CAAD 438/2016-T: Stamp Tax on Vertical Property Under Item 28 TGIS – Arbitral Decision

ARBITRAL DECISION

REPORT

A - PARTIES

A…, with domicile at Rua…, no.…, … …-… Caxias, holder of tax identification number …, and ESTATE OF B…, with tax identification number…, hereinafter referred to as Claimant or taxpayer.

AUTHORITY FOR TAX AND CUSTOMS (which succeeded the Directorate-General of Taxes, by means of Decree-Law no. 118/2011, of 15 December) hereinafter referred to as Respondent or AT.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD, and the Arbitral Tribunal was regularly constituted on 10-03-2016 to examine and decide on the subject matter of the present proceedings, and automatically notified the Tax and Customs Authority on 10-03-2016, as recorded in the respective minutes.

The Claimants did not proceed with the appointment of an arbitrator, wherefore, in accordance with the provisions of no. 1 of article 6 and subparagraph b) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20 January, with the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed Paulo Ferreira Alves as arbitrator, the appointment having been accepted in accordance with legal provisions.

On 10-03-2016 the parties were duly notified of this appointment and did not express an intention to refuse the appointment of the arbitrators, in accordance with article 11 no. 1, subparagraphs a) and b), of RJAT and Articles 6 and 7 of the Deontological Code.

In accordance with the provisions of subparagraph c) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20 January, with the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the single arbitral tribunal is regularly constituted on 19-03-2016.

Both parties agree to waive the meeting provided for in article 18 of RJAT.

A time period was granted to the Claimants to present their responses to the exceptions invoked by the Respondent.

The arbitral tribunal is regularly constituted. It is materially competent, in accordance with articles 2, no. 1, subparagraph a), and 30, no. 1, of Decree-Law no. 10/2011, of 20 January.

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

The proceedings do not suffer from defects that would invalidate them.

B - REQUEST

1. The Claimants seek a declaration of illegality of the tax assessment acts concerning Stamp Tax: nos: 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, and 2016…, of 05/04/2016, which fixed a total tax payable of € 5,864.62 (five thousand, eight hundred and sixty-four euros, sixty-two cents).

C - CAUSE OF ACTION

1. To substantiate their request for an arbitral pronouncement, the Claimants alleged, with a view to obtaining a declaration of illegality of the tax assessment acts concerning Stamp Tax already described in point 1 of this Award, in summary, the following:

I. The claimant A… is a co-owner, in the proportion of 14/48, of the urban property situated at Rua…, no.… (previously Lot…), …, in Cascais, not constituted under a horizontal property regime, described in the First Registry Office of Land Registration of…, under no.…, inscribed in the respective urban property matrix of the Union of Parishes of … and …, municipality of Cascais, under article …º (previously article …º).

II. The Claimant Estate of B…, which all its heirs qualified to inherit, without determination of share or right, undivided estate with tax identification number…, and of which the urban property better identified in the previous article is part, in the proportion of 14/48.

III. The Claimants thus have legitimacy to pursue the present request for an arbitral pronouncement, with a view to obtaining a declaration of illegality of the identified Stamp Tax assessment acts relating to the year 2015 - including reimbursement of any amounts paid relating to the consequent and related acts of the mentioned tax acts, concerning the "2nd Installment" and "3rd Installment" of Stamp Tax, whose voluntary payment deadlines occur in the months of July and November 2016 - in accordance with the provisions of articles 10, no. 2, of RJAT, and 9, no. 4, of CPPT.

IV. The Claimants allege that the Stamp Tax assessment acts are vitiated by breach of law due to error as to the prerequisites, justifying such request for declaration of illegality with a view to their annulment.

V. They further argue that the legal prerequisite for the incidence of Stamp Tax provided for in Item no. 28.1 of the General Table of Stamp Tax is not met, as the prerequisites on which the application of Item no. 28 of the General Table of Stamp Tax depends are not met, the Respondent, AT, violated, by erroneous interpretation and application, Item no. 28.1 of the General Table of Stamp Tax, and likewise, the principles of tax legality, justice, equality, tax proportionality and the prevalence of material truth over formal legal reality, and consequently the identified Stamp Tax assessment acts relating to the year 2015 are illegal, justifying their annulment, in accordance with the provisions of article 163 of CPA.

VI. The Claimants contend that liability to Stamp Tax contained in Item no. 28.1 of the General Table of Stamp Tax is determined by the combination of two factors: residential allocation and Tax Property Value (hereinafter referred to as "TPV") contained in the urban property matrix which should be equal to or greater than € 1,000,000.00 (one million euros).

VII. In the case of an urban property (in vertical ownership) with the characteristics described in the present proceedings, liability to Stamp Tax is determined by the TPV attributed to each of the storeys or divisions comprising the property and not by the total TPV of the property itself.

VIII. The identified urban property is composed of 7 (seven) storeys or divisions capable of independent use, and the TPV of the mentioned urban property, constituted in vertical ownership, was determined separately, in accordance with the provisions of article 7, no. 2, subparagraph b), of CIMI.

IX. The urban property in question, despite being composed of 7 (seven) storeys or divisions with independent use, is not constituted under a horizontal property regime.

X. The Claimants argue that each of the mentioned 7 (seven) independent storeys or divisions, all with residential allocation, has a TPV attributed, determined in accordance with CIMI, comprised between € 34,980.00 (thirty-four thousand, nine hundred and eighty euros) - Ground Floor Left - and € 178,360.00 (one hundred and seventy-eight thousand, three hundred and sixty euros) - 1st Floor -, in accordance with the following TPVs contained in the urban property register.

XI. And the urban property in vertical ownership comprises, as mentioned, a total of 7 (seven) storeys or divisions with independent use, all allocated to residential use, and its total TPV amounts to € 1,005,360.00 (one million, five thousand, three hundred and sixty euros), and none of the storeys or divisions has a TPV exceeding € 1,000,000.00 (one million euros).

XII. On 18/04/2016, the Claimants proceeded to pay the total sum of € 2,343.84 (two thousand, three hundred and forty-three euros, eighty-four cents), corresponding to the capital of the tax debt allegedly owed relating to the "1st Installment" and "Single Installment" of Stamp Tax relating to the year 2015, whose voluntary payment deadline occurred in the month of April 2016.

XIII. And on 05/07/2016, the Claimants paid the sum of €1,381.16 (one thousand, three hundred and eighty-one euros, sixteen cents), corresponding to the capital of the tax debt allegedly owed to them relating to the "2nd Installment" of Stamp Tax for the year 2015.

XIV. Thus, considering that the registration in the property matrix of properties in vertical ownership, constituted by different parties, storeys or divisions with independent use, in accordance with CIMI, follows the same registration rules as properties constituted in horizontal ownership, and their respective Municipal Property Tax (IMI), as well as Stamp Tax, are assessed individually in relation to each of the parties, there is no doubt that the legal criterion for defining the incidence of the new tax must be the same.

XV. Therefore, if the legal criterion requires the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, it clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of the new tax.

