Stamp Tax (Verba 28.1 TGIS) Annulment for Violation of Contradictory Principle | CAAD 408/2014-T

ARBITRAL DECISION

I – The arbitral decision handed down on 17 December 2014, in the proceedings referenced above, which is hereby reproduced in full, did not rule on the request for annulment of the first assessments of Stamp Duty (item 28.1 of the GIST) relating to the year 2013 and to the various divisions of independent use and residential allocation of the urban property identified therein, having concluded that the dilatory exception of "non-impugnability of the challenged act" was met, cognizable ex officio.

From the aforementioned decision, the Applicant would file an action for annulment with the Central Administrative Court – South, registered therein under no. 0.8370/2015, in which, among the grounds adduced, it invoked having been "seriously prejudiced" by the fact that, in the invitation directed to it for perfection of the initial petition, in order to proceed with better identification of the challenged acts: (1) if the acts of stamp duty assessment for the year 2013, relating to each of the economically independent parts of the aforementioned urban property registered under the article … of the parish of … – Lisbon; or (2) if only each of the first instalments of the aforementioned stamp duty assessments, whose voluntary payment deadline ran in April 2014, the Arbitral Court had not communicated its intention to rule ex officio on the "non-impugnability of the challenged act", in which case it would always have opted to challenge the totality of the assessment acts.

By Judgment handed down on 3 March 2016 in the Annulment Proceedings no. 8.370/15, the Venerable Central Administrative Court – South decided to annul the challenged arbitral decision, on the grounds of violation of the principle of contradiction, as shown in the excerpt transcribed below:

"The principle of contradiction, as a principle of arbitral proceedings, is ensured through the parties' ability to pronounce on factual or legal questions raised in the proceedings and there will be no violation of this principle if the Applicant had been afforded the possibility of pronouncing on the factual or legal questions raised in the proceedings.

(…)

The applicant said nothing about this invitation and the Court concluded that a single instalment of a stamp duty assessment, item 28.1 of the GIST, could not be challenged, by cross-reference to the norms of the CMI, of subsidiary application, which prevented the continuation of proceedings and the examination of the merits of the case, and accordingly absolved the TA of the instance.

Concerning this matter, "non-impugnability of the challenged act" (dilatory exception cognizable ex officio), appreciated and decided upon in the arbitral decision was not given prior notice to the applicant, now appellant, so that it could pronounce upon it, as it was only invited in accordance with the terms already stated to proceed with the perfection of the initial petition.

Now, this is a matter cognizable ex officio. And, even with respect to this matter of ex officio cognition, the judge may only rule on it if the parties have had the opportunity to pronounce upon it, which did not occur in the situation at hand, as the parties were not given notice, in particular the applicant, now appellant, of the possibility of non-examination of the merits of the case due to non-impugnability of the challenged act. It is verified, therefore, that the decision appealed against suffers from violation of the principle of contradiction, because the parties, in particular the appellant, did not have the possibility of pronouncing on the question raised ex officio and which moreover prevented examination of the merits.

In the present case, the judge could only rule on this matter through prior hearing of the parties, and should, for that purpose, order notification of the parties to pronounce on this question of non-impugnability of the tax act. This is precisely what results from art. 3, no. 3 of the CPC, which provides that the judge must observe and ensure compliance with, throughout the entire proceedings, the principle of contradiction, and is not permitted, save in case of manifest unnecessary, to decide questions of law or fact, even if cognizable ex officio, without the parties having had the possibility of pronouncing upon them.

This requirement of art. 3, no. 3 of the CPC is to prevent surprise decisions such as occurred with the decision in question in which the principle of contradiction was not observed with respect to the question of non-impugnability of the tax act.

It is verified, therefore, due to the lack of possibility of the parties, in particular the appellant, to pronounce on the matter cognizable ex officio, the alleged violation of the principle of contradiction which constitutes a ground for appeal of the decision in question with provision in subsection d) of art. 28, no. 1 of the RJAT.

The appeal thus proceeds with the consequent annulment of the decision appealed against."

II – The present proceedings having been reopened on 1 June 2016, on the following day an arbitral order was issued, in compliance with the decision of the Central Administrative Court – South, notifying the Parties to pronounce "on the possibility of ex officio cognition of the (…) exception of 'non-impugnability of the challenged act'", by means of successive written submissions within a period of 10 days, beginning with the Applicant.

On 15 June 2016 the written submissions of the Applicant were filed, in which it expressly raised the preliminary question that "(…) comes hereby to comply with the Order for perfection of its initial request, clarifying that it intends to challenge all stamp duty assessment acts for the year 2013, relating to each of the economically independent parts of the urban property registered under article … of the parish of …, in Lisbon" (emphasis and underlining in original).

The Applicant alleges, in summary, that:

• The Arbitral Court should consider proven all facts contained in the initial petition and its respective perfection, as well as those contained in the documents (assessment notes for the year 2013 and property records attached to the proceedings);

• Supplementing the omission from the initial petition, it hereby requests that "the proceedings continue with examination of the request for annulment of all tax acts of stamp duty assessment for the year 2013";

• Item 28.1 of the GIST expressly indicates that the tax is levied on "(…) taxpayer's property value used for IMI purposes (…)";

• Law no. 55-A/2012, of 29/10, which added item 28 to the GIST, makes no reference to the concept of property with residential allocation, with the CMI being applied subsidiarily; by cross-reference to art. 67, no. 2, of the Stamp Duty Code;

• Article 6 of the CMI establishes the classification of urban properties, among which residential ones, and the determining factor for such classification is the normal use of the property, that is, the purpose to which it is intended;

• The legislator made no distinction between properties in vertical ownership and those constituted under the horizontal property regime;

• The TA's understanding, in considering the total value of the property for purposes of applying Stamp Duty, is in opposition to the spirit underlying item 28 of the GIST;

• The TA's criterion of considering the sum of the VPT attributed to parts of independent use does not find legal support, in particular as it does not result from the CMI, subsidiarily applicable to item 28 of the GIST, and violates the principles of legality and tax equality, as well as that of the prevalence of material truth over legal-formal reality;

• In the case at hand, the property consists of seven storeys or divisions of independent use, all destined for residential use, whose VPT was determined in accordance with art. 7, no. 2, subsection b), of the CMI;

• Since none of the aforementioned storeys or divisions has a VPT equal to or exceeding €1,000,000.00, it is concluded that one of the prerequisites for the applicability of item 28 of the GIST is not met;

• The Respondent's interpretation, in considering the sum of the VPT of the storeys or divisions of independent use of the property, has no correspondence either with the letter or the spirit of the law or heeds the historical element, and is formally incongruous, in that, although considering the total VPT of the property, it issues individualised assessments for each storey or division;

• The discrimination carried out by the TA is arbitrary and illegal, since nothing in the law imposes the constitution of properties in horizontal ownership;

• It is illegal and unconstitutional to consider the sum of the VPT of the storeys or divisions of independent use, in violation of the principles of tax equality and proportionality, as the legislator cannot treat equal situations in a differentiated manner.

