Stamp Tax on Building Land (Verba 28.1 TGIS) - CAAD Arbitration 421/2017-T

ARBITRATION DECISION

I. REPORT

A…, S.A., holder of NIPC…, with registered office at …, no. …, …-… Lisbon, (hereinafter referred to as the Applicant) filed, on 10/07/2017, a request for the constitution of a single arbitration 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 referred to as the Respondent or AT) is the defendant. The arbitration petition is intended to challenge the dismissal of the hierarchical appeal filed against the decision dismissing the request for revision of the acts of assessment of Stamp Duty, by application of item 28.1 of the General Table of Stamp Duty (TGIS), on the urban properties described with land for construction and identified in the case file.

The request for constitution of the arbitration tribunal was accepted by the President of CAAD on 11/07/2017 and, on the same date, was notified to the Tax and Customs Authority. Pursuant to the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, on 1/09/2017, the Ethics Council appointed the undersigned as arbitrator of the single arbitration tribunal, who communicated acceptance of the appointment within the legally prescribed period, and notified the parties of this appointment. The parties accepted the appointment of the indicated arbitrator, whereby, in accordance with the provisions of paragraph c) of no. 1 of article 11 of the RJAT, the arbitration tribunal was constituted on 19-09-2017.

On 20-09-2017 an arbitration order was issued, in accordance with article 17 of the RJAT, and accordingly the AT was notified to present its Answer. On 14-07-2017 the Applicant submitted documents nos. 12 to 17 to the case file, referenced in the PI, and on 22/09/2017 requested the attachment of proof of payment of the contested stamp duty assessments.

On 26-10-2017 the AT presented its Answer, which is hereby deemed to be fully reproduced herein.

On 30-10-2017 an arbitration order was issued, considering the request by the AT in article 71 of its answer, notifying the Applicant to pronounce itself on the requested dispensation with the realization of the meeting provided for in article 18 of the RJAT, taking into account that the disagreement between the parties refers only to a question of law in dispute, with no disagreement regarding the facts established by both parties and evidenced in their respective pleadings. Within the fixed period, the Applicant expressed its agreement with the dispensation of the said meeting, its interest in submitting written submissions, and requested that a period be set for this purpose. Accordingly, the arbitration tribunal issued an arbitration order on 10-11-2017, notified to the parties on 14-11-2017, which dispensed with the realization of the meeting provided for in article 18 of the RJAT, notified the parties to submit written submissions, within equal and successive periods of 15 days, payment of the subsequent arbitration fee, proceeding to final decision, to be rendered, presumably, within 30 days following the submission of written submissions by the parties or after the expiration of the period set for this purpose.

The Applicant submitted its written submissions to the case file on 30-11-2017 and the Respondent, after the fixed period had elapsed, chose not to submit submissions. After the period for submissions by the parties had elapsed, considering the judicial recess period that had occurred, an arbitration order was issued on 15-01-2018, setting the date for arbitration decision until 19-02-2017.

The Position of the Applicant:

The Applicant requests the declaration of illegality of the order dismissing the hierarchical appeal filed against the order dismissing the request for revision of the acts of assessment of Stamp Duty (IS), issued with reference to the year 2015 and to the properties identified in the case file, as results from documents nos. 1 (decision of dismissal) and 2 to 13, attached to the case file by the Applicant. These tax assessments, whose illegality is successively invoked in the request for revision, in the hierarchical appeal filed, whose order of dismissal gives rise, finally, to the present arbitration petition, refer to three parcels of land for construction, with the following specifications:

Parcel A 1, described under article …, to which correspond assessments nos. 2016…, 2016… and 2016…, corresponding to 3 installments, in the total value of €13,368.20 (docs. 2 to 4 attached to the PI);

Parcel A 2, described under article …, to which correspond assessments nos. 2016…, 2016… and 2016…, corresponding to 3 installments, in the total value of €14,568.20 (Docs. 5 to 7 attached to the PI);

Parcel B, described under article …, to which correspond assessments nos. 2016…, 2016… and 2016…, corresponding to 3 installments, in the total value of €11,413.80 (Docs. 8 to 10 attached to the PI);

and

Parcel K, described under article …, to which correspond assessments nos. 2016…, 2016… and 2016…, corresponding to 3 installments, in the total value of €10,484.10 (Docs. 11 to 13 attached to the PI),

All located in the Parish of …, Municipality of Portimão, of which the Applicant is the owner.

