Process: 391/2014-T

Date: December 30, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (391/2014-T) addresses whether Stamp Duty under Item 28.1 of the General Table applies to buildings held in vertical ownership (propriedade vertical) when individual units are aggregated to exceed the €1 million threshold. The claimant, a real estate investment company, owned a property in vertical ownership comprising 18 independently assessed divisions (13 residential, 4 commercial, 1 parking), none individually exceeding €1 million in taxable patrimonial value (VPT) for Municipal Property Tax (IMI) purposes. The Tax Authority assessed Stamp Duty totaling €13,906.20 by aggregating the residential units' values. The claimant argued that Item 28.1 makes no distinction between horizontal and vertical ownership regimes, and that each independently assessed division should be considered separately, consistent with IMI treatment under Article 12(3) of the IMI Code. The claimant further contended the Tax Authority's interpretation violated constitutional principles of equality and tax capacity by treating economically identical situations differently based solely on legal ownership structure. The Authority countered that only autonomous fractions in horizontal ownership constitute separate properties under Article 2(4) of the IMI Code, and that vertical ownership constitutes a single property despite separate IMI assessments of component parts. The case raises fundamental questions about whether tax law should prioritize legal form (ownership regime) or economic substance (independent assessment and use) when determining Stamp Duty liability, with significant implications for real estate investment structures and mixed-use properties.

Full Decision

ARBITRAL DECISION

Case No. 391/2014-T

Claimant – A… – Real Estate Investment Company. Ltd.

Respondent - Tax and Customs Authority

Subject Matter: Stamp Duty – Item 28.1 of the General Table of Stamp Duty – Vertical Ownership

I – REPORT

1. On 22 May 2014, A… – Real Estate Investment Company. Ltd.", with VAT No. …, with registered office at …, came before this tribunal pursuant to articles 10 et seq. of the Legal Framework for Arbitration in Tax Matters, requesting the constitution of an arbitral tribunal for examination of the legality and annulment of the acts of assessment of Stamp Duty (IS), by application of Item 28.1 of the General Table annexed to the Stamp Duty Code, referring to the year 2012, which gave rise to Collection Documents numbered …; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…, in the total amount of € 13,906.20. Seventeen documents were attached.

2. In the Request for Arbitral Pronouncement, the Claimant chose not to designate an arbitrator, having been designated as sole arbitrator by decision of the President of the Deontological Council, in accordance with article 6(1) of the LFATM, the undersigned, who accepted the position within the legally prescribed deadline.

3. The arbitral tribunal was constituted on 20 August 2014.

4. On 2 October 2014, the Tax and Customs Authority (AT or Respondent) came to justify the failure to submit a Response and to request the waiver of submission of the administrative record, by accepting as proven the documentary evidence submitted by the Respondent, as well as the holding of the meeting provided for in article 18 of the LFATM, nevertheless requesting the possibility of submitting written arguments.

5. There being no opposition from the Claimant, it was decided by the tribunal to waive the meeting of article 18 and to permit optional submission, in successive order, of written arguments, indicating as the deadline for delivery of the decision 19 February 2015.

6. Written arguments were submitted by the Respondent on 12 December 2014.

7. THE REQUEST FOR PRONOUNCEMENT

The Claimant sustains, in summary:

  • It is the owner of the urban property registered in the urban property matrix under article …, of the parish of …, municipality of …, property constituted in vertical ownership, composed of 18 divisions susceptible to independent use, each of which was subject to assessment for purposes of Municipal Property Tax (IMI), as per the Property Record attached;

  • The property is not entirely assigned to residential use – of the 18 divisions, 4 are assigned to services, 13 to residential use and 1 to covered and closed parking – and each of the divisions was subject to independent assessment, none of which attained a Taxable Patrimonial Value (TPA) exceeding one million euros;

  • Not agreeing with the legality of the Stamp Duty assessments for 2012, regarding the divisions assigned to residential use, it filed a gracious appeal on 30/12/2013, which was dismissed on 10/03/2014, but does not accept the decision considering it unjust, illegal and unconstitutional;

