Summary
Full Decision
ARBITRAL DECISION
Report
A..., Ldª, NIPC..., with headquarters at Rua..., no...., in Lisbon, filed a request for arbitral pronouncement, under the provisions of the Legal Framework of Tax Arbitration approved by Decree-Law no. 10/2011, of 20 January (RJAT), as amended by Law 66-B/2012, for declaration of nullity or, alternatively, annulment of the assessments of Stamp Tax (relating to item 28.1 of the corresponding General Table), concerning the year 2014, in the amount of 15,954.84 € (fifteen thousand, nine hundred and fifty-four euros and eighty-four cents), also requesting the reimbursement of the tax amounts disbursed, increased by what it designates as interest due for the delay in their restitution.
The Tax and Customs Authority (AT) is the Respondent.
The Claimant did not proceed to appoint an Arbitrator. For this purpose, the President of the Deontological Council of the Administrative Arbitration Centre designated the undersigned, who expressly accepted this appointment. The parties were duly notified thereof and did not manifest any intention to refuse it.
The arbitral tribunal was thus constituted on twenty-third September 2015.
The AT timely submitted its reply, arguing:
a) As a preliminary matter, for the attachment of documentation proving the alleged factuality; for the clarification of the year and for the identification of the property to which the assessment relates;
b) Then, for the absolute incompetence of this arbitral tribunal;
c) Alternatively, for the legality of the tax act in question, with corresponding total lack of merit of the claim and consequent absolution of the Respondent.
Called upon to observe the aforementioned in a) above, by Rulings of 17 November 2015 and, subsequently, of 3 March last, the Claimant offered nothing to the case file.
Nevertheless, the position of the parties is absolutely clear and there are no disputed factual questions, excluding those already mentioned (means of proof, year and identification of the property).
In view of the principles of autonomy of the arbitral tribunal (art. 16, letter c), of the RJAT) and of free conduct of the proceedings (art. 19 of the RJAT), by the aforementioned Ruling of 3 March last, this arbitral tribunal considered, in the event that the Claimant should offer nothing to the case file, as it did not, that the hearing referred to in art. 18 was unnecessary, as well as the production of pleadings, the conduct of which it dispensed with for that reason, having thus fixed a date for the pronouncement of the arbitral decision.
The Tribunal was regularly constituted and is materially competent.
The parties have legal personality and judicial capacity and are legitimate.
The proceedings do not suffer from nullities.
However, a preliminary matter was raised (that of the aforementioned factual question) and also an exception that would prevent the consideration of the merits of the case (that of absolute incompetence of this arbitral tribunal). For that reason these matters will be analyzed preliminarily.
Preliminary Matter, Object of the Dispute, and Factual Matter
As already mentioned, by arbitral Ruling of 17 November 2015, a period of fifteen days was fixed for the Claimant, if it wished, to attach to the case file documents supporting the claims formulated in its petition, particularly the identification of the property in question, and to clarify whether the claim relates to a tax assessment of Stamp Tax for the year 2013 or for the year 2014. This Ruling was issued following the preliminary matter raised by the Respondent in its reply, and thus adequate observance of the principle of contradictory was guaranteed.
As the Claimant offered nothing to the case file, the Ruling of 3 March 2016 was issued with the content summarized above.
It is thus necessary to ascertain whether the claim is intelligible or not, as the Respondent contends, and to draw consequences from that conclusion.
The Claimant begins its petition by expressly stating that it intends to challenge the assessments contained in the assessment documents which it immediately submitted, in a total of 27 documents, also stating that the deadline for voluntary payment of such assessments ended on 30 April 2015. And immediately afterwards it adds that the assessments relate to the year 2014 and to the urban property registered in the property register of the parish of..., in Lisbon, under no.... And it further clarifies that on 31 December 2014, none of the divisions of that property had a Tax Patrimonial Value (VPT) equal to or greater than the amount of one million euros.
Furthermore, the 27 documents submitted are consistent with that factuality.
However, in its conclusion, with formulation of the claim, the Claimant petitions the declaration of nullity or, alternatively, the declaration of illegality and consequent annulment of the Stamp Tax assessments (relating to item 28.1 of the corresponding General Table), concerning the year 2013.
However, it immediately adds that the value of the claim amounts to the total amount of 15,954.84 €. (fifteen thousand, nine hundred and fifty-four euros and eighty-four cents) and submits 28 documents of which 27 correspond to what it designated as assessment documents.
Thus, it is absolutely clear that the assessments, or supposed assessments, relate to the divisions with independent property registration of an urban property, concretely identified, with reference to the year 2014, there being a manifest clerical error when the year 2013 is mentioned in the claim.
But it also happens that the twenty-seven documents submitted relate to the collection documents of the first installments of item 28 of Stamp Tax relating to the independent property registrations corresponding to 27 divisions susceptible to independent use, and intended for dwelling, of the aforementioned property (contained in the register ... of said parish of...), by reference to the year 2014 and having as payment deadline April 2015.
