Summary
Full Decision
ARBITRAL DECISION
Report
1. The A…, with the tax identification number…, represented by the management company B… – Investment Fund Management Company for Transferable Securities, S.A., with the tax identification number…, with headquarters at Avenue…, no….., …-…, Lisbon, hereinafter referred to as the Claimant, submitted on 6 July 2017 a request for arbitral pronouncement in which it seeks the declaration of illegality of the act, and consequent revocation, of rejection of the ex officio review no. …2016…, which has as its object the assessment of the legality of the tax acts of Stamp Tax assessment no. 2015…, no. 2015… and no. 2015…, relating to the urban property registered under the matrix article…, belonging to the parish and municipality of …, district of Leiria, being sued the Tax and Customs Authority, hereinafter referred to as the Respondent or AT.
2. The purpose of the request for arbitral pronouncement consists of the declaration of illegality and consequent annulment of the tax act of Stamp Tax assessment to which corresponded the collection documents no. 2015…, no. 2015… and no. 2015…, referring to the tax year 2014, for defect of violation of law, for error in the assumptions of fact and law.
3. The Claimant further requests the restitution of the entirety of the tax paid plus indemnificatory interest, at the legal rate, until full reimbursement of the amount owed calculated on the tax.
4. The request for the constitution of the arbitral tribunal was accepted by the President of the Administrative Arbitration Centre (CAAD) and automatically notified, on 17 July 2017, to the AT.
5. The Claimant did not proceed with the appointment of an arbitrator, whereby, under the provisions of no. 1 of article 6 and of subparagraph a) of no. 1 of article 11 of the RJAT, the President of the Deontological Council of CAAD designated the undersigned as arbitrator of the singular arbitral tribunal, which communicated acceptance of the designation within the deadline.
5.1. On 30 August 2017, the parties were notified of the appointment of the arbitrator, having raised no impediment.
5.2. In accordance with what is stipulated in subparagraph c) of no. 1 of article 11 of the RJAT, the singular arbitral tribunal was constituted on 14 September 2017.
6. To substantiate the request for arbitral pronouncement, the Claimant alleged, in summary, the following:
6.1. The urban property, at the date of the facts, was registered in the respective matrix as land for construction.
6.2. The urban property registered in the respective matrix as land for construction cannot be subsumed in the concept of "property with residential use" and, consequently, is not included within the scope of objective incidence of item 28.1 of the TGIS.
6.3. The urban property in question in the present request did not have in 2014 a "building, authorized or provided for" for "residential purposes" as required by item 28.1 of the TGIS.
6.4. In these terms, given the situation of the urban property in question, the taxation set out in item 28.1 of the TGIS could not have been applied in this case, given that the respective prerequisites for application were not met.
6.5. The Claimant concludes by alleging that the Stamp Tax assessments, the mediate object of the present request, should be declared illegal for violation of what is set out in item 28.1 of the TGIS.
6.6. As a subsidiary matter, it alleged the unconstitutionality of item 28 of the General Table of Stamp Tax when applied to "land for construction".
7. Notified in accordance with and for the purposes set out in article 17 of the RJAT, the Respondent presented a reply, defending itself by exception and by challenge, and remitted the "administrative file".
7.1. By exception, the AT invoked the absolute incompetence of the arbitral tribunal for the assessment of the request for declaration of the material unconstitutionality of item 28.1 of the TGIS.
7.2. By challenge, the AT invoked, in summary, the following:
7.2.1. In the property register that is the basis of the present assessment, it appears that the land for construction is allocated to residential use.
7.2.2. Urban properties that are land for construction and to which residential use has been attributed in the context of their respective assessments, with such use appearing in their respective matrices, are subject to Stamp Tax.
7.2.3. It refuted the alleged unconstitutionality of item 28 of the TGIS.
8. In its Reply, the AT further stated that it saw no interest and utility in the holding of the meeting provided for in article 18 of the RJAT, requested its waiver if the Claimant did not object to such fact, and further informed that it did not intend to make any further submissions.
9. Notified of the AT's Reply, expressly for the exercise of the right to be heard regarding the subject matter of the exception, the Claimant, on 27 October 2017, came to inform that it also did not intend to make submissions and that it had nothing to object to regarding the waiver of the aforementioned meeting.
10. Since proof was not requested and given the position assumed by the parties, on 27 December 2017, the Tribunal decided:
a) To waive the holding of the meeting provided for in article 18 of the RJAT;
b) To waive the phase of final submissions;
c) To determine that the matter of exception be decided upon the pronouncement of the arbitral decision;
d) To designate 31 January 2018 for pronouncement of the arbitral decision.
11. In the name of the principle of cooperation of the parties, on 11 January 2018, the Tribunal decided to order notification of the Claimant to, within the period of 10 days from notification of the said order, attach to the case file the proof of payment of the instalments of the assessed tax.
