Summary
Full Decision
ARBITRAL AWARD
I – Report
A…, taxpayer no.…, married to B…, taxpayer no.…, residents at …Street, no.…/…, in Lisbon, in the terms and for the purposes of the provisions set out in paragraph a) of no. 1 of Article 2 and paragraph a) of no. 1 of Article 10, in fine, both of Decree-Law no. 10/2011, of January 20 (Legal Framework of Tax Arbitration (RJAT)), came to request the Establishment of an Arbitral Tribunal with a view to the declaration of illegality of the Stamp Tax assessment act for the year 2015, in the total amount of €98,310.80 (ninety-eight thousand three hundred and ten euros and eighty cents), relating to the article…, of the Parish of…, Municipality of Coimbra, carried out under the provisions of item 28.1 of the General Table of Stamp Tax (TGIS), introduced by Law no. 55-A/2012, of October 29.
Founded the request as follows:
1. The Applicant received the notification, a copy of which is attached as Doc. no. 1, to proceed with payment of the 1st instalment of stamp tax, in the amount of €32,770.28, concerning the property identified as …– U –…, with a note that the assessment was being carried out under the provisions of item 28.1 of the TGIS.
2. In fact, the total amount of stamp tax assessed under that item and once the 3 instalments thereof are added, amounts to €98,310.80 (ninety-eight thousand three hundred and ten euros and eighty cents), a value which is hereby impugned.
3. The Applicant acquired, on December 26, 2006, by donation, the ownership of the rustic property, registered in the rustic property register under the article…, with an area of 71,480 m², which borders to the north with C… and another, to the south with D…, to the east with E… and to the west with F…, and located in…–… place of…, parish of…, municipality of Coimbra.
4. On February 25, 2013, the Applicants presented, to the Municipality of Coimbra, the request which is attached as Doc. no. 2, requesting information, and consequently, certification as to: "whether with regard to the property in question [object of the assessment here impugned], delimited in the attached topographic plan, with an approximate area of 71,480 m², located in the zones…,…, was granted by the Municipality of Coimbra any 'subdivision licence' for the property referred to, in their name or that of another person or entity, defining the types of use intended for the same and whether a subdivision design for the said property was submitted to the competent municipal services, in their name or that of another person."
5. Further, they requested that "taking into account the provisions contained in the Municipal Master Plan Regulation, namely what concerns its Article 33, it be equally certified whether on the property in question, the installation of a Private University, of initiative of a CPLP country, of a Health Unit, of the most varied nature, of a Shopping Centre or Large Retail Space, of a Hotel or similar facilities, typologies which we believe are integrated within the generalized specification contained in the aforementioned Article 33 of the Master Plan Regulation – 'commerce, service and hotel units or similar, small craft and industrial establishments of Classes C and D'." (See Doc. no. 2)
6. In response to what was requested, the Applicants received, on March 13, 2014, the Official Letter from the Municipality of Coimbra, which is attached as Doc. no. 3, which contains the certification that: "in accordance with information no.…, from the Urban Planning Division dated March 5, 2013, within the framework of the town planning criteria arising from the Master Plan, without prejudice to any other applicable legislation/regulations, the following: '…having consulted the SPO computer system as well as the computer application register for georeferencing of processes, a subdivision design for the property delimited in the plan attached to the request submitted was not submitted to the services of the Municipality of Coimbra, and therefore no subdivision licence was granted by the Municipality for the said property.'"…"With part of the land located in a residential zone…, thus classified in the city planning plan, the uses compatible with this land classification are defined in no. 1 of Article 33 of the Master Plan Regulation: 'Thus, the installation of a university (educational establishment/facility), shopping centre (commerce) and hotel, are uses that, generically, may be envisaged in a residential zone…'"
7. The now Applicant proceeded to submit the Model I Declaration of Municipal Property Tax (IMI), concerning the property identified above, as appears from the respective Urban Property Record, a copy of which is attached as Doc. no. 4, from which resulted the attribution of a Tax Patrimonial Value of €14,367,842.65.
8. Subsequently, from the appraisal carried out on 07.01.2014, concerning the property identified above, for purposes of fixing the tax patrimonial value, resulted a value of €9,831,080.00, as per copy of the Property Record attached as Doc. no. 5.
9. Now, the property here in question is, nothing more nothing less, than a plot of land for construction, as is apparent from its respective property record (See Docs. nos. 4 and 5).
