Stamp Tax Verba 28.1 TGIS Exemption for Public Utility Cooperative on Property Ownership

ARBITRAL DECISION

Claimant: A…

Respondent: Tax and Customs Authority

I – REPORT

A) The Parties and the Constitution of the Arbitral Tribunal

1. A…, taxpayer number …, with registered office at Street …, no…, …, in Lisbon, (hereinafter referred to as "Claimant"), requested the constitution of a collective Arbitral Tribunal, pursuant to the provisions of Article 2, no. 1, subparagraph a) and Article 10, nos. 1 and 2 of Decree-Law no. 10/2011, of 20 January, hereinafter referred to as "RJAT" and of Ordinance no. 112-A/2011, of 22 March, for the challenge and declaration of illegality of the acts of taxation of stamp duty (IS), issued in application of the provision in entry 28.1 of the General Table of Stamp Duty (TGIS) concerning the year 2015, in the total amount of €15,750.98, seeking their annulment. The challenged acts relate to the building registered in the urban property register under article … of the Parish of …, ….

2. The request for constitution of the Arbitral Tribunal was submitted by the Claimant on 22-07-2016, was accepted by the Esteemed President of CAAD on 25-07-2016 and notified to the Tax and Customs Authority. The Claimant chose not to appoint an arbitrator, wherefore, pursuant to the provision in no. 1 of Article 6 of the RJAT, the undersigned was designated by the Ethics Board of the Centre for Administrative Arbitration on 30-09-2016 as arbitrator for the constitution of the singular Arbitral Tribunal. Thus, in accordance with the provision in subparagraph c), of no. 1 of Article 11 of the RJAT, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the Arbitral Tribunal was constituted on 18-10-2016. On 26-10-2016 an arbitral order was issued, requiring the Tax and Customs Authority (TA) to submit its response within the legal period, under the terms and for the purposes provided in nos. 1 and 2 of Article 17 of the RJAT.

3. On 24-11-2016 the Respondent submitted its response and the respective Administrative Process (PA), which are hereby deemed to be fully reproduced. Having analyzed the request for arbitral determination submitted by the Claimant and the Response submitted to the record by the TA, it follows that the issues to be decided are exclusively matters of law, wherefore on 22-12-2016 an arbitral order was issued dispensing with the holding of the meeting provided for in Article 18 of the RJAT, setting a deadline for written submissions and fixing a probable date for the pronouncement of the sentence until 17-02-2017.

The parties were invited to submit their respective procedural documents in Word format to the record and the Claimant was notified to, up to 10 days before the date set for pronouncing the arbitral decision, effect payment of the subsequent arbitration fee.

1. The Claimant and Respondent submitted their submissions, respectively, on 18-01-2017 and 2-02-2017.

B) THE REQUEST FORMULATED BY THE CLAIMANT:

1. The Claimant formulates the present request for arbitral determination pleading the illegality of the IS assessments, determined under entry 28.1 of the TGIS, concerning the year 2015. The Claimant argues the illegality and the consequent annulment of the assessment acts in the context of Stamp Duty (hereinafter "IS") under Entry 28.1 of the General Table of Stamp Duty (hereinafter "TGIS"), concerning the year 2015 and the property registered in the urban property register under article … of the parish of …, ..., formalized in assessment no. 2015…, and in collection notes nos. 2016…, 2016… and 2016…, corresponding to the three installments assessed, in the total amount of €15,750.98. It further requests indemnificatory interest on the amounts paid in relation to the collection notes.

The Claimant alleges that the IS assessments were issued in error, under entry 28.1 of the TGIS, given that, as the Claimant is a public utility collective person and is exempt from payment of the tax by virtue of the provision in Article 6, subparagraph c) of the CIS. This exemption rule constitutes a rule of negative incidence, covered by the principle of tax legality, wherefore in compliance with the provision in no. 3 of Article 103 of the CRP, this exemption cannot be waived by mere administrative act.

The Claimant develops its arguments around the status of public utility recognized to it, to conclude that stamp duty taxation should be waived, by virtue of the provision in no. 7 of Art. 6 of the DIS and of Art. 44, no. 1, subparagraph e) of the EBF, insofar as the property is used for the direct and immediate realization of its statutory purposes.

