from the defect of violation of law, whether of the Constitution or of the Stamp Duty Code, and therefore the claim made should be judged unfounded and the Respondent Entity should be absolved of the claim.

E – FACTUAL GROUNDS

1. Before proceeding to examine these issues, it is necessary to present the factual matter relevant to its understanding and decision. The examination was conducted based on documentary evidence and taking into account the facts alleged.

2. Regarding the relevant factual matter, this tribunal finds the following as established:

3. The claimant is the owner of an urban property consisting of "building land", registered in the property register of the Parish of Union of Parishes …, municipality of … under property item …, to which the Tax Administration assigned a tax equity value (TEV) of €1,215,974.30.

F – UNPROVEN FACTS

1. Of the facts with interest for the decision of the case, contained in the challenge, all those subject to specific analysis, those not contained in the factual description above were not proven.

G – ISSUES FOR DECISION

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

a. The allegation by the Claimant of the declaration of illegality of the tax assessment act for additional Stamp Duty No. …

1. H – MATTER OF LAW

2. Considering the positions of the parties assumed in the pleadings submitted, the central issue to be decided by this arbitral tribunal consists of determining whether the stamp duty assessment act, in the amount of €4,053.26, relating to an urban property consisting of building land, registered in the property register of the Parish of Union of Parishes of …, municipality of … under property item …, suffers from formal defects, specifically that raised by the respondent regarding lack of reasoning, and violation of law, due to erroneous interpretation and application of Item 28.1 of the General Stamp Duty Table and Article 6.1(f)(i) of the aforementioned Law No. 55-A/2012, of 29 October.

3. The factual matter is fixed and proven, for which reason we now proceed to determine the law applicable to the disputed facts.

4. The legal defects due to error regarding the prerequisites of the law on assessment, concerning the classification of building land within the scope of Article 28.1 of the General Stamp Duty Table, introduced by the Regime of Law No. 55-A/2012, of 29 October.

5. The amendment of the regime regarding the subjection to stamp duty of properties with residential use by the addition of Item 28 to the General Stamp Duty Table, carried out by Article 4 of Law 55-A/2012, of 29/10, came to classify the following taxable facts, through the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose tax equity value recorded in the register, in accordance with the Property Tax Code (CIMI), is equal to or greater than €1,000,000 – on the tax equity value used for purposes of Property Tax:

28.1 – For property with residential use – 1%;

28.2 – For property, when the taxpayers other than natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the ordinance approved by 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 must be observed with reference to the assessment of stamp duty provided for in Item No. 28 of the respective General Table:

a) The taxable fact occurs on 31 October 2012;

b) The taxpayer of the tax is the one mentioned in Article 2.4 of the Stamp Duty Code on the date referred to in the preceding item;

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

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

e) The tax must be paid, in a single installment, by the taxpayers until 20 December 2012;

f) The applicable rates are as follows:

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

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

iii) Urban properties when the taxpayers other than natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the ordinance approved by the Minister of Finance: 7.5%.

2 – In 2013, the assessment of stamp duty provided for in Item No. 28 of the respective General Table must be based on the same tax equity value used for purposes of assessing property tax to be made in that year.

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

1. On the interpretation of this statute, the decision 53/2013-T[1] has already pronounced itself, which states: "Item 28.1 and sub-items i) and ii) of item f) of Article 6.1 of Law 55-A/2012 used a concept that is not used in any other tax legislation in these precise terms, which is that of 'property with residential use'. Specifically in the CIMI, which in various rules of the Stamp Duty Code introduced by that Law is indicated as a diploma of subsidiary application with respect to the tax provided for in the said Item No. 28 [Articles 2.4, 3.3(u), 5(u), 23.7, and 46 and 67 of the Stamp Duty Code], is not used a concept defined in those terms."

2. Regarding the concept of "properties", it is necessary to resort to the concepts of "properties" used in the CIMI, in which the species of properties are enumerated in its Articles 2 to 6, which is transcribed:

Article 2
Concept of property

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

2. Buildings or constructions, although movable by nature, are considered to have character of permanence when dedicated to non-transitory purposes.

3. The character of permanence is presumed when the buildings or constructions are erected in the same location for a period exceeding one year.

4. For purposes of this tax, each autonomous fraction, in horizontal property regime, is considered to constitute a property.

Article 3
Rural properties

1 – Rural properties are those lands situated outside of an urban settlement that cannot be classified as building land, in accordance with Article 6.3, provided that:

a) They are dedicated or, in the absence of concrete dedication, have as their normal destination a use generating agricultural income, such as are considered for purposes of personal income tax (IRS);

b) Not having the dedication indicated in the preceding item, they are not built or have only buildings or constructions of accessory character, without economic autonomy and of reduced value.