Thus, there is also no doubt that those documents do not correspond to tax assessment documents, but rather to collection documents of the first installment thereof.
Now, on one hand, as mentioned, it is also certain that the doubts raised by the AT cannot be justified, requesting the attachment of documentation proving the alleged, with clarification of the year and identification of the property to which the assessment relates. Indeed, it is clear that the claim relates to the IS due by reference to a well-determined property and to the year 2014, despite the clerical error of the claim in alluding to the year 2013.
But, on the other hand, it transpires from the documents submitted, precisely, that the value of the IS due amounts to three times the value contained in the claim, since the value attributed to it corresponds only to the first of three installments. This as better appears from the table that follows, for ease of exposition.
Now, as all 27 documents submitted relate to the first installment, even though all of them contain the seal proving payment, the complete payment of the tax is not proven, but only its first installment, and thus, in this respect, the AT's doubts have merit.
From this it also follows an error in the value of the case, which amounts to 47,864 € (forty-seven thousand, eight hundred and sixty-four euros), the total value of the assessments in question (see table above), and not to the value aforementioned and indicated by the Claimant.
This value is still within the amount that determines the functioning of the arbitral tribunal with a single arbitrator if the taxpayer has not chosen to appoint an arbitrator (twice the value of the jurisdiction of the TCA – cf. art. 5, no. 2 of the RJAT).
Thus, the intention of the Claimant should be interpreted in the sense that the claim contests the Stamp Tax assessment relating to 2014, and therefore the value thereof must be corrected, with utilization of the instance.
Furthermore, if it were understood that the divisions do not correspond to independent divisions, or that they were not intended for dwelling, a fortiori the Claimant's claim would proceed. Indeed, in this regard and given the AT's doubts, it is important to note that if those divisions corresponded to autonomous fractions or were not intended for dwelling, the assessment would be manifestly illegal, in the first case due to manifest insufficiency of the VPT and in the second due to diversity of purpose against the provision of item 28 of the TGIS. Furthermore, these data (contained in the register) are naturally in the possession of the AT, which cannot thus legitimately claim ignorance thereof.
Thus, the following factuality is deemed proven:
a) In 2014, the Claimant was the owner, or at least the usufructuary or holder of the right of surface, of an urban property in vertical ownership, i.e., in complete ownership, not constituted in horizontal ownership, located in the parish of..., in Lisbon, registered in the corresponding property register under article..., to which corresponded a total tax patrimonial value (VPT) exceeding the value of one million euros;
b) Such property was composed, at least, of 27 divisions susceptible to independent use, all intended for dwelling;
c) None of these 27 divisions susceptible to independent use had a VPT equal to or greater than the value of one million euros (but rather a VPT always less than € 187,810.00);
d) The AT proceeded to assess the IS of item 28.1 of the TGIS by reference to these divisions and to the year 2014;
e) The total value of these twenty-seven assessments is 47,864.00 € (forty-seven thousand, eight hundred and sixty-four euros);
f) The assessment acts in question gave rise to the collection documents of the corresponding first installment and referred to in the initial request as documents 1 to 27;
g) These installments amounted to the total value of 15,954.84 €. (fifteen thousand, nine hundred and fifty-four euros and eighty-four cents) and had a due date in April 2015;
h) All these installments were paid within the said period, more concretely on 13 April 2015.
The payment of the other installments of the tax (second and third installments) was not proven.
There are no other facts relevant to the consideration of the merits of the case that are not proven.
The proven facts are based on the documents supplied by the Claimant, whose correspondence to reality is not disputed.
Matter of Law
On the Exception Raised by the AT (Incompetence Due to Indivisibility of the Assessment Act)
As mentioned, the Claimant comes to request the constitution of an Arbitral Tribunal to, allegedly, pronounce itself on the assessment of Stamp Tax (IS) under item 28.1 of the General Table of the Stamp Tax Code, amended by art. 4 of Law no. 55-A/2012, of 29/12, with reference to the year 2014, on the divisions susceptible to independent use of the aforementioned property of the urban property register of the parish of..., in the municipality and district of Lisbon.
For this purpose it invokes the nullity of the assessment or its illegality, due to violation of law due to error on the factual and legal assumptions.
And, in conclusion, it requests the declaration of nullity or, alternatively, the annulment of the tax act (in the Claimant's view) or only of the collection notes of the 1st installment of the corresponding IS, according to the position sustained in the proceedings by the Respondent. Additionally, the Claimant also requests the reimbursement of the tax paid and interest calculated from the alleged delay by the AT.
The Respondent, however, understands, this being the exception presented, that the Arbitral Tribunal is materially incompetent, in light of the provisions of art. 2 of the RJAT, to examine the legality of an installment of the assessment act, which does not correspond to a tax act, since the law does not include the autonomous challenge of an installment of item 28 of the IS (in this case the one contained in the collection notes of the first installment).
