Summary
Full Decision
ARBITRAL DECISION
Claimant / Applicant: A..., S.A.
Respondent: Tax and Customs Authority (hereinafter T.C.A.)
1. REPORT
On 28-07-2016, the joint-stock company A..., S.A., legal entity number..., with registered address at Street..., number..., ...–... Porto, registered at the Commercial Registry Office of Porto under number..., hereinafter referred to as the Applicant, submitted to the Administrative Arbitration Centre (CAAD) a request for constitution of an arbitral tribunal with a view to annulling the tax assessment act for Stamp Duty relating to the year 2015 and with reference to urban properties registered in the registry under articles... and..., of the parish of..., municipality of Porto, both described as land for construction.
The Applicant alleges that the assessment in question is affected by the following defects:
(i) Error as to assumptions;
(ii) Violation of the principle of equality and taxpaying capacity;
(iii) Defective reasoning.
The Applicant begins by stating that the value of land for construction corresponds to a mere legal expectation, which translates into a right to construct a property with certain characteristics and value thereon. And since no construction, whether residential, for services or of any other nature, is implemented on the lands in question, the lands could not be subject to the Stamp Duty assessment under item 28.1 of the GIST, constituting an error as to assumptions. The Applicant further refers to CAAD decisions in cases no. 480/2015-T and 546/2014-T.
The Applicant alleges that the introduction of item 28.1 of the GIST into law, within a framework of national emergency, was intended to tax taxpayers with increased taxpaying capacity, through the taxation of luxury properties, from which it follows that the reality to be taxed, according to the Applicant, would be the set of residential urban properties and not other realities. And with the State Budget for 2015, the legislator expanded the objective scope of Stamp Duty in accordance with item 28.1 of the GIST to land for construction. According to the Applicant, in this case too the legislator intended to subject only to tax, when referring to "land for construction whose building authorization or intended for housing in accordance with the IMI Code", the houses whose construction is approved or intended in accordance with the IMI Code.
On the other hand, the Applicant considers that while the ownership of residential properties with tax value greater than one million euros evidences superior taxpaying capacity, justifying a "solidarity tax", this does not follow from the ownership of properties by a real estate company that holds in its legal sphere land for construction intended to carry out its corporate purpose and develop real estate promotion activity, inasmuch as it does not represent a portfolio of luxury items, and even less an additional or exceptional taxpaying capacity.
The Applicant concludes by stating that "the tax assessment in question, which is based on land for construction, in addition to literally not observing compliance with real scope of taxation rules, clearly affects the legislative intent represented by the amendment introduced to the General Table also with the wording given by the State Budget for 2014".
As to the violation of constitutional principles, the Applicant refers to the principle of taxpaying capacity implying equal taxation for those with equal taxpaying capacity, and different taxation for those with different taxpaying capacity, though in the measure of the difference. And in the tax domain, what is intended to be taxed is the taxpaying capacity evidenced by the passive subject. At the level of corporate taxation, by constitutional mandate, it falls upon their actual income, not on a mere legal expectation, as occurs in these proceedings, according to the Applicant.
Thus, for the Applicant, the taxation under Stamp Duty in accordance with item 28.1 of the GIST in relation to investment assets reveals a clear violation of the principle of equality and taxpaying capacity, and it should be concluded that the Stamp Duty assessments under item 28.1 of the GIST are unlawful. On this matter, the Applicant refers to the CAAD decision in case no. 482/2015-T.
Regarding the defective reasoning alleged by the Applicant, the latter states that the T.C.A. "would have to invoke that we are before land for construction whose building, authorized or intended, is for housing, in accordance with the provisions of the IMI Code".
The Applicant alleges that the reasoning contained in the Stamp Duty assessments in question is non-existent, not permitting the taxpayer the reconstruction of the cognitive and evaluative itinerary followed by the T.C.A. It also states that the T.C.A. did not consider the factual reality of the property subject to the assessment that is now being challenged, or did not correctly identify the scope of the tax determined by law by expanding it to realities not included therein.
