Summary
Full Decision
ARBITRAL DECISION
The arbitrators Dr. Jorge Manuel Lopes de Sousa (arbitrator-president), Dr. Luís Máximo dos Santos and Dr. Jaime Carvalho Esteves appointed by the Deontological Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, constituted on 27-08-2014, agree as follows:
1. Report
A, S.A., with registered office at …, legal entity no. …, Tax Service of Lisbon 2, applied, pursuant to the provisions of no. 1 of article 2 of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT") and of Regulation no. 112-A/2011, of 22 March, for the constitution of an Arbitral Tribunal, for review of the legality of the Stamp Tax assessments nos. 2014..., 2014..., 2014..., 2014... and 2014....
The Tax Authority and Customs Authority is the respondent.
The application for constitution of the arbitral tribunal was filed on 24-06-2014, accepted by the President of the CAAD on 26-06-2014 and notified to the Tax Authority and Customs Authority on 27-06-2014.
Pursuant to the provisions of subparagraph a) of no. 2 of article 6 and of subparagraph b) of no. 1 of article 11 of the RJAT, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the undersigned, who communicated their acceptance of the assignment within the applicable timeframe.
In accordance with the provisions of subparagraph c) of no. 1 of article 11 of the RJAT, the collective arbitral tribunal was constituted on 27-08-2014.
The Tax Authority and Customs Authority filed a response.
By order of 06-10-2014 it was decided to dispense with the holding of the meeting provided for in article 18 of the RJAT and that the proceedings should proceed with successive pleadings.
Neither party filed pleadings.
The arbitral tribunal was regularly constituted and is competent.
The parties have legal personality and capacity, are legitimately constituted and are duly represented. (arts. 4 and 10, no. 2, of the same instrument and art. 1 of Regulation no. 112-A/2011, of 22 March).
The proceedings are free from nullities.
2. Object of the Dispute
The Applicant requests the annulment of the following Stamp Tax assessment acts.
The assessments were made pursuant to the provisions of item 28.1 of the Schedule attached to the Stamp Tax Code, and the Applicant contends that the legal requirements for application of the tax provided for in the said item are not met with respect to the properties in question.
The Applicant argues, in summary, that the properties referred to are land for construction, which it considers are not covered by item 28.1 of the General Schedule of the Stamp Tax, as worded by Law no. 55-A/2012, of 29 October, in force in 2013, which establishes "For property with residential use – 1%".
The Tax Authority and Customs Authority contested, stating, inter alia, that the Stamp Tax assessments identified in the application for arbitral decision are in the total amount of €221,615.47, although the Applicant quantifies the application at €693,199.49, which appears entirely inconsistent with the rules for determining the value of the case set out in the CPPT, as well as with the timeframe for submitting the application for arbitral decision, provided for in article 10 of the RJAT.
As to the merits of the application for arbitral decision, the Tax Authority and Customs Authority contends, in summary, that the property on which each of the disputed assessments falls has the legal nature of property with residential use, and therefore the assessment acts subject of the application for arbitral decision should be upheld, as they embody correct interpretation of Item 28 of the General Schedule, amended by Law 55-A/2012, of 29 December.
The Applicant commented on the issue of the value attributed to the proceedings, stating that the value referred to by the Tax Authority and Customs Authority is the value of one of the Stamp Tax installments for the year 2013 relating to the properties in question and that the value should be considered as that of the annual assessments.
The issue of value will be addressed at the end of this decision.
