Summary
Full Decision
ARBITRAL DECISION
Report
A…, NIF …, married, resident at Rua … in Lisbon, better identified in the case file, filed a request for arbitral determination, under the provisions of article 2, paragraph 1 of Decree-Law no. 10/2011, of 20 January (RJAT) and Ordinance no. 112-A/2011, of 22 March, for declaration of illegality and consequent annulment of the assessments of Stamp Tax (relating to item 28.1 of the corresponding General Table), concerning the year 2014, in the total amount of € 12,729.59 (twelve thousand, seven hundred and twenty-nine euros and fifty-nine cents).
The defendant is the Tax and Customs Authority (AT).
The Claimant did not proceed with the appointment of an Arbitrator. For this purpose, the President of the Deontological Council of the Centre for Administrative Arbitration appointed the undersigned, who expressly accepted this appointment. The parties were duly notified thereof and expressed no intention to refuse it.
The arbitral tribunal was thus constituted on the first of October of this year.
The AT timely filed its response, arguing for the total lack of merit of the claim, with consequent dismissal of the Defendant.
The parties waived the holding of the meeting provided for in article 18 of the RJAT.
The Tribunal was properly constituted and is materially competent.
The parties have legal personality and judicial capacity and are legitimate.
The proceedings are not affected by nullities, nor have questions been raised therein that may prevent the examination of the merits of the case.
Subject Matter of the Dispute and Factual Issues
In 2014, the Claimant was the owner of an urban property in vertical ownership, located at…, Lisbon, registered in the property matrix of the parish of … under article …, to which corresponded a total taxable property value (VPT) of € 1,628,211.03.
Said property, which is owned by the Claimant, corresponds to a residential building, in full ownership, not constituted in horizontal ownership, composed of floors and divisions capable of independent use, some destined for housing and others for commercial purposes (shops).
Each of the dwelling units, which are autonomous and independent of one another, then had an autonomous cadastral registration and a taxable property value (VPT) attributed to each of them below € 1,000,000 (one million euros).
The assessments in question result from the application of the aforementioned item of Stamp Tax (IS) to the independent divisions allocated to housing of said property, in a total of twelve, including the caretaker's apartment, with the total VPT of these amounting to € 1,272,959.50, which is below the total VPT of the property, as it does not include the VPT of the other parts capable of independent use but not allocated to housing.
The assessment acts in question gave rise to the following collection documents, which correspond to the first instalment of the tax, all due in April 2015:
2015…,
2015…,
2015…,
2015…,
2015…,
2015…,
2015…,
2015…,
2015…,
2015…,
2015…,
2015…;
All attached to the case file as documents numbers one to twelve of the Initial Request.
There are no facts relevant to the examination of the merits of the case that have not been proven.
The proven facts are based on documents furnished by the parties, whose correspondence to reality is not disputed.
Legal Matters
Position of the Parties
The issue in these proceedings concerns the application, in situations of so-called vertical ownership, of the new taxation in IS relating to urban properties with residential allocation and VPT equal to or exceeding one million euros. This new taxation was introduced in 2012 to strengthen budgetary control measures on the revenue side, in a context of financial necessity (or economic-financial necessity, cf. Sustainability and Solidarity in Times of Crisis, Suzana Tavares da Silva, in Fiscal Sustainability in Times of Crisis, Coord. José Casalta Nabais and Suzana Tavares da Silva, pp. 61 et seq.).
As is well known, this new IS taxation has raised serious doubts and substantial opposition. This not only in specific cases of its application (e.g., vertical ownership, co-ownership, land for construction or its application in 2012), but also in general terms, due to its possible unconstitutionality, whether of its general regime or transitional regime (see Luís Menezes Leitão, On the Taxation in Stamp Tax of Luxury Properties (item 28.1 TGIS), in Tax Arbitration no. 1, pp. 44 et seq.).
Claimant
The Claimant contests precisely the application of the new item 28.1 of TGIS to urban properties not constituted in horizontal ownership, but which include divisions capable of independent use, in which the minimum value of incidence set by law is reached by the sum of the VPT of separate (or autonomous) cadastral registrations corresponding to these various divisions, but not by any one of them individually considered.