The amount of stamp duty (IS) assessed in the year 2015, with reference to these properties, challenged in the present arbitration petition, corresponds to the total value of €49,834.30. All these properties are described as land for construction, and, according to the Applicant, Parcels A1, A2, and K have no authorization issued to authorize buildings, nor are there any buildings constructed thereon. As for Parcel B, although this is described as land for construction with residential use, the constructions provided for therein are intended for local accommodation, thus for the exercise of an economic activity, as results from documents nos. 15, 16 and 17 attached to the PI.

The tax assessment was issued in application of item no. 28.1 of the General Table of Stamp Duty and article 6 of Law No. 55-A/2012, of 29 October, as amended by Law 83-C/2013 of 31 December (Budget Law for 2014), which provides for taxation in IS of "Ownership, usufruct or right of surface of urban properties whose tax patrimonial value contained in the register, in accordance with the terms of the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000.00 – on the tax patrimonial value used for IMI purposes.

28.1 – Per residential property or per land for construction whose authorized or planned building shall be for residential purposes, in accordance with the provisions of the IMI Code" (our emphasis)

The Applicant requests the declaration of illegality of these assessments, because, having presented a request for revision of these assessments on the basis of error regarding the factual and legal assumptions underlying the assessments, this request was dismissed and, having filed the corresponding hierarchical appeal, this was also dismissed, as results from Office no. …-…-…, of 07-04-2017, whose challenge the Applicant submits, having for this purpose presented the arbitration petition that is now to be decided.

It therefore claims the annulment of this order dismissing the hierarchical appeal filed, considering that the error regarding the factual and legal assumptions of the incidence of the tax persists, which from the outset taint the assessments with illegality and imposes their annulment. To the defect of violation of law alleged is added, according to the Applicant, the defect of unconstitutionality resulting from the violation of the principle of equality, of contributive capacity, of the prohibition of double taxation (undue), as well as violation of the principle of Good faith, trust and impartiality. It concludes, petitioning for the annulment of the act of dismissal and as well as of the IS assessments above identified, with all legal consequences, including the condemnation of the AT to reimburse the amounts of tax paid and to the payment of compensatory interest.

It supports its petition, in summary, alleging that the norm in question has its scope of application limited to land for construction whose building, authorized or planned, shall be for residential purposes and whose tax patrimonial value is greater than €1,000,000.00. Thus, the Applicant alleges that it is imperative to demonstrate that the factual reality to be taxed corresponds to land for construction whose building, authorized or planned, shall be for residential purposes and not for another purpose, such as buildings authorized or planned for services or other purposes.

In the case at hand, the Applicant alleges that in Parcels A1, A2 and K there is no construction built nor any authorization issued to permit buildings for residential purposes. It further alleges that the Applicant never made a request for licensing or prior notice to the Municipal Chamber of Portimão with a view to building.

As for Parcel B, the Applicant alleges that, being land for construction with potential for residential use, the planned constructions are intended for a business activity of a tourist nature, as they are intended for Local Accommodation. It further alleges that this is the vocation or specific purpose of the Applicant, a legal entity dedicated to tourist investments. Despite all this, the Applicant alleges that this Parcel continues to be only a "land for construction" with unfinished buildings intended for another purpose (provision of tourist services) other than residential use. In that sense, on the date of the taxable event (2015) it could not be considered, for any of the parcels in question, that there existed or would exist a building with exclusively residential use, as results from all the documentation attached to the PI. Moreover, the Applicant further alleges that the burden of proof of the incidence assumptions fell upon the AT, as clearly results from article 74 of the LGT, which it failed to do.

In summary, it concludes that the legal assumptions of incidence of IS are not met, wherefore the contested assessment is illegal.

Alternatively, the Applicant invokes the material unconstitutionality of item 28.1 of the TGIS for violation of the principles of tax equality, of contributive capacity, of double taxation undue and violation of the principle of Good faith, trust and impartiality.