XVI. Thus, there would only be incidence of the new Stamp Tax if one of the parts, storeys or divisions with independent use presented a TPV exceeding € 1,000,000.00 (one million euros).

XVII. The Claimants argue that the AT cannot thus consider the total value of the urban property as the reference value for the incidence of Stamp Tax, when the legislator itself established a different rule in the context of CIMI, and this is the Code applicable to matters not regulated with respect to Item no. 28 of the General Table of Stamp Tax.

XVIII. Thus, the adoption of the criterion defended by AT violates the principles of legality and tax equality, as well as the prevalence of material truth over formal legal reality.

1. The Claimants conclude by arguing for the illegality and annulability of the assessment acts concerning Stamp Tax due to breach of law, and given that none of the 7 (seven) storeys has a property value equal to or exceeding € 1,000,000.00 (one million euros), it should be concluded that the legal prerequisite for the incidence of Stamp Tax provided for in Item no. 28 of the General Table of Stamp Tax is not met.

D - RESPONSE OF THE RESPONDENT

1. The Respondent, duly notified for this purpose, timely presented its response in which, in brief summary, alleged the following:

I. The situation of the Claimant's property falls literally within the scope of item 28.1 of the General Table of Stamp Tax.

II. The Claimants are, therefore, owners of a property under a regime of full or vertical ownership, wherefore there are no autonomous fractions to which tax law can attribute the qualification of property.

III. This follows from the notion of property in article 2 of CIMI, according to which only autonomous fractions of property under a horizontal ownership regime are deemed to be properties.

IV. Thus, the Claimants, for purposes of Municipal Property Tax and Stamp Tax, by force of the wording of the mentioned item, are not owners of 13 autonomous fractions, but rather of a single property.

V. The respondent argues that horizontal ownership is a specific legal regime of property provided for in articles 1414 and following of the Civil Code, which provides for and regulates the mode of constitution as well as other rules regarding the rights and obligations of co-owners, recognizing it as an more evolved regime of property.

VI. It further contends that to attempt to have the interpreter and applier of tax law apply, by analogy, the regime of horizontal ownership to the regime of full ownership would be, at minimum, abusive and illegal. These two property regimes are regimes of civil law, which were imported into tax law, specifically in accordance with the terms referred to by article 2 of CIMI.

VII. It is forbidden to the interpreter of tax law to equate the two property regimes, in accordance with the rule that concepts from other branches of law have the meaning in tax law that is given to them in those branches of law, or as referred to in article 11, no. 2 of LGT.

VIII. On the other hand, taking into account that in determining the meaning of tax norms and in the qualification of facts to which they apply, the general rules and principles of interpretation and application of laws are observed, as provided by article 11, no. 1 of LGT, which refers to the Civil Code which, in article 10 regarding the application of analogy, determines that this will only be applicable in case of gaps in the law.

IX. Arguing that tax law contains no such gap.

X. It cannot be accepted that, for purposes of item 28.1 of the General Table annexed to the Stamp Tax Code, parts susceptible to independent use should have the same tax regime as autonomous fractions of the horizontal ownership regime, under penalty of open violation of the principle of legality.

XI. The property being subject to the regime of full ownership, but being physically composed of parts susceptible to independent use, tax law attributed relevance to such materiality, evaluating individually, in accordance with article 12, no. 3, of C.I.M.I., each storey or part of property susceptible to independent use - considered separately in the property registration, but forming part of the same matrix - proceeding to assess Municipal Property Tax taking into account the tax property value of each part.

XII. In that case, the property registration must make reference to each of the parts and also to the property value corresponding to each of them, determined separately in accordance with articles 37 and following of CIMI; the unity of the urban property in vertical ownership composed of various storeys or divisions is not, however, affected by the fact that all or some of those storeys or divisions are susceptible to independent economic use.

XIII. Such property does not cease to be a single one, and thus its distinct parts are not legally equated to autonomous fractions under a horizontal ownership regime.

XIV. The fact that Municipal Property Tax was calculated based on the tax property value of each part of property with independent economic use equally does not affect the application of item 28, no. 1 of the General Table.

XV. This results from the fact that the determining factor for the application of that item of the General Table is the total property value of the property and not separately that of each of its portions.

XVI. The respondent further notes that the property registration of each part susceptible to independent use is not autonomous by matrix, but consists of a description in the matrix of the property as a whole - see the property register of this property which represents the owner's document containing the matricial elements of the property.

XVII. What is intended to be concluded is that these procedural norms regarding evaluation, property registration and assessment of parts susceptible to independent use do not permit asserting that there is an equating of the property under a full ownership regime to the vertical ownership regime, this being because, and as already mentioned...

XVIII. Wherefore, the property value relevant for purposes of the incidence of Stamp Tax is thus the total property value of the urban property and not the property value of each of the parts composing it, even when susceptible to independent use.

XIX. And this interpretation of the norm of incidence to Stamp Tax results from the combination of another norm of incidence to Municipal Property Tax which is article 1, according to which Municipal Property Tax is levied on the tax property value of urban properties, taking into account the notion of property in article 2 and of urban property contained in article 4 and further the species of urban properties described in article 6.

1. The Respondent concludes by arguing for the legality of the assessment acts concerning Stamp Tax, and in terms of substance, violated no legal or constitutional provision, and should be maintained in the legal order.

E - FACTUAL FINDINGS

1. Before proceeding to examine these issues, it is appropriate to present the factual matter relevant for its respective understanding and decision, which was conducted on the basis of documentary evidence and taking into account the facts alleged.

2. With regard to relevant factual matter, the present tribunal finds established the following facts:

3. The Claimants are co-owners, in the proportion of 14/48, of the urban property situated at Rua…, no.… (previously…), …, in Cascais, not constituted under a horizontal property regime, described in the First Registry Office of Land Registration of…, under no.…, inscribed in the respective urban property matrix of the Union of Parishes of … and …, municipality of Cascais, under article …º (previously article …).

4. The Claimants are, further, head of the estate left by the death of B…, which all its heirs qualified to inherit, without determination of share or right, undivided estate with tax identification number …, and of which the urban property better identified in the previous article is part, in the proportion of 14/48.

5. The mentioned property is composed of six storeys with independent use, comprising seven divisions of residential allocation.

6. The property value of the property is € 1,005,360.00, and the value of the fractions of independent use with residential allocation of the property is € 1,005,360.00.