Thus, the Claimant argues that he is not the owner of a property with VPT equal to or exceeding the aforementioned minimum amount, but rather the owner of a property in vertical ownership in which the VPT exceeding this value is only reached by the sum of the VPT of divisions capable of independent use allocated to housing, without any of them, considered individually, reaching this minimum threshold of tax relevance. For this reason, according to the Claimant, the assessments in dispute are affected by a defect of violation of law, which renders them voidable.
In conclusion, the Claimant considers that the tax acts violate the principles of Good Faith, Legal Certainty, Trust and Cooperation and Prevalence of Substance over Form, as well as the principle of Equality, citing in support of its position the decisions rendered in proceedings nos. 50/2013 T and no. 95/2013-T, available at www.caad.org.pt.
Defendant
Conversely, the Defendant contests this understanding, arguing for the maintenance of the assessments, emphasizing, in summary, that full ownership, or vertical ownership, corresponds to a property, this being the reality to be considered in determining whether the minimum value set forth in the incidence rule is met. For the Defendant, the VPT relevant for purposes of tax incidence is therefore the VPT of the urban property and not the VPT of each part comprising it, even though these are capable of independent use, provided they are allocated to housing. In support of this thesis, it also emphasizes that the unity of the property is not affected, and its distinct parts cannot be legally equated to autonomous units of a property constituted in horizontal ownership, particularly because ownership must necessarily be attributed to only one owner (or more than one, but in cases of co-ownership).
It further adds that a different understanding (i.e., that the VPT relevant to the incidence rule would correspond to the VPT of each floor or division capable of independent use) would be unconstitutional, by violation of the principle of tax legality (inherent in article 103, paragraph 2 of the Portuguese Constitution).
More extensively, the AT argues that the property value relevant for purposes of tax incidence is the total property value of the urban property and not the property value of each of the parts comprising it, even though capable of independent use, recalling that article 80, paragraph 2 of the Property Tax Code (CIMI) states that, except as provided in articles 84 and 92, each property corresponds to a single entry in the matrix. This notwithstanding recognizing that, as appears in the respective property matrix, the floors or independent divisions are assessed under article 12, paragraph 3 of CIMI, according to which each floor or property capable of independent use is considered separately in the cadastral registration, which shall also discriminate the respective taxable property value, upon which IMI shall be levied.
And it further recognizes that this rule is not unprecedented, having correspondence in article 232, rule 1, of the Property Contribution and Agricultural Industry Tax Code (CCPIIA), which already provided that each housing unit or part of property was to be taken automatically for purposes of determining collectible income upon which the assessment would be levied.
Nevertheless, in the understanding of the Defendant, the taxable property value upon which the incidence of stamp tax of item 28.1 of the General Table depends shall be, as it was, the global property value of the property and not the value of each of its independent parts.
This is because the unity of the urban property in vertical ownership composed of various floors or divisions would not be affected by the fact that all or some of these floors or divisions are capable of independent economic use. In this context, it notes that the property in vertical ownership remains only one, and thus its distinct parts are not legally equated to autonomous units in a horizontal ownership regime, being the property of only a single owner, without prejudice to the regime of co-ownership, when applicable. In this context, the autonomous registration in the property matrix of each of the parts, economically and functionally independent, of the same property, with indication of the corresponding property value of each, determined separately under articles 37 et seq. of CIMI, would be irrelevant for purposes of interpretation of the new item of TGIS. That is, the fact that IMI is calculated based on the taxable property value of each part of property with independent economic use would not affect the application of article 28, paragraph 1 of the General Table.
According to the Defendant, any other interpretation would violate the letter and spirit of item 28.1 of the General Table and also the principle of legality concerning the essential elements of taxes, provided for in article 103, paragraph 2 of the Constitution of the Portuguese Republic (CRP). For this reason, an interpretation of item 28.1 of the General Table in the sense that the property value upon which the incidence of this item depends should not be calculated globally but rather division by division would be unconstitutional by violation of the principle of tax legality.
With respect to the principle of equality, the Defendant further argues that the legislator may subject properties in horizontal ownership and vertical ownership to a different tax legal framework and, thus, discriminatory, without this discrimination necessarily being considered arbitrary and, therefore, violative of such principle.
Summary of the Disputed Issues
In summary, in the present case, there are thus three disputed legal issues:
- What is the relevant VPT in cases of vertical ownership;
- Possible conformity of the interpretation obtained with the principle of equality;
- Possible conformity thereof with the principle of legality.