Finally, since from its perspective the assessments are illegal due to error of fact and law attributable to the TA, and the Claimant paid the amount of the tax charged in three installments, it petitions for the right to indemnificatory interest under the terms legally provided.

C – THE RESPONSE OF THE RESPONDENT

1. The Respondent TA timely submitted its response in which it pleaded for the legality of the assessment acts and the inadmissibility of the arbitral request, as per the response which is hereby deemed to be fully reproduced.

In summary, the TA maintains that the Claimant is "prima facie" a cooperative and that, as such, it is subject to its own tax regime, established by Law 85/98, of 16 December which was in force until repealed by Article 147 of Law no. 84-B/2011, of 30 December (State Budget Law for 2012), whose Article 145 added Article 66-A to the EBF which establishes all the benefits that cooperatives may enjoy, constituting an autonomous chapter (XI) of this Statute. Besides, if there were any doubts, the TA argues, the said Article 66-A, as regards entry 28.1, introduced a no. 14, in which it provides that "Housing and construction cooperatives are exempt from stamp duty provided for in entry 28.1 of the General Table of Stamp Duty (added by Law 7-A/2016 of 30 March).

Finally, the TA alleges that the Claimant cannot benefit from the invoked stamp duty exemption under the provision in Art. 44 of the EBF, which exempts collective persons of administrative public utility and those of mere public utility, as regards properties or parts of properties intended directly for the realization of their purposes, by being a cooperative and not a collective person of public utility.

II - PROCEDURAL PREREQUISITES

1. The Arbitral Tribunal is regularly constituted. The Parties enjoy legal personality and capacity, are legitimate and are legally represented (cf. Articles 4 and 10, no. 2 of the RJAT and Art. 1 of Ordinance no. 112/2011, of 22 March).

2. The process does not suffer from vices that would invalidate it.

3. Having regard to the tax administrative process, the documentary evidence joined to the record, it is necessary to establish the relevant factual matter for the understanding of the decision, which is fixed as follows.

III – Factual Matter

A) Established Facts

1. As relevant factual matter, this tribunal establishes the following facts as certain:

a. The Claimant is a Cooperative of a cultural nature, whose object consists in providing to its members a set of goods and services of culture, sport and leisure, without profit objectives;

b. The Claimant has been, since 15-01-1993, a Collective Person of Public Utility;

c. The Claimant has its tax situation entirely regularized;

d. The Claimant is the owner of the property registered in the urban property register under article … of the parish of …, ..., constituted under the regime of total or "vertical" ownership;

e. The tax patrimonial value was determined under the terms of Art. 7, no. 2, subparagraph b), of the CIMI, adding the patrimonial value of the floors with residential allocation, which totals €1,575,098.37;

f. The property in question is dedicated to the realization of the cooperative purposes pursued by the Claimant;

g. On this value IS was applied in accordance with entry 28.1 of the TGIS, at the rate of 1%, resulting in an assessment of €15,750.98;

h. The Claimant paid the entirety of the assessed tax, charged in 3 installments already fully paid;

i. Regarding identical assessments concerning previous years, the Claimant filed a gracious objection and hierarchical appeal, with the respective processes awaiting decision, still in administrative proceedings.

B) UNPROVEN FACTS

1. With relevance to the decision, there are no facts that should be considered as unproven.

C) SUBSTANTIATION OF THE ESTABLISHED FACTS

1. With regard to the factual matter, the Tribunal does not have to pronounce on everything that was alleged by the parties, but rather has the duty to select the facts that matter for the decision and to distinguish the proven from the unproven matter. [cf. Art. 123, no. 2, of the CPPT and Art. 607, no. 3 of the Code of Civil Procedure (CPC), applicable by virtue of Art. 29, no. 1, subparagraphs a) and e), of the RJAT].

Accordingly, the facts relevant to the judgment of the case are chosen and selected based on their legal relevance, which is established in light of the various plausible solutions to the legal issue(s) [cf. prior Article 511, no. 1, of the CPC, corresponding to the current Article 596, applicable by virtue of Article 29, no. 1, subparagraph e), of the RJAT].