  • From item 28 of the General Table of Stamp Duty no discrimination results between properties constituted in horizontal or vertical ownership and, resorting to the application of articles 67(2) of the Stamp Duty Code and 12(3) of the Municipal Property Tax Code, it is the value of each independent division that should be considered in the application of item 28 and not any other TPA different from that used for purposes of Municipal Property Tax;

  • Several arbitral decisions have been rendered to this effect, notably in cases 50/2013-T and 132/2013-T;

  • The property in question is decomposed by the AT itself into various property units for purposes of Municipal Property Tax, and cannot be considered for purposes of Stamp Duty as merely a single property unit; and if it were, it could not be qualified as a "residential property" since it contains divisions with other types of use;

  • The interpretation made by the AT is unconstitutional by violation of the principles of equality and tax capacity, there being no reasons that justify different treatment of situations of ownership of identical economic realities, depending on whether they are in a situation of horizontal or vertical ownership, when they reveal identical economic capacity;

  • Article 12(4) of the Municipal Property Tax Code, by providing that each autonomous fraction in the horizontal ownership regime is deemed to be a property, is justified by the fact that these properties may have different owners, making possible the determination of the tax subject;

  • But the legal regime of ownership – vertical or horizontal – should be considered irrelevant for purposes of interpretation of the scope of application of item 28 of the General Table of Stamp Duty, the TPA used for purposes of Municipal Property Tax being that relating to the part of independent use, in the case of vertical ownership, and that corresponding to the autonomous fraction, in the case of horizontal ownership;

  • Therefore, the Stamp Duty assessments impugned should be annulled, with all legal consequences flowing therefrom.

8. THE RESPONSE

The Respondent replied, in summary:

  • According to the concept of property contained in article 2 of the Municipal Property Tax Code, only autonomous fractions of property in the horizontal ownership regime are deemed to be properties (article 2(4)), therefore, where the property is in full ownership regime, there are no autonomous fractions to which tax law can attribute the qualification of property;

  • For purposes of Municipal Property Tax and Stamp Duty, by force of the wording of item 28, the Claimant is not the owner of 18 autonomous fractions but of a single property;

  • Horizontal ownership is a specific legal regime of ownership provided for in articles 1414 et seq. of the Civil Code that regulate the constitution and rules on the rights and obligations of co-owners, establishing a more evolved regime of ownership, so that for purposes of stamp duty assessment the interpreter and applicator of tax law cannot apply, by analogy, the same horizontal ownership regime to full ownership;

  • Nor does any gap exist to be filled by analogy, and articles 11 of the General Tax Law and 10 of the Civil Code must be applied;

  • The Municipal Property Tax Code, to which item 28 of the General Table of Stamp Duty refers, provides that in the horizontal ownership regime the fractions constitute properties; where the property is not subject to the horizontal ownership regime, the fractions are, juridically, parts susceptible to independent use without there being common parts;

  • Where the property is subject to the full ownership regime, but physically constituted by parts susceptible to independent use, tax law attributed relevance to this materiality by evaluating these parts individually, pursuant to article 12(3) of the Municipal Property Tax Code, so that each floor or part of property susceptible to independent use is considered separately in the matriculation registration, but in the same matrix, proceeding to the assessment of Municipal Property Tax taking into account the taxable patrimonial value of each part;

  • The floors or independent divisions, evaluated pursuant to article 12(3) of the Municipal Property Tax Code, are considered separately in the matriculation registration, containing the respective taxable patrimonial value on which Municipal Property Tax is assessed, just as happened in the body of article 232, rule 1, of the Code of Urban Property Contribution and Tax on Agricultural Industry (CCPTIA), which provided that each dwelling or part of property was automatically taken for purposes of determining the taxable income on which the assessment should be levied, but, according to the same Code, the taxable income had necessarily to correspond to the sum of the rent or rental value of each of the components of the property with economic autonomy;

  • The matriculation registration must make reference to each of the parts and also to the taxable patrimonial value corresponding to each of them, determined separately pursuant to articles 37 et seq. of the Municipal Property Tax Code, without the unit of the urban property in vertical ownership composed of several floors or divisions being affected by the fact that all or some of these floors or divisions are susceptible to independent economic use;

  • The property does not cease to be just one, its separate parts not being juridically comparable to autonomous fractions in the horizontal ownership regime and, without prejudice to the co-ownership regime where applicable, its ownership cannot be attributed to more than one owner;