Legal Matters
Vertical Ownership
As noted, Law no. 55-A/2012, of 29 October, amended the Stamp Tax Code, adding a new item to the General Table of the STC.
On the problem of determining the (minimum) VPT relevant for the application of item 28.1 of TGS in cases of vertical ownership, several decisions have already been rendered by CAAD in proceedings numbers 50/2013-T, 132/2013, 181/2013-T, 183/2013-T, 272/2013-T, 280/2013-T, 26/2014-T, 30/2014-T, 88/2014-T, 177/2014-T and 206/2014-T, which were subsequently confirmed by various other arbitral decisions.
In all of them, the issue was, as in these proceedings, whether the VPT relevant to the incidence rule (28.1 of TGIS) is the VPT corresponding to each of the divisions capable of independent use separately considered in the matrix or whether, conversely, the relevant VPT should correspond to the sum of all these divisions capable of independent use but forming part of the same property and allocated to housing.
And the answer in those decisions was always for the first option, and it is considered that correctly so. Let us now examine the reasons underlying such jurisprudence and the interpretation followed here.
The Stamp Tax Code
The new item was inserted in the Stamp Tax Code, an option that provides no significant contribution to systematically framing the new tax, as this tax "incides upon a heterogeneous multiplicity of facts or acts … without a common trait conferring identity upon them," which was further aggravated by the 2003/2014 Patrimonial Taxation Reform, making even more complex "the problem of the classification of this tax" (cf. José Maria Fernandes Pires, Op. Cit., p. 422).
But it is known that this new item was introduced as a way to strengthen budgetary control measures on the revenue side, in a context of financial necessity (or economic-financial necessity, cf. Sustainability and Solidarity in Times of Crisis, Suzana Tavares da Silva, in Fiscal Sustainability in Times of Crisis, Coord. José Casalta Nabais and Suzana Tavares da Silva, pp. 61 et seq.), with the purpose of identifying new forms of externalization of tax capacity that could be called upon to support the purpose of reducing the negative budgetary balance.
And it did so by choosing to make the new taxation fall exclusively on certain assets, implying thus a strong negative discrimination of these, which requires a reinforced explanation of this choice, so as not to call into question the principle of equality, or equity in the terminology of Glória Teixeira, whether in its sense of horizontal equity or vertical equity (Glória Teixeira, Manual of Tax Law, p. 56, 2nd ed., Almedina).
It appears that in the legislator's thinking there is an intention to identify in properties with VPT equal to or exceeding one million euros ("luxury") destined for housing, a reference point, not arbitrary, of an additional tax capacity, capable of broadening the spectrum of contributions to the desired and necessary budgetary equilibrium.
In this framework, the question to be decided is whether a property constituted in full or vertical ownership, but with floors or divisions with independent uses, is a "property with residential allocation" for purposes of the application of article 1 of the STC and item 28.1 of TGIS, added by article 4 of Law no. 55-A/2012, of 29 October (especially as, as in the present case, it may have areas allocated to non-residential purposes) or whether by "property" should be considered instead the divisions separately considered in the property matrix and, furthermore, what is the relevant VPT (whether the VPT relative to the property, whether the VPT inherent to the sum of its parts with residential allocation, or whether rather the VPT relative, autonomously, to each one of these).
For this purpose, it is important to bear in mind that each floor or part of a property capable of independent use is considered separately in the property registration of the total property, which also discriminates the taxable property value thereof (paragraph 2 of article 12 of CIMI), and IMI is levied individually in relation to each floor or part of a property capable of independent use (article 119, paragraph 1 of CIMI).
And, if this is so for IMI, it should also be so for Stamp Tax. Let us see why.
Literal Interpretation
As noted in the decision rendered in proceedings 206/2014-T: "Given that the STC refers to CIMI, it must be concluded that the registration in the property matrix of properties in vertical ownership, constituted by different parts, floors or divisions with independent use, follows the same registration rules as horizontal ownership."
Since IMI and Stamp Tax "are levied individually in relation to each of the parts," the "legal criterion for defining the incidence of the new tax must be the same." Consequently, there will be incidence of item 28.1 of TGIS (only) if one of these parts, floors or divisions with independent use has a VPT, at least, equal to the amount provided in the incidence rule.
