Stamp Tax on High-Value Properties: Full Ownership and TGIS Clause 28.1 Arbitration Ruling 400/2016-T

ARBITRAL DECISION

I – Report

1. On 14 July 2016, A…, S.A., legal entity no. …, with registered office at …, no. …, …-… Lisbon, came pursuant to articles 95 of the General Tax Law, 99, paragraph a) of the Code of Tax Procedure and Process, 2, no. 1, paragraph a) and 10 of the Legal Regime of Arbitration in Tax Matters, approved by Decree-Law no. 10/2011, of 20 January and amended by Law no. 66-B/2012, of 31 December, to request the establishment of an Arbitral Tribunal and to submit a Request for Arbitral Pronouncement, with a view to the declaration of illegality and consequent annulment of the acts of collection of Stamp Duty, item 28.1 of the GIST, concerning the year 2015, with total collection of € 59,379.30, relating to urban properties described under the following urban property matrix numbers: … of the Parish of …; … of the Union of Parishes of …, … of the Union of Parishes of … and … and … of the Parish of …, requesting condemnation to reimburse the amounts paid and respective default interest and compensatory interest. Attaches 108 documents.

2. In the Request for Arbitral Pronouncement, the Claimant chose not to appoint an arbitrator, and, pursuant to no. 1 of article 6 of the LRAT, by decision of the President of the Deontological Council, the undersigned was appointed as sole arbitrator, who accepted the position within the legally stipulated period.

3. The parties were notified of this appointment and did not express any objection to it, the arbitral tribunal being constituted on 4 October 2016.

4. On 28 October 2016, the Tax and Customs Authority (TA or Respondent) presented a Response, requesting waiver of the meeting provided for in article 18 of the LRAT and of submission of pleadings.

5. Taking into account the position of the Claimant, the tribunal decided to waive the meeting provided for in article 18 of the LRAT but not written pleadings, submitted on 16 and 22 November 2016, respectively. It was indicated that the arbitral decision would be issued by 30 March 2017.

6. The Request for Pronouncement

The Claimant argues, in summary (our responsibility):

• It challenges the assessments relating to urban properties, its full ownership, located at …, … a…, in Lisbon; Avenue …, no. … a …, turning onto the Street of … …, nos. … a …, and onto the Street …, no. … a …, …, in Setúbal; Street …, no.…, in Loures and on the Street …, … a…, in Lisbon, verifying that the merits of any of the cumulative requests depends on the assessment of the same circumstances of fact, and the interpretation and application of the same legal rules and principles (art. 3 no. 1 of the LRAT).

• The properties referred to in the preceding number are all in full ownership, with divisions susceptible of independent use: the first comprises 7 floors, with divisions of independent use, with floors 1 to 6 on the right, front and left devoted to residential use, with total TCV amounting to the value of 1,357,010.00€; the second comprises a total of 12 floors, devoted to residential use from the 2nd to the 6th floors, letters A to C, and its total TCV amounts to the value of 2,850,600.00€; the third property, in vertical ownership, comprises a total of 11 floors, with divisions susceptible of independent use, with floors 1 to 10 devoted to residential use, with letters A to D, and its total TCV amounts to the value of 1,908,520.00€; the fourth property, in vertical ownership, comprises a total of 7 floors, with divisions susceptible of independent use, with floors 1 to 6 devoted to residential use, with letters A to D, and its total TCV amounts to the value of 1,569,890.00€.

• It verifies that none of the parts or floors with residential use of any of the properties referred to in the preceding numbers has a tax asset value exceeding 1,000,000.00€.

• On each of the divisions susceptible of independent use, the Respondent assessed stamp duty, with reference to the year 2015, pursuant to the General Stamp Duty Table, attached to the Stamp Duty Code, approved by Law no. 150/99, of 11 September, as amended by art. 4 of Law no. 55-A/2012, of 29 October, at the rate of 1%.

• From the assessment acts referred to, having as reference the tax asset value of each of the residential divisions of independent use, the collections for the year 2015 resulted, in relation to each of the four identified properties, amounts totalling €12,775.50, €17,751.90 €17,724.00 €11,127.90, respectively. The understanding of the TA, in considering that the criterion for determining the scope of stamp duty is the global TCV of the floors and divisions, is illegal and it is necessary to combine residential use and the TCV contained in the matrix equal to or exceeding € 1,000,000.00.

