Summary
Full Decision
ARBITRAL DECISION
I – REPORT
On 25 June 2014, A…, NIF …, resident at Rua …, …, NIF …, resident at Rua …, B…, NIF …, resident at Rua … and C…, NIF …, resident at Rua …, filed a request for constitution of an arbitral tribunal, under the combined provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters, as amended by article 228 of Law No. 66-B/2012, of 31 December (hereinafter, briefly referred to as RJAT), seeking a declaration of illegality and annulment of the acts of Stamp Tax assessment Nos. 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014… 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014… and 2014….
To substantiate their request, the Claimants allege, in summary, that the assessment of Stamp Tax on the sum of the Tax Patrimonial Value (TPV) of the divisions susceptible to independent use that comprise a property in full ownership is not lawful.
On 27 June, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority (AT).
The Claimant did not proceed to appoint an arbitrator, wherefore, under the provisions of subparagraph a) of paragraph 2 of article 6 and subparagraph a) of paragraph 1 of article 11 of the RJAT, the President of the Ethics Council of CAAD appointed the undersigned as arbitrator of the sole arbitral tribunal, and the latter communicated acceptance of the charge within the applicable period.
On 14 August 2014, the parties were notified of said appointment, and did not express any desire to refuse it.
In accordance with the provisions of subparagraph c) of paragraph 1 of article 11 of the RJAT, the Arbitral Tribunal was constituted on 1 September 2014.
On 19 September 2014, the Respondent, after being notified for this purpose and within the deadline for which it was notified, presented its response defending itself by impugnation, and sustaining, in summary, that the tax acts in question in the case are in conformity with the law and the Constitution of the Portuguese Republic (CRP).
Subsequently, both parties, having been notified for this purpose, came to the case to communicate that they waived the holding of the meeting referred to in article 18 of the RJAT, as well as the presentation of submissions, wherefore the holding of the first meeting of the Arbitral Tribunal, under the terms and for the purposes of the provisions of article 18 of the RJAT, was dispensed with, given that, in this case, none of the purposes legally entrusted to it were present, and that the arbitral process is governed by the principles of procedural economy and prohibition of the performance of useless acts, with a period of 30 days being set for the issuance of a decision.
The Claimants presented a Motion to the case, reaffirming, among other things, the request properly made in the initial petition. The AT, having been notified for this purpose, exercised the right of reply granted to it.
The Arbitral Tribunal is materially competent and is duly constituted, under the terms of articles 2, paragraph 1, subparagraph a), 5, and 6, paragraph 1, of the RJAT.
The parties have legal personality and capacity, are legitimately constituted, and are legally represented, under the terms of articles 4 and 10 of the RJAT and article 1 of Ordinance No. 112-A/2011, of 22 March.
The case is not affected by any nullities.
Thus, there is no obstacle to the examination of the merits of the case.
Everything considered, it is necessary to render:
II. DECISION
A. FACTUAL MATTERS
A.1. Facts deemed established
1– The claimants were, as of the date of the tax facts at issue in the present case, owners of the urban property registered in the property register of the parish of …, municipality of …, under article …, said property located at … and constituted under the regime of full ownership, also designated as vertical ownership, and in respect of which horizontal ownership had not been constituted.
2– The property in question comprised, as of the date of the tax facts at issue in the present case, 10 storeys and divisions susceptible to independent use, the TPV of which was determined separately, under the terms of article 7, paragraph 2, subparagraph b) of the Municipal Property Tax Code (CIMI).
3– Each of the independent storeys had, as of the date of the tax facts at issue in the present case, a TPV attributed, determined under the terms of the CIMI, comprised between €121,490.00 and €130,280.00, the sum of their respective TPVs totalling €1,284,960.00.
4– The AT, for the year 2013, by means of the assessments which are the subject of the present case, assessed Stamp Tax, by reference to item 28.1 of the table annexed to the Stamp Tax Code (CIS), on the sum of the patrimonial value of the storeys/parts with residential use (€1,284,960.00), in a total of €12,849.68, requiring one quarter of this amount from each of the Claimants, with a payment deadline of 30-04-2014.
5– For non-payment on a voluntary basis, tax enforcement proceedings were instituted, in which requests for payment in installments were presented by all the Claimants, under the terms of article 196 of the Tax Code of Procedure and Process (CPPT), which were granted and were being complied with until October 2014.
A.2. Facts deemed not established
With relevance to the decision, there are no facts that should be considered as not established.
A.3. Substantiation of the factual matters established and not established
Regarding the factual matters, the Tribunal need not pronounce on everything alleged by the parties, but rather has the duty to select the facts that are relevant to the decision and to distinguish the established from the non-established matters (cf. art. 123, paragraph 2, of the CPPT and article 607, paragraph 3 of the Code of Civil Procedure (CPC), applicable by virtue of article 29, paragraph 1, subparagraphs a) and e), of the RJAT).