3. Factual Matters
3.1. Proven Facts
a) In 2013, the Applicant was owner of the property located in the parish of ..., with property register article no. U-..., with tax patrimonial value of €8,294,405.18, which is land for construction (document no. 2 attached with the application for arbitral decision, the contents of which are reproduced);
b) In 2013, the Applicant was owner of the property located in the parish of ..., with property register article no. U-..., with tax patrimonial value of €6,421,239.35, which is land for construction (document no. 2 attached with the application for arbitral decision, the contents of which are reproduced);
c) In 2013, the Applicant was owner of the property located in the parish of ..., with property register article no. U-..., with tax patrimonial value of €20,764,235.73, which is land for construction (document no. 2 attached with the application for arbitral decision, the contents of which are reproduced);
d) In 2013, the Applicant was owner of the property located in the parish of ..., with property register article no. U-..., with tax patrimonial value of €18,235,286.75, which is land for construction (document no. 2 attached with the application for arbitral decision, the contents of which are reproduced);
e) In 2013, the Applicant was owner of the property located in the parish of ..., with property register article no. U-..., with tax patrimonial value of €12,589,466.23, which is land for construction (document no. 2 attached with the application for arbitral decision, the contents of which are reproduced);
f) The Tax Authority and Customs Authority before April 2014 notified the Applicant of the Stamp Tax assessment no. 2014..., for the year 2013, dated 17-03-2014, with payment due date of the 1st Installment in April 2014, in the amount of €82,944.05, relating to the property located in the parish of ..., with property register article no. U-..., with tax patrimonial value of €8,294,405.18;
g) The Tax Authority and Customs Authority before April 2014 notified the Applicant of the Stamp Tax assessment no. 2014..., for the year 2013, dated 17-03-2014, with payment due date of the 1st Installment in April 2014, in the amount of €64,212.39, relating to the property located in the parish of ..., with property register article no. U-..., with tax patrimonial value of €6,421,239.35;
h) The Tax Authority and Customs Authority before April 2014 notified the Applicant of the Stamp Tax assessment no. 2014..., for the year 2013, dated 17-03-2014, with payment due date of the 1st Installment in April 2014, in the amount of €207,642.36, relating to the property located in the parish of ..., with property register article no. U-..., with tax patrimonial value of €20,764,235.73;
i) The Tax Authority and Customs Authority before April 2014 notified the Applicant of the Stamp Tax assessment no. 2014..., for the year 2013, dated 17-03-2014, with payment due date of the 1st Installment in April 2014, in the amount of €182,352.87, relating to the property located in the parish of ..., with property register article no. U-..., with tax patrimonial value of €18,235,286.75;
j) The Tax Authority and Customs Authority before April 2014 notified the Applicant of the Stamp Tax assessment no. 2014..., for the year 2013, dated 17-03-2014, with payment due date of the 1st Installment in April 2014, in the amount of €125,894.68, relating to the property located in the parish of ..., with property register article no. U-..., with tax patrimonial value of €12,589,466.23;
k) On 30-04-2014, the Applicant provided a guarantee in the amount of €276,269.34 to suspend tax enforcement for collection of the amounts relating to the 1st installment of Stamp Tax relating to each of the properties (document no. 3 attached with the application for arbitral decision, the contents of which are reproduced);
l) On 24-06-2014, the Applicant filed the application for arbitral decision that gave rise to the present proceedings.
3.2. Unproven Facts
There are no facts of relevance for review of the merits of the case that have not been proven.
3.3. Rationale for the Determination of Factual Matters
The proven facts are based on the documents indicated for each point, the correspondence of which to reality is not disputed.
4. Legal Matters
The issue that is the subject of the present action is whether land for construction, in whose subdivision authorization there is provided for the construction of property intended for housing, falls within the scope of item no. 28.1 of the General Schedule of the Stamp Tax (TGIS), in its original wording, introduced by Law no. 55-A/2012, of 29 October.
4.1. Regime of Law no. 55-A/2012, of 29 October
Law no. 55-A/2012, of 29 October, made various amendments to the Stamp Tax Code and added to the TGIS item 28, with the following wording:
28 – Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value contained in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or exceeding €1,000,000 – on the tax patrimonial value used for purposes of IMI:
28.1 – For property with residential use – 1%;
28.2 – For property, when the liable persons who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the list approved by regulation of the Minister of Finance – 7.5%.
