Stamp Tax on Vertical Property Under Verba 28 TGIS: CAAD Arbitration Ruling 417/2015-T

ARBITRAL DECISION

I. REPORT

A..., S.A., a legal person no. ..., with registered office at ..., no. ..., ...-..., in Lisbon filed a petition for the constitution of a singular Arbitral Tribunal, in accordance with the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority (hereinafter AT) is the respondent, with the objective of obtaining the declaration of illegality and unconstitutionality of the Stamp Tax (Imposto do Selo) assessment acts relating to the year 2014 identified in the proceedings, in the amount of €35,311.40.

The petition for the constitution of the Arbitral Tribunal was accepted by the Honourable President of CAAD on 16.07.2015 and automatically notified to the AT.

In accordance with the provision contained in item c) of paragraph 1 of Article 11 of the RJAT, the singular Arbitral Tribunal was constituted on 14.09.2015.

The AT filed a response, arguing for the dismissal of the arbitral proceedings, given the existence of the exception of lack of subject-matter jurisdiction of the tribunal or, failing that, the dismissal of the petition on its merits.

The meeting referred to in Article 18 of the RJAT was waived and the presentation of closing arguments was dispensed with, given the nature of the matters contained in the case file, with the examination of the exception raised by the respondent in its response being reserved for the final decision to be delivered.

II. STATEMENT OF FACTS

Based on the elements contained in the case file, the following facts are considered proven:

A) On 1 April 2015, the petitioner was notified to pay the first instalment of IS, with a payment deadline of 30 April 2015, relating to urban properties described in the Urban Property Register under article ... and under article...;

B) Regarding the property registered under article..., the petitioner was notified of IS assessment acts numbered 2015..., 2015 ... 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015...;

C) Regarding the property registered under article..., the petitioner was notified of IS assessment acts numbered 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015...;

D) The urban properties described are owned in full by the petitioner;

E) The urban properties are located at Rua das..., no. ... and..., in Lisbon and Avenida ..., no. ... to..., turning to Avenida..., no. ... to ..., in Lisbon;

F) The property located at Rua das ... is composed of six floors, comprising a basement, ground floor, and ... to ... storeys, left and right, which constitute divisions capable of independent use, whose taxable asset value (VPT) was determined separately, in accordance with the provision of Article 7, paragraph 2, item b) of the Municipal Property Tax Code (CIMI);

G) The property is not constituted in a horizontal property regime, but rather in full ownership, with storeys or divisions capable of independent use;

H) Each of the independent divisions, used for dwelling purposes, has an assigned taxable asset value, determined in accordance with the provisions of the CIMI, as follows:

I) The property, in vertical ownership, comprises a total of 6 floors, with divisions capable of independent use, with residential use for the ground floor and 1st to 4th storeys, left and right, and its total VPT amounts to €1,212,410.00, with none of the parts or storeys with residential use having a taxable asset value exceeding €1,000,000.00;

J) The property located at Avenida ... is composed of six floors, with divisions capable of independent use, whose taxable asset value (VPT) was determined separately, in accordance with the provision of Article 7, paragraph 2, item b) of the CIMI;

K) The property is not constituted in a horizontal property regime, but rather in full ownership, with storeys or divisions capable of independent use;

L) Each of the independent divisions, used for dwelling purposes, has an assigned taxable asset value, determined in accordance with the provisions of the CIMI, as follows:

M) The property, in vertical ownership, comprises a total of 7 floors, with divisions capable of independent use, with residential use from 1st to 4th storeys, left (on the 4th storey with letters A and B), right and penthouse, and its total VPT amounts to €3,055,280.00, with none of the parts or storeys with residential use having a taxable asset value exceeding €1,000,000.00;

N) The petitioner proceeded to pay the IS assessment acts relating to the first IS instalment identified.

With relevance to the decision, there are no facts that should be considered as not proven.