10. Thus, the taxpayer comes to impugn the stamp tax assessment of which they were notified (See Doc. no. 1) in the amount of €98,310.80 (ninety-eight thousand three hundred and ten euros and eighty cents), given its manifest illegality, which results from the legal grounds they invoked in their pleadings and which come down to the alleged violation of the provisions of TGIS – Item 28.1, as amended by Law no. 83-C/2013 (State Budget Law/2014), in that this norm regarding the tax base of stamp tax that supports the assessment impugned, does not provide that the same may be carried out on plots of land for construction without it being demonstrated the existence of a "building, authorised or envisaged" for residential purposes, "in the terms provided in the Code of Municipal Property Tax (IMI)",
11. The Applicant considers, in this respect that: a) The property in question was acquired by the owner as a rustic property, registered in the rustic property register under the article…, with an area of 71,480 m², and located in…–…, place of…, parish of…, municipality of Coimbra; b). The land in question is located in a green zone, equipment zone and residential zone. This supposed residential function admits various compatible uses which means that even there non-residential constructions are admitted (e.g. Hospital Units, educational units, hospitality, etc), and the installation of commerce, services, and hotel units or similar is equally permitted, as well as small craft and industrial establishments. (See Doc. no. 3) c). "(…) part of the land [is] located in a residential zone…, thus classified in the city planning plan, the uses compatible with this land classification are defined in no. 1 of Article 33 of the Master Plan Regulation (…)." (See Doc. no. 3); d). Regarding the land in question "a subdivision design for the property delimited in the plan (…) was not submitted to the services and therefore no subdivision licence was granted by the Municipality for the said property." (See Doc. no. 3)
12. The legislator – alleges or concludes the Applicant – did not intend to tax the reality of properties like this one here in question, even after the amendment introduced by the State Budget Law 2014, with temporal application in the present case.
13. Subsidiarily the Applicant invokes the defects of duplication of assessment and unconstitutionality of the norms applied by the Tax Authority in the interpretation it gave them and which allegedly violate the provisions of Articles 13, 62, 103 and 104 of the Constitution.
II – Grounds: Matters of Fact
II.A. Proven Facts
The Tribunal considers the following essential facts proven for the purposes of the request:
a) On 25.01.2007, the Applicant submitted the Model 1 declaration of Municipal Property Tax under registration no.…, for registration of a new property as a plot of land for construction, originating from the rustic property …º of the parish of…, municipality of Coimbra, with effect from 28.12.2006, indicating Total Land Area: 71,480.0000 m²; Plot Development Area: 4,859.0000 m²; Gross Building Area: 27,721.0000 m²; Gross Dependent Area: 0.0000 m² and attached the corresponding annexes to the Location Plan and the Constructability Feasibility Project, contained in the Information from the Municipality of Coimbra, issued pursuant to Article 110 of the Legal Framework of Urban Planning and Building (RJUE), dated 28.12.2006, identifying as Subject: Registration No.: …/2006 –A…–Information referred to in Article 110 of the Legal Framework of Urban Planning and Building (RJUE) –…, on the technical and planning conditions described in the attached sheet, which states: "1. Urban Planning Framework (zoning of the Master Plan): a) The land indicated in the topographic location plan is located in a residential zone…, equipment zone and green protection zone –….; 2. Use Index to apply in accordance with that defined in Chapter V of the Master Plan Regulation, being: a) i=0.445 in residential zone –…; b) i=0.225 in green protection zone –…; c) i=0.45 in equipment zone – and 3. Number of storeys (maximum/recommended): a) 7 storeys (in zone R3.7); b) Should not exceed the dominant in the place and should be justified through joint study. 4. Typology (recommended): a) Collective housing building isolated/semi-detached/terraced. 5. Alignment / setback of building: a) Coherent with the local urban design to be justified within the scope of Article 27 of the Master Plan Regulation and Urban Planning Rules; 6. Observations: a) General and municipal legislation and regulations in force must be respected; b) An architectural and planning solution adjusted to the characteristics of the land and surroundings should be proposed, justifying the occupation through joint and detailed study; c) Transverse and longitudinal profiles of the measured land should be presented which establish the relationship of the proposal with the surroundings, including adjacent streets; d) Any division of property must respect current legislation: Decree-Law no. 555/99, of 15/12 and General Urban Planning Regulations, with a prior study being desirable, supported by existing roads, in coordination with the surroundings – Article 33 of the Master Plan (Annex III); e) For the purposes of requesting a licence, a property record certificate should be presented (Registry of Property Registry). 7. Feasibility and scope: a) The content of the technical opinion refers only to the town planning point of view. b) It is recommended to contact AC, Águas de Coimbra, EDP, TELECOM PORTUGAL and Lusitânia Gas, should information be required within the scope of those entities' technical matters, which may prove decisive for the effective constructability at the location."