Should this be understood, the arbitral claim of the Claimant should be dismissed due to non-arbitrability of the claim and indivisibility of the Stamp Tax assessment act. For this purpose, the AT invokes extensive jurisprudence (cases that took place in the arbitral tribunals functioning at the CAAD with the numbers 726/2014-T, 205/2013-T and 120/2012-T, CAAD), to conclude that "As each of the installments of the Stamp Tax assessments identified in the proceedings cannot be autonomously challenged, for the reasons previously stated, there is a case of incompetence of the arbitral tribunal to examine and declare their illegality and consequent annulment"; In these terms, the AT concludes for the manifest material incompetence of the Arbitral Tribunal and for the merit of the exception raised."
The question is thus merely to analyze the claim of the Claimant. This requests that the arbitral tribunal pronounce itself on the legality of an installment of a tax act or, inversely, that it examine the legality thereof, of which that is a mere consequence (in this case the first installment of the tax allegedly due).
For the AT it follows from the law that "the annulment of the tax assessment act necessarily affects all installments, causing the obligation to pay them to cease or imposing on the tax administration the obligation to refund the amounts possibly paid by the taxpayer, as would be concluded by the ... Arbitral Decision in Case no. 138/2015-T"; citing in favor of the "indivisibility of the assessment tax act of both IMI and item 28 of IS, ... beyond the ... cases 120/2012-T, 408/2014-T and 138/2015-T, the arbitral decisions issued in cases nos. 387/2014, 726/2014-T and 736/2014-T" and also, "more recently, in case 90/2015-T".
From this it follows for the AT that "the acts object of the present request for arbitral pronouncement are not included in the scope of the provisions of article 2, no. 1, letter a) of the RJAT, as they are not "tax assessment acts" (nor should they be confused with them, as in reality they correspond to 1/3 of the assessed value)" should be "the exception of absolute incompetence of the Arbitral Tribunal based on the subject matter in accordance with the provisions of article 16, no. 1 of the CPPT (applicable by force of article 29 of the RJAT), associated with the non-challengeability of the acts object of the claim, with the consequent absolution of the Respondent". Thus it concludes for the "manifest non-challengeability of the installments of the assessment acts contained in the collection notes that constitute the object of the present request for arbitral pronouncement" whereby "the dilatory exception provided for in letter c), of no. 1, of art. 89 of the CPTA occurs, subsidiarily applicable by art. 29, no. 1, letter c), of the RJAT, which prevents consideration of the merits and results in the absolution of the AT from the instance."
However, it should be understood that this is not the case.
It is manifest that the Claimant seeks the declaration of nullity or annulment of the tax assessment acts (as follows from the claim and the pleadings, with the useful sense attributed to it above) and not merely that of its first installment, or another, which would indeed be unfeasible. This notwithstanding the two indicated errors: the first as to the year and the second as to the value of the case (which results from, by error, indicating the collection documents submitted as assessment documents). But this does not prevent recognizing that the Claimant petitions the recognition or declaration of the invalidity of the "assessment" and not of an installment thereof. And if this interpretation finds support in the formulation of the claim, it is simultaneously that which best accords with the principle of procedural economy.
The Claimant's claim thus merits no censure, and for that reason the competence of this arbitral tribunal is manifest.
Moreover, this was likewise decided in the tax proceedings of the year 2015 that took place in the arbitral tribunals functioning at the CAAD with the numbers 207, 236 to 238, 250, 253, 263, 273, 280, 302, 305, 306, 323, 329, 340, 399, 411, 444, 461, 463 and 520.
In these terms, it is concluded for the competence of this arbitral tribunal and for the arbitrability of the claim (invalidity of the Stamp Tax assessment under item 28 of the TGIS relating to 2014).
Position of the Parties
The question in the proceedings thus corresponds to the application, in situations of the so-called vertical ownership, of the new Stamp Tax taxation on urban properties with residential allocation and VPT equal to or greater than one million euros. This new taxation was introduced in 2012 to reinforce budgetary control measures on the revenue side, in a framework of financial necessity (or economic-financial, cf. Sustainability and Solidarity in Times of Crisis, Suzana Tavares da Silva, in Fiscal Sustainability in Times of Crisis, Coord. José Casalta Nabais and Suzana Tavares da Silva, pgs. 61 et seq).
As is well known, that new Stamp Tax taxation has raised strong doubts and considerable contestation. This not only for specific cases of its application (e.g., vertical ownership, co-ownership, land for construction or its application to the year 2012), but also in general terms, for its possible unconstitutionality, whether of its general regime or of its transitional regime (see Luís Menezes Leitão, On the Stamp Tax Taxation of Luxury Real Estate (item 28.1 TGIS), in Tax Arbitration no. 1, pgs. 44 et seq).