Taking into account the positions assumed by the parties, in light of Article 110, paragraph 7 of the Code of Tax Procedure and Process (CPPT), the documentary evidence and the administrative proceedings contained in the case file, the above-mentioned facts are considered proven, with relevance to the decision.

III. MATTERS OF LAW

The main issue that arises in the present proceedings concerns determining which is the taxable asset value relevant for the purposes of applying items 28 and 28.1 of the General Table of Stamp Tax (TGIS) with respect to urban residential properties constituted in a vertical ownership regime, which comprise storeys or divisions capable of independent use.

To this end, the petitioner alleges in its petition for arbitral ruling the following:

1. The petitioner seeks the declaration of illegality and unconstitutionality of the IS assessment acts, resulting from item no. 28 of the TGIS, as applied by the AT, in the cases of the present proceedings. In fact,

2. The AT understands that, for a property in vertical ownership, the rule contained in item 28 of the TGIS determines that the criterion for determining its applicability is the overall VPT of the property, regardless of whether it is composed of divisions intended for dwelling, capable of independent use. On the contrary,

3. The petitioner understands that the sum of the VPT of each storey and division should not be taken into account to determine the applicability of stamp tax;

4. The subjection to IS contained in item no. 28.1 of the TGIS is determined by the conjunction of two facts: residential use and VPT recorded in the register equal to or exceeding €1,000,000.00.

5. Thus, in the case of properties with the characteristics already described, the subjection to IS is determined, not by the VPT of the properties, but by the VPT attributed to each of those storeys or divisions capable of independent use.

6. The subjection to stamp tax of properties with residential use results from the addition of item 28 of the TGIS, carried out by Article 4 of Law 55-A/2012, of 29 October, which typified the following taxable events:

28 - Ownership, usufruct or right of superficies of urban properties whose taxable asset value recorded in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or exceeding €1,000,000 - on the taxable asset value used for the purposes of IMI:

28.1 - For residential property or land for construction where the building, authorized or envisaged, is for dwelling purposes, in accordance with the provisions of the Municipal Property Tax Code - 1%;

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

1. From this it follows that what matters to the legislator is not the legal-formal rigour of the concrete situation of the property but rather its normal use, the purpose for which the property is intended. In fact,

2. To this effect, as is very well pointed out in the learned Arbitral Decision delivered in the context of case no. 50/2013-T, "what matters is not the legal-formal rigour of the concrete situation of the property but rather its normal use, the purpose for which the property is intended. We also conclude that for the legislator the situation of the property in vertical ownership or horizontal property ownership was irrelevant, since no reference or distinction is made between them. What is relevant is the material truth underlying its existence as an urban property and its use."

3. As regards the issue of the value relevant for determining the amount of stamp tax, the position of the AT does not appear acceptable, nor in accordance with the principle of fiscal legality.

4. We rely, once again, on the Arbitral Decision previously mentioned, where it is expressly stated:
   "Using the criterion that the law itself introduced in Article 67, paragraph 2 of the Stamp Tax Code, to matters not regulated in this code relating to item 28 of the General Table, the CIMI rules apply subsidiarily."

5. From this is extracted in the aforementioned Arbitral Decision that "therefore, considering that the registration in the property register of properties in vertical ownership, constituted by different parts, storeys or divisions with independent use, in accordance with the CIMI, follows the same registration rules as properties constituted in horizontal property ownership, with the respective IMI, as well as the new IS, being levied individually in relation to each of the parts, there is no doubt that the legal criterion for defining the applicability of the new tax must be the same."

6. Thus, there would only be incidence of new stamp tax if any of the parts, storeys or divisions with independent use presented a VPT exceeding €1,000,000.00;

7. The AT cannot consider as the reference value for the applicability of the new tax the total value of the property, when the legislator established a different rule in the Municipal Property Tax Code, and this is the code applicable to matters not regulated regarding item no. 28 of the TGIS - see the Arbitral Decisions mentioned but also the more recent ones, delivered in cases no. 181/2013-T and 183/2013-T.