12. Notified of the aforementioned arbitral order of 11 January 2018, the Claimant said nothing and did not attach any documentation to the case file.
13. Under the principles of the autonomy of the Arbitral Tribunal in the conduct of the proceedings, celerity, simplification and procedural informality (articles 19, no. 2, and 29, no. 2, of the RJAT), on 31 January 2018, the Tribunal decided:
a) In the name of the principle of cooperation of the parties, to insist on the notification of the Claimant to, within the period of 10 days from notification of the order, attach to the case file the proof of payment of the instalments of the assessed tax;
b) In the name of the principle of cooperation of the parties, to notify the AT to, within the period of 10 days from notification of the order, inform whether payment of the tax was made by the Claimant and, if so, the dates of payment of the instalments of the assessed tax.
14. Since it was not possible to pronounce the arbitral decision on the date previously communicated to the parties for the reasons referred to, the Tribunal designated 28 February 2018 as the new date for pronouncement of the arbitral decision.
15. Notified of the aforementioned arbitral order of 31 January 2018, neither the Claimant nor the AT said anything, nor attached any documentation to the case file.
16. As time still permitted, under the principles of the autonomy of the Arbitral Tribunal in the conduct of the proceedings, celerity, simplification and procedural informality (articles 19, no. 2, and 29, no. 2, of the RJAT), on 28 February 2018, the Tribunal decided:
a) In the name of the principle of cooperation of the parties, to insist, once more, on the notification of the Claimant to, within the period of 5 days from notification of the order, attach to the case file the proof of payment of the instalments of the assessed tax;
b) In the name of the principle of cooperation of the parties, to notify the AT to, within the period of 5 days from notification of the order, inform whether payment of the tax was made by the Claimant and, if so, the dates of payment of the instalments of the assessed tax;
17. Since it was not possible to pronounce the arbitral decision on the date previously communicated to the parties for the reasons referred to, the Tribunal designated 14 March 2018 as the final date for pronouncement of the arbitral decision.
18. Notified of the arbitral order of 28 February 2018, on 1 March 2018, the AT came, in summary, to state that the law determines deadlines for the attachment of documents intended to prove the facts and that the subsequent presentation of documentary evidence by the Claimant became barred, since there is no legal support for the allegation of new facts nor for the granting of a deadline for presentation of new documents. In its request the AT did not provide the information requested by the Tribunal.
19. Notified of the arbitral order of 28 February 2018, on 2 March 2018, the Claimant came, in summary, to justify that it had not been able to locate the documents proving the respective payment of tax, having nonetheless attached to the case file three printscreens of the records of the Stamp Tax Collection Notes, obtained through the respective Finance Portal.
2. Sanitation
Article 3, no. 1, of the RJAT, provides that: "The joinder of claims even though relating to different acts and the joinder of plaintiffs are admissible when the success of the claims depends essentially on the assessment of the same circumstances of fact and on the interpretation and application of the same principles or rules of law".
Thus, the joinder of claims underlying the present case is admissible, since it has as its object acts of assessment of the same tax. As the identity between the matter of fact is also verified and the success of the claim depends on the interpretation of the same principles and rules of law, cf. art. 3, no. 1, of the RJAT.
The arbitral tribunal was regularly constituted, in accordance with what is stipulated in articles 2, no. 1, subparagraph a), and 10, no. 1, of Decree-Law no. 10/2011, of 20 January, and is competent.
The parties are properly represented, possess legal personality and capacity and have legitimacy (articles 4 and 10, no. 2, of the same diploma and article 1 of Ordinance no. 112-A/2011, of 22 March).
The proceedings do not suffer from nullities.