Finally, the Applicant requests the condemnation of the T.C.A. to reimburse the unduly paid tax and the payment of compensatory interest, in accordance with article 43, paragraph 1 of the General Tax Code (GTC).
A sole arbitrator was appointed on 03-10-2016: Suzana Fernandes da Costa.
In accordance with the provisions of article 11, paragraph 1, subsection c) of the Arbitration Rules in Tax Matters (ARTM), the singular arbitral tribunal was constituted on 19-10-2016.
The T.C.A. presented its response on 21-11-2016 (within the legal deadline therefor).
The T.C.A. begins by presenting a defence by exception, asserting that there is a material lack of competence of the Arbitral Tribunal to consider the request for declaration of material unconstitutionality of item 28.1 of the GIST, by violation of the principle of taxpaying capacity, as a facet of the principle of equality, leading to the absolution of the instance as to the respective request. In relation to the Stamp Duty assessments that are the subject matter of the arbitral request, the T.C.A. defends that the request for declaration of illegality and consequent annulment of the disputed assessment should be judged groundless, since the assessment in question embodies a correct interpretation of item 28.1 of the General Table of Stamp Duty, given that the said property in question is "land for construction whose building, authorized or intended, is for housing".
In relation to the defect of lack of reasoning alleged by the Applicant, the T.C.A. states that the assessments in question do not suffer from said defect, since the Applicant became aware of the origin and reason for the assessments, what was assessed, how, and what the reasons were why the assessments were made in the precise manner in which they were.
As to the Applicant's request for payment of compensatory interest, the Respondent believes that there was no error on the part of the services that could support the request for compensatory interest, in accordance with article 43 of the GTC.
On 29-11-2016, an order was issued ordering notification of the Applicant to, within 10 days, pronounce itself on the possibility of waiving the hearing provided for in article 18 of the ARTM.
On 06-12-2016, the Applicant attached to the proceedings the assessment notice and the respective proof of payment relating to the third installment of the tax.
An order was issued on 14-02-2017, designating 03-03-2017 at 14:30 hours for the hearing provided for in article 18 of the ARTM, since the Applicant did not pronounce itself on the order of 29-11-2016.
On 12-12-2016, a request from the Applicant was attached to the proceedings in which it pronounced itself on the exception, alleging that the exception of absolute lack of competence in relation to the subject matter of the Arbitral Tribunal would have to be dismissed.
On 21-02-2017, an order was issued setting aside the scheduled hearing and ordering notification of the parties to present submissions if they so wished. In the same order, 18-04-2017 was designated for the issuance of the arbitral decision, and the Applicant was warned to proceed until that date with payment of the subsequent arbitration fee.
The Applicant presented its submissions on 02-03-2017, and the Respondent sent theirs on 10-03-2017.
The Applicant attached the subsequent arbitration fee on 22-03-2017.
The parties have legal personality and capacity and are legitimate (articles 4 and 10, paragraphs 1 and 2 of the ARTM and article 1 of Ordinance no. 112-A/2011 of 22 March).
The present request for arbitral pronouncement was presented timely, in accordance with article 10, paragraph 1, subsection a) of Decree-Law no. 10/2011 of 20 January.
The proceedings do not suffer from nullities and no preliminary questions were raised, beyond the exception of material lack of competence of the Arbitral Tribunal to consider the request for declaration of material unconstitutionality of item 28.1 of the GIST.
PRELIMINARY QUESTION OF THE COMPETENCE OF THE ARBITRAL TRIBUNAL
The Respondent alleges in its response that the Arbitral Tribunal is materially incompetent to consider the request for declaration of material unconstitutionality of item 28 of the GIST, by violation of the principle of taxpaying capacity as a facet of the principle of equality, provided for in articles 13 and 104, paragraph 3 of the CRP.
In the view of this tribunal, what the Applicant seeks is the declaration of illegality of the contested assessment act, based on the unconstitutionality of the norm that sustains it. And this conclusion regarding the object of the present proceedings results evident from the Applicant's initial request: "(...) to present its request for arbitral pronouncement to consider the legality of the tax assessment acts for Stamp Duty (SD) provided for in Item 28 of the GIST relating to the year 2015 (...)".