Claimant
Now, the Claimant precisely comes to contest the application of the new item 28.1 of the TGIS to urban properties not constituted in horizontal ownership, but which include divisions susceptible to independent use, in which the minimum value of incidence set by law is achieved by the sum of the VPT of the separate property registrations (or autonomous) corresponding to those various divisions, but not by any one of them individually considered.
The Claimant thus sustains that it is not the owner of a property with VPT equal to or greater than the said minimum amount, but rather the owner of a property in vertical ownership in which the VPT exceeding that value is only reached by the sum of the VPT of the divisions susceptible to independent use allocated to dwelling, without any of them, considered individually, reaching that minimum amount of tax relevance (cf. previous table). For that reason, for the Claimant, the assessments in question suffer from the defect of violation of law, which makes them null or voidable (due to non-compliance with legal formalities, error on the factual assumptions and lack of reasoning).
Respondent
Differently and in a subsidiary manner, as was seen, the Respondent contests that understanding, sustaining instead the maintenance of the assessments, stressing, in summary, that complete ownership, or vertical ownership, corresponds to a property, this being the reality to be taken into account for ascertaining the verification of the minimum value contained in the rule of incidence. For the Respondent, the VPT relevant for purposes of tax incidence is thus the VPT of the urban property and not the VPT of each one of the parts that comprise it, even though these are susceptible to independent use, since they are allocated to dwelling. In support of this thesis, it also stresses that the unity of the property is not affected, and its distinct parts cannot be juridically equated to the autonomous fractions of a property constituted in horizontal ownership, especially because their title is necessarily attributed to only one single owner (or more than one, but in cases of co-ownership).
It further adds that a different understanding (i.e., that the VPT relevant to the rule of incidence would correspond to the VPT of each floor or division susceptible to independent use) would be unconstitutional, due to violation of the principle of tax legality (inherent in art. 103, no. 2 of the CRP).
More extensively, the AT sustains that the patrimonial value relevant for purposes of the incidence of the tax is the total patrimonial value of the urban property and not the patrimonial value of each one of the parts that comprise it, even though susceptible to independent use, recalling that art. 80, no. 2, of the C.I.M.I. states that, except as provided in arts. 84 and 92, to each property corresponds a single article registered in the register. This notwithstanding recognizing that, as appears in the respective property register, the floors or independent divisions are valued in accordance with art. 12, no. 3, of the C.I.M.I., according to which each floor or property susceptible to independent use is considered separately in the property registration, which shall likewise discriminate the respective tax patrimonial value, on which the IMI shall be assessed.
Nevertheless, in the Respondent's understanding, the tax patrimonial value on which the incidence of the Stamp Tax of item 28.1 of the General Table depends must be, as it was, the total patrimonial value of the property and not the value of each one of its independent parts.
This is because the unity of the urban property in vertical ownership comprised of several floors or divisions would not be affected by the fact that all or part of those floors or divisions are susceptible to independent economic use. In this context, it states that the property in vertical ownership does not cease to be only one, its distinct parts thus not being juridically equated to autonomous fractions under a horizontal ownership regime, being property of only a single title-holder, without prejudice to the co-ownership regime, when applicable. In this context, the autonomous registration in the property register of each one of the parts, economically and functionally independent, of the same property, with indication of the corresponding patrimonial value of each one, ascertained separately in accordance with arts. 37 and following of the C.I.M.I., would be irrelevant for purposes of interpretation of the new item of the TGIS. That is, the fact that the IMI is ascertained based on the tax patrimonial value of each part of property with independent economic use would not affect the application of art. 28, no. 1, of the General Table.
According to the Respondent, any other interpretation would violate, indeed, the letter and spirit of item 28.1 of the General Table, being inconsistent with the cohesion of the tax system and with constitutional principles.
Summary of Controversial Questions
In summary, in the present case, the relevant question is merely to ascertain which VPT to consider in cases of vertical ownership.
Matter of Law
Vertical Ownership
As is mentioned, Law no. 55-A/2012, of 29 October, amended the Stamp Tax Code, adding a new item to the General Table of the CIS.
On the problem of determining the (minimum) VPT relevant for the application of item 28.1 of the TGS in cases of vertical ownership, have already pronounced themselves, among others and beyond those mentioned above, the decisions of the CAAD in case numbers 50/2013-T, 132/2013, 181/2013-T, 183/2013-T, 272/2013-T, 280/2013-T, 26/2014-T, 30/2014-T, 88/2014-T, 177/2014-T and 206/2014-T, which were later confirmed by several other arbitral decisions.
In all of them the question resided, as in these proceedings, in ascertaining whether the VPT relevant to the rule of incidence (28.1 of the TGIS) is the VPT corresponding to each one of the divisions susceptible to independent use separately considered in the register or if, on the contrary, the VPT relevant should correspond to the sum of all those divisions susceptible to independent use but constituting part of the same property and which are allocated to dwelling.
And the answer, in those decisions, was always for the first option and it is considered that it was correct. Let us now look at the reasons underlying such jurisprudence and the interpretation followed here.