In this manner, the relevant facts for the adjudication of the case are chosen and selected according to their legal relevance, which is established in consideration of the various plausible solutions of the legal question(s) (cf. previous article 511, paragraph 1, of the CPC, corresponding to current article 596, applicable by virtue of article 29, paragraph 1, subparagraph e), of the RJAT).
Thus, having regard to the positions assumed by the parties, the documentary evidence and the procedural file attached to the case, the above-listed facts were deemed established, with relevance to the decision, furthermore consensually acknowledged and accepted by the parties.
B. ON THE LAW
At issue in the present case is, in the first place, the question of whether the owner(s) of a property in full ownership (or vertical), constituted by divisions susceptible to independent use, whose tax patrimonial value was determined separately, under the terms of article 7, paragraph 2, subparagraph b), of the Municipal Property Tax Code (CIMI), is (are) subject to the incidence of Stamp Tax, by virtue of the provision of item 28.1 of the table annexed to the CIS, on the sum of the TPVs of those divisions, when none of said divisions has a TPV exceeding €1,000,000.00, but the sum of their respective TPVs exceeds this amount.
This question has already been the subject of recurring examination in arbitral proceedings, and the case law is consistent in the sense of a negative answer, and reference may be made, by way of example, to the decisions rendered in cases No. 48/2013-T, 49/2013-T, 50/2013-T, 53/2013-T, 132/2013-T, 248/2013-T and 280/2013-T.
For convenience, and with the due deference, the reasoning of the latter decision is transcribed here, as it is particularly succinct and precise.
"The legal question to be resolved in the first place is whether, in accordance with the provision in item 28.1 of the Tax General Table of Stamp Tax (TGIS), one should or should not consider the sum of the TPV of each of the parts or divisions susceptible to independent use, given that none of them has a value equal to or exceeding €1,000,000.00;
Bearing in mind that the CIS refers to the CIMI for the regulation of the concept of property and of matters not regulated regarding item 28 of the TGIS (paragraph 6 of article 1 and paragraph 2 of article 67, both of the CIS), it is in the CIMI that we must observe the concepts that will allow us to resolve the question;
The generalist concept of property appears in article 2 of the CIMI. In article 3 of the same statute, the legislator, using criteria of use and location, established the concept of rustic properties, and then, in a classification by way of negation, in its article 4, established that urban properties shall be all those that should not be classified as rustic;
In paragraph 2 of article 5 of the same Code, the legislator establishes the concept of mixed properties which shall be those in which distinct rural and urban economic realities exist and there is no subordination of one to the other;
Article 6 of the cited CIMI divides urban properties into: residential, commercial, industrial or for services, land for construction and others;
In the specific case at hand, we are in the presence of an urban property with parts or divisions susceptible to independent use with residential use and others with commercial use, it is a property with parts classifiable in the residential division of subparagraph a) of paragraph 1 of article 6 and with parts classifiable in subparagraph b) of the same paragraph and article, but in no way shall it be a mixed property in the concept established in the aforementioned article 5 of the CIMI;
Each of the parts or divisions susceptible to independent use that comprise the property in question fulfils the concept of property established in article 2 of the CIMI, they are physically and economically independent and form part of the assets of a legal entity;
In fact, the AT, in excluding the TPV of the parts or divisions with use other than residential, for purposes of Stamp Tax taxation, did nothing more than use the criterion defined in paragraph 4 of article 2 of the CIMI for properties under the regime of horizontal ownership;
In other words, the AT, in order to make such exclusion, considered that the parts or divisions susceptible to independent use were true autonomous parts of property in vertical ownership meeting the concept of property;
And did nothing more than observe what is provided in paragraph 3 of article 12 of the CIMI: 'each storey or part of property susceptible to independent use shall be considered separately in the property register entry, which also discriminates its respective patrimonial value';
Similarly, the AT, in taxing under the Property Tax (IMI), did so by taxing separately the TPV of each of the parts or divisions susceptible to independent use;
The AT used the same criterion in Stamp Tax taxation, by making its calculation on the TPV of each of the parts or divisions with independent use with residential use, except that at the end it considered the global TPV, verifying that it was exceeding €1,000,000.00 and summed the values of Stamp Tax ascertained individually;
But this procedure has no legal support, since none of the parts or divisions with independent use with residential use, each of them fulfilling the concept of property enunciated in article 2 of the CIMI, has a TPV equal to or exceeding €1,000,000.00, the requirement necessary for there to be Stamp Tax taxation;
To levy Stamp Tax considering the global TPV of the property, even excluding the TPV of the parts or divisions not used for residential purposes, as the respondent claims, finds no support in the CIMI, as provided by paragraph 2 of article 67 of the CIS;
Nor should it be said that there is a different valuation and taxation of a property in full ownership with parts or divisions susceptible to independent use, compared to a property in horizontal ownership. In fact, it does not exist under the Property Tax (IMI), just as it cannot exist under the Stamp Tax, since, as has been said, the applicable legislation is the same;
In this perspective and considering that none of the parts or divisions susceptible to independent use with residential destination or use has a TPV equal to or exceeding €1,000,000.00, it is necessary to conclude that the acts of Stamp Tax assessment are illegal for having failed to observe the conditions defined in item 28 of the TGIS."