2 – Rural properties also include those lands situated within an urban settlement, provided that, by force of legally approved provision, they cannot have a use generating any income or can only have a use generating agricultural income and are actually being given this dedication.

3 – Also considered rural properties:

a) Buildings and constructions directly dedicated to the production of agricultural income, when situated on the lands referred to in the preceding numbers;

b) Water and plantations in the situations to which Article 2.1 refers.

4 – For purposes of this Code, urban settlements are considered, in addition to those within legally fixed perimeters, nuclei with a minimum of 10 housing units served by public streets, with their perimeter delimited by points distanced 50 m from the axis of the streets, in the transverse direction, and 20 m from the last building, in the direction of the streets.

Article 4
Urban properties

Urban properties are all those that should not 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, in accordance with the main part.

2 – If neither of the parts can be classified as main, the property is considered mixed.

Article 6
Species of urban properties

1 – Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Building land;

d) Others.

2 – Residential, commercial, industrial or for services are the buildings or constructions licensed for such purposes or, in the absence of license, that have as their normal destination each of these purposes.

3 – Building land is considered those lands situated within or outside an urban settlement, for which a license or authorization has been granted, admitted prior notification or issued favorable prior information of a subdivision or construction operation, and also those that have been declared as such in the title of acquisition, except for lands in which the competent entities prohibit any of such operations, namely those located in green areas, protected areas or which, in accordance with municipal land use plans, are dedicated to spaces, infrastructure or public facilities. (Amended by Law No. 64-A/08, of 31-12)

4 – Falls within the provision of item d) of Article 6.1 lands situated within an urban settlement that are not building land nor are covered by Article 3.2, as well as buildings and constructions licensed or, in the absence of license, that have as their normal destination purposes other than those referred to in Article 6.2, and also those of the exception of Article 6.3.

1. On the interpretation of tax rules, for the case before us, 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 tax provisions employ terms specific to other branches of law, they must be interpreted in the same sense that they have therein, unless otherwise derives directly from the law.

Whenever doubt persists regarding the meaning of the applicable tax incidence provisions, regard must be had to the economic substance of the taxable facts.

Gaps resulting from tax provisions covered by the reservation of law of the Parliament cannot be filled by analogical integration.

1. To this provision, it is also necessary to resort to the general principles of interpretation of laws, to which Article 11.1 of the General Tax Law refers, which are established in Article 9 of the Civil Code, which establishes the following:

Article 9
Interpretation of law

The interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative intent, 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.

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

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 its intent in adequate terms.

1. Given the legal grounds already set forth, and considering the articles transcribed and stated, the following hypotheses of interpretation arise for the concept of "property with residential use", both regarding the Concept of "property with residential use" as referring to residential properties, and regarding the Concept of "property with residential use" as a distinct concept from "residential properties".

2. Articles 2 to 6 of CIMI transcribed above are not used by the legislator in classifying properties under the concept of "property with residential use". Nor is this concept found, with this terminology, in any other statute.

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

4. The text of the law, being the starting point for the interpretation of the expression "properties with residential use", is the basis on which the "legislative intent" must be reconstructed, as required by Article 9.1 of the Civil Code, applicable by force of the provisions of Article 11.1 of the General Tax Law, already transcribed.

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

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

"The concept most closely approximating the literal meaning of this expression used is manifestly that of 'residential properties', defined in Article 6.2 of the CIMI as encompassing 'buildings or constructions' licensed for residential purposes or, in the absence of license, that have as their normal destination residential purposes.

If it is understood that the expression 'property with residential use' coincides with that of 'residential properties', it is manifest that the assessments would be afflicted by error regarding the factual and legal prerequisites, since all properties for which Stamp Duty was assessed under the said Item 28.1 are building lands, without any building or construction, required to fulfill that concept of 'residential properties'.

For this reason, if the interpretation is adopted that 'property with residential use' means 'residential property', the assessments whose declaration of illegality is requested will be illegal, as there is no building or construction on any of the lands.

However, the non-coincidence of the terms of the expression used in Item 28.1 of the General Stamp Duty Table with what is extracted from Article 6.2 of the CIMI points towards the sense that it was not intended to use the same concept."