• The legislator is not concerned with the formal legal rigor of the concrete situation of the property but rather its normal use, the purpose for which the property is intended, there being no need to distinguish between treatment of properties constituted or not in horizontal property, therefore, as decided namely in processes no. 50/2013-T, no. 132/2013-T: 181/2013-T and 183/2013-T, there would only be a place for the incidence of new stamp duty if any of the parts, floors or divisions with independent use presented a TCV exceeding 1,000,000.00€.

• The criteria adopted by the TA violate the principles of legality and tax equality, as well as the prevalence of material truth over formal legal reality, as, in accordance with the arbitral decisions rendered, has been decided in a way that can be said to be unanimous.

• The present request for arbitral pronouncement encompasses the acts of collection of Stamp Duty for the year 2015, requesting the declaration of illegality and annulment of the stamp duty assessment acts identified, with all legal consequences, namely condemnation to reimburse the amounts paid as stamp duty (item 28.1 of the GIST) with reference to the year 2015, plus default interest and compensatory interest.

7. The Response

The Respondent answered, in summary (our responsibility):

• From the concept of property defined in article 2, nos. 1 and 4 of the CIMI results that a "property in full ownership with floors or divisions susceptible of independent use" is, unequivocally, different from an immovable in horizontal property regime, constituted by autonomous fractions, that is, various properties. Article 12 of the CIMI establishes the concept of property matrix, and its no. 3 concerns, exclusively, the manner of registering the matrix data.

• As for properties in full ownership, the assessment takes as its calculation basis the value entered in the property register as "total tax asset value", and the collection document discriminates the parts susceptible of independent use, respective tax asset value and collection assigned to each municipality of the location of the properties (article 119, no. 1 of the CIMI).

• This interpretation does not violate the principles of legality and tax equality because item 28.1 – foreseeing the combination of residential use and tax asset value of the urban property registered in the matrix equal to or exceeding € 1,000,000.00 – intended to tax properties as a single legal-tax reality, and orders the application of the CIMI with the necessary adaptations.

• There is no discrimination in the taxation of properties constituted in horizontal property and properties in full ownership with floors or divisions susceptible of independent use which are differentiated legal institutes (as between properties with residential use and properties with other uses).

• Although the constitution of horizontal property constitutes a mere legal alteration of the property, without reassessment (office – circular no. 40,025, of 11.08.200, of DSCA), the legislator may, nevertheless, submit it to a distinct legal tax framework, such discrimination not being arbitrary but imposed by the need to impose coherence to the tax system.

• The matrix registration of each part susceptible of independent use is not autonomous, by matrix, it consists of a description in the matrix of the property as a whole, as results from the property registers. Horizontal property determines the division/partition of full ownership and the independence or autonomy of each of the fractions that constitute it, for all legal purposes, pursuant to no. 2 of art. 4 of the CIMI and art. 1414 and following of the Civil Code.

• And taxation under Stamp Duty aims at the taxation of wealth embodied in the ownership of immovables of high value, arising in a context of economic crisis which cannot at all be ignored, complying with the criterion of adequacy.

• This interpretation enshrined in the Binding Opinion of the Director-General was also followed in Case no. 668/2015 – T, and should be accepted, therefore the request is without merit.

8. Pleadings

In its pleadings the Claimant countered to the arbitral decision referred to by the Respondent, the existence in the opposite sense of a uniform case law trend of CAAD and Administrative Courts. As an example it cited the Judgment of the STA of 9 September 2015, delivered in Case 047/15.

The Respondent, considering nothing to have been added against the Initial Request, reiterated the arguments presented in its Response.

9. Question to be Decided

The fundamental legal question to be decided consists in knowing whether the scope of the incidence of Stamp Duty provided for in Item 28 of the GIST includes urban properties not constituted in horizontal property but integrated by floors or divisions susceptible of independent use with residential use, when the tax asset value attributed to each one of these distinct parts is less than the value of € 1,000,000.00, although the set of the independent units devoted to residential use reaches a total of TCV equal to or exceeding that amount.