The CAAD has already pronounced itself on this question, namely in the arbitral decision in case no. 385/2015-T, to which we adhere.
Thus, we understand that the Applicant does not intend for this tribunal to substitute itself for the Constitutional Court and declare item 28.1 of the GIST unconstitutional, rather intending that this tribunal, within the scope of the powers legally recognized to it, judge the norm in question to be unconstitutional, thus refusing its application to the specific case. Since the norm cannot be applied, in concreto, the tax act that results from the execution thereof will, consequently, be unlawful and, as such, voidable.
What is at issue in the present proceedings is, therefore, the legality of the assessment act, and in order to decide, this tribunal will necessarily have to, by constitutional requirement (article 204 of the CRP), evaluate the constitutional conformity of the norms that legally sustain it.
In light of the above, the invoked lack of competence of this tribunal is considered groundless.
2. FACTUAL MATTER
2.1. Established Facts:
Having examined the documentary evidence produced, the following facts are considered proven and of interest for the decision of the case:
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The Applicant A..., S.A., in 2015, was the owner of the urban property registered in the registry under article..., of the parish of..., municipality of Porto, with the tax value of 1,382,230.00 €, described as land for construction, as per the property register attached to the arbitral request as document 7.
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The Applicant was also, in 2015, the owner of the urban property registered in the registry under article..., of the parish of..., municipality of Porto, with the tax value of 1,499,170.00 €, described as land for construction, as per the property register attached to the arbitral request as document 8.
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The Applicant was notified of Stamp Duty assessment no. 2016..., relating to the year 2015, in the amount of 13,822.30 €, payable in three installments (April, July, and November), relating to article..., as per the assessment attached to the arbitral request as document 1.
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The Applicant was also notified of Stamp Duty assessment no. 2016..., relating to the year 2015, in the amount of 14,991.70 €, payable in three installments (April, July, and November), relating to article..., as per the assessment attached to the arbitral request as document 2.
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The Applicant proceeded with the payment of the three installments of the two assessments referred to above, as per documents 3 to 6 attached to the arbitral request, and document attached to the proceedings on 06-12-2016.
No other facts of relevance for the decision of the case were proven.
2.2. Reasoning of the Proven Factual Matters:
Regarding the established facts, the arbitrator's conviction was based on the documentary evidence attached to the proceedings and on facts admitted by agreement.
2.3. Facts Not Considered Proven:
No documentary support is attached to the proceedings attesting that the acts in question were executed having as object properties with approved construction projects or any other titles constitutive of the right to construct for housing.
3. LEGAL MATTERS
3.1. Object and Scope of the Present Proceedings
The question to be decided in the present proceedings is whether the property in question, being land for construction, is or is not subject to Stamp Duty provided for in item 28.1 of the General Table of Stamp Duty (GIST), in the wording given to it by Law no. 83-C/2013 of 31 December (State Budget Law for 2014).
On this same question, the CAAD judgments issued in cases number 460/2016-T, 447/2016-T, 312/2016-T, 290/2016-T, 156/2016-T, and 467/2015-T have already pronounced, among others.
Let us begin by analyzing the material defect invoked by the Applicant, of violation of the tax scope norm contained in item 28.1 of the GIST, which, if verified, will definitively rule out the possibility of imposing on the Applicant a new tax assessment act practiced under that same norm. Moreover, and as referred to in the CAAD decision in case no. 522/2015-T, it will only be necessary to proceed with consideration of the question of unconstitutionality of item 28.1 if and insofar as the interpretation and concretization of the normative solution resulting from the mentioned item involves the subsuming to its respective legal provision of the situation sub judice.
3.2. On the Delimitation of the Objective Scope of Item 28.1 of the GIST
It is important first to list the legal norms relevant at the date of occurrence of the facts.