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

"The word 'use' in this context of dedication of a property to a particular use, has the meaning of 'action of destining something to a particular use'. ([2])

"When, as is usually the case, legislative norms (legislative formulas) contain more than one meaning, then the positive function of the text is translated into giving stronger support to or more strongly suggesting one of the possible senses. That is, among the possible senses, 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, contrived manner. Now, in the absence of other elements that induce the selection of the less immediate sense of the text, the interpreter must opt in principle for that sense which best and most immediately corresponds to the natural meaning of the verbal expressions used, and in particular to its technical-legal meaning, in the assumption (not always accurate) that the legislator knew how to express its intent correctly". ([3])

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

The recognized lack of coherence of Stamp Duty is particularly exuberant in the case of this Item 28.1, hastily included outside the General State Budget, by a tax legislator without perceivable overall tax guidance, which keeps successively implementing norms of tax increase as measured by budgetary setbacks, the impositions of international institutional creditors (represented by the 'troika') and oversight by the Constitutional Court.

In fact, although in the "Preamble" of Bill No. 96/XII/2 ([4]), on which Law No. 55-A/2012 was based, reference is made to the praiseworthy concern of the Government to "strengthen the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary to comply with the adjustment program" and its commitment "to ensure that the distribution of these sacrifices will be made by all and not just by those who live on their work income", it is manifest, on the one hand, that these reasons for 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 use and not also properties that do not have it, allows us to see that concerns about social equity and the proclaimed intention to distribute sacrifices among all reaches much more some than properly all.

In this context, in the absence of interpretive elements that would allow detecting legislative coherence in the solution adopted in the said Item 28.1 or the correctness or incorrectness of the adopted solution (relevant for interpretive purposes in the face of Article 9.3 of the Civil Code), the tenor of the legal text must be the primary element of interpretation, in accordance with the presumption imposed by the same Article 9.3, that the legislator knew how to express its intent in adequate terms.

In light of those meanings of the words "use" and "use", which are "to give destination" or "to apply", the formula used in that Item 28.1 of the General Stamp Duty Table manifestly encompasses properties that are already applied to residential purposes, and therefore it is important to ascertain whether it also encompasses properties that, although not yet applied to residential purposes, are destined to these purposes and those whose destination is unknown.

In light of the literal tenor of Item 28.1, it is to be excluded from the scope of the Stamp Duty provision there provided those building lands of some Claimants that do not yet have any defined use, as they are not yet applied or destined to residential purposes. That is, building lands that do not have a defined use cannot be considered properties with residential use, as they do not yet have any use or other destination than the construction of unknown type. An interpretation in the sense that Item 28.1 refers to properties whose use is unknown would not have the least verbal correspondence in the letter of that norm, and therefore any hypothetical legislative intent of that type cannot be considered by the interpreter of the law, in light of the prohibition contained in Article 9.2 of the Civil Code.

But this is not enough to clarify the situation of those building lands that, not yet being applied to residential purposes, already have a determined destination, particularly in the subdivision license, which is the case with the properties referred to in items z) to dd) of the factual matter fixed.

For this reason, it will be necessary to clarify when a property can be understood to be dedicated to residential purposes, in particular whether it is when this destination is fixed in a licensing act or similar, or only when the actual assignment of this destination is realized.

At first, the comparison of Item 28.1 of the General Stamp Duty Table with Article 6.2 of the CIMI, which defines the concept of residential properties, manifestly points in the sense that an actual dedication is necessary.

In fact, a building or construction licensed for residential purposes or, even without license, but that has residential purposes as its normal destination, is, in light of Article 6.2 of that Article 6, a residential property.

For this reason, in the assumption that the legislator of Law No. 55-A/2012 knew how to express its intent in adequate terms (as required by Article 9.3 of the Civil Code that be presumed), if it intended to refer to those properties already licensed for residential purposes or that have residential purposes as their normal destination, it would certainly have used the concept of "residential properties", which would express perfectly and clearly its intent, in light of the definition given by Article 6.2 of the CIMI.

Consequently, it must be presumed that the use of a different expression is intended to have a distinct reality, and therefore, in good hermeneutics, "property with residential use" cannot be merely a property licensed for residential purposes or destined to that end (that is, it will not be sufficient to be a "residential property"), having to be a property that already has an actual dedication to that purpose.

That this is the meaning of the expression "use" in the same context of property classification that is done by the CIMI is confirmed by Article 3 in which, with respect to rural properties, reference is made to those "that are dedicated or, in the absence of concrete dedication, have as their normal destination a use generating agricultural income", which shows that dedication is concrete, actual. In fact, as can be seen from the end of this text, a property may have as destination a certain use and be or not be dedicated to it, which shows that dedication is, at the level of the connection of a property to a particular use, something more intense than mere destination and which may or may not occur, downstream of this and not upstream. ([5])

Moreover, the text of the law, by adopting the formula "property with residential use" instead of "urban properties with residential use", which appears in the said "Preamble", strongly points towards the requirement that the residential use be already implemented, as only then will the property be with that use.