In the transitional provisions contained in article 6 of said Law no. 55-A/2012, the following rules were established regarding the assessment of the tax provided for in that item:
1 – In 2012, the following rules shall be observed by reference to the assessment of the stamp tax provided for in item no. 28 of the respective General Schedule:
a) The taxable event occurs on 31 October 2012;
b) The liable person for the tax is the one mentioned in no. 4 of article 2 of the Stamp Tax Code on the date referred to in the preceding subparagraph;
c) The tax patrimonial 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 by reference to the year 2011;
d) The assessment of the tax by the Tax Authority and Customs Authority shall be made by the end of November 2012;
e) The tax must be paid, in a single installment, by the liable persons by 20 December 2012;
f) The applicable rates are as follows:
i) Properties with residential use evaluated in accordance with the Municipal Property Tax Code: 0.5%;
ii) Properties with residential use not yet evaluated in accordance with the Municipal Property Tax Code: 0.8%;
iii) Urban properties when the liable persons who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the list approved by regulation of the Minister of Finance: 7.5%.
2 – In 2013, the assessment of the stamp tax provided for in item no. 28 of the respective General Schedule must be based on the same tax patrimonial value used for purposes of assessment of municipal property tax to be made in that year.
3 – The failure to deliver, in whole or in part, within the timeframe indicated, of the amounts assessed as stamp tax constitutes a tax infraction, punished in accordance with the law.
The term "property with residential use" as used in item 28.1 and in sub-items i) and ii) of subparagraph f) of no. 1 of article 6 of Law no. 55-A/2012, is a concept that is not used in any other tax legislation, in these precise terms.
Specifically in the CIMI, which in various norms of the Stamp Tax Code introduced by that Law is indicated as a subsidiary statute of application with respect to the tax provided for in the said 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], such a concept is not used with that designation.
Law no. 83-C/2013, of 31 December, amended that item no. 28.1, giving it the following wording:
28.1 - For residential property or land for construction whose building, authorized or anticipated, is for housing, in accordance with the provisions of the Municipal Property Tax Code – 1%.
4.2. Concepts of Properties Used in the CIMI
In the IMI, the types of properties are enumerated in articles 3 to 6 as follows:
Article 2
Concept of Property
1 – For purposes of this Code, property is every parcel of territory, including waters, plants, buildings and structures of any kind incorporated in or resting on it, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plants, buildings or structures, in the circumstances referred to above, having economic autonomy in relation to the land on which they are located, although situated in a parcel of territory that constitutes an integral part of assets diversified or does not have patrimonial nature.
2 – Buildings or structures, even though movable by nature, are considered as having a character of permanence when devoted to non-transitory purposes.
3 – The character of permanence is presumed when the buildings or structures are situated in the same location for a period exceeding one year.
4 – For purposes of this tax, each autonomous fraction, under the horizontal property regime, is considered as constituting a property.
Article 3
Rural Properties
1 – Rural properties are lands situated outside an urban agglomeration that are not to be classified as land for construction, in accordance with no. 3 of article 6, provided that:
a) They are devoted or, in the absence of concrete dedication, have as their normal purpose use generating agricultural income, such as are considered for purposes of the income tax on natural persons (IRS);
b) Not having the dedication indicated in the preceding subparagraph, they are not developed or have only buildings or structures of an accessory character, without economic autonomy and of reduced value.
2 – Also rural properties are lands situated within an urban agglomeration, provided that, by force of a legally approved provision, they cannot have use generating any income or can only have use generating agricultural income and are in fact having this dedication.
3 – Also rural properties are:
a) Buildings and structures directly devoted to the production of agricultural income, when situated on the lands referred to in the preceding numbers;
b) Waters and plants 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, the nuclei with a minimum of 10 dwellings served by public streets, with their perimeter delimited by points distant 50 m from the axis of the streets, in the transverse sense, and 20 m from the last building, in the sense 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, in accordance with the principal part.
2 – If neither of the parts can be classified as principal, the property is considered mixed.
Article 6
Types of Urban Properties
1 – Urban properties are divided into:
a) Residential;
b) Commercial, industrial or for services;
c) Land for construction;
d) Other.
2 – Residential, commercial, industrial or for services are buildings or structures licensed for such or, in the absence of license, that have as their normal purpose each of these purposes.