b) On 18.09.2010, the 1st appraisal of the land was carried out, appearing in Sheet no.… the Total Land Area of 71,480.0000 m², Plot Development Area of 4,859.0000 m², Gross Building Area of 27,721.0000 m² and Gross Dependent Area of 0.0000 m², the type of residential location coefficient, and Tax Patrimonial Value of €14,155,510.00, notified to the Applicant on 23.09.2010.
c) On 25.02.2013, the Applicant requested from the Municipality of Coimbra the issuance of a certificate on "whether with regard to the property in question [object of the assessment here impugned], delimited in the attached topographic plan, with an approximate area of 71,480 m², located in the zones…,…, was granted by the Municipality of Coimbra any subdivision licence for the property referred to, in their name or that of another person or entity, defining the types of use intended for the same; whether a subdivision design for the said property was submitted to the competent municipal services, in their name or that of another person and taking into account the provisions contained in the Master Plan Regulation, namely what concerns its Article 33, it be equally certified whether on the property in question, the installation of a Private University, of initiative of a CPLP country, of a Health Unit, of the most varied nature, of a Shopping Centre or Large Retail Space, of a Hotel or similar facilities, typologies which are believed to be integrated within the generalized specification contained in the aforementioned Article 33 of the Master Plan Regulation – 'commerce, service and hotel units or similar, small craft and industrial establishments of Classes C and D'.
d) On 06.03.2013, the Municipality of Coimbra would issue a certificate with the following tenor: "in accordance with information no.…, from the Urban Planning Division dated March 5, 2013, within the framework of the town planning criteria arising from the Master Plan, without prejudice to any other applicable legislation/regulations, the following: '…having consulted the SPO computer system as well as the computer application register for georeferencing of processes, a subdivision design for the property delimited in the plan attached to the request submitted was not submitted to the services of the Municipality of Coimbra, and therefore no subdivision licence was granted by the Municipality for the said property.'"…"With part of the land located in a residential zone…, thus classified in the city planning plan, the uses compatible with this land classification are defined in no. 3 of Article 33 of the Master Plan Regulation: 'Thus, the installation of a university (educational establishment/facility), shopping centre (commerce) and hotel, are uses that, generically, may be envisaged in a residential zone…'".
e) On 26.12.2013, the Applicant submitted a new Model 1 declaration of Municipal Property Tax, registered with no.…, on the basis of Request for Appraisal – alteration of areas, in accordance with paragraph n) of no. 3 of Article 130 of the IMI Code, rectifying the gross dependent area to 23,958.70 m², from which resulted a Tax Patrimonial Value of €9,831,080.00, notified to the Applicant on 14.01.2014.
f) The Applicant received the notification, a copy of which is attached as Doc. no. 1, to proceed with payment of the 1st instalment (€32,770.28) of the stamp tax assessment for the year 2015, in the amount of €98,310.80 relating to the aforementioned property identified as …– U –…, with the tax patrimonial value of €9,831,080.00, being stated there that the assessment was being carried out under the provisions of item 28.1 of TGIS;
g) On 26.09.2006, the Applicant acquired, by donation, the ownership of the rustic property, registered in the property register under the article…, with the area of 71,480 m², located in…–.., place of…, parish of…, municipality of Coimbra;
h) In accordance with information from the Municipality of Coimbra (Doc 3, with the initial petition), no subdivision licence was granted for the property in question, and the installation of a university (educational establishment/facility), shopping centre (commerce) and hotel may generically be envisaged in the residential zone…, where part of the land is located.
II.B. Unproven Facts
- There are no other facts, proven and/or unproven, essential for the purposes of the dispute.
II.C. Grounds
The Tribunal's conviction was based on the documents incorporated in the proceedings and in the attached instructing administrative process, and it does not result from the pleadings any controversy between the parties regarding the factual framework drawn up by the Applicant.
III – Grounds (cont): Matters of Law
III.A. Position of the Applicant
a) The question which is the subject of this impugnation comes down to the assessment of the legality of the stamp tax assessment, in accordance with item 28.1 of TGIS (General Table of Stamp Tax) concerning property of which the Applicant was the owner in 2015.
b) The Applicant understands that the assessment suffers from a defect of illegality insofar as the property in question is a plot of land for construction without residential allocation, that is, without it being demonstrated the existence of a "building, authorised or envisaged" for residential purposes, "in the terms provided in the Municipal Property Tax Code";
c) The Applicant further alternatively alleged the defects of duplication of assessment and unconstitutionality of the norms applied by the Tax Authority in the interpretation given to them by violation of the provisions of Articles 13, 62, 103 and 104 of the Constitution.