Invoking diverse arbitral jurisprudence and the Judgment handed down by the Supreme Administrative Court on 9/09/2015, in proceedings no. 047/15, the Applicant ends by requesting the annulment of the Stamp Duty assessments (item 28.1 of the GIST) for the year 2013, with the consequent restitution of the amount unduly paid, "including default interest, plus indemnitory interest calculated at the legal rate".

The Respondent produced no submissions.

As regards the factual matters, those facts are considered proven which had already been proven in the arbitral decision of 17 December 2014, insofar as, in the annulment proceedings no. 8370/15 of the Central Administrative Court – South, the Applicant admitted that "With respect to the factual matters, there are no contested facts in the proceedings, insofar as the Arbitral Court considered proven all facts contained in the arbitral petition and response of the TA, as well as the facts contained in the documents attached to the proceedings (copies of assessment notes; property records)" and no subsequent facts were raised.

Having been given the opportunity to the Parties to pronounce on the possibility of ex officio cognition of the dilatory exception of which cognition was taken in the arbitral decision handed down in the proceedings on 17 December 2014, that is, the non-impugnability of a single instalment of a Stamp Duty assessment, for the grounds adduced therein, and the Applicant having proceeded with the correction of the initial petition, so that it now contains the request for annulment of all Stamp Duty assessments for the year 2013, relating to the various divisions of independent use and residential allocation comprising the identified urban property, nothing now prevents a decision on the merits of the case.

III – LEGAL MATTERS – REASONING

The Question to be Decided:

The principal question brought before these proceedings by the Applicant is whether the liability to Stamp Duty, in accordance with item no. 28 of the GIST, of an urban property not constituted in horizontal property, is determined by the Taxpayer's Property Value (VPT) corresponding to each of the parts of the property, economically independent and with residential allocation, as it contends, or whether it is determined by the global VPT of the property, which would correspond to the sum of all VPT of the storeys or divisions of independent use and with residential allocation that compose it, in accordance with the interpretation given by the TA to the aforementioned norm.

In accordance with the provision of art. 124, no. 1 of the CPPT, of subsidiary application to the tax arbitral proceedings, pursuant to art. 29, no. 1, subsection a), of the RJAT, in the absence of defects leading to a declaration of non-existence or nullity of the act(s) challenged, the court should examine the defects argued which determine its voidability, with art. 124, no. 2, subsection b), of the same article providing that, as regards these latter, the order of their examination shall be that indicated by the appellant, whenever a relationship of subsidiarity is established among them, without prejudice to defects whose success would ensure more stable or effective protection of offended interests being examined as a priority.

Insofar as it appears that, from the success of the defect of violation of law, due to error in the application of law resulting from misinterpretation of the norms provided in item no. 28.1 of the GIST and in art. 12, no. 3, of the IMI Code, applicable by virtue of art. 67, no. 2, of the Stamp Duty Code, there would result effective protection of offended interests, we shall proceed immediately to its examination.

On the Concept of Urban Property with Residential Allocation

In its initial wording, applicable to the situation under analysis, item 28 of the GIST provided that the following situations were subject to stamp duty:

"28 — Ownership, usufruct or right of surface of urban properties whose taxpayer's property value shown in the matrix, in accordance with the Municipal Property Tax Code (CMI), is equal to or exceeding €1,000,000 — on the taxpayer's property value used for IMI purposes:

28.1 — For property with residential allocation — 1%;

28.2 — For property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, listed in a ministerial order approved by the Finance Minister — 7.5%."

The requirements for the application of the norm contained in Item 28.1 of the GIST are thus cumulative, namely that the property to be taxed be an urban property "with residential allocation", whose taxpayer's property value, for IMI purposes, is equal to or exceeding €1,000,000.00.

It has long been peacefully accepted by doctrine that tax norms are interpreted as any other legal norms, a solution which is now expressly provided in art. 11, no. 1 of the General Tax Law (LGT), by establishing that "1 - In determining the meaning of tax norms and in qualifying the facts to which they apply the general rules and principles of interpretation and application of laws are observed".

Among the elements of interpretation, the one from which the norm applicant must depart is, precisely, the grammatical element, that is, the text of the law, although it must be stressed that, in determining the meaning and value of the norm, the interpreter cannot fail to consider the logical element or, in accordance with art. 9, no. 1 of the Civil Code, fail to "reconstruct (…) the legislative thought, having especially in mind the unity of the legal system, the circumstances in which the law was drawn up and the specific conditions of the time in which it is applied".

The norm of applicability contained in item 28.1 of the GIST uses the expression "property of residential allocation", whose concept is not found defined in the Code in which it is inserted, nor in any other legislation of a tax nature.

Being a polysemic expression, which may bear more than one meaning, and in order to determine its exact meaning and scope, in observance of the unity of the system, the interpreter should resort to the so-called "parallel places", that is, there should be consideration of "legal provisions that regulate parallel normative problems or related institutes"[1].

Such "parallel places" will necessarily be found, in the case at hand, in the norms of the IMI Code, to whose subsidiary application article 67, no. 2, of the Stamp Duty Code refers in block, added by the same Law no. 55-A/2012, of 29 October, by providing that "2 - For matters not regulated in this Code concerning item no. 28 of the General Table there shall be subsidiarily applied the provisions of the CMI."