7. The assessment notices for the respective property relate to the following storeys and divisions, whose property value of the said divisions with independent use, composing the urban property, was determined separately, in accordance with the provisions of article 7, no. 2, subparagraph b), of the Municipal Property Tax Code (CIMI), resulting in the issuance of the following tax acts, here challenged:

I. With regard to the Claimants:

i. Tax Act no. 2016…, with a tax amount to be assessed of 384.01 €, and with a TPV of 34,980.00 €, relating to Ground Floor Right;

ii. Tax Act no. 2016…, with a tax amount to be assessed of 102.03 €, and with a TPV of 131,660.00 €, relating to Ground Floor Left;

iii. Tax Act no. 2016…, with a tax amount to be assessed of 520.22 €, and with a TPV of 178,360.00 €, relating to 1st Floor;

iv. Tax Act no. 2016…, with a tax amount to be assessed of 515.05€, and with a TPV of 176,590.00 €, relating to 2nd Floor;

v. Tax Act no. 2016…, with a tax amount to be assessed of 515.05 €, and with a TPV of 176,590.00€, relating to 3rd Floor;

vi. Tax Act no. 2016…, with a tax amount to be assessed of 519.40 €, and with a TPV of 178,080.00€, relating to 4th Floor;

vii. Tax Act no. 2016…, with a tax amount to be assessed of 347.47 €, and with a TPV of 128,390.00€, relating to 5th Floor;

II. With regard to the Estate:

i. Tax Act no. 2016…, with a tax amount to be assessed of 384.01 €, and with a TPV of 34,980.00 €, relating to Ground Floor Right;

ii. Tax Act no. 2016…, with a tax amount to be assessed of 102.03 €, and with a TPV of 131,660.00 €, relating to Ground Floor Left;

iii. Tax Act no. 2016…, with a tax amount to be assessed of 520.22 €, and with a TPV of 178,360.00 €, relating to 1st Floor;

iv. Tax Act no. 2016…, with a tax amount to be assessed of 515.05€, and with a TPV of 176,590.00 €, relating to 2nd Floor;

v. Tax Act no. 2016…, with a tax amount to be assessed of 515.05 €, and with a TPV of 176,590.00€, relating to 3rd Floor;

vi. Tax Act no. 2016…, with a tax amount to be assessed of 519.40 €, and with a TPV of 178,080.00€, relating to 4th Floor;

vii. Tax Act no. 2016…, with a tax amount to be assessed of 347.47 €, and with a TPV of 128,390.00€, relating to 5th Floor;

1. The property value of the fractions of independent use with residential allocation of the property at the date of the assessments is € 1,005,360.00, and none of the parts or storeys with residential allocation and with independent use has a tax property value exceeding €1,000,000.00.

2. The AT assessed the Stamp Tax provided for in item no. 28 and 28.1 of the General Table of Stamp Tax (TGIS), in the wording introduced by article 4 of Law no. 55-A/2012, of 29/10, at the rate of 0.5% and 1%, considering as "TPV – total subject to tax", the assessments of Stamp Tax resulted in a tax amount payable in the total amount of 10,353.00 €.

3. The Claimants were notified for payment of Stamp Tax, calculated on the total value of the seven fractions with residential allocation and taxed individually on each fraction.

4. The Claimants proceeded to payment of the tax in the amount of € 5,864.62 (five thousand, eight hundred and sixty-four euros, sixty-two cents), corresponding to the tax collection and respective single installment and three installments.

5. The claimants submitted all supporting documents for payment of the tax assessed in the amount of € 5,864.62 (five thousand, eight hundred and sixty-four euros, sixty-two cents), having submitted only the supporting document for payment relating to the 3rd installment of Stamp Tax, subsequently to the filing of the present arbitral action, since the assessments relating to the 3rd installment were only issued subsequently.

F - UNPROVEN FACTS

1. Of the facts of interest for the decision of the case, contained in the challenge, all objects of concrete analysis, those not contained in the factual description above were not proven.

G - ISSUES TO BE DECIDED

1. Given the positions of the parties assumed in the arguments presented, the following central issues to be decided constitute the question which must be examined and decided:

a. The preliminary issue, alleged by the respondent regarding the exception of lack of jurisdiction of the arbitral tribunal.

b. That alleged by the Claimants:

(i) The declaration of illegality of the tax assessment acts concerning Stamp Tax, no. 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, and 2016…, of 05/04/2016, which fixed a total tax payable of € 5,864.62 (five thousand, eight hundred and sixty-four euros, sixty-two cents).

(ii) Payment of compensatory interest.

H. REGARDING THE EXCEPTION OF LACK OF JURISDICTION OF THE ARBITRAL TRIBUNAL

1. Given the formulation of the respondent's request, it seeks the annulment of the Stamp Tax assessment acts determined within the scope of item 28, year 2015, regarding the 7 fractions with independent use and residential allocation of the single property in question, already identified.

2. The Respondent raises the exception of lack of jurisdiction of the arbitral tribunal, on the ground that the Claimants do not challenge the tax assessment act, but rather the assessment act contained in a document that is a collection notice, that is, payment of an installment, and the subject matter of the proceedings is not the annulment of a tax act (or of 1/3 of a tax act, which would not be legally possible), but rather collection notices for payment of the 1st and 2nd installment of a tax.

3. The respondent alleges that this matter is not contained at all in the set of provisions that delimit the jurisdiction of tax arbitral tribunals, contained in article 2 of RJAT.

4. The respondent further argues that the unapprove-ability of the acts, which the Claimants challenge the installments relating to payment of a single tax value, wherefore the present collection documents are not challengeable per se, reason for which the exception invoked should be upheld and the AT absolved of the request.

5. The Claimants, duly notified to respond to the exception invoked by the Respondent, argued in the following terms:

6. The Claimants argue that they requested the declaration of illegality of the tax assessment act of Stamp Tax relating to the year 2015, relating to the identified urban property situated at Rua…, no.…, …, in Cascais, with the consequent annulment.

7. They further argue that the subject matter of the present arbitral proceedings is the annulment of the tax assessment act of Stamp Tax relating to the year 2015, in the global amount of € 5,864.62 (five thousand, eight hundred and sixty-four euros, sixty-two cents), relating to the mentioned urban property, since such assessment act is vitiated by a breach of law due to error as to the prerequisites, which justifies its annulment, and not the annulment of the collection notices for payment of the 1st, 2nd and 3rd installments of such tax, as referred to by the Respondent.

8. Faced with the positions assumed by the parties, given the exception invoked, it falls to the present tribunal to decide in the following sense.

9. It follows from the request and the amount of the present request for arbitral pronouncement that the claimants challenge the amount of the tax collected in all Stamp Tax assessments for the year 2015 relating to the property.

10. The amount conferred on the arbitral petition by the Claimants relate to the sum of the tax collections in the Stamp Tax assessment acts here challenged by the Claimants, in the total amount of total tax payable of € 5,864.62 (five thousand, eight hundred and sixty-four euros, sixty-two cents).

11. The amount of the tax collected from the acts here challenged is total tax payable of € 5,864.62 (five thousand, eight hundred and sixty-four euros, sixty-two cents).

12. Regarding the challenge of Stamp Tax assessment acts, when issued in installments, the following is stated.

13. This is an indivisible act of a Stamp Tax assessment, in accordance with the combined provisions of articles 120 and 113, no. 1, both of the Municipal Property Tax Code, applicable by cross-reference from no. 7 of article 23 of the Stamp Tax Code, in the wording given to it by Law no. 55-A/2012, of 29 October, it results that in the situations referred to in item 28 of the General Table of Stamp Tax, an annual assessment is made, with payment in installments being nothing more than a collection technique for the tax and not a partial payment thereof.