3 – Land for construction is considered lands situated within or outside an urban agglomeration, for which a license or authorization has been granted, admitted prior notice or issued favorable prior information on subdivision or construction operation, and also those that have been so declared in the acquisition title, excepting lands on which the competent entities prohibit any of those operations, namely those located in green areas, protected areas or that, in accordance with municipal planning plans, are devoted to public spaces, infrastructure or equipment. (As worded by Law no. 64-A/08, of 31-12)
4 – Included in the provision of subparagraph d) of no. 1 are lands situated within an urban agglomeration that are not land for construction nor are they covered by the provision of no. 2 of article 3, and also buildings and structures licensed or, in the absence of license, that have as their normal purpose other purposes than those referred to in no. 2 and also those of the exception of no. 3.
4.3. Rules on Interpretation of Laws
Article 11 of the General Tax Law establishes the essential rules of interpretation of tax laws as follows:
Article 11
Interpretation
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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.
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Whenever in tax norms technical terms of other branches of law are used, they must be interpreted in the same sense that they have there, unless otherwise directly results from the law.
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If doubt persists about the meaning of the applicable tax norms, account must be taken of the economic substance of the tax facts.
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Gaps resulting from tax norms covered by the reservation of law of the Assembly of the Republic are not susceptible to analogical integration.
The general principles of interpretation of laws, to which no. 1 of article 11 of the LGT refers, are established in article 9 of the Civil Code, which establishes the following:
Article 9
Interpretation of Law
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Interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative intent, having especially in mind 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.
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However, the interpreter cannot take into account legislative intent that does not have in the letter of the law a minimum of verbal correspondence, however imperfectly expressed.
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In fixing the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and knew how to express his intent in adequate terms.
4.4. Hypotheses for Interpretation of the Concept of "Property with Residential Use"
As can be seen from the CIMI norms transcribed, the concept of "property with residential use" is not used in the classification of properties.
This concept, with this terminology, is also not found in any other statute.
Thus, in the absence of exact terminological correspondence of the concept of "property with residential use" with any other used in other statutes, several interpretive hypotheses can be raised.
The starting point for interpretation of that expression "properties with residential use" is, naturally, the text of the law, being on the basis of it that the "legislative intent" must be reconstructed, as imposed by no. 1 of article 9 of the Civil Code, applicable by force of the provisions of article 11, no. 1, of the LGT.
4.5. Concept of "Property with Residential Use" as Referring to Residential Properties
The concept closest to the literal meaning of this expression used is manifestly that of "residential properties", defined in no. 2 of article 6 of the CIMI as comprising "buildings or structures" licensed for residential purposes or, in the absence of license, that have as their normal purpose residential purposes.
If it were to be understood that the expression "property with residential use" coincides with that of "residential properties", it is manifest that the assessments would be afflicted by error as to the factual and legal prerequisites, since all properties with respect to which Stamp Tax was assessed under the said item no. 28.1 are land for construction, without any building or structure, required by that no. 2 of article 6 to fulfill that concept of "residential properties".
Therefore, if the interpretation is adopted that "property with residential use" means "residential property", the assessments whose declaration of illegality is requested will be illegal, because there is in any of the lands any building or structure.
However, the non-coincidence of the terms of the expression used in item no. 28.1 of the TGIS with that extracted from no. 2 of article 6 of the CIMI suggests that it was not intended to use the same concept.
4.6. Concept of "Property with Residential Use" as a Concept Distinct from "Residential Properties"
The word "use" (afectação), in this context of dedication of a property, has the meaning of "action of destining something to a determined use".
"When, as is the rule, the norms (legislative formulas) allow more than one meaning, then the positive function of the text is expressed in giving stronger support to or more strongly suggesting one of the possible meanings. For among the possible meanings, some will correspond to the more natural and direct meaning of the expressions used, while others will only fit within the verbal framework of the norm in a forced, affected 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 that better and more immediately corresponds to the natural meaning of the verbal expressions used, and specifically to its technical-legal meaning, in the assumption (not always exact) that the legislator knew how to express his intent correctly."