However, notwithstanding the express reference to the IMI Code which the legislator wished to consecrate in art. 67, no. 2, of the Stamp Duty Code, by reference to matters concerning Item 28 of the GIST, nor does it provide us the concept of "properties with residential allocation".

In fact, its article 6, inserted in Chapter I, under the heading "Applicability", does not use that expression when enumerating, in no. 1, the types of urban properties, which may be classified as: a) Residential; b) Commercial, industrial or services; c) Land for construction; d) Other, with nos. 2, 3 and 4 of the same article defining what should be understood by each of those designations.

The type of urban property that best corresponds to the concept of "property with residential allocation" is that of residential properties, as buildings or constructions licensed for residential purposes or that, in the absence of a license, have residential use as their normal destination (residential purposes).

From the fact that the property of which the Applicant is the owner comprises, exclusively, storeys or divisions of independent use and residential allocation, the Respondent wishes to draw the conclusion that it is a property whose ownership fulfils the prediction of the norm of applicability of item 28.1 of the GIST, appealing to a global VPT of value exceeding €1,000,000.00.

Let us see if it is justified.

On the Taxpayer's Property Value of Urban Properties in Full Ownership

With respect to the determination of the taxpayer's property value of properties not constituted in horizontal ownership, article 7, no. 2 of the IMI Code applies, but only as to "urban properties with parts that can be classified in more than one of the classifications in no. 1 of the preceding article", in which case, in accordance with its subsection b) "(…) each part is valued by application of the corresponding rules, and the value of the property is the sum of the values of its parts".

And this is the only norm of the IMI Code in which reference is made to the "value [global] of the property", without, however, this having any relevance at the level of tax assessment.

From the conjunction of the norms of no. 2 of article 7 and no. 1 of article 6, both of the IMI Code, it results that, if an urban property not constituted in horizontal ownership comprises, exclusively, parts or divisions of residential allocation, the value of the property does not equate to the sum of the VPT attributed individually to each of those parts or divisions.

All the more so that, in accordance with no. 3 of article 12 of the CMI, "Each storey or part of a property capable of independent use is considered separately in the property registration, which also identifies its respective taxpayer's property value".

Which amounts to saying that each of those parts is autonomous and that, not having been assigned a VPT equal to or exceeding €1,000,000.00, will be excluded from the applicability of Stamp Duty – item 28.1 of the GIST.

Thus, the literal element of the norms cited above (no. 1 of article 6, no. 2 of article 7 and no. 3 of article 12, all of the IMI Code) proves to be preventive of the TA formulating a norm of applicability ex novo, different from that created by the legislator, seeking to tax a purported global taxpayer's property value of urban properties not constituted in horizontal ownership, corresponding to the sum of the VPT attributed to the various parts that compose them, economically and functionally independent and, as such, separately registered in the matrix, since the law is clear in subjecting to the stamp duty of item 28.1 of the GIST urban properties of residential allocation whose VPT, for IMI purposes, exceeds €1,000,000.00.

On the other hand, as has come to be recognized by the Supreme Administrative Court, in the wake of diverse arbitral decisions, notably that handed down in proceedings no. 144/2013-T, available in the CAAD database –, when the bill that was the source of Law no. 55-A/2012, of 29 October, was presented and discussed in Parliament, the State Secretary for Tax Affairs is stated to have expressly referred, as shown in the Diary of Parliament (DAR I Series no. 9/XII – 2, of 11 October, p. 32) that «The Government proposes the creation of a special tax on high-value urban residential properties. It is the first time in Portugal that special taxation has been created on high-value properties intended for residential use. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses with a value equal to or above 1 million euros" (emphasis ours), from which it is gathered that the reality to be taxed in mind is, after all, and notwithstanding the imprecision of the law's terminology, "the (urban) residential properties", in common parlance "houses", and not other realities" (cf. the Judgment of the STA, Proceedings no. 0498/16, of 29/06/2016, available at http://www.dgsi.pt/).

We thus have that, apart from the grammatical and systematic elements of interpretation of the norm of applicability contained in item 28.1 of the GIST, also the rational or teleological element, the ratio legis or purpose envisaged by the legislator in drawing up that norm, points toward the taxation applying to urban properties that are residential units, provided they have a VPT equal to or exceeding €1,000,000.00, which is not the case for any of the divisions or storeys of independent use that comprise the Applicant's property.

In light of all the foregoing, it remains to conclude by adhering to the jurisprudence uniformly laid down by the STA on the matter, according to which "I - With respect to properties in vertical ownership, for purposes of the applicability of Stamp Duty (Item 28.1 of the GIST, in the wording of Law no. 55-A/2012, of 29 October), liability is determined by the combination of two factors: residential allocation and the VPT shown in the matrix equal to or exceeding €1,000,000.

II - Where a property is constituted in vertical ownership, the applicability of Stamp Duty should be determined, not by the VPT resulting from the sum of the VPT of all divisions or storeys capable of independent use (individualized in the property registration), but by the VPT attributed to each of those storeys or divisions intended for residential use." – see the summary of the recent Judgment of the STA, Proceedings no. 0498/16, of 29/06/2016, and further jurisprudence cited therein.

On the Request for Indemnitory Interest

Finally, the Applicant petitions for restitution of the amounts unduly paid, relating to the Stamp Duty assessments for the year 2013, "including default interest, plus indemnitory interest calculated at the legal rate".

Article 24, no. 1, subsection b), of the RJAT determines that the arbitral decision on the merits of the claim for which no appeal or challenge is available binds the tax administration from the end of the period provided for appeal or challenge, and it must, in the precise terms of the success of the arbitral decision in favour of the taxpayer and until the end of the period provided for the spontaneous execution of judgments of tax courts, "restore the situation that would have existed had the tax act which is the subject of the arbitral decision not been carried out, adopting the necessary acts and operations for this purpose", which includes "the payment of interest, regardless of its nature, in accordance with the terms provided in the General Tax Law and the Code of Tax Procedure and Process.".

However, the only case in which payment of default interest in favour of the taxpayer is provided for is that contemplated in art. 102, no. 2 of the General Tax Law (LGT), "2 - In case the judgment implies restitution of tax already paid, default interest shall be owed from the end of the period of its spontaneous execution.", in the context of execution of judgment, which is not the situation in the present proceedings.