14. As it is not a divisible tax act, in the sense that "if partial annulment of a tax act is requested, the tribunal may not, as a rule, annul it entirely"[1], therefore the request for annulment of the Stamp Tax assessment act of any of the three installments will be challengeable exclusively as to the act of determination of the tax collection and not as to the tax payable in that installment.

15. Thus the request for annulment of the act can be requested at any time from the date of notification of one of the installments or from the rejection of the voluntary complaint.

16. Given that the act of Stamp Tax assessment that can be annulled and challengeable is the act of determination of the tax collection, the same cannot be divisible and challengeable autonomously, its annulment implies the annulment of the payment acts, respectively the three installments.

17. Regarding the issue of indivisibility of a Stamp Tax assessment (item 28 of the General Table of Stamp Tax), CAAD has already pronounced itself in case no. 205/2013-T (available at https://caad.org.pt/tributario/decisoes/), in accordance with the excerpt transcribed:

"11. The Respondent further challenges the value of the case considering that it is 8,940.94€ and not 28,822.80€, as indicated by the Claimants. The Claimants argue that "the act challenged in these proceedings is the assessment act with no. ... of 22/02/2013, relating to the first installment of Stamp Tax for the year 2012, in the amount of € 8,940.94, attached by the claimant to the request for arbitral pronouncement as Doc. 1". However, the value of assessment no. ... of 22/02/2013, as appears in the mentioned document, is in reality € 26,822.00 and not € 8,940.94."

Note that there is no assessment of € 8,940.94. This value is only the first installment of an assessment that was made from the outset in the amount indicated by the Claimants. From the circumstance that the assessment value can be paid in various installments, it does not follow that there are three assessments. This is, differently, an assessment that can be paid in various installments (emphasized), with the taxpayer not being prevented from challenging it due to the fact that only the payment period of one of them has elapsed."

1. The payment installments of a Stamp Tax assessment, in accordance with Item 28 of the General Table of Stamp Tax, are not autonomously reviewable, because they originate in a single annual obligation, according to the teaching of Braz Teixeira: "It is necessary not to confuse periodic installments, which, although realized through successive acts at different moments, originate in the same obligation and constitute the various portions of the same installment that was divided, with installments that must be performed periodically, not due to a division of the overall installment, but rather due to the periodic birth of new obligations, through the persistence of the factual prerequisites of taxation."

2. Now, in cases where the tax should be paid in installments, the assessment is notified to the taxpayer together with the notification for payment of each of the installments, being able to be challenged only in its entirety and not installment by installment.

3. Regarding the lack of jurisdiction of the arbitral tribunal to annul an installment of a Stamp Tax assessment, the Collective Arbitral Tribunal constituted in case no. 442/2014-T recently pronounced itself, in accordance with the excerpt transcribed (decision available at https://caad.org.pt/):

"(…) the Claimants are correct in arguing that the value of the case should be that of the assessments for whose declaration of illegality they request and not the value of the 1st installment of each of the mentioned properties, since it is the illegality of the annual assessments that the Claimants intend. Moreover, the jurisdiction of the arbitral tribunals functioning in CAAD covers requests for declaration of illegality of assessment acts and not of the installments through which the amounts assessed are collected."

1. It is the illegality of the annual assessment that the Claimant seeks the annulment of.

2. As we have verified, this tax is indivisible, therefore its challenge means the annulment of the three installments, and not the contrary; the decision must concern the act in its entirety, its annulment implies its total annulment.

3. As the three installments are not issued simultaneously, and as the act to be annulled is not divisible, it cannot be considered that the non-challenge through the administrative remedy of one of the installments means that the taxpayer lost the right to defend itself regarding the same.

4. Given the formulation of the Claimants' request, they seek the annulment of the Stamp Tax assessment acts determined within the scope of item 28, year 2015, which set a tax collection of 5,864.62 €.

5. At no point in the request for arbitral pronouncement do the Claimants request the annulment of the collection of the installments; they always request it regarding the tax collected.

6. Given that the tax act in question here is the Stamp Tax assessment act determined within the scope of item 28, year 2015, the value of the arbitral proceedings must be the amount corresponding to the impugned tax, or in this case the Stamp Tax collection, respectively 5,864.62 €.

7. Since the Claimants filed the present request for arbitral pronouncement and proceeded to payment of the arbitration fee for the procedural value of 5,864.62 €, corresponding to the sum of the collections, the existence of lack of jurisdiction of the tribunal regarding the value of the proceedings is not verified, and it is not exceeding its competencies.

8. In light of the above, the present tribunal decides on the lack of merit of the present exception.

J - MATTERS OF LAW

1. Given the positions of the parties assumed in the pleadings presented, the central issue to be decided by the present arbitral tribunal consists of examining the legality of the Stamp Tax assessment acts, which applied to the residential fractions of the Claimants in the urban property described above, due to breach of law, through erroneous interpretation and application of item 28.1 of the General Table of Stamp Tax in the amendments introduced by article 4 of Law no. 55-A/2012, of 29 October.

2. In the case sub judice, it is necessary to determine whether the fractions subject to the tax are covered by the incidence criteria for Stamp Tax in accordance with item no. 28 of the General Table of Stamp Tax, in the amendments introduced by article 4 of Law no. 55-A/2012, of 29 October.

3. It is necessary to first verify whether the fractions have residential allocation, and secondly whether the TPV of the fractions contained in the matrix is equal to or greater than €1,000,000.00, for this it is necessary to examine the fundamental question of what is the TPV of a property in vertical ownership (that is, not horizontal) to be considered for purposes of the mentioned item. Whether it is the TPV corresponding to each of the parts of the property with residential allocation individually, or whether, on the contrary, it is determined by the overall TPV of the property, which would correspond to the sum of all TPVs of the residential fractions composing it.

4. The factual matter is established and proven, reason why we will now determine the applicable law to the disputed facts, giving priority, in compliance with the provisions of subparagraph a) of no. 2 of article 124 of CPPT, to the defects whose approval would determine a more stable and effective protection of the interests of the Claimant, regarding the defect of law due to error as to the prerequisites of the right to assessment, as to the issue of the classification of urban properties under a regime of full or vertical ownership, within the scope of incidence of article 28, no. 1 of the General Table of Stamp Tax, introduced by the Regime of Law no. 55-A/2012, of 29 October.

5. The change in the regime regarding liability to Stamp Tax of properties with residential allocation through the addition of item 28 to the General Table of Stamp Tax, made by article 4 of Law 55-A/2012, of 29/10 and amended by Law no. 83-C/2013, of 31 December, now typifies the following tax facts, through the following wording:

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

28.1 – For residential property or for construction land whose authorized or planned construction is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code - 1%;

28.2 – For property when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance – 7.5%."