  • The fact that Municipal Property Tax is determined on the basis of the taxable patrimonial value of each part of property with independent economic use does not affect the application of item 28(1) of the General Table of Stamp Duty because the determining fact of the application of that item is the total patrimonial value of the property and not that of each of its parts separately;

  • Horizontal and vertical ownership are differentiated legal institutes and, although the constitution of horizontal ownership implies a mere juridical alteration of the property without new assessment, the legislator may subject to a distinct legal tax framework, thus discriminatory, properties in horizontal and vertical ownership regimes, benefiting the juridically more evolved institute of horizontal ownership, without such discrimination necessarily being considered arbitrary, and may even be imposed by the need to impose coherence on the tax system;

  • According to item 28.1, the taxable patrimonial value relevant for purposes of the incidence of the tax will necessarily be the total taxable patrimonial value of the urban property and not the taxable patrimonial value of each of the parts that compose it, even when susceptible to independent use;

  • Any other interpretation would violate the letter and spirit of item 28.1 of the General Table and the principle of legality of the essential elements of the tax, provided for in article 103(2) of the Portuguese Constitution;

  • It is unconstitutional, by offensive of the principle of tax legality, the interpretation of item 28.1 of the General Table, in the sense that the taxable patrimonial value upon which its incidence depends is determined floor by floor or floor or division by division, and not globally;

  • In conclusion, the tax acts impugned, in terms of substance, did not violate any legal or constitutional provision, and should be maintained in the legal order.

9. SUBJECT MATTER OF THE REQUEST

The fundamental legal question to be decided consists of ascertaining whether the scope of incidence of Stamp Duty provided for in Item 28 of the General Table of Stamp Duty includes urban properties not constituted in horizontal ownership but composed of floors or divisions susceptible to independent use with residential assignment, when the taxable patrimonial value assigned to each of these separate parts is less than the value of € 1,000,000.00, although the aggregate of the independent units assigned to residential use reaches a total taxable patrimonial value equal to or greater than that amount.

10. CASE MANAGEMENT

The arbitral tribunal is materially competent, pursuant to the provisions of articles 2(1)(a) of the Legal Framework for Arbitration in Tax Matters.

The parties have legal personality and capacity and have standing pursuant to articles 4 and 10(2) of the Legal Framework for Arbitration in Tax Matters (LFATM) and article 1 of Ordinance No. 112-A/2011, of 22 March.

The case does not suffer from any nullity nor have the parties raised any exceptions that would prevent examination of the merits of the case, so the conditions are met for the delivery of the arbitral decision.

II GROUNDS

11. PROVEN FACTS

On the basis of documents submitted by the Claimant (Request for Arbitral Pronouncement and Documents numbered 1 to 17 attached with that request) and by the Respondent (Response), the following facts are established, it being verified that the proven facts are sufficient for delivery of pronouncement:

11.1. The Claimant A… – Real Estate Investment Company. Ltd.", with VAT No. …, with registered office at …, is the owner of the urban property registered in the urban property matrix under article …, of the parish of …, municipality of …, property constituted in vertical ownership, composed of 18 divisions (see Documents Nos. 1 to 13, Collection Documents, and Document No. 14, Property Record, attached with the request for arbitral pronouncement, the contents of which are deemed reproduced).

11.2. The property subject of these proceedings is composed of a total of 4 floors and 18 divisions susceptible to independent use, with a ground floor, destined for offices, and 4 floors destined for residential use, distributed by Block …, on Street …, with … destined for commerce and 4 floors destined for residential use and Block …, on Street …, constituted by 1 warehouse and 1 office, on the ground floor, and 3 floors (see article 2 of the AT's arguments and Collection Documents and Property Record attached with the request, as docs 1 to 14).