With respect to the request for payment of indemnitory interest, since the tax arbitral process was conceived as an alternative means to the judicial annulment process (cf. the legislative authorization granted to the Government by art. 124, no. 2 (first part) of Law no. 3-B/2010, of 28 April – State Budget Law for 2010), it should be understood that this comprehends the jurisdiction of the Arbitral Courts operating under the auspices of the CAAD the powers which in judicial annulment proceedings are attributed to the tax courts, such as that of examining error attributable to the services.

Article 43, no. 1 of the LGT provides that "Indemnitory interest is owed when it is determined, in an administrative complaint or judicial challenge, that there was error attributable to the services from which resulted payment of the tax debt in an amount greater than that legally due."

It thus appears manifest that, the illegality of the Stamp Duty assessment acts being declared, it having been demonstrated in the concrete case the erroneous application of the norm of objective applicability contained in item 28.1 of the GIST, which justifies its annulment, the Applicant's right to indemnitory interest on the amounts unduly paid must be recognized, from the date of their respective payment, in accordance with what is provided in art. 61, no. 5 of the CPPT, since such illegality is exclusively attributable to the Tax Administration, which carried out those tax acts without the necessary legal support.

On Questions whose Examination is Foreclosed

In the judgment, the judge must pronounce on all questions which should be examined, refraining from pronouncing on questions of which it should not have cognition (final segment of art. 125, no. 1 of the CPPT), and the questions which fall within the court's powers of cognition are, in accordance with art. 608, no. 2 of the CPC, applicable subsidiarily to the tax arbitral process, by cross-reference to art. 29, no. 1, subsection e), of the RJAT, "the questions which the parties have submitted for examination, except those whose decision is foreclosed by the solution given to others (…)".

In light of the solution given to the questions relating to the determination of the VPT relevant for application of the norm of applicability contained in item 28.1 of the GIST and the payment of indemnitory interest in favour of the Applicant, the examination of the remaining questions is foreclosed, in particular those of the unconstitutionality of the aforementioned norm, as the same is not capable of the interpretation which, in the case, was made by the TA.

IV – DECISION

Based on the factual and legal grounds stated above and, pursuant to art. 2 of the RJAT, it is decided, finding the present request for arbitral pronouncement entirely meritorious:

• To declare the illegality of the Stamp Duty assessments challenged, due to error in the legal premises, determining their annulment;

• To condemn the TA to restitution of all amounts unduly paid by the Applicant as a result of the issuance of the Stamp Duty assessments for the year 2013, plus indemnitory interest, from the date of the undue payment until the date of issuance of the respective credit note.

VALUE OF THE PROCEEDINGS: In harmony with the provision of art. 306, nos. 1 and 2 of the CPC, 97-A, no. 1, subsection a) of the CPPT and 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the proceedings are assigned a value of €11,538.30 (eleven thousand, five hundred and thirty-eight euros and thirty cents).

COSTS: Calculated in accordance with art. 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached thereto, in the amount of €918.00 (nine hundred and eighteen euros), chargeable to the Tax and Customs Authority.

Lisbon, 20 July 2016.

The Arbitrator,

/Mariana Vargas/

Text prepared by computer, in accordance with art. 131, no. 5 of the CPC, applicable by cross-reference to subsection e) of art. 29, no. 1 of Decree-Law 10/2011, of 20 January.

The wording of this decision is governed by the orthographic agreement of 1990.

ARBITRAL DECISION[2]

I – REPORT

a) Object of the Dispute:

1. A, with VAT number … and domiciled at Rua … …, in the area of the Finance Service of … … (hereinafter, Applicant), requested the constitution of an Arbitral Court, under the provisions of art. 10, nos. 1 and 2, of the Regime for Tax Arbitration (RJAT), approved by Decree-Law no. 10/2011, of 21 January, with a view to the declaration of illegality and "consequent annulment of tax acts of Stamp Duty assessment" with nos. 2014…, 2014…, 2014…, 2014…, 2014…, 2014… and 2014…, all for the year 2013 and relating to the urban property registered in the property matrix of the parish of …, municipality of Lisbon, under article …;

2. The request for constitution of an Arbitral Court, in which the Tax and Customs Authority (TA) is the Respondent, was filed with the Administrative Arbitration Centre (CAAD) on 30 May 2014, with the TA being automatically notified thereof on 3 June 2014; on 6 June 2014, the initial petition (I.P.) was substituted, for correction of the amount of the claim. The substituted I.P. was notified to the TA on the same date;

3. The Applicant opted not to appoint an arbitrator, and therefore, under the provision of art. 6, no. 2, subsection a), of the RJAT, the undersigned was appointed by the President of the Ethics Council of the Administrative Arbitration Centre (CAAD) to sit on this arbitral court, a charge which I accepted in accordance with the legal provisions.

b) Factual Matters:

In summary, the Applicant bases its claim on the following facts:

a) The Applicant is the owner of the urban property located at Rua …, in Lisbon, registered in the matrix of the parish of … under article …;

b) The aforementioned property consists of seven divisions of independent use, all intended for residential purposes, and was not, in the year to which the identified assessments relate, constituted in horizontal ownership;

c) The taxpayer's property value (VPT) of the various divisions of independent use was determined separately, in accordance with the provisions of art. 7, no. 2, subsection b) of the Municipal Property Tax Code (hereinafter, IMI Code);

d) Each of the independent divisions was assigned a VPT which varied between €98,640.00 and €194,050.00, with the total VPT being €1,153,830.00 (one million, one hundred and fifty-three thousand, eight hundred and thirty euros);

e) In accordance with articles 6 and 7 of the arbitral petition, the claim concerns "the following stamp duty assessments":

1. No. 2014 … - €328.80, left basement, with the VPT of €98,640.00;

2. No. 2014 … - €347.30, right basement, with the VPT of €104,190.00;

3. No. 2014 … - €608.10, ground floor, with the VPT of €182,430.00;

4. No. 2014 … - €634.14, 1st floor, with the VPT of €190,240.00;

5. No. 2014 … - €640.48, 2nd floor, with the VPT of €192,140.00;

6. No. 2014 … - €640.48, 3rd floor, with the VPT of €192,140.00;

7. No. 2014 … - €646.84, 4th floor, with the VPT of €194,050.00;

f) The Applicant attaches to the request for arbitral pronouncement copies of the billing notes and payment notifications, issued during April 2014, of the first instalment of the following Stamp Duty assessments for the year 2013, relating to the various divisions of independent use of the urban property identified above, from which results that the following is the total value of each of the aforementioned assessments:

g) The proceedings are assigned a value of €3,846.14, equivalent to the sum of the values of the first instalments of the assessments effected under item 28.1 of the GIST, for the identified property and for the year 2013.