10. Sanitation

The arbitral tribunal is materially competent, pursuant to the provisions of articles 2, no. 1, paragraph a), of the Legal Regime of Arbitration in Tax Matters.

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

The case does not suffer from any nullity nor were there raised by the parties any exceptions that prevent the appreciation of the merits of the case, therefore the conditions are met for the issuance of the arbitral decision.

II – Reasoning

11. Established Facts

It is considered proven that:

11.1. The Claimant is the owner of four urban properties (buildings) located at …, … a…, in Lisbon; Avenue …, nos. … a…, turning onto R. of … …, nos. … a … and onto R. …, nos. … a…, …, in Setúbal; Street …, no.…, in Loures, and Street …, no. … a …, in Lisbon.

11.2. The property located at …, … a …, in Lisbon, with the matrix article U-… of the parish of …, is composed of 7 floors and 13 floors or divisions with independent use, the following being devoted to residential use: 1st D (TCV € 107,560.00); 1st F (94,390.00); 2nd D (TCV € 107,560.00); 2nd D (TCV € 107,560.00); 2nd E (TCV € 107,560.00); 3rd D (TCV € 107,560.00); 3rd E (TCV € 107,560.00); 4th D (TCV € 107,560.00); 4th E (TCV € 107,560.00); 5th D (TCV € 107,560.00); 5th E (TCV € 107,560.00); 6th D (TCV € 107,560.00) and 6th E (TCV € 107,560.00).

11.3. The property referred to in the preceding number has a total TCV of 1,357,010.00 and the sum of the independent divisions devoted to residential use reaches the amount of € 1,277,550.00, determining a stamp duty amount payable of € 12,775.50, (doc. no. 1 and docs. 5 to 17).

11.4. The urban property located at Avenue …, nos. … a …, in Setúbal, has the matrix article … of the Union of Parishes of … (…, … and …) has twelve floors, and 36 independent floors or divisions, the following being devoted to residential use: 2nd A (TCV 62,230.00), 3rd A (TCV € 67,300.00); 3rd B (TCV € 66,580.00), 3rd C (TCV € 66,580.00), 4th A (TCV € 67,300.00); 4th B (TCV € 66,580.00), 4th C (TCV €66,580.00), 5th A (€ 67,300.00) TCV; 5th B (TCV € 66,580.00), 5th C (TCV € 66,580.00), 6th A (TCV € 67,300.00); 6th B (TCV € 66,580.00), 6th C (TCV € 66,580.00) 7th A (TCV € 67,300.00); 7th B (TCV € 66,580.00), 7th C (TCV € 66,580.00), 8th A (TCV € 67,300.00); 8th B (TCV € 66,580.00), 8th C (TCV € 66,580.00), 9th A (TCV € 67,300.00); 9th B (TCV € 66,580.00), 9th C (TCV € 66,580.00), 10th A (TCV € 67,300.00); 10th B (TCV € 66,580.00); 10th C (TCV € 66,580.00); 11th A (TCV € 28,950.00); 11th B (TCV € 36,910.00); 11th C (TCV € 43,420.00) (doc. no. 2 attached with Request).

11.5. The property referred to in the preceding number has a total TCV of € 2,850,600.00 and the sum of the independent divisions devoted to residential use reaches the amount of € 1,775,190.00 (doc. no. 2 and 18 to 45, attached with Request) determining a stamp duty amount payable of 17,751.90 €.

11.6. The property located at Street …, no.…, in Loures, has the matrix number no. … of the Union of Parishes of … and …, and has 11 floors, with the following independent divisions devoted to residential use with the indicated TCV:

11.7. The property referred to in the preceding number has a total TCV of 1,908,520.00 and the sum of the independent divisions devoted to residential use reaches the amount of € 1,772,400.00 (doc. no. 3 and 46 to 85, attached with Request) residential divisions, determined a stamp duty amount payable of 17,724.00 €.

11.8. The urban property located at Street …, no. … a …, in Lisbon has the urban property matrix number … of the parish of …, has seven floors and the following floors or divisions with independent use and respective tax asset values:

(doc. no. 4 attached with the Request)

11.9. The property referred to in the preceding number has a total TCV of € 1,569,890.00 and the sum of the independent divisions devoted to residential use reaches the amount of € 1,112,790.00 (doc. no. 3 and 86 to 107, attached with the Request. The assessment acts referred to, having as reference the tax asset value of each of the residential divisions, determining a stamp duty amount payable of € 11,127.90.