The Position of the Respondent:

In the answer presented, which is hereby deemed to be fully reproduced herein, the Respondent contests the grounds invoked by the Applicant, and develops a set of arguments in defense of the legality of the contested assessments and the constitutional conformity of item 28.1 of the TGIS which, in its view, does not merit any objection. It considers that the assessment is legal because it results expressly from the letter of the law, by virtue of the amendment introduced by the Budget Law for 2014, which also applies to land for construction, if they meet the legally provided conditions, are subject to the incidence of stamp duty, from 01-01-2014. It concludes, arguing for the legality of all the challenged acts and for the total lack of merit of the arbitration petition submitted by the Applicant.

It should be noted that the analysis of the substantiation of the contested act(s) is assessed by the content thereof and not by the arguments contained in the Answer presented by the AT herein.

Having regard to the substantiation contained in the dismissal decision, since the assessments say nothing in this regard, it is extracted that, in the view of the Respondent AT, land for construction with construction suitability for residential purposes, even without a license issued for this purpose or building authorized or planned for residential purposes. Furthermore, the AT considers that even in relation to Parcel B, with unfinished buildings authorized for residential use of Local Accommodation, the purpose continues to be "residential," as stated in the property record and in the description that determined the evaluation and determination of their respective VPT's. The Respondent further alleges that the Applicant accepted these values determined in the 1st evaluation and did not claim or request, as it should have, a second evaluation, as determined by article 76 of the CIMI.

These are, in summary, the arguments of the parties.

It is now necessary to decide.

The arbitration tribunal was regularly constituted and is materially competent, given the provisions of articles 2, no. 1, paragraph a), and 30, no. 1, of the RJAT.

The parties have legal personality and capacity, are legitimate (articles 4 and 10, no. 2, of the same diploma and article 1 of Ordinance No. 112-A/2011, of 22 March) and are duly represented.

The proceedings do not suffer from nullities.

II. MATTERS OF FACT

Facts Considered Proven

The Applicant is a corporation whose object is the buying and selling of rural and urban properties, the development and tourist use, in all its forms, the exercise of any activities related to tourism, the provision of management services and others, elaboration of economic and financial studies and promotion of investments;

In the year 2015, the Applicant was the owner of the properties, described as parcels of land for construction, located in the parish of …, Municipality of Portimão, hereinafter itemized, all with VPT greater than €1,000,000.00, namely:

Parcel A 1, described under article …, with the VPT of €1,048,410.00;

Parcel A 2, described under article …, with the VPT of €1,141,380.00;

Parcel B, described under article …, with the VPT of €1,556,820.00;

Parcel K, described under article …, with the VPT of €1,336,820.00;

All located in the said Parish of … – Portimão. (See Doc. 1 and Docs. nos. 2 to 14, inclusive, attached as annex to the PI).

With reference to these properties and for the year 2015, stamp duty assessments were issued, under item 28.1 of the TGIS, hereinafter itemized:

Assessments nos. 2016…, 2016… and 2016…, corresponding to 3 installments due by reference to Parcel A 1 (article …), in the amount of €4,456.06 each and in the total amount of €13,368.20 (docs. 2 to 4 attached to the PI);

Assessments nos. 2016…, 2016… and 2016…, corresponding to 3 installments due by reference to Parcel A 2 (article …), in the amount of €4,855.06 each and in the total amount of €14,568.20 (Docs. 5 to 7 attached to the PI);

Assessments nos. 2016…, 2016… and 2016…, corresponding to 3 installments due by reference to Parcel B (article …), in the amount of €3,804.60 each and in the total amount of €11,413.80 (Docs. 8 to 10 attached to the PI);

Assessments nos. 2016…, 2016… and 2016…, corresponding to 3 installments due by reference to Parcel K (article …), in the amount of €3,494.70 each and in the total amount of €10,484.10 (Docs. 11 to 13 attached to the PI),

The amount of stamp duty (IS) assessed in the year 2015, with reference to these properties, challenged in the present arbitration petition, corresponds to the total value of €49,834.30.