The CIS
The new item was inserted in the Stamp Tax Code, an option that does not offer significant contribution to systematically frame the new tax, since that tax "incides on a heterogeneous multiplicity of facts or acts ... without a common trait that confers identity on them", which was, moreover, aggravated by the Reform of Patrimonial Taxation of 2003/2014, making even more complex "the problem of classification of this tax" (cf. José Maria Fernandes Pires, Op. Cit., p. 422).
But it is known that this new item was introduced as a way to reinforce budgetary control measures on the revenue side, in a framework of financial (or economic-financial) necessity, with the purpose of identifying new forms of externalization of tax-paying capacity that could be called upon to support the purpose of reducing the negative budgetary balance.
And it did so by choosing to make the new taxation incide exclusively on certain assets, thus implying a strong negative discrimination of these, which postulates a reinforced explanation of that choice, so as not to place in question the principle of equality, or equity in the terminology of Glória Teixeira, whether in its sense of horizontal equity or in that of vertical equity (Glória Teixeira, Manual of Tax Law, p. 56, 2nd ed., Almedina).
Now, it seems to be glimpsed in the legislator's thinking the intention to identify in real estate with VPT equal to or greater than one million euros ("luxury") intended for dwelling, a referential, not arbitrary, of an additional tax-paying capacity, capable of widening the spectrum of contributions to the desired and necessary budgetary equilibrium.
In this framework, the question to be decided is whether a property constituted in complete or vertical ownership, but with floors or divisions with independent uses, is a "property with residential allocation" for purposes of the application of art. 1 of the CIS and of item 28.1 of the TGIS, amended by art. 4 of Law no. 55-A/2012, of 29 October (especially since, as in the case of the proceedings, it may have areas allocated to non-residential purposes) or if by "property" should instead be considered the divisions separately considered in the property register and, further, which VPT is relevant (whether the VPT relating to the property, whether the VPT inherent in the sum of its parts with residential allocation, or whether instead the VPT relating, autonomously, to each one of these).
For this purpose, it is important to bear in mind that each floor or part of property susceptible to independent use is considered separately in the property registration of the total property, which also discriminates the tax patrimonial value thereof (no. 2 of art. 12 of the CIMI), the IMI being assessed individually in relation to each floor or part of property susceptible to independent use (art. 119, no. 1 of the CIMI).
And, if this is the case in IMI, it should also be the case in Stamp Tax. Let us see why.
Literal Interpretation
As is stated in the decision taken in case 206/2014-T: "Given that the CIS refers to the CIMI, it must be concluded that the registration in the property register of real estate in vertical ownership, constituted by different parts, floors or divisions with independent use, follows the same registration rules as horizontal ownership".
Being the IMI and Stamp Tax "assessed individually in relation to each one of the parts", also "the legal criterion for defining the incidence of the new tax must be the same". In consequence, there will be incidence of item 28.1 of the TGIS (only) if any of those parts, floors or divisions with independent use has a VPT, at least, equal to the amount provided in the rule of incidence.
Thus, for this purpose, property will be the independent area, considered separately and autonomously in the register, being subject to IS if two requirements are met: being intended for residential purposes and having a VPT equal to or greater than one million euros, the criterion for assessing "luxury" residential real estate. Otherwise, a reality not foreseen by the legislator would be created: that of a, so to speak, "residential property", possibly inserted within a larger property with various purposes, in which the VPT thereof, spurious to the property registrations, would consist in the fiction of a VPT given by the addition of the autonomous VPT of each division (independent and with residential purpose) considered in the property registration. That is, where the legislator considered two realities, the interpreter would now, without support in the legislative text, as occurs in the assessments now in question, have to feign a third reality, hybrid, halfway between the urban property and its independent divisions. Divisions to which the legislator of the IMI, and of the IS by referral to the CIMI, understood to give tax relevance.
Also in the decision issued in case 272/2013-T (CAAD) it is stated that "considering that the registration in the property register of real estate in vertical ownership, constituted by different parts, floors or divisions with independent use, in accordance with the CIMI, follows the same registration rules as real estate constituted in horizontal ownership, the respective IMI, as well as the new Stamp Tax, being assessed individually in relation to each one of the parts, there is no doubt whatsoever that the legal criterion for defining the incidence of the new tax must be the same". Moreover, it is further stated in that same decision that the AT's position "finds no legal support and is contrary to the criterion applicable in CIMI terms and, by referral, in Stamp Tax terms", which is why "the adoption of the criterion defended by the AT violates the principles of legality and tax equality, as well as the principle of the prevalence of material truth over juridical-formal reality".
And in the same sense it is stated in the arbitral decision of case 30/2014-T (CAAD) to find in the AT's doctrine a "non-compliance with the literal element of the final part of the rule of incidence (item 28 of the TGIS) which states that the tax incides on "the tax patrimonial value used for purposes of IMI" and therefore, should not incide on the sum of tax patrimonial values of properties, parts of properties or floors, not having legal support the operation of adding tax patrimonial values of floors or parts of property susceptible to independent use, of residential allocation, divorced from the VPT of the others with different purposes, so as to reach the threshold of eligible taxation of 1,000,000.00 euros or more".