c) As regards legal matters, the Applicant alleges that:

1. "The TA assessed stamp duty on each of those storeys, with reference to the year 2013, in accordance with art. 6, no. 1, subsection f), the stamp duty of item 28.1 of the GIST, in the wording given by art. 4 of Law no. 55-A/2012, at the rate of 5%" (art. 8 of the arbitral petition);

2. "The TA understands that stamp duty is applicable by reason of the sum of the VPT of the various storeys which compose the property totalling €1,153,830.00", and that "the criterion for determination of the applicability of stamp duty is the global VPT of the storeys and divisions intended for residential use";

3. "In the Applicant's understanding, the TA's position is manifestly illegal and even unconstitutional", since "liability to the stamp duty contained in item 28.1 of the GIST is determined by the combination of two criteria. Residential allocation and the VPT shown in the matrix equal to or exceeding €1,000,000.00";

4. "In the case of a property with characteristics identical to those described in the present proceedings, liability to stamp duty is determined not by the VPT of the property, but by the VPT of each of the storeys or divisions" (art. 13 of the initial petition);

5. "Law no. 55-A/2012 makes no reference to the concept of property with residential allocation" and "Article 67, no. 2, of the Stamp Duty Code provides that matters regulated in this code, concerning item 28 of the GIST, shall be applied subsidiarily the Municipal Property Tax Code (CMI)";

6. "The concept of urban property is that which results from art. 2 of the CMI, with the determination of VPT complying with the terms of art. 38 et seq. of the same diploma";

7. "Article 6 of the CMI indicates the different types of urban properties, among which are residential ones", and "For the legislator the determining factor is the normal use of the property, that is, the purpose to which it is intended";

8. "The legislator made no distinction between properties in vertical ownership and properties subject to the horizontal property regime";

9. "In the case at hand only the material truth underlying the property and its respective use can be relevant";

10. "There would only be stamp duty assessment if one of the parts or storeys with independent use had a VPT exceeding €1,000,000.00";

11. "The TA cannot consider as the reference value for the new tax the total value of the property, since the legislator himself established a different rule under the IMI Code, this being the Code applicable to matters not regulated concerning item 28 of the GIST";

12. "(…) it is illegal and unconstitutional to consider as reference value the sum of the taxpayer's property values attributed to each of the storeys, insofar as it represents a clear violation of the principle of tax equality and proportionality";

13. "The tax legislator cannot treat equal situations in a differentiated manner, since if it were a property subject to the horizontal property regime, none of the fractions would be subject to the new stamp duty";

14. "In sum, the material truth is that which should prevail as the criterion of tax capacity and not a merely formal reality of the property";

15. "The TA's assessment acts are manifestly illegal and should be annulled".

Notified in accordance with and for the purposes of the provision of art. 17 of the RJAT, the Respondent filed a defence, stating that:

1. "According to the request for arbitral pronouncement, the Tax and Customs Authority (T.A.) is stated to have assessed the 1st instalment of stamp duty for 2013 of item 28 of the GIST on the taxpayer's property values relating to the property registrations of the storeys comprising the urban property with residential allocation which the Applicant refers to in the First Article of the I.P." (underlined by us);

2. "The taxpayer's property value of all those 7 storeys with independent use and residential allocation that compose the aforementioned urban property was determined separately, in accordance with art. 7, no. 2, subsection b) of the Municipal Property Tax Code (C.I.M.I.)";

3. "The sum of the taxpayer's property value of these storeys and divisions amounts to €1,153,830.00 as per the Property Record attached by the Applicant";

4. "It would be on this value that the T.A. would assess, in accordance with arts. 6, no. 1, subsection f) sub-subsection i), the aforementioned stamp duty of item 28.1 of the General Table, in the wording given by art. 4 of Law no. 55-A/2012, of 29 October, at the rate of 0.5 percent";

5. "However, according to the author (…), with the fact that, for purposes of the (…) (I.M.I.), pursuant to art. 12, no. 3 of the (…) (C.I.M.I.), each storey or part of a property capable of independent use is considered separately in the property registration" (…) "The taxpayer's property value shown in the matrix would thus be that of each storey or division capable of independent use and not the global taxpayer's property value of the urban property";

6. However, "Such interpretation does not correspond with the letter of item 28.1 of the General Table" or "with the meaning of that legal norm which, according to the author (…) would be the subjection to tax, not of the properties properly speaking, but of the dwellings existing there";

7. "The concentration in each property of independent dwellings is thus not capable of triggering the applicability of stamp duty on each of them";

8. "The taxpayer's property value relevant for purposes of the applicability of stamp duty is (…) the total taxpayer's property value of the property and not that of each of the parts which compose it even if capable of independent use";

9. "Article 80, no. 2 of the C.I.M.I. states that, except as provided in articles 84 and 92, each property corresponds to a single entry in the matrix";

10. "The principle that each property corresponds to a single property registration is only excepted, thus, with respect to mixed properties in which, pursuant to art. 84, each distinct part is registered in the matrix to the extent that it relates to it and with respect to properties constituted in horizontal ownership in which, although pursuant to art. 2, no. 4 of the C.I.M.I., each autonomous fraction is deemed to constitute a property, each building in horizontal property regime corresponds to a single property registration";

11. "The urban property was not constituted in horizontal ownership at the time of the tax event for stamp duty – 31 December 2013 – in which case each of the autonomous fractions would be deemed a property, including for purposes of liability to the stamp duty of item 28.1 of the General Table, but in a vertical ownership regime";

12. The property "However provides, as shown in its respective property matrix, storeys or independent divisions, evaluated in accordance with art. 12, no. 3 of the C.I.M.I, which states that each storey or part of a property capable of independent use is considered separately in the property registration, which also identifies its respective taxpayer's property value on which IMI is assessed";