The Applicant, cited for the institution of the respective fiscal execution proceedings for non-payment of IS assessments, above identified, made payment of all corresponding amounts and respective interest and costs, as results from the proofs attached to the case file; (See: Request presented by the Applicant on 22/09/2017 and respective documents, nos. 1 and 2, in annex)

All these properties are described as land for construction; (See Doc 1, 14 to 16 of the PI and PA attached to the case file)

The Subdivision License no. …/89, dated 10.01.1989, attached to the case file, states: "The realization of the subdivision is subject to the following requirements: 1) It is authorized the constitution of seventeen parcels of land for urban construction, designated by A1, A2, B, C, D, E, F, G, H, I, J, K, L, O, P, Q and U, two parcels of land for agricultural purposes, designated by M1 and M2 and one parcel of land for landscaping area (…), with the areas, location and type of construction indicated in the attached plan, which I have initialed and authenticated with the white seal of this Municipal Chamber."; (See: PA attached to the case file and Docs. 14 to 16 attached to the PI)

In the Subdivision License attached to the case file, it is stated only that, with reference to parcels A1, A2, B and K that are intended for urban construction, in the following terms:

The Building Works License no. …/08, with process no. …/07, relating to Parcel B, recorded under article … of the parish of … – Portimão, states that: "… the works, approved by order of 2008/06/19, comply with the provisions of license no. …/89, construction area 5336m2, volume 15994m2, number of floors 2, use - RESIDENTIAL (Construction of an urban center of terraced houses in a total of 44 units), Works completion period - 36 months from 09.07.2008 to 09.07.2011, extended until 09.07.2012"; See PA attached to the case file and Docs.14 to 16 attached to the PI)

• In License no. …/13, Proc. No. 118/07, relating to Parcel B, recorded under article … of the parish of … – Portimão, it states that the works were approved by order of 29/07/2013, for construction of 44 units, with the characteristics of use - RESIDENTIAL (Special License For Completion of Unfinished Works) and with works completion period of 12 months from 12.08.2013 to 12.08.2014 extended, first, until 12.08.2015, and then, until 18.02.2016; See: PA attached to the case file; Docs. nos. 14 to 16 attached to the PI)

The tax patrimonial values (VPT's) corresponding to each of the parcels, are as follows: €1,048,410.00; €1,141,380.00, €1,556,820.00 and €1,336,820.00. (See: Docs. 1 to 13 attached to the PI)

It results from the evidentiary documents brought to the proceedings that the assessments resulting from the application of Item 28.1 of the TGIS took into account the Type of property – land for construction; (See: Doc 1, 14 to 16 attached to the PI).

Pursuant to the Subdivision License 1/89, attached to the case file, the land for construction recorded under articles …, … and …, parcels A 1, A 2 and K, has viability for "urban construction," as already results from what is established in g); (See: Doc. 14, 15 and 16 attached to the PI)

From the PA attached to the case file by the Respondent, there is no licensing authorization or licensing request, with reference to the aforementioned properties, corresponding to parcels A 1, A2 and K;

In Parcel B, corresponding to article …, there existed at the date of the taxable event (2015) a set of unfinished constructions, with licensed/authorized building, composed of 44 residential units (residential use), which are intended for "Local Accommodation," a tourist operation which is part of the purpose or object of the activity developed by the Applicant; (See: Docs. 15, 16 and 17 - Positive opinion issued by Tourism of Portugal for local accommodation operation, attached to the case file as Doc. no. 17 annex to the PI);

The Applicant presented a request for revision of the tax acts substantiated in the IS assessments mentioned in the case file, which was dismissed;

The Applicant filed a hierarchical appeal of that dismissal, which was dismissed by Office no. …-…-…, of 07-04-2017;

On 10-07-2017, the Applicant presented the request for constitution of the arbitration tribunal, as recorded in the CAAD computer system.

12. Facts Not Proven

That, regarding the properties designated as land for construction A 1, A 2 and K, to which refer to subparagraph g) and h) of the facts given as proven, there existed, on the date of the taxable event, subdivision license or construction license, or approved project, or prior notice, or favorable prior information or document proving constructive viability, which provided for as possible construction "residential."

There are no other facts not proven to be considered, with relevance for the final decision.

13. Substantiation of Proven Matters of Fact

With regard to the matters of fact, the Tribunal does not have to pronounce itself on everything that was alleged by the parties, but rather it has the duty to select the facts that matter for the decision and to distinguish the proven matter from the unproven – (cfr. art. 123, no. 2, of the CPPT and article 607, no. 3 of the CPC, applicable ex vi article 29, no. 1, letters a) and e), of the RJAT).

In this way, the facts pertinent to the judgment of the case are chosen and selected according to their legal relevance, which is established in consideration of the various plausible solutions of the question(s) of Law (cfr. previous article 511, no. 1, of the CPC, corresponding to current article 596, applicable ex vi of article 29, no. 1, letter e), of the RJAT).