The subjection to Stamp Duty of properties with residential use resulted from the addition of item 28 to the GIST, effected by article 4 of Law no. 55-A/2012 of 29 October, which typified the following tax facts:
"28 – Ownership, usufruct or right of superficies of urban properties whose tax value contained in the registry, in accordance with the Municipal Property Tax Code (MPTC), is equal to or greater than € 1,000,000.00 – on the tax value used for purposes of MPT:
28.1 – For property with residential use – 1%
28.2 – For property, when the passive subjects who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance – 7.5%".
The aforementioned law also added paragraph 7 of article 23 of the Stamp Duty Code, which states that "in the case of the tax owed for the situations provided for in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the MPTC". Paragraph 2 of article 67 was also added, which provides that "for matters not regulated in the present Code relating to item 28 of the General Table, the MPTC shall apply subsidiarily".
Subsequently, Law no. 83-C/2013 of 31 December (State Budget Law for 2014) altered the wording of item 28.1 of the GIST, in force as of 1 January 2014, now providing the following:
"28.1 – For residential property or for land for construction whose building, authorized or intended, is for housing, in accordance with the provisions of the MPT Code – 1%".
Article 2 of the MPT Code refers to the concept of property:
"1 – For purposes of the present Code, property is any fraction of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated or resting thereon, with a character of permanence, provided it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances aforesaid, endowed with economic autonomy in relation to the territory on which they are located, although situated on a fraction of territory that forms an integral part of a patrimony diverse or lacking patrimonial nature.
2 – Buildings or constructions, although movable in nature, are considered as having a character of permanence when dedicated to non-transitory purposes.
3 – The character of permanence is presumed when buildings or constructions are located on the same site for a period exceeding one year.
4 – For purposes of this tax, each autonomous fraction, under the regime of horizontal property, is considered as constituting a property."
In turn, article 4 defines what urban properties are:
"Urban properties are all those that should not be classified as rural properties, without prejudice to the provisions of the following article."
In turn, article 6 determines that:
"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 constructions licensed for such purpose, or, in the absence of license, that have as their normal destination each of these uses.
3 – Land for construction is considered to be land located within or outside an urban agglomeration, for which a license or authorization has been granted, prior communication admitted or favorable prior information issued for subdivision or construction operations, and also those so declared in the acquisition title, except for land which the competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land use plans, are allocated to spaces, infrastructure or public facilities" (...).
As for the tax value of land for construction, let us see what article 45 of the MPT Code refers to.
"1 – The tax value of land for construction is the sum of the value of the building footprint area to be constructed, which is that located within the building perimeter to ground, measured by the exterior, added to the value of land adjacent to the footprint.
2 – The value of the footprint area varies between 15% and 45% of the value of authorized or intended constructions.
3 – In determining the percentage of the land value of the footprint, consideration is given to the characteristics referred to in paragraph 3 of article 42.
4 – The value of the area adjacent to the construction is calculated in accordance with paragraph 4 of article 40.
5 – When the document certifying constructive viability referred to in article 37 only makes reference to the PDM indices, the evaluating experts must, with sound reasoning, estimate the respective construction area, taking into account, in particular, the average construction areas of the surrounding area. (Added by Law no. 64-B/2011, of 30 December)."
Finally, pay attention to the norms on the interpretation of laws, fundamental for understanding the scope of the concept of property with residential use.
Article 11 of the GTC determines that:
"1. 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, terms peculiar to other branches of law are used, they should be interpreted in the same sense that they have there, unless otherwise directly results from law.
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If doubt persists as to the meaning of the scope norms to apply, regard shall be had to 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".
And article 9 of the Civil Code states that:
"1. Interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative thought, taking especially 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.
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However, the legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed, cannot be considered by the interpreter.
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In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most correct solutions and knew how to express its thought in adequate terms".
On the interpretation of law, let us see what is referred to in the arbitral decision issued in case no. 53/2013-T: "The relevance of the text of the law is especially emphasized in the matter of interpretation of Stamp Duty scope norms, which are reduced to an amalgam, under a common denomination, of an incongruous set of taxes of completely distinct natures (on income, on expenditure, on patrimony, on acts, etc.), which leaves no appreciable margin for application of the primary interpretive criterion, which is the unity of the legal system, which demands its overall coherence. (...)