3. Matter of Fact
3.1. Proven Facts
Based on the elements that appear in the file and in the administrative file attached to the case, the following facts are considered proven:
A) As of 31 December 2014, the Claimant was owner and legitimate proprietor, in the proportion of 3/5, of the urban property registered under the matrix article…, belonging to the parish and municipality of … (Cf. Administrative File attached to the case);
B) As of 31 December 2014, the urban property described in A) was matricially registered as "land for construction" (Cf. Property register attached with the Administrative File attached to the case);
C) In the respective property register, the urban property registered under the matrix article.. appears described in the following terms: Description of Property – Type of Property: Land for Construction (Cf. Property register attached with the Administrative File attached to the case);
D) In the "Valuation Data" of the respective property register, the urban property described in A) appears inscribed in the following terms: "Type of location coefficient: Residential" (Cf. Property register attached with the Administrative File attached to the case);
E) On 20 March 2015, the AT effected the assessment of Stamp Tax, in the total amount of € 10,089.00, with respect to the year 2014 and relating to the urban property described in A), which was duly notified to the Claimant (cf. Documents 2, 3 and 4 attached to the P.I. and Administrative File attached to the case);
F) In the tax year to which the said assessment relates (2014), the taxable patrimonial value of the urban property described in A) was € 1,681,500.00 (cf. Documents 2, 3 and 4 attached to the P.I. and Administrative File attached to the case);
G) Following the Stamp Tax assessment, the Claimant was notified of the collection documents which are then itemized (Cf. Documents 2, 3 and 4 attached to the P.I. and Administrative File attached to the case)
I - Tax Year: 2014; Document Identification – 2015 …; Assessment Date – 2015-03-20; Payment Reference –…; Payment Deadline – APRIL/2015; 1st Instalment; Amount to Pay - € 3,363.00;
II - Tax Year: 2014; Document Identification – 2015…; Assessment Date – 2015-03-20; Payment Reference –…; Payment Deadline – JULY/2015; 2nd Instalment; Amount to Pay - € 3,363.00;
III - Tax Year: 2014; Document Identification – 2015…; Assessment Date – 2015-03-20; Payment Reference –…; Payment Deadline – NOVEMBER/2015; 3rd Instalment; Amount to Pay - € 3,363.00;
H) On 16 April 2015, the Claimant made timely and full payment of the amount corresponding to the 1st instalment of the aforementioned Stamp Tax assessment, in the amount of € 3,363.00 (cf. Printscreen of the record of the Stamp Tax Collection Notes, obtained through the respective Finance Portal and attached by the Claimant in its request of 2 March 2018);
I) On 7 July 2015, the Claimant made timely and full payment of the amount corresponding to the 2nd instalment of the aforementioned Stamp Tax assessment, in the amount of € 3,363.00 (cf. Printscreen of the record of the Stamp Tax Collection Notes, obtained through the respective Finance Portal and attached by the Claimant in its request of 2 March 2018);
J) On 17 November 2016, the Claimant made timely and full payment of the amount corresponding to the 3rd instalment of the aforementioned Stamp Tax assessment, in the amount of € 3,363.00 (cf. Printscreen of the record of the Stamp Tax Collection Notes, obtained through the respective Finance Portal and attached by the Claimant in its request of 2 March 2018);
L) The aforementioned Stamp Tax assessment resulted from the application of item 28.1 of the TGIS to the urban property described in A) (Cf. Documents 2, 3 and 4 attached to the P.I. and Administrative File attached to the case);
M) On 21 December 2016, the Claimant filed with the AT a request for ex officio review of the tax act of Stamp Tax assessment, which came to correspond to the Administrative Procedure for Ex Officio Review no. …2016… (Cf. Document 1 attached to the P.I. and Administrative File attached to the case );
N) Through Official Letter no. … of 2017-04-04 from the AT, the Claimant was notified of the decision to reject the request filed for ex officio review of the tax act of Stamp Tax assessment (Cf. Document 1 attached to the P.I. and pages… of the Administrative File attached to the case).
O) On 6 July 2017, the Claimant filed the request for arbitral pronouncement that gave rise to the present proceedings.
3.2. Grounds for the Matter of Fact Given as Proven
The matter of fact given as proven has its genesis in the documents used for each of the facts alleged and whose authenticity was not questioned, namely in the documents attached by the Claimant with the request for arbitral pronouncement and in its request of 2 March 2018 and in the administrative file.
3.3. Facts Not Proven
With interest for the case file, it was not proven that, with respect to the urban property registered under the matrix article…, of the parish and municipality of…, there existed, at the date of the tax event, any subdivision permit, building license permit, approved project, prior notification, prior favorable information or document proving construction viability from which resulted as building provided or authorized for residential purposes.
There are no other facts with relevance for the arbitral decision that have not been given as proven.
3.4. Grounds for the Matter of Fact That is Not Considered Proven
No documentary support is attached to the case file that attests that the acts in question were practiced having as their object property with approved projects for construction or any other titles constituting the right to construct for residential purposes.
4. Law
4.1. The preliminary matter of the alleged preclusion of the subsequent presentation of documentary evidence by the Claimant.
First and foremost, the Tribunal considers it must address the AT's request of 1 March 2018, in which the Respondent came, in summary, to state that the law determines deadlines for the attachment of documents intended to prove the facts and that the subsequent presentation of documentary evidence by the Claimant became barred, given that there is no legal support for the allegation of new facts nor for the granting of a deadline for presentation of new documents.
This request arose following orders from the Tribunal in which, under the principles of the autonomy of the Arbitral Tribunal in the conduct of the proceedings, celerity, simplification and procedural informality (articles 19, no. 2, and 29, no. 2, of the RJAT), it was decided:
a) In the name of the principle of cooperation of the parties, to notify the Claimant to attach to the case file the proof of payment of the instalments of the assessed tax;
b) In the name of the principle of cooperation of the parties, to notify the AT to inform whether payment of the tax was made by the Claimant and, if so, the dates of payment of the instalments of the assessed tax.