Having regard to the positions assumed by the parties and the documentary evidence joined to the record, it was considered proven, with relevance to the decision, the facts listed above, moreover consensually recognized and accepted by the parties.

IV – THE LAW: substantiation of the merits decision

1. Having established, in the aforesaid manner, the factual matter, it is necessary to know the merits, appreciating the legal issue(s) relevant to the final decision.

Given the configuration of the case, as alleged by the Claimant and contradicted by the Respondent, set forth in the positions we summarize above, it appears that the essential issue to be decided in the present record concerns the appreciation of the legal nature of the collective person in question and the tax relevance, in the context of Stamp Duty, of its status as a Collective Person of Public Utility.

To this end, the TA's position translates into an understanding according to which the status of cooperative excludes or removes the legal effect derived from the recognition of the status of public utility to the Claimant. In other words, by being a cooperative it would have its own Tax Status that would exclude the recognition of the benefit arising from its status of public utility.

Conversely, the first and principal argument in defense of the illegality of the challenged assessments, the Claimant alleges that by being a collective person of public utility, it benefits from the application of the provision in Article 6(c) of the CIS.

This is the first and determining legal issue to be resolved, prior to any other.

1. Article 6, subparagraph c) of the CIS provides:

"Are exempt from stamp duty, when this constitutes their charge: (...)

c) Collective persons of administrative public utility and of mere public utility;".

As follows from the factual matter established as proven, the Claimant has been, since 15-01-1993, a Collective Person of Public Utility, a quality that was recognized to it by order of the Prime Minister, of 30-12-1992, as published in the Official Gazette on 15-01-1993. Thus, and without need for further substantiation, it is concluded that the condition for application of the provision in the aforementioned rule is met. There is no doubt about the legal nature of the Claimant as a collective person of the cooperative type, to which is added the benefit of the status of public utility, which was legally recognized to it. Now, the logical conclusion that is imposed, in view of the verification of its nature as a collective person of public utility, is that it is covered by the provision in Article 6(c) of the CIS.

Moreover, to this effect the TA, in the binding opinion joined to the record as document no. 9, set forth a doctrine different from that which it came to defend in the case of the present record, despite the essential issue under consideration being the same. Wherefore, the respondent itself would have altered its doctrinal position on the issue and set forth, in the case of the present record, an understanding totally different and equivocal in its assumptions. According to the understanding here defended by the TA, by being a Cooperative the Claimant would be excluded from the application of the benefit contained in the aforementioned Article 6(c) of the CIS. A position that does not appear to be in accordance with the law.

Now, this arbitral tribunal cannot accept this understanding as it is contrary to the law, as shall be demonstrated.

1. To this effect our superior Courts have already pronounced themselves, to the effect of considering that a collective person of private law, of associative basis, which enjoys the status of public utility, is for all legal purposes a Collective Person of mere public utility, with all the prerogatives that may derive therefrom from the law. [1]

2. Accordingly, the TA's argument, maintaining that the Claimant presents itself, in fiscal terms, as a Cooperative, and not as a Collective Person of Public Utility, cannot be understood. The coherence of the argument is not perceived and it is not possible to glimpse what the legal basis is that permits such a conclusion.

The norm of Article 6(c) of the CIS covers all collective persons (cooperatives or IPSS or other legal type) to whom the status of administrative public utility and of mere public utility is recognized, without exception, there being nothing in the tax-legal order from which the contrary may be extracted.

As was rightly decided in the arbitral process no. 426/2016-T, in which the same Cooperative COFIC, CRL was Claimant: "the argument, according to which the regime applicable to the Claimant is the one contained in Art. 66-A of the EBF, which would enclose all the benefits that cooperatives may enjoy, we also find no legal support. In fact, such rule applies to the generality of cooperatives, and the aforementioned Art. 6(c) of the CIS is a special rule that will apply to cooperatives which, in addition to being so, possess the quality of collective persons of public utility.