III.B. Position of the Respondent
a) In response, the Tax Authority maintains that the Applicant has no grounds, and that, on the contrary, the grounds of the assessments rest on the correct interpretation and application of the relevant regulatory framework.
b) The Respondent defends and concludes that the assessment in dispute does not violate any of the constitutional principles invoked by the Applicant, "(...) concluding, as was concluded in the recent Award no. 568/2016, of 19.10.2016, handed down in case no. 522/2016, that is, 'not to judge unconstitutional the norm of item 28 of the General Table of Stamp Tax, in the wording introduced by Law no. 55-A/2012, of October 29, and amended by Law no. 83-C/2013, of December 31, which imposes annual taxation on the ownership of residential property or a plot of land for construction whose building, authorised or envisaged, is for residential purposes, whose tax patrimonial value is equal to or greater than €1,000,000.00'".
III.C. The Law (cont)
The Stamp Tax Code, approved by Law no. 150/99, of September 11, commenced its effectiveness in March 2000, being significantly amended by Decree-Law no. 287/2003, of November 12, which republished it. With the reform of property taxation carried out in 2003, Stamp Tax became configured above all as a tax on operations which, independent of their materialization, reveal income and wealth, applying to a "heterogeneous multiplicity of facts or acts", without "a common trait that gives them identity" (JOSÉ MARIA FERNANDES PIRES, Lessons on Property and Stamp Taxes, p. 453). This capacity to accommodate within itself taxation of different natures paved the way for the legislator to assign it a complementary role to other taxes.
As pointed out by J. SILVÉRIO DIAS MATEUS and L. CORVELO DE FREITAS (Taxes on Real Property – Stamp Tax, p. 251, Lisbon 2005) "stamp tax is configured as a means of reaching manifestations of taxable capacity not covered by the tax base of any other taxes. Not possessing the nature of overlapping taxation, this tax tends to assume a residual function filling gaps left open by income and consumption taxation".
Law no. 55-A/2012, of October 29, introduced a set of amendments to the codifying diplomas of three taxes – Personal Income Tax, Corporate Income Tax and Stamp Tax – as well as to the General Tax Law, among which the norm now under analysis, all guided at obtaining supplementary fiscal revenue and, in general, to counter budgetary imbalance. Thus, invoking the principles of social equity and tax justice, taxation of capital income and mobile capital gains was increased, measures were introduced to strengthen the fight against tax fraud and evasion, through the strengthening of the regime applicable to manifestations of fortune of taxable persons and transfers to and from tax havens, to which was added the introduction, within the scope of Stamp Tax, of the taxation of legal situations (expression added to no. 1 of Article 1 of the Stamp Tax Code), which was understood to be capable of bearing increased tax burden, thereby distributing more fairly the sacrifice to achieve the budgetary consolidation required of taxpayers.
Thus, with the addition of item no. 28 to the General Table of Stamp Tax by Article 4 of Law no. 55-A/2012, a legal situation was subjected to this tax, embodied in the ownership, usufruct or right of superficies of urban property with residential allocation, whose tax patrimonial value listed in the register, in accordance with the Municipal Property Tax Code, is equal to or greater than €1,000,000.00, with a rate of 1% applied to such value.
The wording of item 28.1 underwent subsequent amendment, via Law no. 83-C/2013, of December 31, coming to extend the incidence of Stamp Tax, at the rate of 1%, to "(…) urban property or (a) plot of land for construction whose building, authorised or envisaged, is for residential purposes, in the terms provided in the Municipal Property Tax Code".
The incidence of Stamp Tax, marked, indeed, by heterogeneity, refers, as regards the essential elements of the tax assessment, particularly as to the normative criteria defining the tax patrimonial value to be considered, to the regulation set out in the Municipal Property Tax Code, ensuring, or at least promoting, a certain degree of harmony among the various legislative bodies within the framework of property taxation. Doctrine even attributes to it the status of "additional Municipal Property Tax rate", directed at "discriminating properties of higher tax patrimonial value and subjecting them to a more onerous tax regime than the others" (JOSÉ MARIA FERNANDES PIRES, op. cit., p. 504), explaining the creation of a new fact subject to Stamp Tax, beyond the heterogeneity that characterizes this tax, by the need to increase State tax revenue, since Municipal Property Tax revenue reverts in favor of municipalities and Stamp Tax is a State revenue (op. cit., p. 506).