Indeed, in article 12 of its petition, the Claimant stated that it proceeded with full and timely payment of the tax due. Such allegation also appeared in the request for ex officio review.
Although the Claimant attached with its petition documents 2 to 4, the fact is that the same did not include payment of the tax.
In its reply, the AT says nothing about said payment, and certainly does not challenge the same.
In the "administrative file" attached to the case by the AT, which is limited to the request for ex officio review of the assessment and the decision rejecting the same, nothing appears about payment of the tax. It is an administrative file that is at the very least incomplete.
The Tribunal understood that the proper decision of the case, given the requests made by the Claimant and the material truth, required the verification or not of payment of the tax and, if so, the dates of the same.
Thus, in the name of the principle of cooperation of the parties, the parties were notified several times to attach to the case file proof of payment of the instalments of the assessed tax (in the case of the Claimant) and to inform whether payment of the tax was made by the Claimant and, if so, the dates of payment of the instalments of the assessed tax (in the case of the Respondent).
The Tribunal did not permit the allegation of new facts, nor did it grant a deadline for presentation of new documents at the request of a party.
In tax proceedings, whatever the procedural phase, the Tribunal must ex officio conduct or order all necessary or useful diligences to the discovery of material truth with respect to the object of the proceedings – in accordance in particular with what is provided in articles 99 of the General Tax Law (LGT), and 13 of the Code of Tax Procedure and Process (CPPT).
Indeed, having in view the realization of the principles of the inquisitorial/investigative and discovery of material truth, it is incumbent upon the Tribunal to direct the proceedings and conduct all diligences which, according to an objective criterion, it considers useful to the ascertainment of the truth, not deriving from the conjunction of articles 13 and 114 of the CPPT, that the Tribunal is obliged to conduct all diligences that are requested by the parties, rather from such provisions deriving the duty to conduct those that the Tribunal considers, in its free appreciation, as useful to the ascertainment of the truth.
And the AT cannot forget that the principles of arbitral proceedings are:
I) The autonomy of the arbitral tribunal in the conduct of the proceedings and in the determination of the rules to be observed with a view to obtaining, within a reasonable time, a ruling on the merits of the claims made;
II) The free appreciation of the facts and the free determination of the diligences for the production of evidence necessary, in accordance with the rules of experience and the free conviction of the arbitrators (cf. subparagraphs c) and e) of article 16 of the RJAT);
III) The principle of free conduct of proceedings (nos. 1 and 2 of article 19 of the RJAT).
In the concrete case, the Tribunal scrupulously fulfilled its function and it was, ultimately, the Respondent who shirked the necessary cooperation with the Tribunal.
In conclusion and without need for further considerations, the Respondent's arguments in its request of 1 March 2018 to the effect that, after the filing of the request for arbitral pronouncement, the subsequent presentation of documentary evidence became barred on the part of the Claimant at the request of the Tribunal are without merit.
The documents attached by the Claimant, at the request of the Tribunal, and as complementary to the alleged payment (not contested by the AT) are elements of proof relevant to the ascertainment of the truth and remain in the case file.
4.2. Exception of incompetence of the arbitral tribunal as to the subject matter
The AT comes to invoke that the competence of arbitral tribunals, defined in article 2, no. 1 of the RJAT, does not comprise the assessment of the constitutional conformity of legislative acts or their norms.
And it then alleges that the AT contends that the arbitral tribunal is incompetent as to the subject matter to assess the request for declaration of the material unconstitutionality "of item 28 of the General Table of Stamp Tax, for violation of the principle of contributive capacity, as an aspect of the principle of equality, provided for in articles 13 and 104, no. 3 of the CRP» (see article 9 of the Reply).
Concluding that the AT that the "absolute incompetence as to the subject matter constitutes a dilatory exception that prevents the continuation of the proceedings, leading to the dismissal of the instance as to the respective request, in accordance with what is provided in articles 576, no. 2, 577, subparagraph a) and 278, no. 1, subparagraph a) of the CPC, applicable ex vi article 29, subparagraph e) of the RJAT" (see article 10 of the Reply).
Notified of the AT's Reply, expressly for the exercise of the right to be heard regarding the subject matter of the exception, the Claimant said nothing.
The competence of the arbitral tribunal is set out in article 2, no. 1 of the RJAT, with its competence being limited to the assessment of the matters provided therein.
As to the binding of the tax administration to the jurisdiction of arbitral tribunals, article 4, no. 1 of the cited regime provides that this depends on an ordinance of the members of the Government responsible for the areas of finance and justice.
The competence of the arbitral instance is thus delimited by the ordinance binding the Tax Administration to the jurisdiction of the Administrative Arbitration Centre (Ordinance no. 112-A/2011, of 22 March).