This situation is not opposed by the reason for the introduction of entry 28.1 of the TGIS, nor does it oppose the application of the remaining exemptions arising from the law, including those provided for in Article 6 of the CIS. (…)

In fact, the rule in question, Article 6(c) of the CIS, is not restricted to public collective persons, but rather refers to all collective persons of administrative public utility or of mere public utility, independently of whether they are public or private collective persons. As is referred to in the Decision of the TCA-South of 19-06-2014, handed down in process 11167/14: "Collective persons of public utility are collective persons of private law that obtain from the Administration the declaration of public utility by reason of the purposes of general or local interest that they pursue." (see Arbitral Decision joined to the record by the Claimant on 02-02-2017)

1. Finally, it is important to note the subjective nature of the exemption established in Article 6, subparagraph c) of the CIS, that is, it is inherent to the subject who enjoys the benefit, without any other condition. Taxation results, thus, from the concrete verification of all the tax prerequisites, as they are provided for and described, abstractly, in the tax law. Personal or subjective exemptions "function as negative conditions with respect to the attribution of specific passive tax personality. And, thus, passive tax personality may not be attributed to a certain entity, if it benefits from exemption." [2]

2. Finally, the TA's allegation regarding the provision in no. 14, added to Article 66-A of the CIS by Law no. 7-A/2016 of 30 March also does not hold. This regulatory provision refers to construction and housing cooperatives, without any reference or distinction between those that possess the status of public utility and the others, and is therefore not a special rule in relation to the norm of Article 6(c) of the CIS. Also on this point we adhere to the arbitral jurisprudence set forth in the Decision handed down in process no. 426/2016-T.

3. Having said this, the TA by disregarding the Claimant's status as a collective person of mere public utility and by not recognizing the benefit of the IS exemption established in Art. 6(c) of the CIS committed an error in the factual and legal premises, and consequent violation of law which requires the declaration of illegality and the annulment of the challenged assessments. Thus, knowledge of the remaining issues raised by the Claimant is rendered moot.

V - Indemnificatory Interest

1. The Claimant couples with the request for annulment of the tax acts object of the present record, the request for condemnation of the ATA in the payment of indemnificatory interest.

Given the admissibility of the annulment request, the amounts paid should be refunded to the Claimant, relative to the annulled tax acts. In the case at hand, it is manifest that the illegality of the assessment acts, whose amount the Claimant paid, is attributable to the TA, which, on its own initiative, carried them out without legal support.

Consequently, the Claimant is entitled to indemnificatory interest, under the terms of Articles 43, no. 1, of the LGT and 61 of the CPPT. Indemnificatory interest is due from the date of the payments shown to have been made, and calculated based on the respective value, until the integral refund to the Claimant, at the legal rate, under the terms of Articles 43, nos. 1 and 4, and 35, no. 10, of the LGT, 61 of the CPPT and 559 of the Civil Code and Ordinance no. 291/2003, of 8 April (without prejudice to any subsequent amendments to the legal rate).

1. In harmony with the provision in subparagraph b) of Art. 24 of the RJAT, the arbitral decision on the merits of the claim for which no appeal or challenge may be filed binds the tax administration from the expiration of the deadline provided for appeal or challenge, and the latter must, in the exact terms of the admissibility of the arbitral decision in favor of the passive subject and until the expiration of the deadline provided for the spontaneous execution of the sentences of the tax judicial courts, "restore the situation that would have existed if the tax act object 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 in Art. 100 of the LGT [applicable by virtue of the provision in subparagraph a) of no. 1 of Art. 29 of the RJAT] which establishes that "the tax administration is obliged, in case of total or partial admissibility of an objection, judicial challenge or appeal in favor of the passive subject, to the immediate and full restoration of the legality of the act or situation object of the litigation, comprising the payment of indemnificatory interest, if applicable, from the expiration of the deadline of the execution of the decision".