The relevance of the text of the law is especially emphasized in the matter of interpretation of norms on the incidence of Stamp Tax, which are reduced to an amalgamation, under a common denomination, of an incongruent set of taxes of completely different natures (on income, on expenditure, on assets, on acts, etc.), which does not leave appreciable margin for application of the primary interpretive criterion, which is the unity of the legal system, which demands its global coherence.
The recognized lack of coherence of Stamp Tax is particularly exuberant in the case of this item no. 28.1, hastily included outside the General State Budget, by a tax legislator without perceptible global fiscal guidance, which was successively implementing norms of fiscal aggravation as the reversals of budget execution required, the impositions of international institutional creditors (represented by the "troika") and the oversight of the Constitutional Court.
In fact, although in the "Explanatory Memorandum" of the Bill no. 96/XII/2nd, 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 an effective distribution of the necessary sacrifices for compliance with the adjustment program" and its commitment "to ensure that the distribution of those sacrifices will be made by all and not just by those who live on the income of their work", it is manifest, on the one hand, that those reasons of equity, certainly existing, did not begin to apply in mid-2012, already existing at the beginning of the year, when the General State Budget came into force, and on the other hand, that the scope of item no. 28.1, in taxing additionally properties with residential use and not also properties that do not have it, suggests that social equity concerns and the proclaimed intention to distribute sacrifices among all reaches much more some than properly all.
In this context, there being no secure interpretive elements that allow detecting legislative coherence in the solution adopted in the said item no. 28.1 or the correctness or incorrectness of the adopted solution (relevant for interpretive 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 accordance with the presumption imposed by the same no. 3 of article 9, that the legislator knew how to express his intent in adequate terms.
In light of those meanings of the words "use" (afectação) and "to dedicate" (afectar), which are "to give destination" or "to apply", the formula used in that item no. 28.1 of the TGIS manifestly encompasses properties that have already been given destination for housing, properties that are already applied to residential purposes, so it is necessary to inquire whether it will also encompass properties that, although not yet applied to residential purposes, are destined for these, specifically in a subdivision authorization.
To that end, it must be clarified when a property can be understood to be devoted to a residential purpose, specifically whether it is when such destination is fixed in a subdivision authorization or licensing act or similar, or only when the effective attribution of that destination is concretized.
From the outset, the comparison of item no. 28.1 of the TGIS with no. 2 of article 6 of the CIMI, which defines the concept of residential properties, suggests that an effective dedication is necessary.
In fact, a building or structure licensed for housing or, even without license, but that has housing as its normal purpose, is, in light of no. 2 of that article 6, a residential property, as it gives that classification to "buildings or structures licensed for such or, in the absence of license, that have as their normal purpose each of these purposes".
Therefore, in the presupposition that the legislator of Law no. 55-A/2012 knew how to express his intent in adequate terms (as imposed by article 9, no. 3, of the Civil Code that be presumed), if he intended to refer to those buildings already licensed for housing or that have housing as their normal purpose, he would certainly have used the concept of "residential properties", which would express perfectly and clearly his intent, in light of the definition given by that no. 2 of article 6 of the CIMI.
Consequently, it must be presumed that the use of a different expression has in view a distinct reality, so that, in good hermeneutics, "property with residential use" cannot be a property merely licensed for housing or destined for that purpose (that is, it will not suffice that it be a "residential property"), having to be a property that already has effective dedication to that purpose.
That this is the meaning of the expression "dedication" (afectação), in the same context of property classification that the CIMI makes, is confirmed by article 3, in which, with respect to rural properties, reference is made to those "that are devoted or, in the absence of concrete dedication, have as their normal purpose use generating agricultural income", which evidences that dedication is concrete, effective. In fact, as can be seen from the final part of this text, a property may have as its purpose a determined use and be or not be devoted to it, which evidences that dedication is, at the level of the link of a property to a determined use, something more intense than mere purpose and may or may not occur, downstream of this and not upstream.
Moreover, the text of the law in adopting the formula "property with residential use", instead of "urban properties with residential use", which appears in the referred "Explanatory Memorandum", points strongly in the sense that dedication to residential use must already be concretized, as only then will the property have that dedication.