Thus, having regard to the positions assumed by the parties, in light of article 110/7 of the CPPT, the documentary evidence and the PA attached to the case file, the facts listed above were considered proven, with relevance for the decision.

The proven facts are based on the documentary evidence attached to the case file by the Applicant, as specified in each of the points of the matters of fact considered proven, whose authenticity and correspondence to reality were not questioned. Furthermore, all the facts established were also confirmed by the tenor of the answer presented by the AT.

The fact given as not proven results from the tenor of documents nos. 14 to 17, attached to the case file by the Applicant.

III. MATTERS OF LAW

14. The question that opposes the parties, underlying the present arbitration petition, concerns the interpretation of item 28.1 of the TGIS, in the wording introduced by Law No. 83-C/2013, of 31 December, and its application in concrete to the land for construction, designated by parcels A1, A2, K and B, above described, of which the Applicant is the owner.

The aforementioned provision, in the version introduced by Law No. 83-C/2013, of 31 December (Budget Law for 2014), in effect at the time of the taxable event, delimits the scope of application in the following terms:

"28. Ownership, usufruct or right of surface of urban properties whose tax patrimonial value contained in the register, in accordance with the terms of the Municipal Property Tax Code (CIMI), is equal to or greater than (euro) 1,000,000 - on the tax patrimonial value used for IMI purposes:

28.1 - Per residential property or per land for construction whose building, authorized or planned, shall be for residential purposes, in accordance with the provisions of the IMI Code: 1% (our emphasis).

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

To assess the question of law, it is important to take into account the legislative evolution that has occurred in this matter.

15. The legislative amendment introduced by Law No. 83-C/2013, came to respond to the controversy raised by the introduction of item 28 of the CIS, which gave rise to extensive arbitration case law, as well as from our superior courts, both establishing the understanding that the initial version of said provision would not include the figure of "land for construction".

With the Budget Law for 2014, the legislature came to expand the objective scope of the tax incidence, coming to include land for construction, in relation to which building for residential purposes has been authorized or is planned.

The legislature, confronted with the extensive controversy generated by the application of this item, consciously chose to tax only land intended for the construction of residential buildings, excluding other types of buildings or urban constructions, intended for commerce, services or social facilities.

This was clearly an express and unequivocally assumed option by the legislature, as results from the letter, as well as from the ratio legis of the provision, in its new formulation.

The same conclusion is drawn from the analysis of the historical element, and it is extensively addressed in the numerous arbitration case law produced on this matter, to which we adhere.

Specifically, as mentioned in the arbitration decision in case no. 525/2015-T, whether or not to tax land for construction is a legislative policy option that must be respected and which, in our opinion, does not evidence, without more, violation of constitutional principles, as alternatively invokes the Applicant. However, we cannot fail to point out that this question seems, even so, controversial. This is evidenced by the tenor of the recent Decision of the Constitutional Court, No. 250/2017, of 24-05-2017, in which it was decided:

"a) To declare unconstitutional the provision of item 28.1 of the General Table of Stamp Duty, approved by Law No. 55-A/2012, of 29 October, and amended by Law No. 83-C/2013, of 31 December, insofar as it imposes annual taxation on the ownership of land for construction whose building, authorized or planned, shall be for residential purposes, whose tax patrimonial value is equal to or greater than €1,000,000.00;(…)"[1]

In the case at hand, it is important to decide the question in light of the correct application of the applicable law, especially since the declaration of concrete unconstitutionality does not have general binding force.

16. Having said this, and similarly to what was decided in the Arbitration Award rendered in case 490/2016-T of 15-02-2017, it is beyond doubt that the new formulation introduced by the Budget Law for 2014 is not so comprehensive as to allow the taxation of all land for construction. The legislature restricted the scope of application, in the case of land for construction, to those "whose building, authorized or planned, shall be for residential purposes".

The major change introduced by the legislature with the Budget Law for 2014 consisted in the alteration of the reference concept for the incidence of the tax, which ceased to be "property with residential use," having the legislature altered and expanded the scope of incidence to land for construction, provided that the authorized or planned building is for residential purposes, in accordance with the provisions of the CIMI. This intention is absolutely clear and objective and reflects a choice of fiscal policy in this matter.