8. Therefore, and in conclusion, the criteria adopted by the AT violate the principles of fiscal legality and equality, as well as the principle of the prevalence of material truth over legal-formal reality.

9. From what has been stated it follows that the cited rules, with the interpretation that the AT gave them (which is contrary to law) are unconstitutional, by violation of the principle of equality (Article 13 of the Constitution of the Portuguese Republic (CRP)).

For its part, the AT alleges, in summary, the following:

1. By exception: the Arbitral Tribunal is materially incompetent, in view of the provision of Article 2 of the RJAT, to assess the legality of a tax assessment act, which is not in itself a tax act, there being no doubt whatsoever, even by the value of the case and by all the documents attached to it, that the petitioner contests, exclusively, the collection notes that constitute the first instalments of the tax relating to the three properties;

2. See, in this sense, the clarity of the arbitral decision, which has become final, delivered in case no. 726/2014-T CAAD, with a subject matter identical to this one.

3. By substantive challenge: at the time, the petitioner held full ownership of the urban properties A and B under analysis, evaluated in accordance with the Municipal Property Tax Code, within the general evaluation of urban properties, described as "property in full ownership with storeys or divisions capable of independent use", comprising respectively 1 and 7 floors and 11 and 15 storeys capable of independent use, with taxable asset value (VP) exceeding € 1,000,000.00;

4. With reference to the year 2014, in compliance with and in accordance with the provision of Article 6, paragraph 2 of Law No. 55-A/2012, of 29/10, which added item no. 28 to the TGIS, with the amendment made by Law No. 83-C/2013 of 31/12 and whose respective rule of incidence refers to urban properties, evaluated in accordance with the Municipal Property Tax Code, with VPT equal to or exceeding €1,000,000.00 and, in accordance with its item 28.1, residential use, the AT proceeded to notify the collection documents for the payment of the 1st instalment of the assessments in question;

5. The concept of property is defined in Article 2, paragraph 1 of the Municipal Property Tax Code, and it is provided in its paragraph 4 that in the horizontal property regime, each autonomous unit is deemed to constitute a property.

6. From the analysis of the normative provision it follows that a "property in full ownership with storeys or divisions capable of independent use" is unequivocally different from an immovable in a horizontal property regime, constituted by autonomous units, that is, several properties.

7. Article 12 of the Municipal Property Tax Code establishes the concept of property register, and its paragraph 3 relates exclusively to the manner of recording registration data;

8. As for IMI assessment, in the case of properties in full ownership, the VPT which serves as the basis for its calculation will undoubtedly be the VPT that the now petitioner defines as "the global value of the property";

9. What expressly results from the letter of the law is that the legislator intended to tax with item 28.1 in question properties as a single legal-tax reality, as referred to below;

10. The subjection to stamp tax of item 28.1 of the General Table attached to the Stamp Tax Code results from the conjunction of two facts: residential use and the taxable asset value of the urban property registered in the matrix being equal to or exceeding € 1,000,000.00.

11. In truth, it appears from the property record books that the properties are in a full ownership regime, composed of several parts capable of independent use.

12. This being the registration information, in accordance with Article 23, paragraph 7 of the Stamp Tax Code, the stamp tax assessments relating to the year 2014, were carried out by the tax administration, taking into account the nature of the urban properties, on the date of the taxable event, applying, with the necessary adaptations, the rules contained in the Municipal Property Tax Code.

13. As the properties are in a full ownership regime, not possessing autonomous units, to which tax law attributes the qualification of property, because from the notion of property in Article 2 of the Municipal Property Tax Code, only the autonomous units of property in a horizontal ownership regime are deemed to be properties – paragraph 4 of the cited Article 2 of the CIMI;

14. From the foregoing, the defect of violation of law due to error as to the legal presuppositions should be judged as unfounded, with the challenged assessments remaining in the legal system as they constitute a correct application of law to the facts.