In the case at hand, we are faced with a reality even more distant from residential use, which is that there is not even any building or structure and, therefore, one cannot consider existing a dedication that presupposes its existence.
On the other hand, as the Applicant correctly points out, the legislative intent not to extend the scope of incidence to land for construction was expressly referred to by the Government when presenting to the Plenary of the Assembly of the Republic Bill no. 96-XII by saying, by the voice of the State Secretary for Fiscal Affairs:
"First, the Government proposes the creation of a special rate to tax residential urban properties of higher value. This is the first time in Portugal that a special taxation has been created on high-value properties intended for housing. This rate 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. With the creation of this additional rate, the fiscal effort required of these owners will be significantly increased in 2012 and 2013."
The express reference to "houses" as the target of the incidence of the new tax leaves no room for doubt about the legislative intent.
On the other hand, there is no reference in the discussion of the said Bill to "land for construction".
With regard to article 45 of the CIMI, it has no relation to the classification of properties, only indicating the factors to be considered in the valuation of land for construction. What is considered there, in making reference to the "building to be constructed" is consideration of the destination of the land, which, as seen, is something that, in the context of the CIMI, does not imply dedication and occurs before it.
Law no. 83-C/2013, of 31 December, contrary to what the Tax Authority and Customs Authority contends, was not intended to clarify the logical element underlying the original wording of item no. 28.1, but rather came to indirectly confirm the interpretation that it did not encompass land for construction.
In fact, if the original wording of that item no. 28.1, in speaking of "property with residential use" already intended to encompass the buildings and structures that constituted "residential properties" (within the terms of article 6, no. 2, of the CIMI), and land for construction for which housing was authorized or anticipated, it would be natural to give the new wording an interpretive nature, similar to what the same Law no. 83-C/2013 does in other provisions [article 177, no. 7, with respect to subparagraphs a) and b) of no. 3 of article 17-A of the IRS Code, and article 185, no. 1, with respect to article 3-A of the Value Added Tax Code] and is customary to do in budgetary laws, when new wordings are intended to apply to situations potentially encompassed by previous wordings.
Therefore, the fact that no interpretive nature was given to the new wording points in the sense that it was intended to alter the scope of incidence of the said item no. 28.1 of the TGIS and not to maintain it, clarifying it.
In light of the foregoing, the assessments whose declaration of illegality is requested by the Applicant are afflicted by a defect of error as to the legal prerequisites, embodied in violation of item no. 28.1 of the TGIS, which justifies its annulment (article 135 of the Code of Administrative Procedure).
5. Indemnification for Undue Guarantee
The Applicant also formulates a request for indemnification for undue guarantee.
In accordance with the provisions of subparagraph b) of art. 24 of the RJAT, the arbitral decision on the merits of the claim with respect to which no appeal or challenge lies binds the tax administration from the end of the period provided for appeal or challenge, this administration being required, in the exact terms of the merits of the arbitral decision in favor of the liable person and until the end of the period provided for voluntary execution of the decisions of the judicial tax tribunals, to "restore the situation that would exist if the tax act subject of the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose".
In the legislative authorization on which the Government based itself to approve the RJAT, granted by art. 124 of Law no. 3-B/2010, of 28 April, it is proclaimed, as the primary directive of the institution of arbitration as an alternative form of jurisdictional resolution of conflicts in tax matters, that "the tax arbitration process must constitute an alternative procedural means to the judicial challenge process and to the action for recognition of a right or legitimate interest in tax matters".
Although art. 2, no. 1, subparagraphs a) and b), of the RJAT uses the expression "declaration of illegality" to define the competence of the arbitral tribunals operating in the CAAD and does not refer to constitutive (annulling) and condemnatory decisions, it should be understood, in harmony with the said legislative authorization, that the competences thereof include the powers that in a judicial challenge process are attributed to the tax tribunals with respect to the acts whose review of legality falls within their competences.
Although the judicial challenge process is essentially a process of mere annulment (arts. 99 and 124 of the CPPT), a condemnation of the tax administration can be issued therein for the payment of indemnificatory interest and indemnification for undue guarantee.