11.3. The property in question previously had article … of the extinct parish of … and was registered in the matrix on … [1] (see article 1 of the AT's arguments and property record, doc. 14);

11.4. The taxable patrimonial values of said divisions susceptible to independent use were determined according to the Municipal Property Tax Code, some in 2012, in the amounts of €122,880.00 (1…), €122,880.00 (1…); €122,880.00 (2…); €122,880.00 (2…); €122,880.00 (3…); €122,880.00 (3…); €122,880.00 (4…) € 122,880.00 (4…); €72,910.00 (cv…); €72,910.00 (BL…); €72,910.00 (BL…); €72,910.00 (BL…); €72,910.00 (BL…) and €115,940.00 (BL…) and others in 2013, in the amounts of €26,910.00 (BL…); €135,930.00 (BL…); €53,810.00 (L…); €108,104.00 (L…) and €26,910.00 (RC…) (see Property Record, document No. 14, Collection Documents attached with the Request, and decision on the gracious appeal, doc. No. 17).

11.5. Of the eighteen floors or divisions registered in the matrix as being of independent use, indicated in the preceding number, the first thirteen are classified as assigned to residential use, and of the others, one (BL…) is assigned to parking and the remaining four to Services (Property Record, document No. 2 attached with the request, and Collection Documents attached with the Request), totaling all the taxable patrimonial value of €1,742,320.00 (appeal decision, doc. 17).

11.6. The divisions assigned to residential use were, for the year 2012, subject to the incidence of Stamp Duty provided for in item 28.1 of the General Table of Stamp Duty, the Claimant having received, for payment by December 2013, Collection Documents numbered 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…, in the total amount of € 13,906.20). (Documents Nos. 1 to 13, Collection Documents, attached to the file with the Request).

11.7. The tax assessments determined were, for each of the fractions the following: 1… TPA €1,228.00; 1…, €1,228.00; 2…; €1,228.00; 2…, €1,228.00; 3…, €1,228.00; 3…, €1,228.00; 4…, €1,228.00; 4..., €729.10; cv…, €729.10; BL…, €729.10; BL…, €729.10; BL…, €729.10; BL…, €729.10 and BL…, €1,159.40 (Documents Nos. 1 to 13, Collection Documents, attached to the file with the Request).

11.8. The collection documents contain the indication "taxable patrimonial value of the property – total subject to tax: €1,390,620.00" (value that corresponds to the total value of the nine divisions assigned to residential use) and that the assessment of Stamp Duty, dated 14 July 2013, was based on item 28.1 of the General Table of Stamp Duty Code, and which refers to the year 2012, resulting from the application of the rate of 1% to the value of the TPA of each of the floors or divisions with independent use (Collection Documents, documents 1 to 13, attached with the request).

11.9. The Claimant filed a gracious appeal of the assessments (Doc. No. 15, attached with the request), having been notified, by letter No. …, of 22/01/2014, of the SF of Lisbon … for prior hearing (Doc. 17, attached with the request) on draft decision of dismissal, which came to be converted to final and communicated on 06/03/2014 (Doc. No. 16, attached with the request).

12. UNPROVEN FACTS

There are no unproven facts of relevance to the decision of the case.

13. APPRAISAL OF LAW

13.1. Item 28 of the General Table of Stamp Duty (GTSD)

13.1.1. Regime approved by Law No. 55-A/2012, of 29 October

The fundamental question of law, disputed in the present proceedings, consists of ascertaining whether in the case of properties in full ownership, with floors or divisions of independent use but not constituted in horizontal ownership regime, the TPA to be considered for purposes of incidence of Stamp Duty provided for in item 28.1 of the General Table of Stamp Duty should correspond to the TPA of each floor or division with residential assignment and independent use or to the sum of the TPA corresponding to the floors or divisions of independent use with residential assignment.

That is to say, it must be decided whether the TPA relevant as the criterion of incidence of the tax corresponds to the sum of the taxable patrimonial value attributed to the different parts or floors (global TPA) or, rather, the TPA attributed to each of the parts or residential floors individually.

This question has already been examined in several cases within the framework of Tax Arbitration [2], no arguments being identified, up to now, that would allow breaking the unanimity that has been achieved in the decisions rendered [3].

Item 28 of the General Table of Stamp Duty, annexed to the Stamp Duty Code, was added by article 4 of Law No. 55-A/2012, of 29 October, with the following content:

"28 – Ownership, usufruct or right of surface of urban properties whose taxable patrimonial value contained in the matrix, pursuant to the Code of Municipal Property Tax (CMPT), is equal to or greater than € 1,000,000 – on the taxable patrimonial value for purposes of Municipal Property Tax:

28.1 – For property with residential assignment – 1%;

28.2 – For property, where the tax subjects that are not individuals are residents 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%."