Thus, property will be the independent area, considered separately and autonomously in the matrix, and subject to IS if two requirements are met: being destined for housing purposes and having a VPT equal to or exceeding one million euros, the criterion for assessing "luxury" residential properties. Otherwise, a reality not contemplated by the legislator would be created: that of a, so to speak, "residential property," possibly inserted within a larger property with various purposes, in which the VPT thereof, extraneous to the cadastral registrations, would consist of the fiction of a VPT given by the addition of the autonomous VPT of each division (independent and with housing purpose) considered in the cadastral registration. In other words, where the legislator considered two realities, the interpreter would now have, without support in the legislative text, as occurs in the assessments now in dispute, to create a third reality, hybrid, halfway between the urban property and its independent divisions to which the legislator of IMI, and IS by referral to CIMI, understood to give tax relevance.
Also in the decision rendered in proceedings 272/2013-T (CAAD) it is noted that "considering that the registration in the property matrix of properties in vertical ownership, constituted by different parts, floors or divisions with independent use, under CIMI, follows the same registration rules as properties constituted in horizontal ownership, and their respective IMI, as well as the new Stamp Tax, are levied individually in relation to each of the parts, it offers no doubt that the legal criterion for defining the incidence of the new tax must be the same." Indeed, it is further noted in that same decision that the AT's position "finds no legal basis and is contrary to the criterion that results applicable in CIMI proceedings and, by referral, in Stamp Tax proceedings," for which reason "the adoption of the criterion advocated by the AT violates the principles of legality and tax equality, as well as the prevalence of material truth over legal-formal reality."
And in the same sense it is noted in the arbitral decision of proceedings 30/2014-T (CAAD) to be found in AT doctrine a "non-conformity with the literal element of the final part of the incidence rule (item 28 of TGIS) which states that the tax incides on 'the taxable property value used for IMI purposes' and therefore should not fall upon the sum of taxable property values of properties, parts of properties or floors, having no legal support the operation of adding taxable property values of floors or parts of property capable of independent use, of residential allocation, separated from the VPT of others with different purposes, so as to reach the threshold of eligible taxation of 1,000,000.00 euros or more."
As also noted in the arbitral decision rendered in proceedings 30/2014-T (CAAD), what happens with regard to urban properties with residential allocation, in vertical ownership, with floors or divisions capable of independent use, is that the AT proceeds, in IS assessment operations, as it did in the present case, to the adaptation of CIMI rules (adding the taxable property values of the same property, without considering those corresponding to parts of property with non-residential purpose, thus giving rise to a new and hybrid VPT). Indeed, this "adaptation" corresponds to "adding the VPT of each floor or independent division for housing purposes (separated from the VPT of floors or divisions destined for other purposes), creating a new legal reality, without legal support, which is a global VPT of urban properties in vertical ownership, with residential allocation," which offends "against the literal element of the incidence rule" (incidence on "the taxable property value used for IMI purposes"). Thus, "in urban properties with residential allocation, in vertical ownership, with floors or divisions capable of independent use," the taxable property value should be considered "that results exclusively from paragraph 3 of article 12 of CIMI. Both for IMI and for this IS."
Concretely, as concluded in the decision rendered in proceedings 26/2014-T of CAAD, "for purposes of applying item 28 of TGIS to properties in vertical ownership, the same CIMI rules apply as to properties in horizontal ownership, and in the same sense the VPT for purposes of applying the item is the individual VPT of each independent residential unit, being that in the present case none of the units exceeds the incidence criterion of 1,000,000.00€," the same occurring in the case of the present proceedings.
It is thus concluded, in summary, as clearly emerges from the decisions cited, that the literal interpretation of the new item of TGIS cannot but be different from that sustained by the AT, indeed, the opposite, given the clear and indisputable referral made with respect to the new item of TGIS to the CIMI rules, the interpreter being unable to "create" a new concept of property so as to obtain a hybrid VPT, not recognized in the matrix and without any support in the text of the law.
Economic Substance
But as rightly noted in Decision 117/2013 T of CAAD, "the interpretation based exclusively on the literal content .... cannot be accepted, as in the interpretation of tax norms the general rules and principles of interpretation and application of laws are observed (article 11, paragraph 1 of LGT) and article 9, paragraph 1, expressly prohibits interpretations based exclusively on the literal tenor of the norms in stating that 'interpretation should not be limited to the letter of the law,' instead, should 'reconstitute from the texts the legislative thought, taking above all into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.' So that for there to be a correspondence between the interpretation and the letter of the law it is sufficient 'a minimum of verbal correspondence, even if imperfectly expressed' (article 9, paragraph 3 of the Civil Code), which will only prevent the adoption of interpretations that cannot in any way be reconciled with the letter of the law, even acknowledging therein imperfection in the expression of the legislative intent."