The taxation resulting from the tax base norm contained in item no. 28 assumes the nature of a partial tax (JOSÉ MARIA FERNANDES PIRES, op. cit., p. 507), taking as its tax base urban property allocated to residential purposes, calculating the respective tax patrimonial value per legally and economically relevant unit. It does not constitute a general property tax, or even a tax on all real property, in terms of founding a comparison rooted in a perspective of personalizing the tax and from a basis that takes account of all the property of the taxable person.
From the joint application of no. 4 of Article 2 of the Stamp Tax Code and no. 1 of Article 8 of the Municipal Property Tax Code, it is concluded that the taxable fact to which item 28.1 of TGIS refers occurs on December 31 of each year. In that measure, the tax legal relationship will be fixed according to the legislation in force on that same date, independent of subsequent amendments that may be in force on the date of the tax assessment. Thus, the Stamp Tax of item 28.1 of TGIS for the year 2015, to be assessed in 2016, should be calculated and fixed in accordance with the wording of the norm, introduced by Law no. 55-A/2012, of October 29, as amended by the State Budget Law 2014 (Law no. 83-C/2013).
Recall the original wording of item 28 of TGIS:
28. Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value listed in the register, in accordance with the Municipal Property Tax Code, is equal to or greater than (euro) 1,000,000 – on the tax patrimonial value used for Municipal Property Tax purposes:
28.1 For property with residential allocation -------------------------------------------------------- 1%
28.2 For property, when taxable persons who are not natural persons are residents in a country, territory or region subject to a clearly more favourable tax regime, listed in the official statement approved by the Minister of Finance...................................................................7.5%
This wording (original) was the subject of various disputes that opposed the Tax Authority and taxpayers, owners of plots of land for construction, with the High Administrative Court understanding, for example, in the Award handed down in case no. 048/14, of 09.04.2014, that "(...)having not the legislator defined the concept of "properties (urban) with residential allocation", and resulting from Article 6 of the Municipal Property Tax Code (subsidiarily applicable to Stamp Tax provided for in the new item no. 28 of the General Table) a clear distinction between "urban residential properties" and "plots of land for construction", these latter cannot be considered, for purposes of the incidence of Stamp Tax (Item 28.1 of TGIS, as worded by Law no. 55-A/2012, of October 29), as urban properties with residential allocation( (...)"
In truth, the concept of "property (urban) with residential allocation" was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the Municipal Property Tax Code, to which no. 2 of Article 67 of the Stamp Tax Code (likewise introduced by that Law), refers subsidiarily. And it is a concept which, probably due to its imprecision – a fact all the more serious in that it is in function of it that the objective scope of the new taxation is delineated –, had a short life, as it was abandoned when the State Budget Law for 2014 (Law no. 83-C/2013, of December 31) came into force, which gave new wording to that item no. 28 of the General Table, and which now delineates its objective scope of incidence through the use of concepts that are legally defined in Article 6 of the Municipal Property Tax Code. This amendment – to which the legislator did not attribute an interpretive character, nor does it seem to us that it did, and the question does not interest us to address –, merely makes it unequivocal for the future that plots of land for construction whose building, authorised or envisaged, is for residential purposes are covered within the scope of item 28.1 of the General Table of Stamp Tax (provided that their tax patrimonial value is of a value equal to or greater than 1 million euros).
When presenting and discussing in Parliament the State Secretary for Tax Affairs stated (cf. Parliamentary Record, I Series no. 9/XII – 2, of October 11, p. 32) that: "The Government proposes the creation of a special rate 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 purposes is created. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses of value equal to or greater than 1 million euros" from which it is gathered that the reality intended to be taxed is, after all, and notwithstanding the terminological imprecision of the law, "urban residential properties", in common language "houses", and not other realities. The fact that it may be considered that in determining the tax patrimonial value of urban properties classified as plots of land for construction one must take into account the allocation that the building authorized or envisaged for it will have for determining the respective value of the plot development area (cf. nos. 1 and 2 of Article 45 of the Municipal Property Tax Code), does not determine that plots of land for construction may be classified as "properties with residential allocation", since "residential allocation" always appears in the Municipal Property Tax Code referred to "buildings" or "constructions", existing, authorized or envisaged, since only these can be inhabited, which does not occur in the case of plots of land for construction, which do not have, in themselves, conditions for such, and are not susceptible of being used for residential purposes unless and when the building authorized and envisaged for them is erected on them (but in that case they will no longer be "plots of land for construction" but another species of urban properties – "residential", "commercial, industrial or for services" or "others" – Article 6 of the Municipal Property Tax Code).