15. The provision of item 28.1 of the TGIS does not constitute any violation of the principle of equality, with no discrimination existing in the taxation of properties constituted in horizontal property ownership and properties in full ownership with storeys or divisions capable of independent use, or between properties with residential use and properties with other uses.

In its response, the AT defends itself by exception that, if verified, leads to the dismissal of the proceedings.

Given that, in accordance with the provisions of Articles 16 of the Code of Tax Procedure and Process (CPPT), 13 of the Code of Administrative Court Procedure (CPTA) and 101 of the Code of Civil Procedure (CPC), subsidiarily applicable ex vi of paragraph 1 of Article 29 of the RJAT, the determination of the material jurisdiction of courts is of public order and its examination precedes any other matter, it is important to delimit the scope of jurisdiction of tax arbitral jurisdiction and assess whether the jurisdiction of the tribunal encompasses, or not, the IS assessment acts relating to the year 2014, in their entirety, despite only the collection documents relating to the first IS instalment having been issued so far.

The issue of lack of material jurisdiction of arbitral tribunals has been addressed in various arbitral proceedings ruled upon within the scope of CAAD - See in this regard the decisions delivered in the context of cases no. 48/2012, of 06.07.2012, 73/2012, of 23.10.2012 and 76/2012, of 29.10.2012.

Following the decisions identified, attention should be paid to the provision of paragraph 1 of Article 124 of Law No. 3-B/2010, of 28 April, according to which the Government was authorized "to legislate in order to establish arbitration as an alternative form of jurisdictional resolution of conflicts in tax matters", and, according to its paragraph 2, it should "constitute an alternative procedural means to the process of judicial challenge and the action for the recognition of a right or legitimate interest in tax matters."

Implementing the said legislative authorization, Decree-Law No. 10/2011, of 20 January, "established tax arbitration limited to certain matters, listed in its Article 2" making "the binding of the tax administration depend on an ordinance of the members of Government responsible for the areas of finance and justice" (see the reasoning of the arbitral decision delivered in Case No. 76/2012 mentioned above).

The scope of tax arbitral jurisdiction was thus delimited, in the first place, by the provision of Article 2 of the RJAT which enumerates, in its paragraph 1, the material allocation criteria, encompassing the assessment of claims directed at the declaration of illegality of tax assessment acts (item a)).

Through the Binding Ordinance (Ordinance No. 112-A/2011, of 20 April), the Government, by the State and Finance and Justice Ministers, bound the services of the Directorate-General of Taxes and the Directorate-General of Customs and Special Consumption Taxes to the jurisdiction of the arbitral tribunals functioning in CAAD, with these services now corresponding to the Tax and Customs Authority, in accordance with Decree-Law No. 118/2011, of 15 December, which approves the organic structure of this Authority, resulting from the merger of various bodies.

In this Ordinance, additional conditions and limits of binding are established taking into account the specificity of the matters and the value involved.

Article 2 of the Binding Ordinance provides:

"Article 2

Object of Binding

The services and bodies referred to in the previous article bind themselves to the jurisdiction of the arbitral tribunals functioning in CAAD that have as their object the assessment of claims relating to taxes whose administration is incumbent upon them referred to in paragraph 1 of Article 2 of Decree-Law No. 10/2011, of 20 January, with the exception of the following:

a) Claims relating to the declaration of illegality of self-assessment acts, withholding at source and payments on account that have not been preceded by recourse to the administrative avenue in accordance with Articles 131 to 133 of the Code of Tax Procedure and Process;

b) Claims relating to acts of determination of taxable material and acts of determination of taxable material, both by indirect methods, including decision of the review procedure;

c) Claims relating to customs duties on importation and other indirect taxes affecting goods subject to import duties; and

d) Claims relating to tariff classification, origin and customs value of goods and tariff quotas, or whose resolution depends on laboratory analysis or proceedings to be carried out by another Member State in the context of administrative cooperation in customs matters."