In fact, although there is no express norm to that effect, it has been consistently understood in the tax tribunals, since the entry into force of the codes of the fiscal reform of 1958-1965, that a claim for condemnation for payment of indemnificatory interest can be cumulated in a judicial challenge process with a claim for annulment or declaration of nullity or non-existence of the act, since in those codes it is stated that the right to indemnificatory interest arises when, in a gracious reclamation or judicial process, the administration is convinced that there was error of fact attributable to the services. This regime was subsequently generalized in the Code of Tax Procedure and Process, which established in no. 1 of its art. 24 that "there shall be a right to indemnificatory interest in favor of the taxpayer when, in a gracious reclamation or judicial process, it is determined that there was error attributable to the services", later, in the LGT, in whose art. 43, no. 1, it is established that "indemnificatory interest is owed when it is determined, in a gracious reclamation or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount higher than that legally owed" and, finally, in the CPPT in which it was established, in no. 2 of art. 61 (corresponding to no. 4 in the wording given by Law no. 55-A/2010, of 31 December), that "if the decision recognizing the right to indemnificatory interest is judicial, the payment period is counted from the beginning of the period of its voluntary execution".
With respect to the claim for condemnation for payment of indemnification for undue provision of guarantee, art. 171 of the CPPT establishes that "indemnification in case of bank guarantee or equivalent improperly provided shall be requested in the process in which the legality of the collectable debt is disputed" and that "indemnification must be requested in the reclamation, challenge or appeal or in case its basis is subsequent within 30 days of its occurrence".
Thus, it is unequivocal that the judicial challenge process encompasses the possibility of condemnation for payment of undue guarantee and even is, in principle, the appropriate procedural means for formulating such a claim, which is justified by evident reasons of procedural economy, since the right to indemnification for undue guarantee depends on what is decided regarding the legality or illegality of the assessment act.
The request for constitution of the arbitral tribunal has as its corollary that it is in the arbitral process that the "legality of the collectable debt" will be discussed, so, as results from the express tenor of that no. 1 of the said art. 171 of the CPPT, the arbitral process is also the appropriate one to review the claim for indemnification for undue guarantee.
Moreover, the cumulation of claims relating to the same tax act is implicitly presupposed in art. 3 of the RJAT, in speaking of "cumulation of claims even if relating to different acts", which suggests that the cumulation of claims is also possible with respect to the same tax act and the claims for indemnification for indemnificatory interest and condemnation for undue guarantee are susceptible of being encompassed by that formula, so an interpretation to this effect has, at least, the minimum of verbal correspondence required by no. 2 of art. 9 of the Civil Code.
The regime for the right to indemnification for undue guarantee is contained in art. 53 of the LGT, which establishes the following:
Article 53
Guarantee in Case of Undue Payment
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The debtor who, to suspend execution, offers a bank guarantee or equivalent shall be indemnified in whole or in part for the damages resulting from its provision, if he has maintained it for a period exceeding three years in proportion to the accrual in administrative appeal, challenge or opposition to execution that have as their object the debt guaranteed.
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The period referred to in the preceding number does not apply when it is determined, in a gracious reclamation or judicial challenge, that there was error attributable to the services in the assessment of the tax.
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The indemnification referred to in number 1 has as its maximum limit the amount resulting from the application to the guaranteed amount of the rate of indemnificatory interest provided for in the present law and can be requested in the process of gracious reclamation or judicial challenge itself, or autonomously.
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Indemnification for provision of undue guarantee shall be paid by deduction from the revenue of the tax of the year in which payment is effected.
In the case at hand, the errors of the assessments are attributable to the Tax Authority and Customs Authority, as it made them on its own initiative and the Applicant in no way contributed to those errors being committed.
Therefore, the Applicant has a right to indemnification for the guarantee provided.
There being no elements that permit determination of the amount of indemnification, the condemnation must be made by reference to what is to be assessed in execution of the present decision (article 609 of the Code of Civil Procedure of 2013 and article 565 of the Civil Code).