The only question to be resolved in the present case, concerns the application of said item 28.1 of the table annexed to the CIS, to the parcels described in the case file, all of which are characterized as "land for construction." It is thus a question of the definition of the scope of application of item 28.1 of the TGIS, in the wording given by Law No. 83-C/2013, of 31 December (Budget Law for 2014), more specifically to determine whether the land for construction in question in the present case can be subsumed under the concept of "land for construction whose building, authorized or planned, shall be for residential purposes, in accordance with the provisions of the IMI Code" to which the aforementioned item refers, taking into account that its tax patrimonial value is equal to or greater than €1,000,000.00.

The question arises by virtue of taxation for stamp duty purposes of the ownership, usufruct or right of surface of urban properties whose tax patrimonial value contained in the register is equal to or greater than €1,000,000, in which case tax is due, at the rate of 1% on the tax patrimonial value used for IMI purposes, per property with residential use.

17. As stated, among others, in the Arbitration Award 490/2016-T, "this question is not new, having been subject to appreciation both in arbitration jurisdiction and in the case law of the Supreme Administrative Court, and that in the context of the wording of the CIS given by Law No. 55-A/2012, of 29 October, the decisions rendered were always contrary to what was sought by the Tax Administration."

The situation under consideration in the present case, however, occurs in a differentiated legal framework, insofar as the facts should be appreciated in light of the wording of the CIS given by the Budget Law for 2014, Law No. 83-C/2013, of 31 December (article 194, under the heading - Amendment to the General Table of Stamp Duty), according to which item 28.1 of the General Table of Stamp Duty, annexed to the Stamp Duty Code, approved by Law No. 150/99, of 11 September, came to have the wording stated above.

In this new formulation, various and numerous arbitration decisions have already been rendered, and although with occasional divergences, we can state that, predominantly, all consider that, in the new formulation, land for construction becomes subject to IS incidence – item 28.1, but not all, only those in relation to which the incidence assumptions are met, namely: "whose building authorized or planned is residential."

The said case law, citing again the same Arbitration Award rendered in case 490/2016-T, is based on the understanding that should be considered as fulfilling the assumptions of the new item 28.1 of the TGIS: "with regard to land for construction, whether or not located within an urban agglomeration, as defined in art. 3/4 of this Code [CIMI], should, as such, be considered the land in relation to which has been granted: - license for subdivision operation; - construction license; - authorization for subdivision operation; - construction authorization; - admitted favorable prior notice of subdivision or construction operation; issued favorable prior information of subdivision or construction operation, as well as; - those that have been declared as such in the acquisition title, it being noted that, also for this purpose, only the acquisition title with the form prescribed by civil law should be relevant, that is, the public deed or the authenticated private document referred to in art. 875 CC." [2]

Also in the award rendered in arbitration case 142/2016T it was concluded, equally, in favor of the merit of the petition, with the following substantiation:

"There is no indication in these provisions of the TGIS and the CIMI of what should be understood by «planned building», but, taking into account the documents required to carry out the evaluation of land for construction, indicated in article 37, no. 3, of the CIMI, it is concluded that one can only speak of authorized or planned construction when the «building to be constructed,» referred to in no. 1 of article 45, is defined in a subdivision license or construction license, or approved project, or prior notice, or favorable prior information or document proving constructive viability".

The understanding of the aforementioned awards is fully endorsed here, as regards what, in light of the new wording of the CIS, should be understood by "land for construction whose building, authorized or planned, shall be for residential purposes, in accordance with the provisions of the IMI Code".

Indeed, in accordance with the CIMI, land for construction, which, in accordance with article 6/1/c) of such Code, constitute a type of urban property, may have residential use, as results from article 41, also of the CIMI, use that, as also results, expressly from article 45/5 of the CIMI, will be determined on the basis of the elements referred to in article 37 of the same Code, with no. 3 of this article stating that:

"With regard to land for construction, a photocopy of the subdivision license must be presented, which should be replaced, if there is no subdivision, by a photocopy of the construction license, approved project, prior notice, favorable prior information or document proving constructive viability".

18. It is concluded, thus, here, as in the case law cited above, that should be considered as "land for construction whose building, authorized or planned, shall be for residential purposes, in accordance with the provisions of the IMI Code", those lands in which the «building to be constructed,» is defined as intended for residential purposes in a subdivision license or construction license, or approved project, or prior notice, or favorable prior information or document proving constructive viability.