And if we now look at the economic substance of the tax facts, in compliance with article 11, paragraph 3 of LGT, without adhering to an economic interpretation of the norms of tax law, today condemned by Doctrine (cf. Taxes, General Theory, Américo Fernando Brás Carlos, p. 196, 2014, 4th ed. Almedina), we will equally have to acknowledge that the expression "each urban property" used in paragraph 7 of article 23, for the same reasons, encompasses not only urban properties in horizontal ownership, but also floors, divisions or parts of urban properties in vertical ownership, provided they are allocated to housing purposes, always proceeding, in any case, from a single tax base for all legal purposes: the taxable property value used for purposes of IMI (final part of item 28 of TGIS), as concluded in the arbitral decision of proceedings 177/2014-T (CAAD).
Or, as emphasized in the decision rendered in proceedings 272/2014-T of CAAD, "from the legislator's perspective, the legal-formal rigor of the concrete situation of the property does not matter but rather its normal use, the purpose to which the property is destined," so that "for the legislator the situation of the property in vertical or horizontal ownership did not matter, as no reference or distinction is made between them. What matters is the material truth underlying its existence as an urban property and its use," that is, the economic reality of ownership of independent parts, e.g., capable of independent use or rental, as are autonomous units in the case of horizontal ownership, and therefore capable of allowing use or obtaining income in similar manner and thus externalizing equal tax capacity (as the sum of the VPT of various autonomous units of the same property in horizontal ownership or of various properties that together exceeded the value of one million euros would externalize, without this having been considered by the legislator as externalization of tax capacity relevant for purposes of IS).
System Coherence
And if we look at the totality of the tax system we will find no indications that contradict the conclusion drawn so far.
As noted in the decision rendered in proceedings 26/2014-T of CAAD, no censure of the legislator toward vertical ownership is evident. Indeed, "it could be said, not without reasonableness, that the legislator, for purposes of IMI taxation, chose to confer autonomy, independence, to each of the parts or each of the floors of a single property, provided that these are shown to be of independent use, to the point of providing for individualized registration in the matrix of each of these independent parts and imposing on taxation in IMI proceedings an also autonomous collection. Despite the legal existence of a single property, it is the legislator himself who not only recommends but imposes the autonomous consideration of each of the independent parts, for purposes of taxation of property." Indeed, as follows from an economic interpretation of the fact, with prevalence of its substance over its form, as noted above. And if this is so for IMI, it would not be understood why it should not be so for Stamp Tax, namely in the case of the new taxation on "luxury" properties (houses, more accurately).
In fact, if the legislator is indifferent to one or the other form of structuring the ownership of urban properties in CIMI, it would not be understood that he now intended to favor one to the detriment of the other, namely by considering one form of structuring more advanced than the other. In fact, as decided in proceedings 26/2014-T and 272/2014-T of CAAD, "the current legal regime does not impose the obligation of constituting horizontal ownership," for which reason "the discrimination operated by the AT translates into arbitrary and illegal discrimination," as "the AT cannot distinguish where the legislator himself 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, paragraph 2 of the CRP, and also the principles of justice, equality and tax proportionality."
That is, the literal interpretation initially reached continues to hold.
Legislative Intent
And the fact is that nothing induces the interpreter to conclude that the concrete legislator of the new item of TGIS, contrary to the legislator of IMI, which moreover remains unchanged, intended to discriminate vertical ownership against horizontal ownership. As rightly recalled in the decision rendered in the aforementioned proceedings 26/2014-T of CAAD, "when presenting and discussing in Parliament the bill no. 96/XII (2nd), the State Secretary for Tax Affairs expressly stated: 'The Government proposes the creation of a special tax on the highest value residential urban properties. It is the first time that Portugal has created a special taxation on high-value properties destined for housing. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses with a value equal to or exceeding 1 million euros' (cf. DAR I Series no. 9/XII -2, of 11 October, p. 32). Now, as emphasized in that decision, "the State Secretary for Tax Affairs presents this bill referring without hesitation to the expression 'houses'… with a value equal to or exceeding 1 million euros," so that "it results with meridian clarity that item 28.1 of TGIS cannot be interpreted in the sense that it encompasses each of the floors, divisions or parts capable of independent use when only from their sum results a VPT exceeding that provided by the same item." This is because, in that case, "none of the 'houses' … presents, by itself, 'value equal to or exceeding 1 million euros'."