Under the provisions of article 2 of the indicated Ordinance, the Directorate-General of Taxes and the Directorate-General of Customs and Special Consumption Taxes bind themselves to the jurisdiction of the arbitral tribunals operating in the CAAD that have as their object the assessment of claims relating to taxes whose administration is entrusted to them, referred to in no. 1 of article 2 of Decree-Law no. 10/2011, of 20 January.
There is no doubt whatsoever in the Tribunal's mind that the assessment of the "constitutional conformity of legislative acts or their norms" is not included in the competence of the arbitral tribunal.
And had the Claimant raised the intervention of the arbitral tribunal for assessment of the constitutional conformity of item 28.1 of the TGIS, there would be no doubt that the arbitral tribunal would be incompetent as to the subject matter.
However, upon analysis of the request formulated by the Claimant, it is easily verified that it has not formulated any request for assessment of the constitutionality of item 28.1 of the TGIS.
Indeed, as to this matter, the request formulated by the Claimant, as a subsidiary matter, is as follows:
"that item 28.1 of the General Table of Stamp Tax be disapplied, in the concrete case, for manifest unconstitutionality, for violation of the constitutional principle of equality (cf. article 204 of the CRP) and, consequently, that the illegality of the tax acts of Stamp Tax assessment sub judice be declared, because based on unconstitutional norms, the same being promptly annulled, with all legal consequences". (cf. subparagraph d) of point VII. Request of the P.I.)
Which allows verification that the Claimant does not formulate any request for declaration of unconstitutionality of item 28 of the TGIS, but only its disapplication in the concrete case, which is something quite different.
Note that the request constitutes the concrete means of jurisdictional protection intended by the Claimant, and the tribunal cannot substitute itself for the party, condemning in an object different from what is requested – cf. article 609 of the CPC.
Thus, having the Claimant lodged only a request, moreover subsidiary, for disapplication of item 28.1 of the TGIS for unconstitutionality, the tribunal or the opposing party cannot substitute itself for the Claimant, arguing that the request formulated is another, namely that for declaration of unconstitutionality of item 28.1 of the TGIS, in order thereby to conclude incompetence as to the subject matter of the arbitral tribunal for knowledge of that request, and, it is said, of all else!
Note that even had the Claimant formulated a request for declaration of unconstitutionality of item 28.1 of the TGIS, which, as we have seen, did not occur, still such request would have been formulated only as a subsidiary matter, whereby no impediment existed for the tribunal to know of the other requests, as the Respondent intends.
Wherefore, still it was incumbent upon the tribunal to assess the principal request and, only in the event that this did not succeed, could it declare itself incompetent to assess the subsidiary request formulated.
The AT's arguments regarding the incompetence of the arbitral tribunal are therefore not well-founded.
In these terms, the Tribunal judges the exception of material incompetence of the arbitral tribunal raised by the Respondent to be without merit.
4.3. Assessment of the merits of the request for arbitral pronouncement
In view of all that has been set out above, the Claimant challenges the Stamp Tax assessment, under analysis, on the basis of the following grounds:
- Illegality for error in the assumptions of fact and law;
- Unconstitutionality of item 28.1 of the TGIS, with the wording given by Law no. 83-C/2013, of 31 December, if interpreted in the sense that the relevant tax event is based on an expectation of allocation to residential use, for violation of the constitutional principles of contributive capacity and tax equality.
The Administration is subordinated to the Constitution, like any power or body of the State, but what characterizes it is the immediate subordination to law, there being no Administration without legal mediation. The principle of legality, understood in a broad sense (the lawfulness of the administration), constitutes the presupposition and foundation of all administrative activity, it being only exceptionally that there can be administrative activity directly linked to the Constitution.
In this conformity, it is necessary, first and foremost, to ascertain whether or not the tax acts of assessment that are the object of the present arbitral request are in conformity with the immediate parameter to which the Tax Administration is subordinated, in the case of the present file: item 28.1 of the TGIS, according to the wording given by Law no. 83-C/2013, of 31 December.
As we have seen, the Claimant alleges, in summary, that the Stamp Tax assessments in question are illegal for error in the assumptions of fact and law.
It is necessary to assess this.
For the resolution of the question identified above, it is important to bear in mind, first and foremost, the evolution and framework of said item 28, both before and after the amendment that was determined by article 194 of Law no. 83-C/2013, of 31 December (which is, as stated, the wording applicable to the present case).