It would be strange, moreover, if the determination of the scope of the tax base norm of item no. 28 of the General Table of Stamp Tax were found, after all, in the norms for determining the tax patrimonial value of the Municipal Property Tax Code, and that the terminological imprecision of the legislator in the wording of that rule were, after all, elucidated and finally clarified via an indirect and equivocal referral to the allocation coefficient established by the legislator in relation to erected properties (Article 41 of the Municipal Property Tax Code). Thus, considering that a plot of land for construction – whatever the type and purpose of the building that will or may be erected on it – does not satisfy, by itself, any condition to as such be licensed or to be able to define as being residential purposes its normal destination, and the tax base norm of stamp tax referring to urban properties with "residential allocation", without any specific concept being established for the purpose, cannot from it be drawn that it contains a future potentiality, inherent to a distinct property that perhaps will be erected on the land.
In truth, referring to urban properties, no. 1 of Article 6 of the Municipal Property Tax Code distinguishes various species, dividing them into residential, commercial, industrial or for services, plots of land for construction and others, according to the following criteria: "residential, commercial, industrial or for services" – buildings or constructions licensed for such or, in the absence of a license, which have as their normal destination each of those purposes (cf. Article 6, no. 2 of the Municipal Property Tax Code); "plots of land for construction", lands situated within or outside an urban settlement, for which subdivision or construction license or authorization has been granted, prior notice admitted or favorable prior information issued for a subdivision or construction operation, and also those that have been so declared in the acquisitional title, excepting lands in which the competent entities forbid any of those operations, namely those located in green zones, protected areas or which, in accordance with municipal territorial planning plans, are allocated to public spaces, infrastructure or facilities" (cf. Article 6, no. 3 of the Municipal Property Tax Code, as amended by Law no. 64-A/2008, of 31/12); "Others", are as such considered lands situated within an urban settlement that are not plots of land for construction nor are classified as rustic property, in accordance with the respective legal concept, and also buildings and constructions licensed or, in the absence of a license, which have as their normal destination other purposes than those referred to above (cf. Article 6, no. 4 of the Municipal Property Tax Code).
By imposing taxation on urban properties "with residential allocation", the legislator does not establish in truth, in the Stamp Tax Code, any specific concept that should be considered for that purpose, instead referring the application of the taxation regime of properties mentioned in that Item 28 to the norms of the Municipal Property Tax Code, which establish clear distinction between residential properties and plots of land for construction, the former being so classified according to their respective municipal license, or, this not existing, as a result of normal use, and the latter are defined according to their legal potentiality.
In this light, a plot of land for construction – whatever the type and purpose of the building that will or may be erected on it, including that intended for residential purposes – does not by itself fulfill the requirement provided for in items 28 and 28.1 of TGIS (wording of Decree-Law no. 7/2015), that is, that "(...) the building "authorised or envisaged, is for residential purposes (...)".
In truth, the tax base norm of stamp tax referring to urban properties with residential allocation, without any specific concept being established for that purpose, cannot from it be drawn, as has been seen above, that it contains a future potentiality, together with others, inherent to a distinct property that perhaps will be erected on the land.
The expression "with residential allocation" inculcates, in a simple reading, an idea of real and present functionality.
On the other hand, the understanding that the concept of "residential allocation" derives from the norm of Article 45 of the Municipal Property Tax Code cannot be accepted, as this refers to the rules applicable in determining the tax patrimonial value of plots of land for construction establishing that this is what results from the value of the plot development area of the building to be constructed added to the land adjacent to the development. In the fixing of the value of that area, a percentage is considered, varying between 15% and 45%, of the value of the buildings authorized or envisaged.
Furthermore still, nothing in the law permits the conclusion that the legislator of stamp tax intended to extend, for purposes of the incidence of this tax, to the species provided for in no. 1 of Article 6 of the Municipal Property Tax Code, such that the application of an allocation coefficient refers to one of the elements to be considered in the appraisal of the land, that is, in determining the value of the buildings authorized or envisaged.
Regardless of whether, in determining the value of the buildings authorized or envisaged for a plot of land for construction, one should or should not consider an allocation coefficient, it is admitted, as it is obvious and of general knowledge, that the value of land is determinatively influenced by the type and characteristics of those buildings. However, this is a matter that goes beyond the question on which the present request for arbitral pronouncement bears.