1. Article 6 of Law no. 55-A/2012 contains transitional provisions which established the rules relating to the assessment of the tax provided for in that item:

"1 – In 2012, the following rules must be observed with regard to the assessment of Stamp Tax provided for in item no. 28 of the respective General Table:

a) The tax event occurs on 31 October 2012;

b) The taxpayer for purposes of Stamp Tax is the one mentioned in no. 4 of article 2 of the Stamp Tax Code on the date referred to in the previous subparagraph;

c) The tax property value to be used in the assessment of the tax corresponds to what results from the rules provided for in the Municipal Property Tax Code with reference to the year 2011;

d) The assessment of the tax by the Tax and Customs Authority must be made by the end of November 2012;

e) The tax should be paid in a single installment by taxpayers by 20 December 2012;

f) The applicable rates are as follows:

i) Properties with residential allocation assessed in accordance with the Municipal Property Tax Code: 0.5%;

ii) Properties with residential allocation not yet assessed in accordance with the Municipal Property Tax Code: 0.8%;

iii) Urban properties when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance: 7.5%.

2 – In 2013, the assessment of Stamp Tax provided for in item no. 28 of the respective General Table must be based on the same tax property value used for purposes of Municipal Property Tax assessment to be made in that year.

3 – Non-delivery, total or partial, within the indicated time period, of the amounts assessed as Stamp Tax constitutes a tax infringement, punished in accordance with the law."

1. Regarding the interpretation of this statute, decision 53/2013-T[2] has already pronounced itself, which states:

"The concept used in the mentioned item 28.1 and in the subparagraphs i) and ii) of subparagraph f) of no. 1 of article 6 of Law no. 55-A/2012, is one that is not used in any other tax legislation in these precise terms, which is the concept of 'property with residential allocation.' Specifically, in CIMI, which in various norms of the Stamp Tax Code referred to in that Law is indicated as the subsidiary statute for application regarding the tax provided for in the mentioned item no. 28 [articles 2, no. 4, 3, no. 3, subparagraph u), 5, subparagraph u), 23, no. 7, and 46 and 67 of the Stamp Tax Code], this concept defined in those terms is not used."

1. As to the concept of property, it is necessary for this purpose to resort to the concepts of properties used in CIMI, in which the species of properties are enumerated in its articles 2 to 6, which are transcribed:

Article 2

Concept of Property

1 – For purposes of this Code, property is any fraction of territory, embracing waters, plantations, buildings and constructions of any nature incorporated into or situated upon it, with a character of permanence, provided that it forms 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 different patrimony or has no patrimony character.

2 – Buildings or constructions, even if movable by nature, are deemed to have a character of permanence when allocated to non-transitory purposes.

3 – The character of permanence is presumed when buildings or constructions have been situated in the same location for a period exceeding one year.

4 – For purposes of this tax, each autonomous fraction under a horizontal ownership regime is deemed to constitute a property.

Article 3

Rural Properties

1 – Rural properties are lands situated outside an urban agglomeration that are not to be classified as construction land, in accordance with no. 3 of article 6, provided that:

They are allocated to or, in the absence of concrete allocation, have as their normal destination a use generating agricultural income, as considered for purposes of personal income tax (IRS);

Not having the allocation indicated in the previous subparagraph, they are not constructed or have only buildings or constructions of an accessory character, without economic autonomy and of reduced value.

2 – Lands situated within an urban agglomeration are also rural properties, provided that, by force of legally approved provision, they cannot have a use generating any income or can only have a use generating agricultural income and are in fact having this allocation.

3 – The following are also rural properties:

Buildings and constructions directly allocated to the production of agricultural income, when situated on the lands referred to in the previous numbers;

Waters and plantations in the situations referred to in no. 1 of article 2.

4 – For purposes of this Code, urban agglomerations are considered, in addition to those situated within legally fixed perimeters, nuclei with a minimum of 10 units served by streets of public use, with their perimeter delimited by points distanced 50 m from the axis of the streets, in the transverse direction, and 20 m from the last building, in the direction of the streets.

Article 4

Urban Properties

Urban properties are all those that should not be classified as rural, without prejudice to the provisions of the following article.

Article 5

Mixed Properties

1. Whenever a property has rural and urban parts it is classified, in its entirety, according to the main part.

2. If neither part can be classified as main, the property is deemed to be mixed.

Article 6

Species of Urban Properties

1 - Urban properties are divided into:

Residential;

Commercial, industrial or service;

Construction land;

Other.

2 – Residential, commercial, industrial or service are buildings or constructions licensed for such purposes or, in the absence of license, which have as their normal destination each of these purposes.

3 – Construction lands are considered to be lands situated within or outside an urban agglomeration for which a license or authorization has been granted, an advance notice admitted or favorable preliminary information issued for a subdivision or construction operation, and also those that have thus been declared in the title of acquisition, except lands where competent entities prevent any of those operations, specifically those located in green zones, protected areas or which, in accordance with municipal land use planning plans, are allocated to spaces, infrastructures or public facilities. (Wording of Law no. 64-A/08, of 31-12)

4 – The provisions of subparagraph d) of no. 1 include lands situated within an urban agglomeration that are not construction lands nor are covered by the provisions of no. 2 of article 3 and also buildings and constructions licensed or, in the absence of license, which have as their normal destination other purposes than those referred to in no. 2 and also those excepted in no. 3.

1. Regarding the interpretation of Tax Norms, for the case sub judice, article 11 of the General Tax Law tells us, which establishes the essential rules of interpretation of tax laws, and does so in the following terms:

Article 11

Interpretation

In determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

Whenever tax norms employ terms specific to other branches of law, they must be interpreted in the same sense they have there, unless another meaning follows directly from the law.

If doubt persists about the meaning of the norms of incidence to apply, the economic substance of the tax facts must be considered.

Gaps resulting from tax norms covered by the reservation of law of the Assembly of the Republic are not capable of integration by analogy.

1. For this provision, it is also necessary to resort to the general principles of interpretation of laws, to which no. 1 of article 11 of LGT refers, which are established in article 9 of the Civil Code, which establishes the following:

Article 9

Interpretation of Law

1 - Interpretation must not be confined to the letter of the law, but must reconstruct from the texts the legislative thought, having especially in account the unity of the legal system, the circumstances in which the law was drawn up and the specific conditions of the time in which it is applied.

2 - The interpreter cannot, however, consider the legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

3 - In fixing the meaning and scope of the law, the interpreter will presume that the legislator adopted the most correct solutions and knew how to express its thought in adequate terms.

1. Given the legal foundation already set out, and taking into account the articles transcribed and mentioned, the following hypotheses of interpretation arise regarding the concept of "property with residential allocation," as to the Concept of "property with residential allocation" as referring to residential properties, and as to the Concept of "property with residential allocation" as a concept distinct from "residential properties."

2. From articles 2 to 6 CIMI transcribed above, the legislator does not use the concept of "property with residential allocation" in the classification of properties, nor is this concept found, with this terminology, in any other statute.

3. The lack of exact terminological correspondence of the concept of "property with residential allocation" with any other used in other statutes can give rise to various interpretative hypotheses.

4. The text of the law, being the starting point for the interpretation of the expression "properties with residential allocation," it being on the basis of it that the "legislative thought" must be reconstructed, as required by no. 1 of article 9 of the Civil Code, applicable by force of the provisions of article 11, no. 1 of LGT, already transcribed.