11.10. The Claimant was notified to pay the first installment of the referred assessments, issued with the date of 5 April 2016, of Stamp Duty provided for in item 28.1 of the GIST, concerning the year 2015, in relation to each of the divisions devoted to residential use referred to in the preceding points, payable in three installments, according to art. 120 of the CIMI (Collection documents contained in Documents nos. 5 to 107, attached with the Request).

11.11. The notifications of the assessments referred to in the preceding number identify the amounts corresponding to the 1st installment of the assessed stamp duty, payable in April 2016 (Collection documents attached to the file with the Request, under numbers 5 to 107).

11.12. The collection documents indicate the tax asset values subject to Stamp Duty corresponding to each of the independent divisions, devoted to residential use, in each of the properties/buildings in the numbers above identified as 11.2., 11.4, 11.6. and 11.8, and that the assessment of Stamp Duty, effected on 5 April 2015 had as its basis item 28.1 of the General Stamp Duty Table, applying the rate of 1% to the value of the TCV of each of the referred independent divisions (Collection documents attached with the Request).

11.13. The information from the services of the Respondent (respectively Lisbon SF…, Loures, SF… and Lisbon SF…) concerning the properties of …, … a…, in Lisbon, Street…, no.…, in Loures and Street…, no. … a…, in Lisbon, expressly mention that the collections in question, concerning 2015, were paid (PA 1, PA 3 and PA 4).

12. Unproven Facts

There are no unproven facts relevant to the decision of the case at bar.

13. Substantiation of Evidence

The evidence established was based on the documents submitted by the Claimant – the Request for Arbitral Pronouncement and the documents attached with the request - and by the Respondent (Response and administrative proceedings concerning each of the properties).

14. Legal Appraisal

14.1. Item 28 of the General Stamp Duty Table (GIST)

14.1.1. Regime approved by Law no. 55-A/2012, of 29 October

The fundamental legal question at issue in the present case consists in knowing whether in the case of properties in full ownership, with floors or divisions of independent use but not constituted in the horizontal property regime, the TCV to be considered for purposes of the incidence of Stamp Duty provided for in item 28.1 of the GIST should correspond to the TCV of each floor or division with residential use and independent use or to the sum of the TCV corresponding to the floors or divisions of independent use with residential use.

That is, it is necessary to decide whether the TCV relevant as a criterion for the incidence of the duty is the TCV attributed to each of the residential parts or floors or corresponding to the sum of the tax asset value attributed to each of the different parts or floors (global TCV).

This question has already been appreciated in many proceedings within the scope of Tax Arbitration[1], and no arguments have been identified so far that allow breaking the unanimity that has been achieved regarding the conclusion of the decisions issued.

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

"28 – Ownership, usufruct or right of superficies of urban properties whose tax asset value contained in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the tax asset value for purpose of IMI:

28-1 – For property with residential use – 1%;

28.2 – For property, when the taxpayers that are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance – 7.5%."

According to 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 GIST is levied on a legal situation (no. 1 of article 1 and no. 4 of article 2 of the SDC), in which the respective taxpayers are those referred to in article 8 of the CIMI (no. 4 of art. 2 of the SDC), to whom the burden of the tax falls (subparagraph u) of no. 3 of article 3 of the SDC).

The SDC, as amended by Law no. 55-A/2012, either in article 4, no. 6 ("In situations provided for in item 28 of the General Table, the tax is due whenever the properties are located in Portuguese territory"), or in article 23, no. 7 ("As regards the tax due by 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 CIMI"), in conjunction with art. 1 of the CIMI, considers the property itself as the tax fact (the situation that triggers taxation) provided it reaches the value provided for in item 28 of the General Stamp Duty Table, regardless of the number of taxpayers, possessors (as owners, usufructuaries or superficiaries) of the assets in question.

The wording of item 28.1 of the GIST was amended by Law no. 83-C/2013, of 31 December, which approved the State Budget for 2014, now reading: "For residential property or for land for construction the building of which, authorized or planned, is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code".