As results from the amendments to the Stamp Duty Code, introduced by article 3 of Law No. 55-A/2012, of 29/10, the Stamp Duty provided for in item 28 of the General Table of Stamp Duty is incised upon a legal situation (article 1(1) and article 2(4) of the Stamp Duty Code), in which the respective tax subjects are those referred to in article 8 of the Municipal Property Tax Code (article 2(4) of the Stamp Duty Code), to whom falls the burden of the tax (item u) of article 3(3) of the Stamp Duty Code).

The Stamp Duty Code, in the wording given by Law No. 55-A/2012, both in article 4(6) ("In the situations provided for in item 28 of the General Table, the tax is due whenever the properties are situated in Portuguese territory") and in article 23(7) ("In the case of tax due for the situations provided for in item No. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the Municipal Property Tax Code"), in conjunction with article 1 of the Municipal Property Tax Code, considers the property itself as the tax fact (the situation that triggers taxation) provided that it attains the value provided for in item 28 of the General Table of Stamp Duty, regardless of the number of tax subjects, holders (as owners, usufructuaries or surface right holders) of the goods in question.

The provision in Law No. 55-A/2012, of 29 October, regarding the new item 28 of the General Table of Stamp Duty, entered into force on the day following publication of the law, that is, 30 October 2012. Article 6 of Law No. 55-A/2012 provides transitional provisions by virtue of which, in that first year of application, that is, 2012: the tax fact occurs on 31 October (when, according to article 8 of the Municipal Property Tax Code, applicable by referral from article 2(4) of the Stamp Duty Code, it would be on 31 December); the tax subject is the property holder (article 2(4) of the Stamp Duty Code) also on that 31 October; the taxable patrimonial value to be used in the assessment of the tax corresponds to what results from the rules provided for in the Municipal Property Tax Code by reference to the year 2011; the assessment of the tax by the AT is carried out by the end of November 2012; the tax should be paid in a single installment, by the tax subjects, by 20 December of that year 2012.

As for the rates, item f) of article 6(1) of the same Law No. 55-A/2012, provides for the application in 2012 of a lower rate than the rate of 1% provided for in item 28.1 of the General Table of Stamp Duty for properties with residential assignment, further distinguishing between cases of properties assessed pursuant to the Municipal Property Tax Code (rate of 0.5%) and properties with residential assignment not yet assessed pursuant to the Municipal Property Tax Code (rate of 0.8%).

13.1.2. The concept of "property" used in item 28 of the General Table of Stamp Duty

The concept of "properties with residential assignment" used in item 28.1 [4] is not expressly defined in any provision of the Stamp Duty Code nor in the Municipal Property Tax Code, the code to which article 67(2) of the Stamp Duty Code refers.

In the case at hand, the property in vertical ownership (building) is composed of divisions susceptible to independent use, thirteen divisions assigned to residential use, four assigned to services and one covered parking, that is, by "parts classifiable in more than one of the classifications of properties" provided for in article 6(1) of the Municipal Property Tax Code, properties of residential and commercial assignment (articles 2, 4, 6 and 7 of the Municipal Property Tax Code, applicable by referral from article 67 of the Stamp Duty Code).

The taxable patrimonial values of the thirteen floors or divisions with independent use, of residential assignment, oscillate between € 72,910.00 and €122,880.00, totaling the amount of € 1,390,620.00.

At issue is the exact meaning of the segment "taxable patrimonial value considered for purposes of Municipal Property Tax", contained in the tax incidence rule of stamp duty in the body of item 28 of the General Table of Stamp Duty: in the case of properties in full ownership but with floors or divisions susceptible to independent use, with residential assignment, does the TPA relevant correspond to the sum of the TPA of the various divisions/floors with residential assignment, considered a single property, as the AT claims, or is it what must be taken into account the TPA of each of the respective autonomous floors or divisions with the said residential assignment, as the Claimant argues?

Now the said segment (taxable patrimonial value considered for purposes of Municipal Property Tax) is integrated in a text that defines as the object of incidence of stamp duty the "Ownership, usufruct or right of surface of urban properties whose taxable patrimonial value contained in the matrix, pursuant to the Code of Municipal Property Tax (CMPT), is equal to or greater than € 1,000,000 - (...)" (emphasis ours).