As is also stated in the arbitral decision taken in case 30/2014-T (CAAD), what happens with regard to urban properties with residential allocation, in vertical ownership, with floors or divisions susceptible to independent use, is that the AT proceeds, in the operations of Stamp Tax assessment, just as it proceeded in the present case, to the adaptation of the CIMI rules (adding the tax patrimonial values of the same property, without considering those corresponding to parts of the property with non-residential purpose, thus giving rise to a new and hybrid VPT). Indeed, that "adaptation" corresponds to "adding the VPT of each floor or independent division allocated to residential purposes (divorced from the VPT of the floors or divisions intended for other purposes), creating a new juridical reality, without legal support, which is a global VPT of urban properties in vertical ownership, with residential allocation", which violates "the literal element of the rule of incidence" (incidence on "the tax patrimonial value used for purposes of IMI"). Thus, "in urban properties with residential allocation, in vertical ownership, with floors or divisions susceptible to independent use", should be considered the tax patrimonial value "that results exclusively from no. 3 of article 12 of the CIMI. Both for the IMI and for this IS".
And the same understanding applies to properties in which all independent divisions are intended for dwelling as occurs in the present case.
Concretely, as was concluded in the decision issued in case 26/2014-T of the CAAD, "for purposes of application of item 28 of the TGIS to properties in vertical ownership, the same CIMI rules that apply to properties in horizontal ownership apply, and in the same sense the VPT for purposes of application of the item is the individual VPT of each independent residential fraction, being that in the present case none of the fractions exceeds the incidence criterion of 1,000,000.00€", the same occurring also in the case of the present proceedings.
It is thus concluded, in summary, as clearly appears from the decisions cited, that the literal interpretation of the new item of the TGIS cannot be other than different from that sustained by the AT, indeed, the opposite, given the clear and indisputable referral made with regard to the new item of the TGIS to the CIMI rules, the interpreter of the rule being unable to "create" a new concept of property so as to obtain a hybrid VPT, in cases of properties with residential and non-residential use, not recognized in the register and without any support in the text of the law. What should also apply to properties in vertical ownership whose divisions are intended, all, for residential purpose.
Economic Substance
Furthermore, as is well stated in Decision 117/2013 T of the CAAD, "the interpretation exclusively based on the literal wording .... cannot be accepted, since in the interpretation of tax rules the rules and general principles of interpretation and application of laws are observed (article 11, no. 1, of the LGT) and article 9, no. 1, expressly prohibits interpretations exclusively based on the literal wording of rules by providing that «interpretation should not be limited to the letter of the law», instead, «reconstruct from the texts the legislative thinking, taking especially into account the unity of the juridical system, the circumstances under which the law was elaborated and the specific conditions of the time in which it is applied». Being that to verify a correspondence between the interpretation and the letter of the law it will suffice «a minimum of verbal correspondence, even if imperfectly expressed» (article 9, no. 3, of the Civil Code), which will only prevent the adoption of interpretations that cannot in any way be reconciled with the letter of the law, even recognizing in it imperfection in the expression of the legislative intention".
And if we now look at the economic substance of the tax facts, in compliance with art. 11, no. 3 of the LGT, without thereby adhering to an economic interpretation of tax law rules, today condemned by Doctrine (cf. Taxes, General Theory, Américo Fernando Brás Carlos, p. 196, 2014, 4th ed. Almedina), we will equally have to recognize that the expression "each urban property" used in no. 7 of article 23, by identity of reasons, encompasses not only urban properties in horizontal ownership, but also floors, divisions or parts of urban properties in vertical ownership, insofar as they are allocated to residential purposes, always departing, in any of the cases, from a single taxable base for all legal purposes: the tax patrimonial value used for purposes of IMI (final part of item 28 of the TGIS), as was concluded in the arbitral decision of case 177/2014-T (CAAD).
Or, as is stressed in the decision issued in case 272/2014-T of the CAAD, "from the legislator's perspective, what matters is not the juridical-formal rigor of the concrete situation of the property but rather its normal use, the purpose to which the property is intended", so that "for the legislator the situation of the property in vertical or horizontal ownership did not matter, since no reference or distinction is made between one and the other. What matters is the material truth underlying its existence as an urban property and its use", that is, the economic reality of holding independent parts, e.g., susceptible to independent use or lease, just as autonomous fractions in the case of horizontal ownership, and therefore susceptible of allowing the use or obtaining of income in a similar manner and thus externalizing, for that reason, equal tax-paying capacity (as would be externalized by the sum of the VPT of various autonomous fractions of the same property in horizontal ownership or of various properties whose VPT, taken together, exceeded the value of one million euros, without such having been considered by the legislator as externalization of tax-paying capacity relevant for purposes of IS).