In that sense, the reference to the Supreme Administrative Court Decision of 9 April 2014 (proc. no. 1870/13) becomes useful, which, like other decisions of the Supreme Administrative Court – e.g.: Decision of 9 April 2014 (proc. no. 48/14), Decisions of 23 April 2014 (proc. nos. 270/14, 271/14 and 272/14), Decision of 25 November 2015 (proc. 1338/15) – makes a detailed historical and chronological analysis of the evolution and framework of item 28, now under analysis:
"The concept of «urban property with residential allocation» was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the IMI Code, to which no. 2 of article 67 of the Stamp Tax Code (also introduced by that Law) refers, as a subsidiary matter. And it is a concept which, probably owing to its imprecision – a fact all the more serious given that it is in function of it that the scope of objective incidence of the new taxation is delimited –, had a short life, in that it was abandoned upon the entry into force of the Law of the State Budget for 2014 (Law no. 83-C/2013, of 31 December), which gave new wording to that item no. 28 of the General Table, and which now delimits its scope of objective incidence through the use of concepts that are legally defined in article 6 of the IMI Code.
This amendment – to which the legislator did not attribute an interpretive character, nor do we believe it did –, merely makes it unequivocal for the future that the land for construction whose building, authorized or provided for, is for residential purposes, are comprised within the scope of item 28.1 of the General Table of Stamp Tax (provided that the respective taxable patrimonial value is of an amount equal to or greater than 1 million euros)". (End of citation.)
Prior to the legislative amendment which, in an innovative manner, came to include said land for construction, it was necessary to ascertain, making use of the various interpretive elements, whether, in the absence of that literal reference, such land could still be included within the scope of objective incidence of item 28.
It is for this reason that it is understandable that said decision proceeded, stating:
"[Nothing] clarifying [the legislator] in relation to past situations [i.e., assessments prior to 2014], such as the one in question in the present proceedings, it does not appear to be possible to adopt [as to these] the interpretation of the appellant, in that it does not result unequivocally, either from the letter or from the spirit of the law, that the intention of the latter has been, ab initio, to comprise in its scope of objective incidence land for construction for which the construction of residential buildings has been authorized or provided for, as unequivocally results today from item 28.1 of the General Table of Stamp Tax.
From the letter of the law nothing unequivocal results, moreover, for it itself, upon using a concept which it did not define and which also was not defined in the diploma to which it referred as a subsidiary matter, lent itself, unnecessarily, to equivocations in a matter – of tax incidence – in which certainty and legal security should also be paramount concerns of the legislator.
And from its «spirit», discernible in the explanatory statement of the bill that is at the origin of Law no. 55-A/2012 (Bill no. 96/XII – 2nd, Journal of the Portuguese Parliament, series A, no. 3, 21 September 2012, p. 44 [...]) nothing more results than the concern of generating new tax revenue, on sources of wealth «more spared» in the past from the voracity of the Tax Authority than labor income, in particular capital income, securities gains and property, reasons which bring no relevant contribution to the clarification of the concept of «urban properties with residential allocation», as they take it for granted, without any concern to clarify it. Such clarification will, however, have emerged – as informed in the Arbitral Decision rendered on 12 December 2013, in the proceedings no. 144/2013-T, available in the CAAD database –, upon the presentation and discussion in the Portuguese Parliament of that bill, in the words of the State Secretary for Tax Affairs, who will have explicitly stated, as appears from the Journal of the Portuguese Parliament (DAR I Series no. 9/XII – 2, of 11 October, p. 32) that: «The Government proposes the creation of a special tax on urban residential properties of higher value. It is the first time that in Portugal a special taxation on high-value properties intended for residential use has been created. This tax shall be 0.5% to 0.8% in 2012 and 1% in 2013, and shall apply to houses worth equal to or greater than 1 million euros» (emphasis ours), from which it appears that the reality to be taxed that was in mind are, after all, and notwithstanding the terminological imprecision of the law, «urban residential properties», in common language «houses», and not other realities.
[...]. [...] referring the norm of incidence of the stamp tax to urban properties with «residential allocation», without any specific concept being established for the purpose, cannot one extract from it that it contains a future potentiality, inherent in a distinct property that might possibly come to be built on the land.
It is concluded therefore, in accordance with what was decided in the judgment under appeal that, resulting from article 6 of the IMI Code a clear distinction between urban properties «residential» and «land for construction», cannot these be considered as «properties with residential allocation» for purposes of what is provided in item no. 28.1 of the General Table of Stamp Tax, in its original wording, as given by Law no. 55-A/2012, of 29 October." (End of citation.)
In summary, it is understood from the jurisprudence of the Venerable Supreme Administrative Court that, with the new wording of item 28.1 of the TGIS, given by art. 194 of Law no. 83-C/2013, of 31 December (and applicable to the present case), the scope of objective incidence of the norm was broadened, in an innovative manner, by including, explicitly, land for construction for which authorization or providing for building for residential purposes has been provided.
Having made the essential historical-legal framework, it is now important, in a second moment, to analyze the terms of said broadening of the scope of objective incidence of the norm in question and to ascertain the legality of its application to the case at hand.