Now, the petition presented by the petitioner concerns the declaration of illegality of IS assessment acts issued on 1 April 2014 in relation to the properties already identified, whose payment of the first instalment appears in the collection documents attached to the case file.

Now, in cases where the tax must be paid in instalments, the assessment is notified to the taxpayer together with the notification for payment of each of the instalments, being able to be contested only in its entirety and not instalment by instalment (See decision delivered in the context of case no. 27/2015-T, available at www.caad.org.pt).

In this regard, the distinguished Professor José Casalta Nabais clarifies, in Tax Law, 3rd Edition, Almedina, 2005, the following:

"Assessment in the broad sense, that is, as a set of all operations intended to determine the amount of tax, comprises: 1) Subjective assessment intended to determine or identify the taxpayer or subject of the tax legal relationship, 2) Objective assessment through which the taxable material or base of the tax is determined and, likewise, the rate to be applied, in the case of a plurality of rates, 3) Assessment in the narrow sense translated into the determination of the collection through the application of the rate to the taxable material or base, and 4) (possible) deductions from the collection."

For each taxable event there will, in principle, be a single assessment, by which the amount to be collected will be determined.

In these terms, paragraph 7 of Article 23 of the Stamp Tax Code provides that "in the case of tax due for the situations provided for in item no. 28 of the General Table, the tax is assessed annually (...)" applying, with the necessary adaptations, the rules contained in the CIMI".

Similarly, paragraph 5 of Article 44 of the Stamp Tax Code further provides that "where there is assessment of the tax referred to in item no. 28 of the General Table, the tax is paid in the periods, terms and conditions defined in Article 120 of the CIMI".

That is, in accordance with paragraph 2 of Article 113 of the Municipal Property Tax Code, "the assessment (...) is carried out in the months of February and March of the following year", and the tax must be paid in three instalments, in the months of April, July and November, given its amount – see item c), paragraph 1 of Article 120 of the Municipal Property Tax Code.

From the combination of the legal provisions cited above it follows that IS is assessed annually, payment in instalments being merely a tax collection technique and not a partial payment thereof, as referred to in the arbitral decision delivered in the context of case no. 408/2014-T, available at www.dgsi.pt, cited by the AT.

Therefore, each IS assessment act is a single injurious act, capable of being contested.

Considering that the IS assessment acts underlying the collection documents, subject of the present arbitral petition, may be contested when they are issued and notified for payment of the first instalment of IS tax, that is, at the moment the taxable event occurs, it is understood that the Tribunal is competent to assess the petitioner's claim which is embodied in the declaration of illegality of the IS assessment acts already identified, concluding by the rejection of the exception raised by the AT relating to the absolute incompetence of this Arbitral Tribunal as to the material.

In light of the foregoing, with respect to the position of the parties and the arguments presented, to determine whether the IS assessment acts sub judice are or are not illegal, it will be necessary to verify what interpretation should be made of items 28 and 28.1 of the TGIS, namely to know whether the VPT on which the IS rate should be applied is the sum or should the individual VPT of each storey or division capable of independent use be considered, similar to what happens with properties in a horizontal property regime?

Let us see what should be understood.

It follows from Article 11 of the General Tax Law (LGT) that the interpretation of tax law should be carried out taking into account the general principles of interpretation.

The general principles of interpretation are established in Article 9 of the Civil Code (CC), as follows:

"1. The interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

1. However, the interpreter cannot consider the legislative thought that does not have in the letter of the law a minimum of verbal correspondence, although imperfectly expressed.

2. In fixing the meaning and scope of the law, the interpreter will presume that the legislator established the most appropriate solutions and knew how to express his thought in adequate terms."

Taking into account the rules of interpretation of law, it is important to note that Law No. 55-A/2012, of 29 October, added to the TGIS items 28 and 28.1, creating the IS rate on urban properties of high taxable asset value.