5. Regarding the interpretation of the concept of "property with residential allocation," it is important to cite decision 53/2013-T[3] which has already pronounced itself on this matter. A decision which likewise supports two interpretative hypotheses regarding the concept of "property with residential allocation," respectively in the same sense as the present decision, regarding the concept of "property with residential allocation" as referring to residential properties, and regarding the Concept of "property with residential allocation" as a concept distinct from "residential properties."

6. Decision 53/2013-T states, regarding the concept of "property with residential allocation" as referring to residential properties:

"The concept closest to the literal tenor of this expression used is manifestly that of 'residential properties,' defined in no. 2 of article 6 of CIMI as embracing 'buildings or constructions' licensed for residential purposes or, in the absence of license, which have as their normal destination residential purposes.

To understand that the expression 'property with residential allocation' coincides with that of 'residential properties,' it is manifest that the assessments will be vitiated by error as to the factual and legal prerequisites, since all properties for which Stamp Tax was assessed under the mentioned item no. 28.1 are construction lands, without any building or construction required to meet that concept of 'residential properties.'

For this reason, adopting the interpretation that 'property with residential allocation' means 'residential property,' the assessments whose declaration of illegality is requested will be illegal, because there is no building or construction in any of the lands.

However, the non-coincidence of the terms of the expression used in item no. 28.1 of the General Table of Stamp Tax with that which is extracted from no. 2 of article 6 of CIMI, points to the sense that it was not intended to use the same concept."

1. Regarding the interpretation of the second hypothesis: Concept of "property with residential allocation" as a concept distinct from "residential properties," decision 53/2013-T is cited again, in which it states:

"The word 'allocation,' in this context of use of a property, has the meaning of 'action of designating something for a determined use.' ( [4] )

'When, as is usually the case, norms (legislative formulas) have more than one meaning, then the positive function of the text is translated into giving stronger support to or more strongly suggesting one of the possible meanings. Since among the possible meanings, some will correspond to the most natural and direct meaning of the expressions used, whereas others will only fit within the verbal framework of the norm in a forced, artificial manner. Now, in the absence of other elements that induce the choice of the less immediate meaning of the text, the interpreter should in principle opt for that meaning which best and most immediately corresponds to the natural meaning of the verbal expressions used, and designedly to its technical-legal meaning, in the assumption (not always correct) that the legislator knew how to express correctly its thought.' ( [5] )

The relevance of the text of the law is especially emphasized in the matter of interpretation of norms of incidence of Stamp Tax, which are reduced to an amalgam, under a common denomination, of an incongruous set of tributes of completely distinct natures (on income, on expenditure, on patrimony, on acts, etc.), which leaves little room for application of the primary interpretative criterion, which is the unity of the legal system, which demands its overall coherence.

The recognized lack of coherence of Stamp Tax is particularly excessive in the case of this item no. 28.1, hastily included on the margins of the General Budget of the State, by a fiscal legislator without perceptible overall fiscal guidance, who is successively implementing tax-raising norms in accordance with budgetary reverses in execution, the impositions of international institutional creditors (represented by the 'troika') and the oversight of the Constitutional Court.

In truth, although in the 'Statement of Reasons' of Bill no. 96/XII/2nd Session ( [6] ), on which Law no. 55-A/2012 was based, reference is made to the praiseworthy concern of the Government to 'strengthen the principle of social equity in austerity, ensuring effective distribution of the necessary sacrifices to meet the adjustment program' and its commitment 'to ensure that this distribution of sacrifices will be made by all and not only by those living from the income of their work,' it is manifest, on the one hand, that these reasons for equity, certainly existing, did not begin to apply in mid-2012, already existing at the beginning of the year, when the General Budget of the State came into force, and on the other hand, that the scope of item no. 28.1, by additionally taxing properties with residential allocation and not also properties that do not have it, allows one to perceive that concerns for social equity and the proclaimed intention of distribution of sacrifices by all, affects far more some than properly all.

In this context, where there are no secure interpretative elements that allow the detection of legislative coherence in the solution adopted in the mentioned item no. 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretative purposes in light of no. 3 of article 9 of the Civil Code), the tenor of the legal text must be the primary element of interpretation, in conformity with the presumption imposed by the same no. 3 of article 9, that the legislator knew how to express its thought in adequate terms.

Given those meanings of the words 'allocation' and 'allocate,' which are 'give destination' or 'apply,' the formula used in that item no. 28.1 of the General Table of Stamp Tax, manifestly embraces properties that are already applied to residential purposes, so it is important to inquire whether it will also embrace properties that, although not yet applied to residential purposes, are destined for these and those whose destination is unknown. (…)

For this reason, it will be necessary to clarify when a property can be understood to be allocated to a residential purpose, specifically whether it is when such destination is fixed in a licensing act or similar, or only when the actual assignment of that destination is concretized.

From the outset, the comparison of item no. 28.1 of the General Table of Stamp Tax with no. 2 of article 6 of CIMI, which defines the concept of residential properties, manifestly points to the need for effective allocation.

In truth, a building or construction licensed for residential purposes or, even without license, but which has residential use as its normal destination, is, in light of no. 2 of that article 6, a residential property.

For this reason, on the assumption that the legislator of Law no. 55-A/2012 knew how to express its thought in adequate terms (as required by article 9, no. 3 of the Civil Code to be presumed), if it intended to refer to those properties already licensed for residential purposes or which have residential use as their normal destination, it would surely have used the concept of 'residential properties,' which would express perfectly and clearly its thought in light of the definition given by that no. 2 of article 6 of CIMI.

Consequently, it must be presumed that the use of a different expression is intended to address a different reality, so in good hermeneutics, 'property with residential allocation' cannot be a property merely licensed for residential purposes or destined for that purpose (that is, it will not suffice that it be a 'residential property'), having to be a property which already has effective allocation to that purpose.

That this is the meaning of the expression 'allocation,' in the same context of classification of properties that CIMI makes, is confirmed by article 3, in which, regarding rural properties, reference is made to those that 'are allocated to or, in the absence of concrete allocation, have as their normal destination a use generating agricultural income,' which shows that the allocation is concrete, effective. In truth, as is seen from the final part of this text, a property can have as its destination a determined use and be or not be allocated to it, which shows that allocation, at the level of the connection of a property to a determined use, is something more intense than mere destination and can or cannot occur, downstream of this and not upstream. ( [7] )

The correctness of this interpretation in the sense that only properties that are effectively allocated to residential use are inserted within the scope of incidence of item no. 28.1 of the General Table of Stamp Tax is also confirmed by the discernible ratio legis of the restriction of the scope of application of the norm to properties with residential allocation, in the context of 'the circumstances in which the law was drawn up and the specific conditions of the time in which it is applied,' which article 9, no. 1 of the Civil Code also establishes as interpretative elements. ( [8] ).

From the outset, the limitation of taxation in Stamp Tax to 'properties with residential allocation' allows one to perceive that it was not intended to embrace within the scope of incidence of the tax properties allocated to services, industry or commerce, that is, properties allocated to economic activity, which is understood in a context where, as is notorious, the economy is in a recessionary spiral, publicly proclaimed at the highest level, with unemployment rates reaching maximum historical levels, with an avalanche of business closures resulting from economic unsustainability. (boldface in original)

With this situation in mind and being known and public that the revival of economic activity and increased exports are the way out of the crisis, it is understood that legislative measures were not taken that would hinder economic activity, specifically the increase in the tax burden that hinders it and affects international competitiveness.