13. "This norm is not unprecedented, having correspondence in the body of art. 232, 1st rule, of the Code of Property Contribution and Tax on Agricultural Industry (C.C.P.I.I.A.), which provided that each dwelling or part be automatically considered for purposes of determining the taxable income on which assessment should be levied" (…) "the taxable income had necessarily to correspond to the sum of the rent or rental value of each part of the property with economic autonomy";

14. "(…) the property registration must make reference to each of the parts and also to the taxpayer's property value corresponding to each of them, determined separately in accordance with arts. 37 et seq. of the C.I.M.I.";

15. "The unity of urban property in vertical ownership composed of various storeys or divisions is not, however, affected by the fact that all or some of those storeys or divisions are capable of independent economic use";

16. "In the present case, the taxpayer's property value on which the applicability of stamp duty of item 28.1 of the General Table depended had to be, as it was, the global taxpayer's property value of the property and not that of each of its independent parts", since "The fact that the IMI was determined as a function of the taxpayer's property value of each part of the property with independent economic use does not equally affect the application of art. 28, no. 1 of the General Table";

17. "This is what results from the fact that the determining factor for the application of this item of the General Table is the global taxpayer's property value of the property and not separately that of each of its portions";

18. "Any other interpretation would violate, indeed, 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 in art. 103, no. 2 of the Constitution of the Portuguese Republic (C.R.P.)";

19. "It is thus unconstitutional, in violation of the principle of tax legality, the interpretation of item 28.1 of the General Table, to the effect that the taxpayer's property value on which its applicability depends is ascertained globally and not storey by storey or storey by division";

20. "It is not understood how, furthermore, the taxation in question would have violated the principle of equality", as "In truth, horizontal ownership and vertical ownership are differentiated legal institutes";

21. "The constitution of horizontal ownership does imply, in fact, a mere legal alteration of the property, with no new valuation (Office Circular no. 40,025 of 11 August 2000, of the Directorate of Municipal Property Services (D.S.C.A.)";

22. "The legislator can subject to a distinct tax legal framework, thus discriminatory, properties in horizontal and vertical ownership regimes, without such discrimination necessarily being considered arbitrary";

23. "Concluding:

a) Item 28.1 of the General Table of Stamp Duty applies to urban properties with residential allocation;

b) The taxpayer's property value equal to or exceeding €1,000,000.00 on which the application of this legal norm depends is, as expressly results from its letter, the taxpayer's property value of each property and not of its distinct parts, even if capable of independent use";

c) To that extent, the stamp duty of item 28 was correctly assessed".

Facts Proven: The tribunal's conviction, as to the facts stated above, which are considered proven, derives from the critical analysis of the arbitral petition and the documents attached thereto, that is, from copies of the billing notes and payment notifications identified, of the property records of the divisions of independent use of the urban property registered in the property matrix of the parish of …, municipality of Lisbon, under article …, as well as from the references contained in the TA's response.

Facts Not Proven: There are no facts which should be considered unproven.

II – CASE MANAGEMENT:

The parties possess legal personality and capacity, are duly represented (articles 4 and 10, no. 2, of the RJAT and article 1 of Ministerial Order no. 112-A/2011, of 22 March).

The Arbitral Court was regularly constituted at the CAAD on 7 August 2014, to examine and decide the dispute which is the subject of the present proceedings.

In its response, the TA raised, as a preliminary matter, the failure to attach to the initial petition documents 1 to 7 (copies of the billing notes identified above) capable of supporting the request for arbitral pronouncement, in accordance with art. 10, no. 2, subsection d), of the RJAT.

However, the Respondent did not invoke any exception.

By order of 6 October 2014, subsequently amended on 27 October 2014 and, verifying the attachment to the initial petition of documents 1 to 7, the holding of the meeting provided for in art. 18 of the RJAT was dispensed with and it was determined that the proceedings continue with successive written submissions.

In the same order the Applicant was invited, through its attorney, to, if it so wished and within the period for submissions, proceed with the perfection of the initial petition, in order for better identification of the challenged acts: (1). If the acts of Stamp Duty assessment for the year 2013, relating to each of the economically independent parts of the urban property registered under article … of the parish of … – Lisbon, or (2). If only each of the first instalments of the aforementioned Stamp Duty assessments, whose voluntary payment deadline ran in April 2014.

The parties filed no submissions, nor did the Applicant provide any clarification regarding the object of the request for arbitral pronouncement.

III – REASONING:

In the judgment, the judge must pronounce on all questions which should be examined, refraining from pronouncing on questions of which it should not have cognition (final segment of art. 125, no. 1 of the Code of Tax Procedure and Process – CPPT, applicable subsidiarily to the tax arbitral proceedings, by force of the provision of art. 29, no. 1, subsection a), of the RJAT).

The questions on which the tribunal's powers of cognition fall are, in accordance with no. 2 of art. 608 of the Code of Civil Procedure (CPC), applicable subsidiarily to the arbitral proceedings, by cross-reference to art. 29, no. 1, subsection e), of the RJAT, "the questions which the parties have submitted for examination, except those whose decision is foreclosed by the solution given to others; it cannot concern itself with questions other than those raised by the parties, except if the law permits or requires it to rule on others ex officio.".

Among the matters of ex officio cognition are "procedural questions which may determine the absolving of the instance", on which the judgment must rule as a priority (art. 608, no. 1 of the CPC).

Such procedural questions which may determine the absolving of the instance are, in the tax process, those stated in art. 98, no. 1 of the CPPT, which "may be ruled upon ex officio or raised at any time, until the judgment of the final decision becomes final", in accordance with art. 98, no. 2 of the same article, in addition to those contained in art. 89 of the Code of Administrative Tribunal Procedure (CPTA), while law subsidiarily applicable to the judicial tax process, by force of subsection d) of art. 2 of the CPPT.

Among the grounds which prevent the continuation of proceedings, we shall select for analysis those contained in art. 98, no. 1, subsection a), of the CPPT and art. 89, no. 1, subsection c), of the CPTA, the ineptitude of the initial petition and the non-impugnability of the challenged act, respectively.