As has been repeatedly invoked and admitted, the Municipal Property Tax Code enshrines, both as to the matriculation registration and discrimination of the respective taxable patrimonial value and as to the assessment of the tax, the autonomization of the parts of urban property susceptible to independent use and the segregation/individualization of the TPA relating to each floor or part of property susceptible to independent use [5].

Thus, to each property corresponds a single article in the matrix (article 82(2) of the Municipal Property Tax Code) but, according to article 12(3) of the same Code, relating to the concept of property matrix (registration of the property, its characterization, location, TPA and ownership), "each floor or part of property susceptible to independent use is considered separately in the matriculation registration, which discriminates the respective taxable patrimonial value", not taking as reference the sum of the taxable patrimonial values attributed to the autonomous parts of the same property, but the value attributed to each of them individually considered.

As to the assessment of Municipal Property Tax - application of the rate to the tax base - article 119(1) provides that "the competent collection document" contains the "discrimination of properties, their parts susceptible to independent use, respective taxable patrimonial value and the tax assessed (…)".

That is, the rule is the autonomization, the characterization as "property" of each part of a building, provided it is functionally and economically independent, susceptible to independent use [6], in accordance with the concept of property defined at the outset in article 2(1) of the Municipal Property Tax Code: property is any fraction (of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated or situated therein, with a character of permanence) provided it forms part of the patrimony of an individual or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy (presentation and emphasis ours). [7]

Thus, when article 2(4) provides that "For purposes of this tax, each autonomous fraction, in the horizontal ownership regime, is deemed to constitute a property", it does not properly enshrine an exceptional or special regime for properties in horizontal ownership.

After all, each building in horizontal ownership (article 92) has only a single matriculation registration (No. 1), describing the building generically and mentioning the fact that it is in the horizontal ownership regime (No. 2) and the matriculation autonomy is made concrete in the attribution to each of the autonomous fractions, detailed and individualized, of a capital letter, according to alphabetical order (No. 3). This appears to be the specificity of buildings in horizontal ownership.

But in other cases, of properties in vertical or full ownership, the divisions or floors with independent use autonomy but without the status of horizontal ownership, the matrix also enshrines the autonomy by taxation evidencing the different units with indication of the type of floor/story.

Thus, the assertion of the Respondent in the sense that the claimants are, for purposes of Municipal Property Tax and Stamp Duty, by force of the wording of item 28.1, owners not of 13 autonomous fractions with residential assignment but of a single property (article 22 Response) is not sufficient to render irrelevant the economic and tax autonomy that we verified above to be enshrined in the Municipal Property Tax Code in the case of divisions or floors susceptible to independent use, without horizontal ownership status, integrated in buildings in full ownership.

Nor is it acceptable the argument that has been presented by the AT based on the civil law enshrinement of horizontal ownership, glimpsing in the taxation provided for in item 28 of the General Table of Stamp Duty a legislative intent toward the development of this figure, even as an instrument of tax coherence (articles 24 and 26 et seq. of the Response).

Indeed, there are no elements, neither in the normative text nor in the legislative process that led to the approval of Law No. 55-A/2012, of 29 October, that would allow identifying and legitimizing a purpose (extra-fiscal or fiscal) in the sense advocated by the Respondent. Rather, it seems that such unexpected discrimination would risk violating the principle of legal certainty...

All said, no reason is found for, in the matter of incidence of Stamp Duty provided for in item 28.1 of the General Table of Stamp Duty, to give to fractions of properties in "vertical ownership", endowed with autonomy, treatment different from that granted to properties in horizontal ownership, when in either of these situations Municipal Property Tax is applied to the taxable patrimonial value evidenced in the matrix for each of the autonomous units.

13.2. The ratio legis of items 28 and 28.1 of the General Table of Stamp Duty

The interpretation above sustained, resulting from analysis of the letter of the law and its insertion in the set of other applicable tax norms, is the most consonant with the spirit of the legislative amendments introduced by Law No. 55-A/2012, of 29 October.