For this reason, it is to be concluded that the available interpretative elements, including the 'circumstances in which the law was drawn up and the specific conditions of the time in which it is applied,' clearly point to the sense that it was not intended to embrace within the scope of incidence of item no. 28.1 situations of properties that are not yet allocated to residential use, specifically construction lands held by companies. ( [9] )"

1. In light of the above, it is verified that the fractions intended for residential use are covered by the norm of incidence of item 28.1, as they are urban properties and properties with residential allocation, whose concept results from article 2 of CIMI.

2. It remains to decide, however, for purposes of application of item no. 28 of the General Table of Stamp Tax, which TPV to consider in properties under a vertical regime (that is, not horizontal) if individually determined by the TPV corresponding to each of the parts of the property with residential allocation, or if determined by the overall TPV of the property, which would correspond to the sum of all TPVs of the residential fractions composing it.

3. On this topic, the Arbitral Tribunal of CAAD has already decided through decisions nos. 50/2013-T, 132/2013-T, 48/2013-T, 50/2013-T, 144/2013-T, 132/2013-T, 95/2013-T, 248/2013-T, 240/2013-T, 183/2013-T, 185/2013-T, 280/2013-T, 26/2014-T, 182/2013-T, 30/2014-T, 35/2014-T, 88/2014-T, 72/2014-T, 428/2014-T, 639/2014-T, 724/2014-T, 754/2015-T, 755/2015-T, 766/2015-T, 10/2016-T, 20/2016-T, 43/2016-T, 45/2016-T, 134/2016-T, 120/2016-T, 298/2016-T, 203/2016-T 214/2016-T, 214/2016-T and 327/2016-T.

4. It is important for purposes of the case sub judice to note, regarding decision 50/2013-T, which tells us, regarding the treatment to be afforded for purposes of item 28.1 of the General Table of Stamp Tax to properties in vertical ownership and cumulatively which TPV (individual or overall) to consider:

"From this we can conclude that, in the view of the legislator, what matters is not the legal-formal rigor 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 in horizontal ownership did not matter, since no reference or distinction is made between one and the other. What matters is the material truth underlying its existence as an urban property and its use."

1. It is further important to note from the respective decision:

"Using the criterion that the law itself introduced in article 67, no. 2 of the Stamp Tax Code, 'to matters not regulated in this code concerning item 28 of the General Table applies subsidiarily.'

Now, thus being, considering that the registration in the property matrix of properties in vertical ownership, composed of different parts, storeys or divisions with independent use, in accordance with CIMI, follows the same registration rules as properties composed in horizontal ownership, and their respective Municipal Property Tax (IMI), as well as the new Stamp Tax, are assessed individually in relation to each of the parts, there is no doubt that the legal criterion for defining the incidence of the new tax must be the same. (…)

Therefore, if the legal criterion requires the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, it clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of the new tax.

Thus, there would only be incidence of the new Stamp Tax if one of the parts, storeys or divisions with independent use presented a TPV exceeding €1,000,000.00.

Thus, the AT cannot consider the total value of the property as the reference value for the incidence of the new tax, when the legislator itself established a different rule in the context of CIMI, and this is the Code applicable to matters not regulated regarding item 28 of the General Table of Stamp Tax.

The criterion sought by the AT, of considering the value of the sum of TPVs attributed to the parts, storeys or divisions with independent use, on the ground that the property is not constituted under a horizontal ownership regime, finds no legal support and is contrary to the criterion that applies in the context of CIMI and, by cross-reference, in the context of Stamp Tax.

To which is added the fact that the law itself expressly establishes, in the final part of item 28 of the General Table of Stamp Tax, that the Stamp Tax to be levied on urban properties of value equal to or exceeding €1,000,000.00 – 'on the tax property value used for Municipal Property Tax purposes.'

Thus, the adoption of the criterion defended by the AT violates the principles of legality and tax equality, as well as the prevalence of material truth over formal legal reality.

The tax legislator in article 12, no. 3 of CIMI says that 'each storey or part of property susceptible to independent use is considered separately in the property registration which likewise discriminates the respective tax property value,' makes no distinction regarding the regime of properties that are in horizontal or vertical ownership; if the property were in a horizontal ownership regime, none of its residential fractions would be subject to incidence of the new tax, so the AT cannot treat equal situations differently."

1. In the same sense decided the decision of the arbitral tribunal of CAAD, no. 132/2013-T:

"It further adds that accepting differentiation of treatment could produce results incomprehensible from a legal point of view and contrary to the objectives that the legislator said it had for adding item no. 28. By way of example, suppose the following hypothesis, which seems plausible in light of the interpretation made by the now respondent: a citizen who is the owner of a property constituted in full ownership intended for residential use, with the overall value of autonomous units equal to or exceeding €1,000,000.00 and the TPV of each one less than €1,000,000.00, is subject to an annual taxation of 1% of that value (as occurred in the situation under analysis); whereas another citizen who has a property with the exact same characteristics as the former but which has been constituted in horizontal ownership, with equally the overall value of autonomous fractions equal to or exceeding €1,000,000.00 and the TPV of each one less than €1,000,000.00, will not be subject to taxation in accordance with the mentioned item no. 28...

On the other hand, one could ask: if such fractions have the same owner, why does it not make sense to aggregate, for tax purposes, the respective TPVs? The answer can be illustrated through another hypothesis: a citizen who is the owner of a property in horizontal ownership, in which each of its 20 fractions has a TPV of less than €1,000,000.00, would be subject to taxation if – if such aggregation were admitted – the overall TPV exceeded that value; whereas another citizen with identical 20 fractions distributed among 5, 10 or 20 properties would not be subject to any taxation in accordance with the mentioned item no. 28...

If this line of reasoning makes sense – justifying, therefore, the non-aggregation of TPVs of fractions of properties in horizontal ownership – it is not clear why the same should not be applied to the autonomous units of properties in full ownership.

Observing now the case under analysis, it is found that the TPVs of the storeys (autonomous units) of the property with residential allocation vary between €104,140.00 and €113,780.00, so each of them is less than €1,000,000.00. From this it is concluded, as a result of what was said, that the Stamp Tax referred to in item no. 28 of the General Table of Stamp Tax cannot be levied on them, being, therefore, illegal the assessment acts challenged by the claimant."

1. In light of the above, and applying what the decisions transcribed above tell us to the present case, it results that for purposes of application of item 28 of the General Table of Stamp Tax to properties in vertical ownership, the same rules of CIMI that apply to properties in horizontal ownership apply, and in the same sense the TPV for purposes of application of the item is the individual TPV of each independent residential fraction, and in the present case none of the fractions exceeds the incidence criterion of 1,000,000.00€.