In this context, in the absence of secure interpretive elements that permit the detection of legislative coherence in the solution adopted in the aforementioned item no. 28.1 or the rightness or wrongness of the solution adopted (relevant for interpretive purposes in light of paragraph 3 of article 9 of the Civil Code), the tenor of the legal text must be the primordial element of interpretation, in accordance with the presumption imposed by the same paragraph 3 of article 9, that the legislator knew how to express its thought in adequate terms."
In effect, we verify that the wording of item 28.1, whether the first or that given by the State Budget Law for 2014, has a fundamentally remissive character, because the respective relevant regulatory content depends on the legal norms contained in the MPT Code.
In truth, both as to the objective scope, with reference to "urban properties" and to "tax value contained in the registry, in accordance with the Municipal Property Tax Code", and as to the determination of the taxable base, with reference to "the tax value used for purposes of MPT", item 28 of the GIST results from a general remission to the MPT Code. This aspect is reinforced by paragraph 2 of article 67 of the Stamp Duty Code, which determines that for matters not regulated in the Stamp Duty Code relating to item 28 of the GIST, the provisions of the MPT Code shall apply subsidiarily.
According to the literal wording of item 28.1 of the GIST, as given by the State Budget Law for 2014, urban properties with tax value equal to or greater than € 1,000,000.00 are subject to this tax scope norm, which are residential properties or land for construction with building, authorized or intended, for housing.
In accordance with article 6, paragraph 2 of the MPT Code, residential properties are buildings or constructions licensed by the municipalities for that purpose, or in the absence of license, that have as their normal purpose that use.
As for land for construction, let us see what the CAAD decision in case no. 467/2015-T refers to:
"The new wording of item 28.1 of the GIST (given, as stated, by article 194 of Law no. 83-C/2013, of 31/12) states as follows: 'For residential property or for land for construction whose building, authorized or intended, is for housing, in accordance with the provisions of the MPT Code'.
The essential question that, in this context, arises is whether, using the words of the now Applicant, 'without [...] that provision or expectation of «building for housing» [...] materialized', the application of the Stamp Duty tax here in analysis can be accepted (see articles 83 to 86 of the Request).
To respond to said question, the following considerations appear to be particularly useful:
'With respect to land for construction, whether or not located within an urban agglomeration, as defined in article 3/4 of the present statute [MPTC], must, as such, be considered land for which has been granted: – license for subdivision operation; – construction license; – authorization for subdivision operation; – construction authorization; – admitted favorable prior communication for subdivision or construction operation; – issued favorable prior information for subdivision or construction operation, as well as; – those so declared in the acquisition title, it being necessary to note that, also for that purpose, only the acquisition title in the form prescribed by civil law should be relevant, namely the public deed or the authenticated private document referred to in article 875 of the Civil Code.' [see ANTÓNIO SANTOS ROCHA / EDUARDO JOSÉ MARTINS BRÁS – Taxation of Patrimony. MPT-Property Transfer Tax and Stamp Duty (Annotated and Commented). Coimbra, Almedina, 2015, p. 44]".
In light of the requirements above cited – with which we agree here, for translating and making explicit which legal and administrative requirements are necessary for the consideration of any land for construction as land covered by item 28.1 of the GIST – it is verified that, in the case now under analysis, the lands in question do not meet any of them.
In effect, and as stated in the course of evidence, no documentary support was attached to the present proceedings attesting that the acts in question were executed having as object properties with approved construction projects (whether yet without or already having the said construction licenses and authorizations), or properties located in an area where construction for housing is provided for (with the mentioned prior communications or favorable prior information in effect for the carrying out of subdivision or construction operations). Having failed to make that demonstration, it cannot be considered that the lands in question have building, authorized or intended, for housing, in accordance with the MPT Code.