Cohesion of the System
And if we look at the totality of the tax system we will not find indications that come to contradict the conclusion drawn up to now.
As is stated in the Decision issued in case 26/2014-T of the CAAD, no censure of the legislator toward vertical ownership is glimpsed. Indeed, "it will be said, not without reason, that the legislator, for purposes of taxation in the context of IMI, chose to confer autonomy, independence, to each one of the parts or to each one of the floors of a single property, insofar as one and the other show themselves to be of independent use, to the point of providing for individualized registration in the register of each one of those independent parts and of imposing on taxation in the context of IMI a collection also itself autonomous. Despite the legal existence of a single property, it is the legislator itself who not only recommends but imposes the autonomous consideration of each one of the independent parts, for purposes of taxation of heritage". Indeed, as follows from an economic interpretation of the fact, with prevalence of its substance over its form, as was seen above. And if it is the case in IMI, it would not be understood why it would not be, also, in Stamp Tax, namely in the case of the new taxation on properties (houses, better said) "of luxury" (in the sense used in Parliament by the then State Secretary for Tax Affairs and mentioned below).
Indeed, if the legislator is indifferent to one or another form of structuring the ownership of urban properties in the CIMI, it would not be understood that it now intended to favor one at the expense of the other, namely by considering one form of structuring more advanced than the other. Indeed, as was decided in cases 26/2014-T and 272/2014-T of the CAAD, "the current juridical regime does not impose the obligation to constitute horizontal ownership", reason for which "the discrimination operated by the AT translates into an arbitrary and illegal discrimination", since "the AT cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the fiscal system, as well as the principle of tax legality provided in article 103, no. 2 of the CRP, and also the principles of fiscal justice, equality and proportionality."
That is, the literal interpretation initially reached still applies.
Intention of the Legislator
And the fact is that also nothing induces the interpreter to the conclusion that the concrete legislator of the new item of the TGIS, contrary to the legislator of the IMI, which moreover remains unchanged, intended to discriminate vertical ownership in relation to horizontal ownership. As is well recalled in the Decision issued in the already mentioned case 26/2014-T of the CAAD, "at the time of presentation and discussion, in Parliament, of bill no. 96/XII (2nd), the State Secretary for Tax Affairs expressly stated: "The Government proposes the creation of a special rate on the most valuable urban residential properties. This is the first time that in Portugal a special taxation on high-value properties intended for dwelling is created. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will incide on houses of value equal to or greater than 1 million euros" (cf. DAR I Series no. 9/XII-2, of 11 October, p. 32). Now, as is stressed in that Decision, "the State Secretary for Tax Affairs presents this bill referring unequivocally to the expression "houses"… of value equal to or greater than 1 million euros", so that "it follows with crystal clarity that item 28.1 of the TGIS cannot be interpreted in the sense that it encompasses each one of the floors, divisions or parts susceptible to independent use when only from their sum results a VPT greater than what is provided in the same item". This is because, in that case, "none of the "houses" … has, per se, "value equal to or greater than 1 million euros"".
It being therefore clear, as is stated in the aforementioned decision 272/2014-T, that for the legislator only that value of one million euros, insofar as it is allocated "to a dwelling (house, autonomous fraction or floor with independent use) translates an above-average tax-paying capacity and, as such, susceptible of determining a special contribution to guarantee the just distribution of the fiscal burden".
And if it is the case, we will then have to take into account the concept of "house" as a physical reality that enables a residential purpose, a unit susceptible to independent use, including its lease, since it is in that economic reality that we will find the externalization of the tax-paying capacity associated with "luxury dwellings" that the legislator considered relevant. Moreover, if it were not the case, the legislator would proceed to a discrimination that would not be found to be justified, since as was already seen, no censure is found in the system toward vertical ownership when compared with horizontal ownership. Moreover, that distinction would conflict with a necessary equity among identical externalizations of the same tax-paying capacity.
Tax-paying Capacity and Interpretation in Accordance with the Constitution
It is certain that the tax legislator is subordinated to the principles of equality, which, as is well stated by Sérgio Vasques (Manual of Tax Law, pgs. 249 et seq, 2011, Almedina), is more than a mere negative limit and imposes something more than the mere prohibition of arbitrariness, instead postulating a distribution of taxes in accordance with the criterion of tax-paying capacity, so that the legislator will have to anchor taxation in reasonable and non-arbitrary economic elements, susceptible of justifying the tax claim in a tax-paying capacity concretely externalized by the taxpayer.
In this manner, it is imperative to seek in the text of the new item a reading that gives fulfillment to those principles. Or, what amounts to the same, not to draw from that text a sense that violates such principles.