The creation of this new taxable event occurred in the context of economic crisis and serious public finance crisis, with the purpose of increasing the State's tax revenue, through the taxation of those who reveal greater indicators of wealth.

The special IS rate on properties of value exceeding €1,000,000.00, also known as the "luxury tax", aimed to ensure that the burden of sacrifice was shared by all and not only by those who live from the income of their work.

In these circumstances, items 28 and 28.1 established the incidence of IS in the following terms:

"Ownership, usufruct or right of superficies of urban properties whose taxable asset value recorded in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or exceeding €1,000,000 – on the taxable asset value used for the purposes of IMI:

28.1 – For residential property or land for construction where the building, authorized or envisaged, is for dwelling purposes, in accordance with the provisions of the Municipal Property Tax Code…… 1%."

It therefore follows from the letter of the law that the rate provided for in item 28.1 applies to the right of ownership over property with residential use, whose VPT used for the purposes of IMI is equal to or exceeding €1,000,000.00.

In accordance with the provision of Article 1, paragraph 6 of the Stamp Tax Code, "For the purposes of this Code, the concept of property is the one defined in the Municipal Property Tax Code (CIMI)."

In turn, the Municipal Property Tax Code determines in its Article 2, the following:

"Concept of Property

1 - For the purposes of this Code, property is any fraction of territory, comprising waters, plantations, buildings and constructions of any nature incorporated or based on it, with the character of permanence, provided that it is part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are located, although situated in a fraction of territory that constitutes an integral part of a diverse patrimony or does not have patrimonial nature.

2 - Buildings or constructions, although movable by nature, are deemed to have the character of permanence when used for non-transitory purposes.

3 - The character of permanence is presumed when the buildings or constructions are based in the same location for a period exceeding one year.

4 - For the purposes of this tax, each autonomous unit, in the horizontal property regime, is deemed to constitute a property."

Taking into account the concept of property established in law, it is clear that properties constituted in vertical ownership constitute property, for the purposes of item 28 of the TGIS.

Insofar as the properties under analysis (hereinafter Properties) constitute a property, in accordance with the provisions of Article 2 of the Municipal Property Tax Code, it is literally covered by items 28 and 28.1.

In truth, the law does not distinguish, at any moment, between property in horizontal ownership and property in vertical ownership, with paragraph 4 of Article 2 merely establishing that in the horizontal property regime each autonomous unit is deemed to be property.

From what is stated in paragraph 4 of Article 2, it does not follow, contrary to what the respondent argued in its response, that only autonomous units of property in a horizontal property regime are deemed to be properties.

Nevertheless, the special IS rate fixed in the item in question only applies if the Properties constitute residential properties, whose taxable asset value recorded in the register, in accordance with the Municipal Property Tax Code, is equal to or exceeding €1,000,000.

Since the Stamp Tax Code does not establish what is meant by "residential", by virtue of the provision of paragraph 2 of Article 67 of said Code, the rules provided for in the Municipal Property Tax Code also apply here, namely those established in Articles 6 and 41 of that Code.

From the analysis of the aforementioned rules, it also clearly follows that each of the Properties in question is covered by item 28.1, as urban properties with residential use.

It remains, therefore, to ascertain whether the VPT recorded in the register of the Properties, in accordance with the Municipal Property Tax Code, is equal to or exceeding €1,000,000.

Now, as follows from the letter of the law, the VPT of each of the Properties will be that which is used for the purposes of IMI.

In this regard, it is determined in paragraph 1 of Article 7 of the Municipal Property Tax Code, applicable ex vi of paragraph 7 of Article 23 of the Stamp Tax Code, that "The taxable asset value of properties is determined in accordance with this Code."

In turn, in paragraphs 2 and 3 of Article 7 of the Municipal Property Tax Code, the rules for determining the VPT of properties with two or more classifications are established.

Since the rate provided for in items 28 and 28.1 of the TGIS only applies to properties with residential use, the rules established in paragraphs 2 and 3 of Article 7 of the Municipal Property Tax Code are not applicable to the determination of the relevant VPT within the scope of said item.