In the conditions referred to, the circumstance that, for a determined plot of land for construction, the building of property intended for residential purposes is authorized, or for any other purpose, even though it should be considered in its appraisal, does not determine any alteration in the classification of the land which, for tax purposes, continues to be as such considered.
As such, resulting from Article 6 of the Municipal Property Tax Code a clear distinction between, on the one hand, urban residential properties and, on the other hand, plots of land for construction, the latter cannot be considered, for purposes of the incidence of stamp tax, as "properties with residential allocation".
Moreover, this is the direction in which the constant and uniform arbitral case law prior to the new wording of item 28 of TGIS introduced by Article 194 of Law no. 83-C/2013, of 31/12, has been oriented, with the provision of this (wording) that the taxation in question now applies, at the rate of 1%, to residential property or a plot of land for construction whose building, authorised or envisaged, is for residential purposes.
This amendment to the General Table of Stamp Tax, introduced by Article 194 of Law no. 83-C/2013, of December 31, insofar as it adds to item 28.1 of the same Table the reference to "plot of land for construction whose building, authorised or envisaged, is for residential purposes, in the terms provided in the Municipal Property Tax Code" and, consequently, determines the incidence of stamp tax, in the terms provided in items 28 and 28.1, on the ownership of plots of land for construction, whose building, authorised or envisaged, is for residential purposes and whose tax patrimonial value is equal to or greater than €1,000,000.00, does not translate into a regulatory amendment that justifies substantial alteration of the understanding that prior to the new wording of that norm was being followed by the Case Law.
Summing up:
Now, in light of the evidence produced, it is, at the least, not clear that on the land in question building for residential purposes is authorized or envisaged; on the contrary, it has been demonstrated that this allocation could equally be residential as for other purposes.
That is: the residential purposes being only one of the potentialities of the buildings to be eventually erected on the land, without it being demonstrated that there exists a concrete license for those purposes, entails the exclusion of the taxation of the property in light of Article 28 of TGIS (now repealed by Law no. 42/2016 – State Budget Law for 2017 – Article 210-2).
In this essential line of orientation, are, among others, the decisions handed down by Arbitral Tribunals constituted within the framework of CAAD, in cases nos. 522/2015-T, 532/2015-T, 467/2015-T (citing various High Administrative Court Awards), 578/2015-T, 642/2015-T and 551/2015-T, almost all published on the CAAD website (www.caad.org.pt).
3.2 Questions of Prejudiced Knowledge
In the decision, the judge must pronounce upon all questions it must assess, refraining from pronouncing upon questions of which it should not have knowledge (final segment of no. 1 of Article 125 of the Tax and Procedural Code), and the questions on which the powers of cognition of the tribunal fall, are, according to no. 2 of Article 608 of the Civil Procedure Code, applicable subsidiarily to the tax arbitration process, by referral of Article 29, no. 1, paragraph e) of RJAT, "the questions that the parties have submitted for its assessment, excepting those whose decision is prejudiced by the solution given to others (…)".
Resulting from the aforesaid the declaration of illegality of the assessment which is the subject of the present process – main request –, by defect of violation of law which prevents the renewal of the acts, the knowledge of the defects imputed by the Applicant to the remaining requests is prejudiced, by inutility.
In truth, Article 124 of the Tax and Procedural Code, subsidiarily applicable by virtue of the provisions of Article 29, no. 1 of RJAT, in establishing an order of knowledge of defects, presupposes that, judged to be well-founded a defect that ensures the effective protection of the rights of the challengers, it is not necessary to know of the remainder, as, if it were always necessary to assess all the defects imputed to the impugned act, it would be indifferent the order of its knowledge.
By the aforesaid, no knowledge is taken of the remaining defects imputed by the Applicant to the acts for which the declaration of illegality was requested.
That is: in light of the solution given to the question relating to the concept of "property with residential allocation", the knowledge of the remaining questions posed by the Applicant is prejudiced, namely that of the alleged unconstitutionality of the tax base norm contained in Item 28.1 of TGIS, for the same is not susceptible of the interpretation that, in the case, was made by the Tax Authority, as well as that of the alleged duplication of assessment.