That is, the relevant concept in a case such as the one at bar - assessment concerning 2015 - changed from "property with residential use" to "residential property", and it seems to us that this amendment is not susceptible to altering the interpretation that we have been defending in situations concerning years prior to 2014.

14.1.2. The concept of property used in item 28 of the GIST

Either the concept of "properties with residential use" in the original wording of item 28.1 or that of "residential property", in the subsequent wording, are not expressly defined in any provision of the SDC nor in the CIMI, a statute to which article 67, no. 2 of the SDC refers.

In the case at bar, the properties in full ownership have the following composition and value (above, 11.2. to 11.9.):

• The property located at …, … a…, in Lisbon, has two shops for commerce and 13 independent divisions devoted to residential use, 12 with TCV of € 107,560.00 each, and the other with TCV of € 94,390.00 (total TCV of fractions devoted to residential use – € 1,277,550.00);

• The property located at Avenue …, nos. … a…, in Setúbal, has 36 independent divisions, presented 28 as devoted to residential use, with TCV values between € 28,950.00 and € 67,300.00 (total of fractions devoted to residential use – € 1,775,190.00);

• The property located at Street …, no.…, in Loures, composed of 44 independent divisions, 4 devoted to commerce and 40 devoted to residential use, the latter presenting a TCV, in some cases of € 39,480.00 and in others of € 49,140.00 (total of fractions devoted to residential use – € 1,772,400.00);

• The property located at Street …, no. … a …, in Lisbon, composed of 24 independent divisions, 1 devoted to commerce and 23 devoted to residential use, with TCV between € 31,890.00 and € 49,980.00 (total of fractions devoted to residential use - € 1,112,790.00).

At issue is the exact meaning of the segment of the standard of tax incidence of stamp duty in the body of item 28 of the GIST that refers to the tax asset value in accordance with the CIMI: in the case of properties in full ownership but with floors or divisions susceptible of independent use, with residential use, does the relevant TCV correspond to the sum of the TCV of the various divisions/floors with residential use, the whole being considered a single property, as the TA contends, or should what be taken into account be the TCV of each of the respective floors or divisions autonomous with the said residential use, as the Claimant argues?

The said segment (tax asset value considered for purposes of IMI) is integrated into a text that defines as the object of incidence of stamp duty the "Ownership, usufruct or right of superficies of urban properties whose tax asset value contained in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 - (...)" (bold ours).

As has been repeatedly invoked and admitted, the IMI Code enshrines, both as to matrix registration and discrimination of the respective tax asset value and as to the assessment of the tax, the autonomization of parts of urban property susceptible of independent use and the segregation/individualization of the TCV relating to each floor or part of property susceptible of independent use [2].

Thus, each property (building) corresponds to a single article in the matrix (no. 2 of article 82 of the CIMI) but, according to no. 3 of art. 12 of the same Code, concerning the concept of property matrix (registration of the property, its characterization, location, TCV and ownership), "each floor or part of property susceptible of independent use is considered separately in the matrix registration, which discriminates the respective tax asset value", not taking as reference the sum of the tax asset 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 IMI - application of the rate to the tax base - art. 119, no. 1, of the CIMI provides that "the competent collection document" contains the "discrimination of the properties, their parts susceptible of independent use, respective tax asset value and collection (…)".

That is, for tax purposes the rule is the autonomization, the qualification also as "property" of each part of a building, provided that it is functionally and economically independent, susceptible of independent use [3], in accordance with the concept of property defined in no. 1 of article 2 of the CIMI: property is any fraction (of land, encompassing waters, plantations, buildings and constructions of any nature incorporated or based therein, with a character of permanence) provided that it is part of the assets of a natural 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 (emphasis and underlining ours). [4]

Thus, when no. 4 of article 2 provides that "For purposes of this tax, each autonomous fraction, in the horizontal property regime, is deemed to constitute a property", it does not properly establish a regime exceptional or special for properties in horizontal property regime.

After all, each building in horizontal property regime (article 92) has only a single matrix registration (no. 1), describing the building generically and mentioning the fact that it is in horizontal property regime (no. 2) and the matrix autonomy is achieved in the attribution to each of the autonomous fractions, thoroughly described and individualized, of a capital letter, according to alphabetical order (no. 3). This seems to be the specificity of buildings in horizontal property regime.