As has already been evidenced in other arbitral decisions, "the legislator, upon introducing this legislative innovation, considered as the determining element of contributive capacity urban properties, with residential assignment, of high value (luxury), more precisely, of value equal to or greater than €1,000,000.00, on which a special stamp duty rate came to be incised, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of surface of urban properties of luxury with residential assignment. For this reason, the criterion was the application of the new rate to urban properties with residential assignment, whose TPA is equal to or greater than € 1,000,000.00". (...) "The justification of the measure designated as 'special rate on the highest-value residential urban properties' is based on the invocation of the principles of social equity and tax justice, calling to contribute in a more intense manner the holders of properties of high value destined for residential use, making the new special rate incise on the 'houses of value equal to or greater than 1 million euros. Clearly the legislator understood that this value, when attributed to a residence (house, autonomous fraction or floor with independent use) reflects a contributive capacity above average and, as such, susceptible of determining a special contribution to ensure the fair distribution of the tax burden." [8]

Given the legislative purpose, it is further concluded that the holding of fractions in full or vertical ownership does not reveal greater contributive capacity than if they were constituted in the form of horizontal ownership.

On the contrary, in the majority of cases, as evidenced by Arbitral Decision No. 50/2013, "many of the existing properties in vertical ownership are old, with undeniable social utility, as in many cases they accommodate residents with modest rents and more accessible, factors that necessarily should be taken into account."

Also the analysis from this perspective confirms the correctness of the interpretation that item 28 of the General Table of Stamp Duty does not encompass each of the floors, divisions or parts susceptible to independent use when only from their aggregate results a TPA greater than that provided for in the same item.

Just as decided in other arbitral cases, this tribunal understands that regarding the date of the constitution of the tax obligation, fiscal connection, determination of the tax base, assessment and payment of the stamp duty in question, the corresponding rules of the Municipal Property Tax Code apply, by express referral from articles 5(1)(u), 4(6), 23(7), 44(5), 46(5) and 49(3) of the Stamp Duty Code.

To subject to the new stamp duty autonomous parts without the legal status of horizontal ownership and not to subject any of the residential fractions if the property were in the horizontal ownership regime would constitute a violation of the constitutional principle of equality, treating equal situations in a different manner.

As likewise, the incoherence, in terms of taxation of heritage, of the different treatment given to holders of fractions concentrated in the same property or dispersed through different properties, taxed in the first case and not taxed in the second, even though in either situation the amount of their respective TPA reached the value of 1 million euros, cannot be disregarded.

Thus, the present arbitral tribunal concludes that the assessments of Stamp Duty, based on items 28/28.1 of the General Table of Stamp Duty, relating to each of the floors or parts susceptible to independent use, owned by the Claimants, subject of these proceedings, are tainted with illegality, because the said provisions cannot be interpreted in the sense of their application to floors or parts susceptible to independent use of a property in vertical ownership, when only from the aggregate of each of these floors or parts is a TPA equal to or greater than € 1,000,000.00 (one million euros) obtained, not attaining the TPA of each of said floors or parts that amount.

As results from the facts established, none of the floors destined for residential use, of the property in vertical ownership subject of this case, has a taxable patrimonial value equal to or greater than €1,000,000.00, the legal prerequisite for the incidence of Stamp Duty provided for in Item 28 of the General Table of Stamp Duty not being met, with consequent illegality of the acts of assessment under review.

14. DECISION

With the grounds exposed, the arbitral tribunal decides:

a) To find the request for arbitral pronouncement well-founded and, consequently, to declare illegal the assessments of Stamp Duty that gave rise to the collection documents numbered 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…; 2013…, in the total amount of €13,906.20, with consequent annulment of these assessments and all legal consequences.

b) To condemn the Respondent in costs.

15. VALUE OF THE CASE

In accordance with the provision in article 315(2) of the Code of Civil Procedure, article 97-A(1)(a) of the Code of Tax Procedure and also article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is set at € 13,906.20 (thirteen thousand nine hundred and six euros and twenty cents).

16. COSTS

For the purposes of the provision in article 12(2) and article 22(4) of the LFATM and article 4(4) of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 918.00 (nine hundred and eighteen euros), in accordance with Table I annexed to the said Regulation, to be borne entirely by the Respondent.

Notice to be given.

Lisbon, 30 December 2014.