The new wording of item 28.1 of the TGIS (given, as stated, by art. 194 of Law no. 83-C/2013, of 31 December) states the following: "For residential property or for land for construction whose building, authorized or provided for, is for residential purposes, in accordance with the provisions of the IMI Code" - 1%".
Having regard to the letter of the law, it appears that the norm of incidence in question restricts the tax event to land for construction whose authorized or provided building is for residential purposes.
Excluding land for construction whose authorized or provided building is for other purposes, such as commerce or services.
In the absence of a definition of "land for construction" in the Stamp Tax Code, it is necessary to ascertain the concept of "land for construction" as provided in no. 3 of article 6 of the IMI Code.
Thus, land for construction are considered "(…) land situated within or outside an urban agglomeration, for which a license or authorization has been granted, a prior notification admitted or prior favorable information issued for subdivision or construction operations, and also those which have been declared as such in the acquisition title, with the exception of land in which the competent entities prevent any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land use plans, are allocated to spaces, public infrastructure or equipment".
Indeed, the concept of "land for construction" for tax purposes should not be understood as a concept of a formal nature, but rather as a concept of a material nature, specially translated in the potential destination for construction.
The essential question that, in this context, arises, is whether or not there exists a provision or expectation of «building for residential purposes» with respect to the land for construction under analysis and whether the application of stamp tax, in the manner effected by the AT, can be accepted.
To answer the said question, it appears particularly useful to consider the following: "as regards land for construction, whether or not located within an urban agglomeration, as defined in art. 3/4 of this diploma [CIMI], should, as such, be considered the land with respect to which there has been granted: - license for subdivision operation; - building license; - authorization for subdivision operation; - building authorization; - prior favorable notification admitted for subdivision or construction operation; prior favorable information issued for subdivision or construction operation, as well as; - those which have been declared as such in the acquisition title, it being necessary to take into account that, also for that purpose, only the acquisition title with the form prescribed by civil law, that is to say, the public deed or the authenticated private document referred to in art. 875 CC should be relevant." [see ANTÓNIO SANTOS ROCHA / EDUARDO JOSÉ MARTINS BRÁS – Taxation of Assets. IMI-IMT and Stamp Tax (Annotated and Commented). Coimbra, Almedina, 2015, p. 44].
Consequently, although the property here in question is matricially registered as being "land for construction", such does not legitimate the automatic application of item 28.1 of the TGIS, since, as appears obvious, the mere matricial registration does not in itself constitute demonstration that a property has building for residential purposes provided for.
And neither does the automatic application of item 28.1 of the TGIS legitimate the attribution by the AT of residential allocation in the context of their respective assessments, with such allocation appearing, without more, in their respective matrices. The legislator did not attribute to the use of that coefficient any relevance in the qualification of the property, but solely in its respective valuation.
Now, in the context of the application of Item no. 28.1 of the General Table, the jurisprudence has been consistent in considering that "(…) only properties that are actually allocated to residential use are comprised within the scope of incidence (…), this interpretation being based on the literal element «allocation», which presupposes a concrete and actual use for residential purposes, and on the «ratio legis», resulting from the restriction of the field of application of the norm to properties with residential allocation, to the circumstances in which the law was drafted.".
(Cf. Decision of the Supreme Administrative Court of 28 January 2015, rendered in proceedings no. 0419/14, available at http://www.dgsi.pt.)
The current wording of Item no. 28.1 of the General Table, introduced by Law no. 83-C/2013, of 31 December, broadened, in an innovative manner, the scope of objective incidence of the norm, by including, in an explicit manner, «land for construction» for which authorization or providing for building for residential purposes has been provided.
However, the current wording of Item no. 28.1 of the General Table, having come to include «land for construction», maintained the conditioning relating to the inclusion of the building, authorized or provided for, being for residential purposes.
In practice, it continues to restrict the scope of incidence, in the case of «land for construction», to building authorized or provided for that is for residential purposes, as provided in the IMI Code.
To this extent, subjection to Item no. 28.1 of the General Table depends on the cumulative fulfillment of the following requirements (in addition to ownership of the property):
- the taxable patrimonial value stated in the matrix, in accordance with the IMI Code, being equal to or greater than € 1,000,000.00;
- it being land for construction; and
- the building authorized and provided for on the land for construction being for residential purposes, as provided in the IMI Code.
Thus, it is necessary to verify in the case at hand the fulfillment of the same.
As to the first requirement, the urban property, considered as a whole, has a taxable patrimonial value greater than € 1,000,000.00, whereby the same is verified.
As to the second requirement, there is no doubt about the qualification of the property as "land for construction", nor about its inclusion in the definition contained in no. 3 of article 6 of the IMI Code, whereby the same is also verified.
Finally, it is necessary to analyze whether the third requirement is also fulfilled: whether the building, authorized and provided for, is for residential purposes, as provided in the IMI Code.