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 property, the matrix also enshrines tax autonomy by highlighting the different units with indication of the type of floor/floor.

Thus, the arguments of the Respondent are not convincing in the sense of justifying the diversity of treatment in the context of Stamp Duty (item 28) of two types of realities – properties with independent fractions in full (or vertical) property regime and properties with independent fractions under horizontal property regime – considering the first situation as constituting a single unit, with irrelevance of the economic and fiscal autonomy enshrined in the same CIMI. Against the thesis that these properties are only one for purposes of item 28 of the GIST we have the near unanimity of arbitral and administrative decisions, in this case confirmed at the highest level, by the STA.

The defense of an interpretation based on an institutional difference between the two property situations – and in which the TA has frequently glimpsed in item 28 of the GIST an intent of the legislator to develop the figure of horizontal property – does not seem to us to result either from the letter of the provision nor from its confrontation with other rules of the legal system, from which no justification results for, in the matter of incidence of Stamp Duty provided for in item 28.1 of the GIST, to give to fractions of properties in "vertical property", endowed with autonomy, treatment different from that granted to properties in horizontal property, when in either of these situations IMI is applied to the tax asset value evidenced in the matrix for each of the autonomous units.

And there is nothing in the legislative process that led to the approval of Law no. 55-A/2012, of 29 October, any element that permits identifying and legitimizing a purpose (extra-fiscal or fiscal) in the sense of the difference sustained by the Respondent between the two situations: ownership of a building in full property or its division into units with status of horizontal property.

14.2. The ratio legis of items 28 and 28.1 of the GIST

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

As already evidenced in other arbitral decisions, "the legislator when introducing this legislative innovation considered as the determining element of the ability to pay urban properties, with residential use, of high value (luxury), more rigorously, of value equal to or greater than €1,000,000.00 on which a special rate of stamp duty was imposed, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of superficies of urban properties of luxury with residential use. Therefore, the criterion was the application of the new rate to urban properties with residential use, whose TCV is equal to or greater than € 1,000,000.00" (...). "The substantiation of the measure called 'special rate on residential urban properties of higher value' rests on the invocation of the principles of social equity and fiscal justice, calling on the holders of properties of high value intended for residential use to contribute in a more intense way, applying the new special rate to the 'properties of value equal to or greater than 1 million euros. Clearly the legislator understood that this value, when attributed to a residential property (house, autonomous fraction or floor with independent use) translates an ability to pay above average and, as such, susceptible of determining a special contribution to ensure the just distribution of the tax effort." [5]

Given the legislative purpose, it is also concluded that the holding of fractions in full or vertical property does not reveal a greater ability to pay than if they were constituted under the form of horizontal property. On the contrary, in most cases, as evidenced by Arbitral Decision no. 50/2013, "many of the properties existing in vertical property are old, with an undeniable social utility, since in many cases they accommodate residents with modest and more accessible rents, factors which must necessarily be taken into account." [5]

Also the analysis from this perspective confirms the correctness of the interpretation that item 28 of the GIST does not encompass each of the floors, divisions or parts susceptible of independent use when only from the sum of the respective tax asset values results a TCV exceeding that provided for in the said item.

The legislator did not intend to treat in a different way residential properties distinguishing between those that are or are not under horizontal property regime, but to give relevance to divisions or property fractions devoted to residential purposes and considered for purposes of IMI as autonomous units, identifying those whose TCV is greater than one million, understanding that such value configures them as luxurious and justifies a specific taxation, as title of Stamp Duty.

Thus, and even without understanding that item 28 would be affected by unconstitutionality by different treatment of situations that are tax equivalent[6], it is considered that "The substantiation of the measure called 'special rate on residential urban properties of higher value' rested on the invocation of the principles of social equity and fiscal justice, calling on the holders of properties of high value intended for residential use to contribute in a more intense way, applying the new special rate to the 'properties of value equal to or greater than 1 million euros. Clearly the legislator understood that this value, when attributed to a residential property (house, autonomous fraction or floor with independent use) translates an ability to pay above average and, as such, susceptible of determining a special contribution to ensure the just distribution of the tax effort."[7]

That is, item 28 intended to reach the properties that, in themselves, individually have value exceeding one million because it is understood that this value would be the threshold for expression of "luxury residential property", not intending, in this perspective to reach properties that only combined with others of the same owner (regardless of whether or not they have the legal form of horizontal property) reach that value.