III.D. Compensatory Interest
In accordance with the provisions of paragraph b) of Article 24 of RJAT, the arbitral decision on the merits of the claim to which no appeal or challenge may lie binds the tax authority from the expiry of the period provided for appeal or challenge, and the latter must, in the exact terms of the well-foundedness of the arbitral decision in favor of the taxable person and until the expiry of the period provided for spontaneous execution of the sentences of the tax courts, "restore the situation that would exist if the tax act which is the subject of the arbitral decision had not been carried out, adopting the acts and operations necessary for that purpose", which is in harmony with the provision of Article 100 of the General Tax Law [applicable by virtue of the provisions of paragraph a) of no. 1 of Article 29 of RJAT] which establishes that "the Tax Authority is obliged, in case of total or partial well-foundedness of objection, judicial impugnation or appeal in favor of the taxable person, to the immediate and full restoration of the legality of the act or situation which is the subject of the dispute, comprising the payment of compensatory interest, if applicable, from the expiry of the period of execution of the decision".
Although Article 2, no. 1, paragraphs a) and b), of RJAT uses the expression "declaration of illegality" to define the jurisdiction of the arbitral tribunals functioning in CAAD, without reference to condemning decisions, it should be understood that included in its jurisdictions are the powers that in judicial impugnation process are attributed to the tax courts, and that is the interpretation that harmonizes with the sense of the legislative authorization on which the Government based itself to approve RJAT, in which it is proclaimed, as the first guideline, that "the tax arbitration process must constitute an alternative procedural means to the judicial impugnation process and to the action for the recognition of a right or legitimate interest in tax matters".
The judicial impugnation process, although essentially a process of annulment of tax acts, admits the condemnation of the Tax Authority in the payment of compensatory interest, as is apparent from Article 43, no. 1, of the General Tax Law, in which it is established that "compensatory interest is due when it is determined, in gracious objection or judicial impugnation, that there was error attributable to the services from which resulted payment of the tax debt in an amount greater than that legally due" and Article 61, no. 4 of the Tax and Procedural Code (as amended by Law no. 55-A/2010, of December 31, to which corresponds no. 2 in the original wording), that "if the decision that recognized the right to compensatory interest is a judicial one, the payment period is counted from the beginning of the spontaneous execution period thereof".
Thus, no. 5 of Article 24 of RJAT in saying that "payment of interest is due, regardless of its nature, in the terms provided in general tax law and in the Tax and Procedural Code" should be understood as allowing the recognition of the right to compensatory interest in the arbitration process.
It is or could be such the situation of the case at hand, that is, the Tax Authority will refund the tax in case it has been paid [situation not evidenced in the proceedings nor also alleged and documented the payment], with payment of compensatory interest in the terms exposed, with the Tax Authority determining the amount to be refunded eventually to the Applicant and calculating the respective compensatory interest, at the legal supplementary rate for civil debts, in accordance with Articles 35, no. 10, and 43, nos. 1 and 5, of the General Tax Law, 61 of the Tax and Procedural Code, 559 of the Civil Code and Administrative Order no. 291/2003, of April 8 (or diploma or diplomas which succeed it), with compensatory interest being due from the date of payment until the date of processing of the credit note, in which they are included (Article 61, no. 5, of the Tax and Procedural Code).
IV Decision
In these terms this Arbitral Tribunal decides:
a) To judge the request wholly well-founded;
b) To declare, as a consequence, the illegality of the stamp tax assessment which is the subject of the request [Assessment no. 2016 –… of 2016-04-05, in the amount of €98,310.80] and determine its annulment, with the legal consequences inherent thereto;
c) To condemn the Tax Authority and Customs Authority to the refund of amounts eventually paid concerning the aforementioned assessment, with compensatory interest in the terms exposed above; and
d) To further condemn the Tax Authority and Customs Authority in the costs of this process.
Value of the Process
The value of the process is fixed at €98,310.80 in accordance with Article 97-A, no. 1, a), of the Tax and Procedural Code, applicable by virtue of paragraphs a) and b) of no. 1 of Article 29 of RJAT and no. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.
Costs
The value of the arbitration fee is fixed at €2,754.00, in accordance with Table I of the Regulation of Costs of Tax Arbitration Proceedings, to be paid by the Respondent, as the request was wholly well-founded, in accordance with Articles 12, no. 2, and 22, no. 4, both of RJAT, and Article 4, no. 4, of the aforementioned Regulation.
Notify.
Lisbon, March 15, 2017
The Arbitral Tribunal,
José Poças Falcão
(Arbitrator-President)
Jorge Bacelar Gouveia
(Associate Arbitrator)
Nuno de Oliveira Garcia
(Associate Arbitrator)
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