It is thus necessary, in accordance with the elements contained in the proceedings and with applicable law, to verify whether the initial petition, corresponding to the request for arbitral pronouncement, is inept or whether the challenged act is impugnable.

a) On the Ineptitude of the Initial Petition:

A petition is said to be inept when "the claim is in contradiction with the cause of action" (cf. art. 186, no. 2, subsection b), of the CPC).

Should it be possible to accept the impugnability of one of the instalments of a Stamp Duty assessment (under item 28.1 of the GIST), as partial challenge of the tax act of assessment, as it is believed to be the intention which can be drawn from the content of the initial petition and the documents attached thereto, it is possible that, in the present proceedings, there be a contradiction between the claim and the cause of action, since:

(i) In accordance with the evidence above, although the legal consequence sought be "the annulment of the tax acts, as being manifestly illegal", the Applicant identifies not the assessments, but only the first instalment of each of those assessments, having in mind the partial values indicated, as well as the value assigned to the proceedings, equivalent to the sum of the values of the first instalments of the Stamp Duty assessments for the year 2013;

(ii) Although the entire impugning discourse has as its basis the invocation of illegalities which would determine the total annulment (and not merely partial) of the Stamp Duty assessments for the year 2013, carried out in accordance with item 28.1 of the GIST, relating to the identified urban property;

(iii) Having been notified to proceed with the regularization of the arbitral petition, as regards better identification of the challenged acts, the Applicant did nothing about it, reinforcing the tribunal's conviction that the object of the claim is the first instalment of each of the aforementioned assessments and not the Stamp Duty assessments in their entirety.

As regards the divisibility of the tax act of assessment and the consequent possibility of its partial annulment, jurisprudence has understood that assessment is a divisible act, both by nature, as it concerns the assessment of a pecuniary obligation, and by legal definition, since art. 100 of the General Tax Law (LGT) admits "total or partial success of administrative complaints or appeals, or judicial proceedings in favour of the taxpayer", in which case the tax administration is obliged "to the immediate and full restoration of the situation that would have existed had the illegality not been committed, including the payment of indemnitory interest, in accordance with the terms and conditions provided by law".

However, for there to be partial annulment of the tax act, it is necessary that the illegality affect it only in part (cf. in this sense, the Judgment of the Plenary of the Tax Contentious Section of the STA, handed down on 10 April 2013, in the appeal no. 0298/12, available at http://www.dgsi.pt, in whose summary is read: "Summary: I - The tax act, as a divisible act, both by nature and by legal definition, is capable of partial annulment. II - The criterion for determining whether the act should be totally or partially annulled is to determine whether the illegality affects the tax act as a whole, in which case the act should be entirely annulled or only in part, in which case partial annulment is justified." (Underlined by us).

Cases of divisibility of the tax act are, in particular, those where there is a complex tax event, where there was overstatement of the taxable matter and not, as in the case of the present proceedings, where such quantification occurs autonomously, by means of the act of valuation and there is no overstatement in that quantification from which partial illegality of the assessment to which it served as basis could result.

Thus, in cases where the tax act is divisible, "if partial annulment of a tax act is requested, the tribunal cannot, in principle, annul it entirely"[3]; if total annulment is requested and the act is only partially annullable, the claim will be partially dismissed.

However, to say that the assessment act carried out in accordance with item 28.1 of the GIST is an indivisible act, not capable of being partially challenged, is not sufficient to affirm that the initial petition is inept, due to contradiction between the claim and the cause of action, since, as Castro Mendes teaches[4], many times "The difficulty is maintaining a line of separation between the ineptitude of the initial petition and the impossibility of success in the strict sense (…) Impossibility of success "strict sense" concerns the question on the merits. The judge should dismiss "at the threshold" the initial petition "when it be evident… that, for another reason, the plaintiff's claim cannot succeed".

b) On the Non-Impugnability of One of the Instalments of the Assessment Made Under Item 28.1 of the GIST:

Item 28 of the GIST was added by art. 4 of Law no. 55-A/2012, of 29 October, with the following wording:

"Article 4 – Amendment to the General Table of Stamp Duty

The following item no. 28 is added to the General Table of Stamp Duty, attached to the Stamp Duty Code, approved by Law no. 150/99 of 11 September:

"28 — Ownership, usufruct or right of surface of urban properties whose taxpayer's property value shown in the matrix, in accordance with the Municipal Property Tax Code (CMI), is equal to or exceeding €1,000,000 — on the taxpayer's property value used for IMI purposes:

28.1 — For property with residential allocation — 1%;

28.2 — For property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, listed in a ministerial order approved by the Finance Minister — 7.5%."

For its part, art. 3 of the same Law no. 55-A/2012, of 29 October, introduced amendments to various articles of the Stamp Duty Code, approved by Law no. 150/99, of 11 September, among which its article 23, no. 7, with the following wording:

"7 — In the case of taxes owed in connection with the situations provided 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 CMI" (underlined by us)

and article 44, whose no. 5 provides:

"5 — Should the tax assessment referred to in item no. 28 of the General Table take place, the tax is paid in the periods, terms and conditions defined in article 120 of the CMI."

And article 120 of the IMI Code, with the amendments introduced thereto by art. 215 of Law no. 66-B/2012, of 31 December (State Budget Law for 2013), has the following wording:

"Article 120 – Payment Period

1 - The tax shall be paid:

a) In one instalment, in the month of April, when its amount is equal to or less than €250;

b) In two instalments, in the months of April and November, when its amount is more than €250 and equal to or less than €500;

c) In three instalments, in the months of April, July and November, when its amount is more than €500.

2 - Whenever assessment should take place outside the period referred to in no. 2 of article 113, the taxpayer is notified to proceed with payment, which shall take place by the end of the month following that of notification.

3 - Whenever in the same year, for reasons attributable to the services, tax is assessed concerning two or more years and the total amount to be collected exceeds €250, the tax relating to each of the years in arrears is paid at intervals of six months counted from the month following inclusive that of the notification referred to in the preceding number, with the oldest tax being paid first.

4 - In the case provided for in nos. 1 and 3, failure to pay an instalment or an annual payment in the established period immediately causes all remaining payments to become due. (underlined by us)

5 - If the delay in assessment is attributable to the taxpayer, the latter is notified to pay the tax relating to all years in arrears."