19. Now, in the case at hand, it was not found that there existed, regarding the land for construction designated as Parcels A1, A2 and K, to which refer part of the Stamp Duty assessments, object of the present arbitration petition, on the date of the taxable event, subdivision license or construction license, or approved project, or prior notice, or favorable prior information or document proving constructive viability, which provided for as possible construction the residential use.

It results from the Subdivision License attached to the case file that only "urban construction" is provided for as possible, which may have various purposes other than, specifically, residential (See: facts established in subparagraphs g) and h) of the matters of fact).

Thus, it is not possible to conclude that the «building to be constructed» on the lands in question is intended for residential use, nor did the Respondent demonstrate that it was so, and as results from the provision of article 74 of the LGT, it was the burden upon her to prove this.

20. Given the above, it cannot be considered demonstrated, as regards parcels A1, A2 and K, that such lands qualify as "land for construction whose building, authorized or planned, shall be for residential purposes, in accordance with the provisions of the IMI Code", not meeting, therefore, the provision of item 28.1 of the Table annexed to the CIS, in the applicable wording, whereby the respective stamp duty assessments suffer from error regarding the factual assumptions, and consequent error of law, and should, as such, be annulled, with the arbitration petition proceeding in full as regards these properties.

21. As regards Parcel B, as results from the proven matters of fact, it has Building License, with construction of 44 units provided for, which are intended for use as residential.

It happens that it is proven that in relation to these, a prior request was made to Tourism of Portugal in order to obtain a favorable opinion for their destination to Local Accommodation.

Such opinion was positive and from it results the intention of the Applicant to destine such constructions (still not completely built, at least by the time of the taxable event that occurred in 2015) to commercial operation, that is, to the provision of tourist services, which, moreover, fit within the economic activity developed by the Applicant.

In coherence with what is stated above, the legislature was clear in the intention to introduce within the scope of application of the provision contained in item 28.1 of the TGIS land for construction, if the planned or authorized building is for residential use, it being understood pacifically that those intended for commercial purposes, services or social utility are excluded.

The reasons of fiscal policy, underlying this provision, may be criticizable, but appear to be clear, starting from the express starting point in the preparatory works, which point in the direction of taxing properties of greater tax patrimonial value, intended for residential use (built or to be built) of "luxury." This same explains the high value to which the legislature resorted as a quantitative criterion from which the incidence of the tax is verified.

It will not matter, therefore, that there already exists some construction built, but rather that there exists authorized licensing for its construction and that its purpose is exclusively for residential use.

Having said this, it is concluded that there are expressly excluded from taxation, from the outset, land for construction whose planned or authorized buildings are intended for commercial, industrial, services or social facilities purposes.

Whereby, also as regards this Parcel, the assumptions of application contained in item 28.1 of the TGIS are not met, whereby it is concluded that the contested IS assessments suffer from error regarding the factual assumptions and consequent error of law, which imposes their annulment.

22. Thus, in conclusion, in the case at hand it is important to distinguish parcels A1, A2 and K from parcel B, since the legal situation is distinct.

With respect to the three former it was proven that therein there is no construction built, nor any authorization issued to permit any buildings for residential use.

Indeed, as the Applicant states, it was left to be demonstrated and proven that, on the date of the verification of the taxable event (…), there would be valid authorization or provision that the buildings to be erected on said land would be intended for residential use.

The subdivision license attached to the case file does not demonstrate that building intended for residential use is licensed or authorized for parcels A1, A2 and K, but only "urban construction," which may have different purposes different from residential use.

It was incumbent upon the AT to carry out such demonstration, essential to assess the verification of the assumptions of application of the provision. As referred to in the arbitration award rendered in proc. 578/2015-T[1], whose tenor we endorse, "In summary, it appears clear, in the case being treated, that the incidence of the tax on land for construction cannot be materialized with the mere entry of the same, as such, in the register, but rather, and decisively, by the verification of the effective potential for building on said lands (which should be assessed in casu and revealed by the existence of the documents above described). In other words, that the incidence of the tax, for purposes of item 28.1, is only materialized with the verification of the «effective use,» to use the apt expression of JOSÉ MANUEL FERNANDES PIRES".»

Therefore, without need for further considerations, it is concluded that in relation to these parcels, the assumptions contained in the incidence provision of item 18.1 of the TGIS are not met.