The Arbitrator

(Maria Manuela Roseiro)

[Text prepared by computer, pursuant to article 131(5) of the Code of Civil Procedure (CCP), applicable by referral from article 29(1)(e) of the Regime of Tax Arbitration. The wording of the present decision follows the spelling prior to the 1990 Orthographic Agreement]

[1] Which refers to prior matriculation number ….

[2] On the application of item 28 of the General Table of Stamp Duty in the case of properties in vertical ownership, a large number of decisions are already publicized on the CAAD tax case law website, namely those rendered in cases 50/2013T;132/2013-T;181/2013-T;182/2013-T;183/2013-T;185/2013-T;240/2013-T; 248/2013-T; 268/2013-T; 272/2013-T; 280/2013-T; 14/2014-T; 26/2014-T, 30/2014-T; 88/2014-T; 100/2014-T; 177/2014-T, 193/2014-T; 194/2014-T, 206/2014-T and 72/2014-T.

[3] We will largely reproduce the text of the decision rendered within the CAAD, in case No. 194/2014-T decided by a collective panel with participation of the undersigned.

[4] The wording of this item was altered by Law No. 83-C/2013, of 31 December, now using the concept "residential property", but the assessments subject of these proceedings are by reference to the year 2012.

[5] "Another aspect that should be evidenced in the matrix has to do with the need to make relevant the autonomy that, within the same property, can be attributed to each of its parts, functionally and economically independent. In these cases, the matriculation registration should not only make reference to each of the parts but should make express reference to the taxable patrimonial value corresponding to each of them" (Silvério Mateus and Freitas Corvelo, "The Taxes on Real Estate Property and Stamp Duty, Commented and Annotated", Engifisco, Lisbon 2005, pages 159 and 160). And the same authors further said (ibidem, p.160): "This autonomization of the autonomous parts of a property, applicable especially to urban properties, was justified within the framework of the former Property Contribution in which the taxable income corresponded to the rent or rental value of each of these components, continued to be justified in the case of the Municipal Contribution in which the taxable patrimonial value had underlying the effective or potential rent and continues to be pertinent in the context of Municipal Property Tax, given that the valuation factors provided for in articles 38 et seq. may not be the same for all these components (...) the fact that a property is or is not rented continues to have relevance for purposes of determining the taxable patrimonial value both for purposes of Municipal Property Tax and for Real Estate Transfer Tax (see Article 17 of Decree-Law 287/2003)" (referred to the original wording "transitional regime for rented urban properties", provision to be reviewed, according to its No. 5, when the urban rental law was revised, which occurred with Law No. 6/2006, of 27/02).

[6] On this aspect, and in line with the comment cited in the previous note, see the grounds contained in the decision of case No. 248/2013-T: "The autonomization in the matrix of the parts functionally and economically independent of a property in full ownership relates to reasons of a fiscal and extra-fiscal nature. On the fiscal plane, this autonomization has to do with the very determination of the taxable patrimonial value, which constitutes the tax base of Municipal Property Tax, given that the formula for determining that value, provided for in article 38 of the same Code, contains indices that vary depending on the use attributed to each of these parts. On the extra-fiscal plane, this autonomization continues to find justification in the relevance attributed to the taxable patrimonial value of properties and their autonomous parts in the urban rental legislation." It also mentions article 15-O(1) of Decree-Law No. 287/2003, of 12/11, added by Law No. 60-A/2011, of 30/11 (providing that the safeguard clause relating to the aggravation of taxation in Municipal Property Tax resulting from the general assessment of urban properties is applicable to each property or part of urban property that is the subject of that assessment) as confirming the individualization, for tax purposes, of the autonomous parts of urban properties.

[7] As noted in the decision of arbitral case No. 132/2013-T: "The norms (...) listed enshrine the principle of autonomization of the independent parts of an urban property, even when it is not constituted in horizontal ownership. That is, each part susceptible to independent use should be, for purposes of Municipal Property Tax, valued in light of its specificities and use, resulting in an autonomous TPA, individualizable and corresponding to each part susceptible to independent use."

[8] Excerpts from the Decision in case No. 50/2014-T, also referring to the Arbitral Decision in case No. 48/2013-T, regarding the analysis of the discussion of the legislative proposal in the National Assembly.