6. Value of the Case
As referred to, the Tax Authority and Customs Authority understands that the value of the case should be calculated based on the 1st installments of Stamp Tax for the year 2013 of each of the properties in question, while the Applicant understands that the value of the case should be calculated based on the annual assessment amounts.
By force of the provisions of article 3, no. 4 of the Regulation of Costs in Tax Arbitration Proceedings "the value of the case is determined in accordance with article 97-A of the Code of Tax Procedure and Process".
In accordance with subparagraph a) of no. 1 of article 97-A of the CPPT, the value to be considered for purposes of costs when an assessment is challenged is the amount whose annulment is requested.
Thus, the Applicant is correct in arguing that the value of the case should be that of the assessments whose declaration of illegality it requests and not the value of the 1st installment of each of the properties referred to, as it is the illegality of the annual assessments that the Applicant claims.
Moreover, the competence of the arbitral tribunals operating in the CAAD encompasses claims for declaration of illegality of assessment acts and not of the installments through which the amounts assessed are collected.
However, the sum of the annual values of the assessments is €663,046.35 and not €693,199.49.
On the other hand, although the Applicant has provided a guarantee, it does not formulate any claim for a specific amount.
Thus, the value of the case is fixed at €663,046.35.
7. Decision
In these terms, the Arbitral Tribunal agrees on:
a) To uphold the claim for arbitral decision declaring the illegality of the Stamp Tax assessments nos. 2014..., 2014..., 2014..., 2014... and 2014..., in the total amount of €663,046.35;
b) To uphold the claim for payment of indemnification for undue guarantee and condemn the Tax Authority and Customs Authority to pay to the Applicant the indemnification to be assessed in execution of the present decision, relating to the expenses of the guarantee provided.
8. Costs
In accordance with art. 22, no. 4, of the RJAT, the amount of costs is fixed at €9,792.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax Authority and Customs Authority.
Lisbon, 06 November 2014
The Arbitrators
(Jorge Manuel Lopes de Sousa)
(Luís Máximo dos Santos)
(Jaime Carvalho Esteves)
[1] Dictionary of Contemporary Portuguese Language of the Lisbon Academy of Sciences, Volume I, page 102.
The Houaiss Dictionary of the Portuguese Language defines "dedication" (afectação), in a context close to this one, as "act that gives destination to public assets".
The Great Dictionary of the Portuguese Language, by JOSÉ PEDRO MACHADO, indicates "to destine" and "to apply" among the meanings of "to dedicate" (afectar).
[2] BAPTISTA MACHADO, Introduction to Law and Legitimizing Discourse, page 182.
[3] Bill no. 99/XII/2nd is available at
http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=37245
[4] Other norms of the CIMI make it clear that the term "dedication" (afectação) is used to reference situations already existing and not merely future, even if foreseeable, like "destination".
This is the case of article 9 of the CIMI, which, after establishing that "the tax is due from" "the 4th year following, inclusive, that in which land for construction has come to appear in the inventory of a company whose purpose 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 purpose is its sale" [subparagraphs d) and e) of no. 1], provides that "for purposes of the provisions of subparagraphs d) and e) of no. 1, liable persons must communicate to the tax service of the area of the situation of the properties, within 60 days counted from the occurrence of the fact determining its application, the dedication of the properties to those purposes".
The "dedication of the properties to those purposes", in the context of this article 9, amounts to the concrete attribution to the properties of the purpose "for sale", materialized by their inventorization, it not being sufficient that they were constructed or acquired with a view to their sale.
[5] Page 32 of the Journal of the Assembly of the Republic, no. 9 of the 2nd Legislative Session of the XII Legislature, relating to the Plenary Meeting of 10-10-2012, available at
http://app.parlamento.pt/darpages/dardoc.aspx?doc=6148523063446f764c324679626d56304c334e706447567a4c31684a5355786c5a79394551564a4a4c305242556b6c42636e463161585a764c7a497577716f6f6c4d6a42545a584e7a77364e764a5449775447566e61584e7359585270646d4576524546534c556b744d4441354c6e426b5a673d3d&nome=DAR-I-009.pdf
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