This legislative choice may or may not merit agreement, being incidentally confronted with the alternative (and its respective advantages and real possibilities) of global taxation of assets or, at least, of the set of all immovables of the same owner. But it cannot be unknown that this was the choice affirmed by the legislator which in the letter of the law left no indications in the opposite sense[8].

Thus, the present arbitral tribunal concludes that the assessments of Stamp Duty, effected on the basis of items 28/28.1 of the GIST, concerning each of the floors or parts susceptible of independent use, property of the Claimant, object of the present case, are affected by illegality, because the said legal provisions cannot be interpreted in the sense of their application to floors or parts susceptible of independent use of a property in vertical ownership when only from the sum of each of these floors or parts is it possible to obtain a TCV equal to or greater than € 1,000,000.00 (one million Euros), the TCV of each of the said floors or parts not reaching that amount.

Thus it has already been decided in various cases by the STA. Among all, is cited Judgment 0166/16, of 4 May 2016, which concluded: «I - Item 28 of the General Stamp Duty Table (GIST) added by art. 4 of Law no. 55-A/2012, of 29/10, does not apply to urban properties, with one matrix article but constituted by parts with use and independent use to which independent TCV were attributed, each of these of value less than one million euros. II - Item 28 of the General Table not having made any distinction between properties in horizontal property regime and full/vertical property regime and referring to the tax asset value used for purposes of IMI, it will not be incumbent upon its applier to introduce any distinction, all the more so as it is a rule of incidence. III - If it were the legislator's intention to tax immovables that having a single matrix article, because they are constituted by parts susceptible of independent use, have assigned various tax asset values, and intended that for purposes of taxation in the context of stamp duty, in this case, attention should be paid to the sum of these various tax asset values, it would not have added the final part of the provision: on the tax asset value used for purposes of IMI. IV - Nothing in the law imposing the consideration of any sum of all or part of the TCV attributed to the various parts of a property with a single matrix article, also shows to be contrary to law to make such arithmetic operation only for purposes of the taxation provided for in item 28 of the General Stamp Duty Table».

And as evidenced in identical situation, by the Judgment rendered by the STA on 24 May 2016, in case 01344/15, there is no need to appreciate item 28 of the GIST, "in light of principles and constitutional parameters, rather imposing a teleological and systematic interpretation of it, so that, the case law orientation that has been followed by the common courts, and which will now be followed, does not touch upon the good doctrine imposed by that Constitutional Court".[9]

In the case at bar, it results from the established facts that none of the floors intended for residential use, of the four properties in full ownership object of this case, has tax asset value equal to or exceeding €1,000,000.00, therefore it is concluded that the legal presupposition of incidence of Stamp Duty provided for in Item 28 of the GIST is not verified, with consequent illegality of the tax acts under review.

In the event that the tax has meanwhile been fully paid there will still be room, as has been peacefully understood, by application of article 24, no. 5 of the LRAT, when an erroneous interpretation and application by the Respondent of a rule of tax incidence is at issue, for payment of compensatory interest in accordance with articles 43 and 100 of the LGT and 61 of the CPPT.

15. Decision

With the grounds exposed, the arbitral tribunal decides:

a) To judge the request for arbitral pronouncement well-founded and, in consequence, to declare illegal the tax acts of assessment of Stamp Duty (items 28 and 28.1 of the General Stamp Duty Table) levied on the properties identified in the case, dated 4 April 2016 and concerning the year 2015, as expressed in the collection documents identified, ordering the annulment of the Stamp Duty assessed in relation to the year in question, in the total amount of € 59,379.30 (fifty-nine thousand three hundred and seventy-nine euros and thirty cents), as per the Request, and with all legal consequences, including reimbursement of tax that may have meanwhile been paid and payment of the corresponding compensatory interest.

b) To condemn the Respondent in costs.

16. Value of the Proceedings

In accordance with the provisions of no. 2 of article 315 of the CPC, in subparagraph a) of no. 1 of article 97-A of the CPPT and also of no. 2 of article 3 of the Rules of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 59,379.30 (fifty-nine thousand three hundred and seventy-nine euros and thirty cents).