Being thus clear, as noted in the aforementioned decision 272/2014-T, that for the legislator only that value of one million euros, provided that allocated "to a housing unit (house, autonomous unit or floor with independent use) translates into an above-average tax capacity and, as such, capable of determining a special contribution to ensure the just distribution of the tax burden."
And if it is so, we must then attend to the concept of "house" as a physical reality that enables a housing purpose, a unit capable of independent use, including its rental, as it is in this economic reality that we will find the externalization of the tax capacity associated with "luxury housing" that the legislator considered relevant. Moreover, if it were otherwise, the legislator would proceed to a discrimination that would not be found justified, as it has already been seen that no censure is found in the system toward vertical ownership when compared with horizontal. Moreover, this distinction would conflict with a necessary equity between identical externalizations of the same tax capacity.
Tax Capacity and Interpretation Consistent with the Constitution
It is certain that the fiscal legislator is subordinated to the principles of equality, which, as rightly noted by Sérgio Vasques (Manual of Tax Law, pp. 249 et seq., 2011, Almedina), is more than a mere negative limit and imposes something more than the mere prohibition of arbitrariness, instead postulating a distribution of taxes according to the criterion of tax capacity, whereby the legislator must anchor taxation in reasonable and non-arbitrary economic elements, capable of justifying the tax claim in a tax capacity concretely externalized by the taxpayer.
Thus it is imperative to seek in the text of the new item a reading that gives effect to those principles. Or, which is equivalent, not to seek to obtain from that text a sense that violates such principles.
Now, the tax capacities externalized by the ownership of a property composed of a set of autonomous units in horizontal ownership or by a set of divisions of independent use under a vertical ownership regime cannot but be considered identical, if not even, possibly, smaller in the case of the second hypothesis. That is, a property does not, certainly, have a greater market value by being organized as vertical ownership. It is the same (allowing equal benefit by its use or equal income by way of its rental, as noted above), or will even have a smaller value, since the alternatives of transferability will possibly be smaller. And we know that VPT is intended to be an approximation, precisely, to the market value of properties and will therefore be the measure and limit of the tax capacity relevant for the new item of TGIS.
Thus, the interpretation advocated by the AT, finding no hermeneutical justification, as has been seen so far, would further lead to a manifest inequality between owners of properties in horizontal ownership and in vertical ownership (and it has also been seen that no penalizing intent toward these is evident, even if it were admitted that such were constitutionally permissible). In the same sense, as rightly emphasized in the decision of proceedings 272/2014-T of CAAD, the "existence of a property in vertical or horizontal ownership cannot, by itself, be an indicator of tax capacity. To the contrary, the law provides that both should receive the same tax treatment in compliance with the principles of justice, tax equality and material truth."
Concluding, "material truth is what imposes itself as the determining criterion of tax capacity and not mere legal-formal reality of the property, since the constitution of horizontal ownership implies a mere legal alteration of the property, not even requiring a new assessment" (as noted in the decision rendered in proceedings 26/2014-T of CAAD). And this fact "does not seem consistent with the AT's decision to tax the housing parts of a property in vertical ownership, based on the global VPT of the property and not on what is actually attributed to each part." Thus, "the AT cannot distinguish where the legislator himself understood not to do so, under penalty of violating the coherence of the tax system, as well as the principle of tax legality … and also the principles of justice, equality and tax proportionality," as said by the creation ex novo of an innovative concept and of a hybrid VPT, frequently corresponding to part of a property, as occurs in the case of the present proceedings.
Conclusion
In these terms, the tax acts in dispute are affected by a defect of violation of law, due to error in the legal and factual premises, as no part of the property has a VPT of value equal to or exceeding the threshold resulting from the rule applied, which renders said tax acts voidable.