The answer cannot but be negative.
Indeed, and as was stated in the matter of proof, no documentary support was attached to the present case file which attests that the acts in question were practiced having as their object properties with approved projects for construction (still without or already with the said building licenses and authorizations), or properties which are located in an area where building for residential purposes is provided for (with the mentioned prior notifications or prior favorable information for the completion of subdivision or construction operations).
Having not made such demonstration, one cannot consider that the land in question has building, authorized or provided for, for residential purposes, as provided in the CIMI.
Thus, the third requirement contained in the norm of tax incidence is not fulfilled, in that the «land for construction» does not have building, authorized or provided for, allocated to residential purposes.
Having regard to what has been set out, and without need for further considerations, it is necessary to conclude that the urban property in question – land for construction – is not subject to Stamp Tax provided for in the norm of tax incidence contained in Item 28.1 of the TGIS.
Consequently, both the express rejection of the request for ex officio review no. …2016…, and the Stamp Tax assessments in dispute, suffer from defect of violation of law, for error in the assumptions of fact and law, embodied in the erroneous interpretation and application of Item 28.1 of the TGIS, which implies the declaration of its illegality and consequent annulment, which will be decided finally.
Since the Claimant's understanding as to the question referred to appears well-founded, it is prejudiced, in view of the provisions of art. 124 of the CPPT, ex vi art. 29, no. 1, subparagraph c), of the RJAT, the knowledge of other allegations of the Claimant, namely the invoked unconstitutionality (there being no, in view of this decision, any prejudice to the more stable or effective protection of the interests thereof).
4.4. Indemnificatory Interest and Reimbursement of the Amount Paid
In light of the provisions of no. 5 of art. 24 of the RJAT – in the part which states that "payment of interest is due, regardless of its nature, in accordance with the provisions of the general tax law and the Code of Tax Procedure and Process", it has been understood that such norm permits the recognition of the right to indemnificatory interest in arbitral proceedings.
It is justified thus, by what has been set out, the analysis of the request for payment of indemnificatory interest to the now Claimant.
Indemnificatory interest is due when it is determined, in gracious objection or judicial challenge, that there has been error attributable to the services from which results payment of the tax debt in an amount higher than legally due (see art. 43, no. 1, of the LGT).
It is, therefore, a necessary condition for the attribution of said interest the demonstration of the existence of error attributable to the services. To that end, see, for example, the following decisions: "The right to indemnificatory interest provided for in no. 1 of art. 43 of the LGT [...] depends on it having been demonstrated in the proceedings that that act is affected by error in the assumptions of fact or law attributable to the AT." (Decision of the Supreme Administrative Court of 30 May 2012, proc. 410/12); "The right to indemnificatory interest provided for in no. 1 of article 43 of the General Tax Law presupposes that in the proceedings it be determined that in the assessment «there was error attributable to the services», understood this as the «error in the assumptions of fact or law attributable to the Tax Administration»" (Decision of the Supreme Administrative Court of 10 April 2013, proc. 1215/12).
Now, having there been, as results from what was said in point 4.3 of the present arbitral decision, error attributable to the services – which leads to the annulment of the tax acts in question and to the consequent return of the amounts paid by the Claimant, in accordance with the provisions of art. 173, no. 1, of the CPTA, ex vi art. 29, no. 1, subparagraph c), of the RJAT –, it is concluded, without need for further considerations, by the success of the request for payment of indemnificatory interest to the Claimant.
Decision
In view of what has been set out, the Arbitral Tribunal decides:
1. To judge the dilatory exception of material incompetence of this arbitral tribunal to be without merit;
2. To judge the present request for arbitral pronouncement to be well-founded and, in consequence, to annul the decision of express rejection of the ex officio review and, in sequence thereof,
3. To annul the Stamp Tax assessments in question, with the consequent restitution of the tax paid;
4. To judge the request well-founded in the part relating to the recognition of the right to indemnificatory interest in favor of the Claimant, by virtue of the tax indebtedly paid, in accordance with legal terms.
III. Value of the Case
In accordance with the provisions of articles 306, no. 2, and 297, no. 2 of the C.P.C., article 97-A, no. 1, subparagraph a) of the C.P.P.T. and article 3, no. 2, of the Regulation of Costs in Arbitration Proceedings, the value of the case is fixed at € 10,089.00.
IV. Costs
In accordance with the provisions of articles 22, no. 4, and 12, no. 2, of the RJAT, article 2, no. 1 of article 3 and nos. 1 to 4 of article 4 of the Regulation of Costs in Arbitration Proceedings, as well as in Table I attached to this diploma, the global amount of costs is fixed at € 918.00, to be borne by the Tax and Customs Authority.
Lisbon, 13 March 2018
The Arbitrator,
Pedro Miguel Bastos Rosado
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