Given that the payment period established by art. 120 of the CMI refers to the payment of the assessment, which can be made in a single payment, in two or three instalments, depending on the value of the tax assessed, it is also important to conjoin this norm with that of art. 113 of the same Code, in whose no. 1 is established:

"Article 113 – Competence and Assessment Period

1 - The tax is assessed annually, in relation to each municipality, by the central services of the Directorate-General of Taxes, based on the taxpayer's property values of the properties and in relation to the taxpayers who appear in the matrices on 31 December of the year to which the same relates." (underlined by us).

From the combined provisions of articles 120 and 113, no. 1, both of the IMI Code, in addition to the already cited no. 7 of art. 23 of the Stamp Duty Code, in the wording given thereto by Law no. 55-A/2012, of 29 October, it results that also for the Stamp Duty referred to in item 28 of the GIST, only one annual assessment is made, with payment in instalments being more than a technique of tax collection and not a partial payment.

That the payment of one of the instalments of the assessment made under the provision of item 28.1 of the GIST is not a partial payment of that assessment, but only a tax collection technique, is corroborated by no. 4 of art. 120 of the IMI Code, applicable subsidiarily, according to which "In the case provided for in nos. 1 and 3, failure to pay an instalment or an annual payment in the established period immediately causes all remaining payments to become due", which reveals the unity of the tax obligation owed[5].

On the non-impugnability of one instalment of IMI the arbitral process no. 120/2012-T has already pronounced, which proceeded at the CAAD (available at https://caad.org.pt/tributario/decisoes/), from which the following fragments are extracted, in which reference is made to the wording of art. 120 of the CMI in force at the date of the facts which were its subject:

"In accordance with the provision of art. 113, no. 2 of the IMI Code, assessment of this tax is made in the months of February and March of the year following that to which the tax relates. In accordance with no. 1 of art. 120 of the same diploma, the tax shall be paid in two instalments, in the months of April and September, as long as its amount exceeds Euros 250, with payment, should that amount be equal to or less than that limit, being made in a single payment during the month of April." (…) "As results thus from the provision of the aforementioned articles, although the autonomously challengeable act be the act of IMI assessment (underlined by us), the period for disputing its legality should only be counted from the end of the payment period of the tax assessed therein. Should this be paid, in accordance with the law, in more than one instalment, only with the end of the last of those (assuming, of course, the non-occurrence of situations of early maturity) would it thus be possible to initiate the running of the period referred to in art. 102, no. 1, subsection a) of the CPPT, applicable within the tax arbitral proceedings, by virtue of the provision of art. 10, no. 1, subsection a) of Decree-Law no. 10/2011, of 20 January ("RJAT")." (…) "Such conclusion results, moreover, clearly from the indivisible nature of the assessment act, as well as the necessity – moreover, emphasized by the Respondent herself – that, regarding the same IMI assessment - which, in accordance with law, should be paid in two instalments - contradictory administrative or judicial decisions not be handed down." (underlined by us) (…) "It is that – let us reiterate –, not being any of the instalments of IMI payment autonomously challengeable – but only the assessment act to which those refer". (underlined by us).

Quoting BRAZ TEIXEIRA, we shall say that "The payment corresponding to the tax obligation may be instantaneous or periodic (…)". However, "It is necessary not to confuse periodic payments which, although being carried out by successive acts, at diverse moments, have origin in the same obligation and constitute the various portions of a single payment that was divided, with payments which should be made periodically, not due to a division of the global payment, but rather to the birth, also periodic, of new obligations, by the permanence of the factual premises of taxation.".[6] (underlined by us)

The nature of the instalments of an IMI assessment and, correlatively, of the Stamp Duty assessments referred to in item 28.1 of the GIST, is that of division of the global assessment, made annually, and cannot, for that reason, be challenged autonomously, since the object of judicial challenge (and of the tax arbitral process) is the tax act of assessment.

Concluding, for the reasons exposed, on the non-impugnability of an instalment of a Stamp Duty assessment, item 28.1 of the GIST, by cross-reference to the norms of the IMI Code, of subsidiary application to the matter under analysis, the proceedings cannot continue.

IV – DECISION:

The conclusion that the assessment of Stamp Duty, of item 28 of the GIST, is indivisible, with each of its instalments not capable of being autonomously challenged, coming under the "non-impugnability of the challenged act", prevents the continuation of proceedings and the examination of the merits of the case, and therefore it is decided to absolve the TA of the instance.

VALUE OF THE PROCEEDINGS:

In harmony with the provision of art. 306, no. 2 of the CPC and 97-A, no. 1, subsection a) of the CPPT and 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the proceedings are assigned a value of €3,846.14.

COSTS:

Calculated in accordance with art. 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached thereto, in the amount of €612.00, chargeable to the Applicant.

Lisbon, 17 December 2014.

The Arbitrator,

/Mariana Vargas/

Text prepared by computer, in accordance with art. 131, no. 5 of the CPC, applicable by cross-reference to subsection e) of art. 29, no. 1 of Decree-Law 10/2011, of 20 January.

The wording of this decision is governed by the orthographic agreement of 1991.

[1] MACHADO, J. Baptista, "Introduction to Law and Legitimizing Discourse", Almedina, Coimbra, 1995, p. 183.

[2] Arbitral Decision annulled by the judgment of the TCA–South handed down within Proceedings no. 08370/15, of 03-03-2016.

[3] SOUSA, Jorge Lopes de, "Code of Tax Procedure and Process – annotated and commented" Volume I, Áreas Editora, 2006, p. 875.

[4] MENDES, João de Castro, Tax Civil Procedure – II Volume AAFDL; 1987, pp. 491 and 495.

[5] According to Nuno Sá Gomes, "Manual of Tax Law", Volume I, Rei dos Livros Publishing, 1995, at p. 131, "the [succession] tax does not cease to be a single payment even if paid in instalments (cf. art. 120 of the Succession Tax and Gift Tax Code); as once an instalment is matured and not paid the total tax immediately matures (art. 122) which reveals the unity of the tax obligation owed".

[6] TEIXEIRA, António Braz, "Principles of Tax Law", Vol. I, 3rd Edition, Almedina, Coimbra, 1995, pp. 243 and 244.