To everything that has been stated above, only the following shall be added: even if, hypothetically, it were concedible that in cases of properties in full ownership (or vertical), constituted by divisions susceptible to independent use, Stamp Tax could be required for the entirety of the property if the value fixed in item 28.1 of the table annexed to the CIS were reached, such value would nonetheless have to be fixed autonomously, through an independent assessment, and not through the sum of the values in which each of the parts susceptible to independent use was independently assessed. Effectively, and as it is clear to see, the "market value" of the whole shall not necessarily – and shall not, as a rule – equal the sum of the parts, and it is well known to be easier and more profitable (which may even constitute part of the economic foundation of the institution of horizontal ownership) the sale "in parts" than the sale of the whole as a whole, foremost due to the broadening of the market, which the substantially lower price of the parts in relation to the whole brings.
Moreover, and for that matter, it will be this increase in economic value resulting from the division that will justify an independent assessment of each autonomous part of the property in full ownership, so as to ensure that there is no less tax revenue, under the Property Tax (IMI) and Transfer Tax (IMT), due to the fact that the division of the property has no correspondence in law in the form of horizontal ownership.
In other words, the partition of the property always carries an increase in the value of the whole, since the "market value" of the whole shall be (at least) as a rule, less than the "market value" of the parts, separately.
Wherefore, and at the limit, if the AT intended, legitimately, to apply item 28.1 of the table annexed to the CIS to a property in full ownership (or vertical) constituted by divisions susceptible to independent use, it would always be obliged to conduct an assessment of the same as a whole (that would be a credible approximation of its "market value" at "wholesale") and not as a sum of the parts (at "retail"), foremost because these are not susceptible to being, in a valid manner, placed on the "market" separately.
Thus, and with the AT presenting no basis and no self-evident reason being apparent to diverge in a well-founded manner from the arbitral case law cited, with the additions above formulated, the Tribunal adheres without further consideration to the same, deeming the arbitral petition submitted in the present case to be well-founded.
In light of the well-foundedness of the petition for annulment, the installments that, regarding the annulled tax acts, come to be verified as paid by the Claimants shall be refunded, if necessary in execution of judgment.
The Claimants combine with the petition for annulment of the tax acts that are the subject of the present case, the petition for condemnation of the AT to pay compensatory interest.
In the case at hand, it is evident that the illegality of the tax assessment acts, the amount of which the Claimants have paid, is attributable to the Tax Authority, which, by its own initiative, performed them without legal support.
Consequently, the Claimants are entitled to compensatory interest, under the terms of article 43, paragraph 1, of the General Tax Law (LGT) and 61 of the CPPT.
Compensatory interest is due from the date of the payments made, and calculated on the basis of the respective amount, until its full refund to the Claimants, at the legal rate, under the terms of articles 43, paragraphs 1 and 4, and 35, paragraph 10, of the LGT, 61 of the CPPT and 559 of the Civil Code and Ordinance No. 291/2003, of 8 April (without prejudice to any subsequent alterations of the legal rate).
C. DECISION
For all the foregoing, this Arbitral Tribunal hereby decides:
a) To deem well-founded the arbitral petition filed and, in consequence, to annul the tax acts that are the subject of the present case and to condemn the AT to refund to the Claimants the tax paid, accrued with compensatory interest;
b) To condemn the AT for the costs of the proceedings, in the amount of €918.00.
D. Value of the Case
The value of the case is fixed at €12,849.68, under the terms of article 97-A, paragraph 1, a), of the Tax Code of Procedure and Process, applicable by virtue of subparagraphs a) and b) of paragraph 1 of article 29 of the RJAT and of paragraph 2 of article 3 of the Regulation on Costs in Tax Arbitration Proceedings.
E. Costs
The arbitration fee is fixed at €918.00, under the terms of Table I of the Regulation on Costs in Tax Arbitration Proceedings, to be paid by the Respondent, given that the petition was entirely well-founded, under the terms of articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and article 4, paragraph 4, of the said Regulation.
Let notification be made.
Lisbon, 9 December 2014
The Arbitrator
(José Pedro Carvalho)