2. The material truth is the one that imposes itself as the determining criterion of tax capacity and not the mere formal legal reality of the property, since the constitution of horizontal ownership implies a mere legal alteration of the property not even requiring a new assessment; now such finding does not seem coherent with the decision of the AT to tax the residential parts of a property in vertical ownership, based on the overall TPV of the property and not on what is actually attributed to each part.

3. The current legal regime does not impose the obligation of constitution of horizontal ownership, so the action of the AT translates into arbitrary and illegal discrimination. The AT cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the tax system, as well as the principle of tax legality provided for in article 103, no. of the Constitution of the Portuguese Republic, and also the principles of justice, equality and tax proportionality.

4. As none of the fractions intended for residential use has a property value equal to or exceeding €1,000,000.00, as results from the documents attached to the file, it is concluded that the legal prerequisite for the incidence of Stamp Tax provided for in Item 28 of the General Table of Stamp Tax is not met.

5. In this sense and following the jurisprudence of CAAD and of the Supreme Administrative Court in cases 50/2013-T, 132/2013-T, 48/2013-T, 50/2013-T, 144/2013-T, 132/2013-T, 95/2013-T, 248/2013-T, 240/2013-T, 183/2013-T, 185/2013-T, 280/2013-T, 26/2014-T, 182/2013-T, 30/2014-T, 35/2014-T, 88/2014-T, 72/2014-T, 428/2014-T, 639/2014-T, 724/2014-T, 754/2015-T, 755/2015-T, 766/2015-T, 10/2016-T, 20/2016-T, 43/2016-T, 45/2016-T, 134/2016-T, 120/2016-T, 298/2016-T, 203/2016-T 214/2016-T, 214/2016-T and 327/2016-T and the jurisprudence of the Supreme Administrative Court in the same sense, respectively in the awards: no. 047/15, of 09/09/2015, Case no. 1354/15, of 02/03/2016, Case no. 1534/15, of 27/04/2016, Case no. 166/16, of 04/05/2016, Case no. 172/16, of 04/05/2016, Case no. 1504/15, of 04/05/2016, Case no. 1352/15, of 24/05/2016, Case no. 1344/15, of 24/05/2016, and Case no. 498/16, of 29/06/2016.

6. In this way, the present tribunal concludes for the declaration of illegality of the assessments sub judice, for being vitiated by the breach of that item no. 28.1, due to error as to the legal prerequisites, which justifies the declaration of their illegality and annulment (article 135 of CPA).

7. Faced with the above, the assessment of Stamp Tax, in the part covered by the annulment to be decreed, results from errors of fact and law attributable exclusively to the tax administration, insofar as the Claimants complied with their duty of declaration and were committed by that administration and could not the same be unaware of different understandings.

I - COMPENSATORY INTEREST

1. The claimant further petitions for payment of compensatory interest.

2. Faced with the above, the assessment of Stamp Tax, in the part covered by the annulment to be decreed, results from errors of fact and law attributable exclusively to the tax administration, insofar as the Claimants complied with their duty of declaration and were committed by that administration and could not the same be unaware of different understandings.

3. In truth, it being demonstrated that the claimant paid the impugned tax in a portion exceeding what is due, by force of the provisions of articles 61 of CPPT and 43 of LGT, the Claimants have the right to the compensatory interest due, such interest to be counted from the date of payment of the unduly assessed (annulled) tax until the date of issuance of the respective credit note, with the period counting for such payment from the beginning of the period for spontaneous execution of the present decision (article 61, nos. 2 to 5, of CPPT), all at the rate determined in accordance with the provisions of no. 4 of article 43 of LGT.

4. The claim of the claimants is upheld.

L - DECISION

Accordingly, given all of the above, the present Arbitral Tribunal decides:

The request for declaration of illegality of the tax assessment acts concerning Stamp Tax, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, 2016…, of 05/04/2016, and 2016…, of 05/04/2016, which fixed a total tax payable of € 5,864.62, is granted due to breach of law regarding the norm contained in item 28, no. 1, due to error as to the legal prerequisites, which justifies the declaration of its illegality and annulment.

The Respondent is ordered to restore to the claimant that sum unduly assessed and paid plus payment of compensatory interest already accrued relating to the period between the date of assessment of the tax in the amount of € 5,864.62 until the full reimbursement of the tax unduly assessed, in accordance with nos. 2 to 5 of article 61 of CPPT and at the rate determined in accordance with the provisions of no. 4 of article 43 of LGT until full reimbursement.

The value of the case is fixed at € 5,864.62 of the value of the assessment taking into account the economic value of the case determined by the value of the tax assessments challenged, and in accordance the costs are fixed in the respective amount of 612.00€, at the charge of the respondent in accordance with article 12, no. 2 of the Regime of Tax Arbitration, article 4 of RCPAT and Table I annexed to the latter. – no. 10 of article 35, and nos. 1, 4 and 5 of article 43 of LGT, articles 5, no. 1, subparagraph a) of RCPT, 97-A, no. 1, subparagraph a) of CPPT and 559 of CPC).

Notify.

Lisbon, 11 December 2016

Paulo Ferreira Alves

[1] SOUSA, Jorge Lopes de, "Code of Tax Procedure and Process – annotated and commented" II Volume, 6th Edition, Áreas Publisher, 2011, p. 319.

[2] On this matter the Arbitral Tribunal of CAAD has already decided in decisions nos. 42/2013-T, 48/2013-T, 49/2013-T

[3] On the interpretation of the concept of "property with residential allocation" for purposes of item 28.1 of the General Table of Stamp Tax, see the decisions issued by the Arbitral Tribunal of CAAD in cases nos. 42/2013; 48/2013; 49/2013; 53/2013; 75/2013; 158/2013; 251/2013; 310/2013.

[4] Dictionary of Contemporary Portuguese Language of the Academy of Sciences of Lisbon, I volume, page 102.

[5] BAPTISTA MACHADO, Introduction to Law and Legitimizing Discourse, page 182.

[6] Bill no. 99/XII/2nd Session is available at http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=37245

[7] Other norms of CIMI show that the term "allocation" is used to reference already existing situations and not merely future ones, even if foreseeable, such as "destination." This is the case of article 9 of CIMI, which, after establishing that "the tax is due from" "the 4th year following, inclusive, that in which construction land has come to appear in the inventory of a company whose object is the construction of buildings for sale" or "the 3rd year following, inclusive, that in which a property has come to appear in the inventory of a company whose object is its sale" [subparagraphs d) and e) of no. 1], determines that "for purposes of the provisions of subparagraphs d) and e) of no. 1, taxpayers must notify the tax office in the area of the location of the properties, within 60 days from the date of the occurrence of the fact determining its application, of the allocation of the properties to those purposes." The "allocation of the properties to those purposes," in the context of this article 9, is reduced to the concrete assignment to the properties of the purpose "for sale," materialized by their inventory listing, it not sufficing that they have been built or acquired with a view to their sale.

[8] This approach does not have in mind the special cases provided for in item no. 28.2, of ownership of the properties by legal persons resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance, to which, as in other norms, strong tax penalization is attributed, because such situations are normally associated with tax evasion.

[9] Outside the special cases provided for in item no. 28.2.