In truth, the VPT of properties with residential use, provided for in items 28 and 28.1, must be determined taking into account paragraph 3 of Article 12 of the Municipal Property Tax Code, according to which:

"Each storey or part of property capable of independent use is considered separately in the registration record, which also specifies the respective taxable asset value."

Thus, taking into account that the legislator does not attribute any relevance to the fact that the property is constituted in a vertical ownership regime, what is relevant is the material truth underlying its existence as an urban property and its use.

In fact, there is no rule in the Municipal Property Tax Code that permits the conclusion that the VPT of property in a vertical ownership regime should be obtained by adding the VPT that were attributed individually to the parts that constitute it (See, among others, the arbitral decisions delivered in Cases 50/2013-T, 131/2013-T, 177/2014-T, 396/2014-T).

Taking into account that the rules of incidence are subject to the principle of fiscal legality (See Article 103 of the Constitution of the Portuguese Republic (CRP) and Article 8 of the LGT), there appears to be no legal basis for the assessment of IS based on the sum of the VPT of each of the parts of the Properties.

Since the rules of incidence of taxes must be interpreted in their exact terms, without recourse to analogy, making prevail certainty and security in their application (See Decision of the South Central Administrative Court, delivered in the context of case 7648/14, of 10.07.2014), the AT cannot conduct an assessment operation based on a rule of incidence, which does not expressly provide for the basis of incidence of the tax in the terms assessed.

Therefore, it was also recently decided by the Supreme Administrative Court, in Decision No. 047/15, of 9.09.2015, that "II – In the case of a property constituted in vertical ownership, the incidence of IS 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 registration article), but by the VPT attributed to each of those storeys or divisions intended for dwelling."

It is thus understood that there is no legal basis that permits the AT to add the taxable asset values of the storeys or parts of property capable of independent use, in order to reach the eligible taxation threshold of €1,000,000.00, provided for in item 28 of the TGIS.

In view of the foregoing, given that none of the storeys, capable of independent use of the Properties, has a taxable asset value exceeding €1,000,000.00, there is no incidence of the rate provided for in item 28 of the TGIS.

As a consequence, the annulment of the IS assessment acts sub judice is required, and the recognition of the right to indemnity interest of the petitioner with respect to the IS instalments already paid, since the illegality of the assessment acts is attributable to error of the respondent, in accordance with the provisions of Article 43 of the LGT.

IV. DECISION

Whereupon this Arbitral Tribunal decides:

A) To find in full the petition for annulment of the IS assessment acts relating to the urban properties registered in the urban property register of the parish of ... under no. ... and of the parish of ... under no. ..., relating to the year 2014;

B) To order the Tax and Customs Authority to refund to the petitioner the amount of tax paid, increased by indemnity interest;

C) To order the respondent to bear the costs of the present proceedings, as the defeated party.

V. VALUE OF THE CLAIM

In accordance with the provision of Article 306, paragraph 2 of the Code of Civil Procedure, Article 97-A, paragraph 1 a) of the CPPT and Article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the claim is fixed at €35,311.40.

VI. COSTS

Pursuant to the provisions of Articles 12, paragraph 2 and 22, paragraph 4, both of the RJAT, and Article 4, paragraph 4 of the Regulation of Costs of Tax Arbitration Proceedings, the amount of the arbitration fee is fixed at €1,836.00, in accordance with Table I of said Regulation, to be borne by the respondent.

Let it be notified.

Lisbon, 3 November 2015

The Arbitrator

Magda Feliciano

(The text of this decision was prepared by computer, in accordance with Article 131, paragraph 5, of the Code of Civil Procedure, applicable by reference of Article 29, paragraph 1, item e) of Decree-Law No. 10/2011, of 20 January (RJAT), with its drafting governed by the spelling prior to the 1990 Orthographic Agreement.)