Returning to the judgment that we have been following, 'It is also important to emphasize that, although the properties here in question are registered in the registry as being 'land for construction', this does not justify the automatic application of item 28.1 of the GIST, given that, as appears to be obvious, mere registry registration does not itself constitute proof that a property has building for housing provided for.
Proof of what has just been said is the fact that, as also stated by ANTÓNIO SANTOS ROCHA and EDUARDO JOSÉ MARTINS BRÁS (op. cit., p. 46), 'properties located in urbanized areas or included in areas covered by already approved urban plans [...] should only be considered as land for construction when, by action undertaken by the respective owner, the issuance of any of those documents [«granting of licenses, construction or subdivision authorizations, favorable prior communications or information for the same purpose»] is verified'.
'The same authors add (see ibid) – reinforcing the understanding already expressed here, according to which, without licenses or construction authorizations, mere registry registration of properties as land for construction does not justify, by itself, the application of item 28.1 of the GIST –, in support of their position, the following:
'Properties already described in the registry as land for construction, in relation to which the expiration of the subdivision, license or construction authorization occurs, and in which no construction operation has even been initiated, must, by means of the institute of expiration, recover their previous nature'.
'In the same sense, see also, JOSÉ MANUEL FERNANDES PIRES, (Lessons of Taxes on Patrimony and Stamp Duty. Coimbra, Almedina, 3rd ed., 2015, pages 110 to 112): 'The right to construct is not inherent in the right of ownership, but only arises ex novo in the patrimony of the owner when an administrative act of the competent public entity recognizes and authorizes the owner to construct or subdivide. [...] only when that right is constituted in the legal sphere of the owner does the MPT Code establish that we are before land for construction. Being that constitutive act practiced by the public entity at the request of the owner, then the classification of a property as land for construction always depends on the will of the owner.'
'In summary, it is clear, in the case being treated, that the incidence of the tax on land for construction cannot be materialized with mere registration thereof as such in the registry, but rather, and decisively, by the verification of the actual potentiality of building on said lands (which must be ascertained in casu and revealed through the existence of the documents above described). In other words, the incidence of the tax, for purposes of the provision in item 28.1, is only materialized with the verification of the 'actual dedication', to use the apt expression of JOSÉ MANUEL FERNANDES PIRES (op. cit., p. 507).
'Without that demonstration of the actual potentiality of building – which, as stated, did not occur in the case here under analysis – the purposes underlying the new wording of the legal text of item 28.1 of the GIST are not fulfilled, reason for which it is concluded that the assessments in question incur in the error invoked by the Applicant (see article 92 of the Petition).'
This Arbitral Tribunal, adhering integrally and without reservation to this understanding, can only declare the Applicant's position as to the aforementioned question to be well-founded, and the consideration of further allegations of the Applicant is prejudiced, in light of the provision in article 124 of the Tax Code of Civil Procedure (TCCP), by virtue of article 29, paragraph 1, subsection c), of the ARTM, without, in light of this decision, any prejudice to the more stable or effective protection of the interests thereof).
However, let us analyze whether the violation of the constitutional principles alleged by the Applicant is verified.
The analysis of the conformity of item 28 of the GIST with the constitutional principles of equality and its corollary, the principle of taxpaying capacity, must be analyzed in light of what has been stated above.
It will be important, in this sense, to analyze the provisions of articles 13 and 104, paragraph 3, of the CRP.
Article 13 of the CRP, which establishes the principle of equality, imposes the following: "All citizens have the same social dignity and are equal before the law", and "No one may be privileged, benefited, prejudiced, deprived of any right or exempted from any duty by reason of ancestry, sex, race, language, territory of origin, religion, political or ideological convictions, education, economic situation, social condition or sexual orientation".
This principle is interpreted consistently as a limit to arbitrariness and discretionarity.