17. Costs

For the purposes of the provisions of no. 2 of article 12 and no. 4 of article 22 of the LRAT and no. 4 of article 4 of the Rules of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 2,142.00 (two thousand one hundred and forty-two euros), pursuant to Table I attached to the said Rules, to be borne entirely by the Respondent.

Lisbon, 16 March 2017.

The Arbitrator

Manuela Roseiro

[1] Regarding the application of item 28 of the GIST in the case of properties in full/vertical ownership, a very large number (hundreds) of decisions are already published on the CAAD tax case law website.

[2] "Another aspect that should be highlighted in the matrix concerns the need to demonstrate the autonomy that, within the same property, can be attributed to each of its parts, functionally and economically independent. In these cases, the matrix registration not only must refer to each of the parts but must make express reference to the tax asset value corresponding to each of them" (Silvério Mateus and Freitas Corvelo, "Real Estate Tax Impositions and Stamp Duty, Annotated", Engifisco, Lisbon 2005, pp. 159 and 160). And the same authors further stated (ibidem, p. 160): "This autonomization of autonomous parts of a property, applicable especially to urban properties, was justified within the scope of the old Real Estate Tax in which the collectible income corresponded to the rent or rental value of each of these components, continued to be justified in the case of Municipal Tax in which the tax asset value had underlying the actual or potential rent and continues to be relevant in the context of IMI, given that the valuation factors provided for in articles 38 and following may not be the same for all these components (...) the fact that a property is or is not leased continues to have relevance for purposes of determining the tax asset value either for purposes of IMI or for IMT (see Article 17 of DL 287/2003)" (they referred to the original wording "transitional regime for leased urban properties", a rule to be reviewed, according to its no. 5, when the urban rental law was reviewed, which happened with Law no. 6/2006, of 27/02).

[3] On this aspect, and in line with the comment cited in the preceding note, see the substantiation contained in the decision of case no. 248/2013-T: "The autonomization in the matrix of the functionally and economically independent parts of a property in full ownership is linked with reasons of a fiscal and extra-fiscal nature. On the fiscal plane, this autonomization concerns the very determination of the tax asset value, which constitutes the tax base of IMI, given that the formula for determining this value, provided for in art. 38 of the same Code, contains indexes 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 tax asset value of properties and their autonomous parts in urban rental legislation." It also mentions no. 1 of art. 15-O, 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 increase in taxation in IMI resulting from the general assessment of urban properties, is applicable per property or part of urban property that is the object of the said assessment) as confirming the individualization, for tax purposes, of the autonomous parts of urban properties.

[4] As observed in the decision of arbitral case no. 132/2013-T: "The rules (...) listed enshrine the principle of autonomization of the independent parts of an urban property, even when it is not constituted in horizontal property. That is, each part susceptible of independent use must be, for purposes of IMI, valued in light of its specificities and use, resulting in an autonomous TCV, individualizable and corresponding to each part susceptible of independent use."

[5] Excerpts from the Decision in case no. 50/2014-T, also referring to Arbitral Decision in case no. 48/2013-T, as to the analysis of the discussion of the legislative proposal in the Assembly of the Republic.

[6] Various decisions of the Constitutional Court have considered unfounded the invocation, on this ground, of the unconstitutionality of item 28 of the GIST.

[7] Excerpts from the Decision in case no. 50/2014-T, also referring to Arbitral Decision in case no. 48/2013-T, as to the analysis of the discussion of the legislative proposal in the Assembly of the Republic.

[8] On this issue we left some considerations in the arbitral decision of 4 May 2014, in case no. 219/2013-T, where, as it was a single undivided property not in horizontal property nor in independent units, the Request was considered unfounded as to the legality of the assessment, not accepting the thesis of the unconstitutionality of item 28 of the GIST.

[9] Judgment no. 247/2016 of the Constitutional Court, of 04.05.2016, which concluded in the sense of "not deeming unconstitutional the provision contained in items 28 and 28.1 of the General Stamp Duty Table, added by article 4 of Law no. 55-A/2012, of 29 October, insofar as it imposes annual taxation on the ownership of urban properties with residential use, whose tax asset value is equal to or greater than €1,000,000.00."