In what concerns Parcel B, the situation is different, since on the land for construction buildings are under construction, although unfinished, 44 units or residential dwellings. However, this construction was the subject of a request to Tourism of Portugal, intended to enable its destination for tourist purposes, within the activity of the Applicant, and there to install Local Accommodation. Thus, although the unfinished constructions have the announced destination of use for temporary and sporadic residential use of tourists, the fact is that this purpose is dedicated to the economic activity developed by the Applicant. We are before a provision of tourist residential accommodation services, a purpose of a commercial nature inserted in the corporate purpose of the Applicant.

There is lacking, thus, the verification of an essential assumption for purposes of application and taxation.

23. Accordingly, in the case of the present proceedings, the factual assumptions provided for in the law are not met in relation to any of the properties in question.

Based on all the foregoing, it is concluded in favor of the merit of the arbitration petition, given that the IS of the year 2015, assessed with reference to all the properties described in the case file, suffers from a defect regarding the factual assumptions and consequent error of law, requiring its annulment.

This defect accompanied, for the reasons set out above, the orders dismissing the request for revision and the consequent hierarchical appeal that determined the submission of the arbitration petition.

Whereby, both are tainted with illegality, by violation of law, and should be annulled, with the other legal consequences.

In this way, and given the foregoing, the assessments that are the object of the present arbitration petition suffering from error in the factual assumptions, and consequent error of law, should the same be annulled, the arbitration petition succeeding and remaining prejudiced the examination of the remaining questions raised.

Regarding the request for compensatory interest formulated by the Applicant:

24. No. 1 of article 43 of the LGT provides that compensatory interest is due when it is determined that there has been error attributable to the services from which results payment of the tax debt in an amount greater than legally due.

In this case, the errors that affect the acts now annulled are attributable to the Tax and Customs Authority, which perpetrated them on its own initiative, contrary to what is provided in law.

The Applicant thus has the right to be reimbursed of the amount it paid unduly (in accordance with the provisions of articles 100 of the LGT and no. 1 of article 24 of the RJAT) and, furthermore, to be indemnified for the undue payment through the payment of compensatory interest, by the Respondent, from the date of payment of the amount, until reimbursement, at the legal supplementary rate, in accordance with nos. 1 and 4 of article 43 and no. 10 of article 35 of the LGT, of article 559 of the Civil Code and of Ordinance No. 291/2003, of 8 April.

IV - DECISION

In these terms, the decision of this Arbitration Tribunal is as follows:

1. To find merit in the arbitration petition filed and, as a consequence, to annul all the contested tax acts, including the IS assessments, relating to all the properties described in the present case file, object of the arbitration petition, in the total value of €49,834.30.

2. To condemn the Respondent to restitution of all amounts unduly paid by the Applicant in compliance with the acts now annulled, plus compensatory interest, in accordance with the above fixed terms, until the date of issuance of the respective credit note.

3. To condemn the Respondent to payment of the costs of the proceedings.

Value of the proceedings: in accordance with the provisions of article 306, no. 2, of the CPC and 97-A, no. 1, letter a), of the CPPT and 3, no. 2, of the Costs Regulation in Tax Arbitration Proceedings, the value of the proceedings is fixed at €49,834.30, corresponding to the value of the contested assessment.

Costs: in accordance with no. 4 of article 22 of the RJAT, the amount of costs is fixed at €2,142.00, in accordance with Table I annexed to the Costs Regulation in Tax Arbitration Proceedings, at the charge of the losing party.

Let it be recorded and notified.

Lisbon, 15-02-2018

The Arbitration Tribunal,

(Maria do Rosário Anjos – Single Arbitrator)

[1] It should be noted that this Decision of the Constitutional Court reveals, with evidence, the controversy inherent therein, which resulted in the decision of unconstitutionality of the provision contained in item 28.1 of the TGIS, in the format introduced by the Budget Law for 2014, accompanied by two dissenting opinions, rendered by Judges João Pedro Caupers and Manuel da Costa Andrade.

[2] See: ANTÓNIO SANTOS ROCHA / EDUARDO JOSÉ MARTINS BRÁS (2015) Taxation of Patrimony. IMI-IMT and Stamp Duty (Annotated and Commented). Coimbra, Almedina, p. 44.