Now, the tax-paying capacities externalized by the ownership of a property composed of a set of autonomous fractions in horizontal ownership or by a set of independent-use divisions in a vertical ownership regime cannot fail to be considered identical, if not even, possibly, smaller in the case of the second hypothesis. That is, a property certainly does not have a greater market value by being organized as vertical ownership. It is the same (allowing equal benefit from its use or equal income by way of its lease, as was mentioned above), or will even have a smaller value, since the alternatives for transferability will possibly be fewer. And we know that the VPT intends to be a close approximation, precisely, to the market value of properties and will therefore be the measure and the limit of the tax-paying capacity relevant for the new item of the TGIS.
Thus, the interpretation defended by the AT, not finding hermeneutical justification, as was seen up to now, would moreover lead to a manifest inequality between owners of real estate in horizontal and vertical ownership (and it was also seen that no discriminatory intention toward these is glimpsed, even if it were admitted that such would be constitutionally admissible). In that same sense, as is well stressed in the decision of case 272/2014-T of the CAAD, the "existence of a property in vertical or horizontal ownership cannot, by itself, be an indicator of tax-paying capacity. On the contrary, it follows from the law that one and the other should receive the same fiscal treatment in obedience to the principles of justice, tax equality and material truth".
Concluding, "the material truth is that which imposes itself as the determining criterion of tax-paying capacity and not the mere juridical-formal reality of the property, since the constitution of horizontal ownership implies a mere juridical alteration of the property, not even imposing a new appraisal" (as is stated in the decision issued in case 26/2014-T of the CAAD). And that fact "does not appear coherent with the decision of the AT to tax the residential parts of a property in vertical ownership, based on the global VPT of the property and not on what is effectively attributed to each part". Thus, "the AT cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the fiscal system, as well as the principle of tax legality … and also the principles of justice, fiscal equality and proportionality", as was said, by the creation ex novo of an innovative concept and of a hybrid VPT, frequently corresponding to part of a property.
Conclusion
In these terms, the tax acts in question suffer from the defect of violation of law, due to error on the legal and factual assumptions, since no part of the property has a VPT of value equal to or greater than the threshold resulting from the applied rule, which makes the said tax acts voidable (which should therefore be declared), its value being 47,864 € (forty-seven thousand, eight hundred and sixty-four euros).
As the assessments have been paid, as regards their first installments, these should be refunded, in the aforementioned amount of 15,954.84 € (fifteen thousand, nine hundred and fifty-four euros and eighty-four cents).
Indemnificatory Interest
The Claimant petitions what it designates as interest for the delay in the restitution of the tax, which can be understood as interest for the deprivation of the funds as a result of the illegal assessments.
Indeed, from the illegality of the assessment it follows that indemnificatory interest is due, (art. 43, no. 1 of the LGT, 61, no. 4 of the CPPT and 24, no. 5 of the RJAT), counted from payment until processing of the credit note, in case the illegality has resulted in payment greater than that due due to error attributable to the AT (that is, due to error not attributable to the taxpayer – cf. Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, General Tax Law, Annotated and Commented, encounters of writing, 4th Ed., 2012, p. 342).
What manifestly occurs in the proceedings, as was seen regarding the first installment of the censured assessments.
The Respondent should therefore be condemned to refund to the Claimant the amount that it has disbursed by reference to the assessments here in question, at least 15,954.84 €, increased by indemnificatory interest, at the legal rate, counted from payment until the date of processing of the credit note in which they are included (art. 61, no. 5, of the CPPT).
Operative Part
As a result of the foregoing, this Single Tribunal decides to declare the exception invoked by the AT unfounded and the claim well-founded and, in consequence, to annul the assessment acts in question, on the grounds of violation of law, resulting from error on the assumptions, condemning the AT to refund the amounts that the Claimant has disbursed for payment of those assessments, increased by indemnificatory interest, counted from the dates of payment until the date of processing of the corresponding credit notes.
Value
As mentioned, the assessments object of annulment amount to the total value of 47,864 €, this thus being the value of the action and the claim, also because the claim for annulment of an installment of the tax is not arbitrable, as the autonomous challenge thereof is not feasible.
Thus and in accordance with the provisions of art. 306, nos. 1 and 2, of the CPC and 97-A, no. 1, letter a), of the CPPT and 3, no. 2, of the Costs Regulation in Tax Arbitration Proceedings, the value of the case is fixed at 47,864 € (forty-seven thousand, eight hundred and sixty-four euros)
Costs
In accordance with art. 22, no. 4, of the RJAT, the amount of costs is fixed at € 2,142.00 € (two thousand, one hundred and forty-two euros), in accordance with Table I attached to the Costs Regulation in Tax Arbitration Proceedings, charged to the Tax and Customs Authority, here the Respondent.
Lisbon, 23-03-2016
Text prepared by computer, in accordance with the Code of Civil Procedure (CPC), applicable by referral of article 29, no. 1, letter e) of the RJAT, with blank verses, reviewed and signed by the undersigned arbitrator.
The Arbitrator
(Jaime Carvalho Esteves)
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