Although Art. 2, no. 1, subparagraphs a) and b), of the RJAT uses the expression "declaration of illegality" to define the jurisdiction of arbitral tribunals functioning in the CAAD, making no reference to condemnatory decisions, it should be understood that the powers attributed to tax courts in judicial challenge proceedings are comprised within their jurisdiction, and this is the interpretation that harmonizes with the sense of the legislative authorization on which the Government based itself to approve the RJAT and in which it proclaims, as a first directive, that "the tax arbitral process must constitute an alternative procedural means to the judicial challenge process and to the action for recognition of a right or legitimate interest in tax matters".

1. The judicial challenge process, despite being essentially a process of annulment of tax acts, admits the condemnation of the tax administration in the payment of indemnificatory interest, as is understood from Art. 43, no. 1, of the LGT, in which it is established that "indemnificatory interest is due when it is determined, in a gracious objection or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount higher than that legally due" and from Art. 61, no. 4 of the CPPT (in the wording given by Law no. 55-A/2010, of 31 December, to which corresponds no. 2 in the original wording), which "if the decision that recognized the right to indemnificatory interest is judicial, the payment deadline is counted from the beginning of the deadline for its spontaneous execution".

The TA must, therefore, execute the present arbitral decision, under the terms of Art. 24, no. 1, of the RJAT, and refund to the Claimant the amounts paid plus the respective indemnificatory interest, at the supplementary legal rate for civil debts, under the terms of Arts. 35, no. 10, and 43, nos. 1 and 5, of the LGT, 61 of the CPPT, 559 of the Civil Code and Ordinance no. 291/2003, of 8 April (or statute or statutes that may succeed it).

1. In the present case, the error affecting the assessment is attributable to the Tax and Customs Authority, which carried out the assessment act on its own initiative, without the requisite legal support. The Claimant thus has the right to be reimbursed for the amount it paid, under the terms of the provision in Articles 100 of the LGT and 24, no. 1, of the RJAT and, further, to be indemnified for the undue payment through the payment of indemnificatory interest, by the Respondent, from the date of payment of the amount, until reimbursement, at the supplementary legal rate, under the terms of Articles 43, nos. 1 and 4, and 35, no. 10, of the LGT, Article 559 of the Civil Code and Ordinance no. 291/2003, of 8 April.

VI. Decision

In view of all the foregoing, this Arbitral Tribunal decides to entirely uphold the request for arbitral determination and, in consequence:

a) Annul the assessment act in the context of Stamp Duty under Entry 28.1 of the General Table of Stamp Duty, concerning the year 2015 and the property registered in the urban property register under article … of the parish of …, ..., formalized in assessment no. 2015/…, in the total amount of €15,750.98, and in collection notes nos. 2016/…, 2016/… and 2016/…;

b) Determine the refund of the tax unduly paid by the Claimant, plus the payment of indemnificatory interest due from the date of payment of the tax until integral refund of the amount paid;

c) Condemn the losing party to the payment of arbitration costs.

PROCESS VALUE

The process value is fixed at €15,750.98, under the terms of Article 97-A, no. 1, a), of the CPPT, applicable by virtue of subparagraphs a) and b) of no. 1 of Article 29 of the RJAT and of no. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings, under the terms of Table I of the RCPAT, and in compliance with the provision in Articles 12, no. 2, and 22, no. 4, both of the RJAT.

COSTS

The value of the arbitration fee is fixed at €918.00, under the terms of Table I of the Regulation of Costs in Tax Arbitration Proceedings, by the losing party, under the terms of Articles 12, no. 2, and 22, no. 4, both of the RJAT, and Article 4, no. 4, of the cited Regulation.

Notify.

Lisbon, 17 February 2017

The Arbitral Tribunal,

(Maria do Rosário Anjos)

[1] In this sense, see Decision of the TCA-South of 11-12-2012, handed down in process 05814/121, in which it was decided that: "The appellant should be considered a collective person of private law, of associative basis (cf. Art. 157 of the Civil Code), without profit objectives, which enjoys the status of public utility, which was conferred to it under the regime provided for in Decree-Law 460/77, of 7/11 (cf. currently Decree-Law 391/2007, of 13/12). We are thus faced with a private collective person to which the status of public utility was conferred and which doctrine denomines as a collective person of mere public utility."

[2] In this sense, cf. Decision of the STA of 13-10-2010, handed down in process 0431/10.