With respect to Article 45 of the CIMI, it has no relation to the classification of properties, only indicating the factors to be considered in the valuation of building land. What is considered there, in making reference to the "building to be constructed" is the consideration of the destination of the land, which, as was seen, is something that, in the context of the CIMI, does not imply dedication and occurs before this.

The correctness of this interpretation in the sense that only properties that are actually dedicated to residential purposes are included in the scope of Item 28.1 of the General Stamp Duty Table is also confirmed by the perceivable ratio legis of the restriction of the field of application of the norm to properties with residential use, in the context of the "circumstances in which the law was drafted and the specific conditions of the time in which it is applied", which Article 9.1 of the Civil Code also establishes as interpretive elements. ([6]).

From the outset, the limitation of Stamp Duty taxation to "properties with residential use" allows us to perceive that it was not intended to encompass within the scope of application of the tax properties dedicated to services, industry or commerce, that is, properties dedicated 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 maximum historical levels, with an avalanche of business closures resulting from economic unsustainability.

With this situation in mind and it being well-known and public that the revitalization of economic activity and the increase of exports are the gateways out of the crisis, it is understood that legislative measures were not taken that would hinder economic activity, particularly the increase in the tax burden that hinders it and affects competitiveness in international terms.

For this reason, it must be concluded that the available interpretive elements, including the "circumstances in which the law was drafted and the specific conditions of the time in which it is applied", point clearly towards the sense that it was not intended to encompass within the scope of application of Item 28.1 situations of properties that are not yet dedicated to residential purposes, particularly building lands held by companies. ([7])"

1. It results from the foregoing that the application of the regime to the situation of the Claimant, concerning the urban property corresponding to a "building land", which is not in the present case, before a property with current residential use, for which reason that Stamp Duty provided for in Item 28.1 of the General Stamp Duty Table does not apply to these properties.

2. In this manner, the assessment in question, whose declaration of illegality is requested, is afflicted by the defect of violation of that Item 28.1, due to error regarding the legal prerequisites, which justifies the declaration of its illegality and cancellation (Article 135 of the Administrative Procedure Code).

J – DECISION

Therefore, in light of all the above, the present Arbitral Tribunal decides:

I. To judge the request for declaration of illegality of the tax assessment acts for Stamp Duty, No. …, due to the defect of violation of law regarding the provision contained in Item 28.1, due to error regarding the legal prerequisites, which justifies the declaration of its illegality and cancellation, as well-founded.

II. The value of the case is set at €4,053.26 for the value of the assessment, considering the economic value of the case as assessed by the value of the tax assessments challenged, and accordingly the costs are set at the amount of €612.00 (six hundred and twelve euros), to be borne by the respondent in accordance with Article 12.2 of the Tax Arbitration Regime, Article 4 of the Rules of Procedure for Tax Cases and Table I attached to the latter. – Article 35.10, and Articles 43.1, 4 and 5 of the General Tax Law, Articles 5.1(a) of the Rules of Procedure for Tax Cases, 97-A.1(a) of the Code of Administrative Procedure and 559 of the Code of Civil Procedure.

Notify.

Lisbon, 21 October 2014.

The Arbitrator

Paulo Renato Ferreira Alves

[1] On this matter, the decisions of the Arbitral Tribunal of CAAD, No. 42/2013-T, 48/2013-T, 49/2013-T have already decided.

[2] Dictionary of Contemporary Portuguese Language of the Lisbon Academy of Sciences, Volume I, page 102.

[3] BAPTISTA MACHADO, Introduction to Law and Legitimizing Discourse, page 182.

[4] Bill No. 99/XII/2 is available at http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=37245

[5] Other provisions of the CIMI make clear that the term "dedication" is used to reference situations already existing and not merely future, even if foreseeable, like "destination". Such is the case of Article 9 of the CIMI, which, after establishing that "the tax is due from" "the 4th year following, inclusive, that in which building land has come to appear in the inventory of a company whose business is the construction of buildings for sale" or "the 3rd year following, inclusive, that in which a property has come to appear in the inventory of a company whose business is its sale" [items d) and e) of Article 9.1], provides that "for purposes of the provisions in items d) and e) of Article 9.1, taxpayers must communicate to the finance service of the area where the properties are located, within 60 days counted from the occurrence of the fact determining its application, the dedication of the properties to those purposes". The "dedication of the properties to those purposes" in the context of this Article 9 refers back to the concrete assignment to the properties of the purpose "for sale", materialized by their inclusion in inventory, not being sufficient that they have been built or acquired with a view to their sale.

[6] Not contemplated in this approach are the special cases provided for in Item 28.2, of ownership of properties by legal persons resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the ordinance approved by the Minister of Finance to which, as in other norms, a strong tax penalty is assigned, because these are situations normally associated with tax evasion.

[7] Outside the special cases provided for in Item 28.2.