Unconstitutionality
The examination of the unconstitutionality of the norm is thus rendered unnecessary, whether based on the principle of equality or on the principle of legality (grounds which would lead to opposite conclusions), because the interpretation advocated flows precisely from the text of the law, and not from an application divergent from its immediate normative command, by mediate and subsequent intervention of any constitutional principle, or by innovative intervention of the interpreter.
The content of the decision of the Constitutional Court no. 692/2015 of 16 December 2015, rendered in Proceedings no. 51/14 (cf. the page http://www.tribunalconstitucional.pt/tc//tc/acordaos/20150692.html) is not overlooked, and which, as the decision no. 620/2015 of the Constitutional Court of 3 December (available at www.tribunalconstitucional.pt/tc/acordaos/), regarding the assessment of the possible unconstitutionality of the norm in question, concluded for the conformity with the Constitution in force of a differentiated treatment between vertical and horizontal ownership, for purposes of the item in question of the General Table of Stamp Tax. This is because it is understood that they constitute "realities with a distinct legal status, in which the ownership of the real rights referred to in item 28.1 of the General Table of Stamp Tax that fall on the units of a property constituted in horizontal ownership may belong to different persons, whereas in a property constituted by units capable of independent use, but which is not constituted in horizontal ownership, this ownership is necessarily of the same person(s)," for which reason the "differences arising from the different proprietary regimes constitute sufficient ground for, with respect to the incidence of stamp tax in the case of buildings in horizontal ownership to take into account the individualized taxable property value of each of the units, which is not the case for residential urban properties in full ownership composed of parts capable of independent use and separately considered in the cadastral registration."
In fact, viewed from the constitutional perspective, the principle of equality could only prohibit arbitrary distinction, that is, not founded on a rational reason, it being certain that the difference in the structure of ownership could be, by itself, sufficient cause for differentiation that is not arbitrary (regardless of its merit, an assessment that, of course, would always be up to the legislator and not the interpreter).
Thus the assessment of compliance with the principle of equality, understood as prohibition of arbitrariness and therefore sufficing merely with a rational cause of justification, rests on the presupposition that the law postulates differentiated treatment of two identical realities (that is, that the immediate command of the norm would lead to tax differentiation between vertical and horizontal ownership) and that only mediately, by application of the principle of equality, would an opposite interpretation be obtained, by unconstitutionality of the norm or the interpretation made of it.
Now, it happens that in the present case regarding the taxation of properties constituted in vertical and horizontal ownership it is concluded, without appeal to constitutional principles, but rather by reference only to elements of sub-constitutional hermeneutics, that the law (the item in question) treats these two realities equally.
Thus, the illegality of the acts results from the norm invoked not being applicable to the situation in question, since none of the assessments relates to the minimum threshold required by the aforementioned item no. 28, and should thus be annulled on this ground, which constitutes a conclusion prior to the analysis of the constitutionality of the norm or the interpretation made of it, under the terms noted in the Decision of the Constitutional Court no. 693/2015 of 16 December 2015 in Proceedings no. 304/15 (cf. the page http://www.tribunalconstitucional.pt/tc//tc/acordaos/20150693.html), on appeal from the arbitral decision rendered in proceedings 205/2014-T of CAAD.
And, on the other hand, it corresponds to the option of the legislator, not that of the interpreter who would substitute for him with a different interpretation, whereby the observance of the principle of legality is also not at issue.
Operative Part
As a result of the foregoing, this Arbitral Tribunal decides to judge the claim well-founded and, consequently, to annul the assessment acts in dispute, on the ground of violation of law, arising from error in the legal and factual premises.
Value
In accordance with the provisions of article 306, paragraphs 1 and 2 of the Code of Civil Procedure and article 97-A, paragraph 1, subparagraph a) of the Tax Court Procedure Code and article 3, paragraph 2 of the Costs Regulation in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 12,729.59 (twelve thousand, seven hundred and twenty-nine euros and fifty-nine cents).
Costs
Under the terms of article 22, paragraph 4 of RJAT, the amount of costs is fixed at € 918.00 (nine hundred and eighteen euros), under the terms of Table I annexed to the Costs Regulation in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.
Lisbon, 28-12-2015
Text prepared by computer, under the terms of the Code of Civil Procedure (CPC), applicable by referral from article 29, paragraph 1, subparagraph e) of RJAT, with blank verses, reviewed and signed by the undersigned arbitrator.
The Arbitrator
(Jaime Carvalho Esteves)
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