As referred to, both in doctrine and in jurisprudence, the principle of equality manifests itself in three dimensions (GOMES CANOTILHO/VITAL MOREIRA, Constitution of the Portuguese Republic Annotated, 4th ed, Vol. I, Coimbra, 2007, p. 339): "a) prohibition of arbitrariness, being inadmissible both differentiations of treatment without any reasonable justification, according to objectively constitutionally relevant criteria, and the identity of treatment for manifestly unequal situations; b) prohibition of discrimination, legitimate differentiations of treatment between citizens based on merely subjective categories or by reason of those categories not being (...); c) obligation of differentiation as a means to compensate for inequality of opportunities, which presupposes the elimination, by public powers, of factual inequalities of a social, economic and cultural nature (...)".
This principle is interpreted and defined not as a prohibition on differentiated treatment, but as a prohibition on arbitrariness and absence of economic rationale in the differences established, as referred to in the CAAD decision in case no. 493/2015-T.
In accordance with the interpretation upheld above, the taxation of land for construction without any building, authorized or intended, for housing, is not covered by the tax scope norm; therefore, its taxation violates the principle of equality, more specifically in its corollaries of taxpaying capacity and tax proportionality.
As to the principle of equality, we conclude, as in the CAAD judgment no. 218/2013-T, stating that "the Stamp Duty assessment now under consideration manifestly violates the principle of tax equality provided for in article 13 of the CRP, because: i) it is based on a norm that treats taxpayers in identical situations in a very different way, the measure of the difference not being gauged by their actual taxpaying capacity; ii) it is based on an arbitrary legal solution devoid of any rational foundation."
The principle of tax equality determines that what is equal should be treated fiscally equally and what is different should be treated differently.
As the CAAD judgment in case no. 218/2013-T states, "The principle of tax equality is based on the general principle of equality provided for in article 13 of the CRP, resulting therefrom the principle of taxpaying capacity which, by constitutional requirement, is the prerequisite and criterion of taxation."
Professor Casalta Nabais states that the principle of tax equality has inherent particularly "the idea of generality or universality, whereby all citizens are bound to fulfill the duty to pay taxes, and of uniformity, requiring that such duty be gauged by one same criterion – the criterion of taxpaying capacity. This implies thus equal taxation for those with equal taxpaying capacity (horizontal equality) and different taxation (in qualitative or quantitative terms) for those with different taxpaying capacity in proportion to that difference (vertical equality)" (Casalta Nabais, Tax Law, 5th edition, Coimbra, 2009, p. 151-152).
4. COMPENSATORY INTEREST
The Applicant states that it proceeded with payment of the assessments in the present proceedings, and requests reimbursement of the amount paid increased by compensatory interest, in accordance with article 43 of the General Tax Code (GTC).
Article 43, paragraph 1 of the GTC determines that "compensatory interest is owed when it is determined, in gracious complaint or judicial challenge, that there was error attributable to the services from which results payment of the tax debt in an amount greater than that legally owed", establishing paragraph 4 of article 61 of the TCCP that "if the decision that recognized the right to compensatory interest is judicial, the deadline for payment is counted from the start of the deadline for spontaneous execution thereof".
In the present proceedings, it is verified that the illegality of the disputed assessment, by error in legal assumptions, is attributable to the T.C.A. for having proceeded with the incorrect interpretation and application of the legal provision contained in item 28.1 of the GIST.
Thus, the Applicant has the right, in accordance with the provisions of articles 24, paragraph 1, subsection b), of the ARTM and 100 of the GTC, to reimbursement of the amount of tax unduly paid and to compensatory interest, in accordance with the provided in articles 43, paragraph 1, of the GTC and 61 of the TCCP, calculated from the date of payment of the tax, at the rate resulting from paragraph 4 of article 43 of the GTC, until the date of processing of the respective credit note, in which they will be included.
5. DECISION
In light of the above, it is determined:
a) To judge groundless the exception of material lack of competence of the Arbitral Tribunal;
b) To judge well-founded the request formulated by the Applicant in the present tax arbitral proceedings, as to the illegality of the Stamp Duty assessments no. 2016... in the amount of 13,822.30 € and no. 2016... in the amount of 14,991.70 €;
To judge well-founded the request for condemnation of the Tax and Customs Authority to reimburse the Applicant the amount of tax paid, increased by compensatory interest in accordance with the law, from the date such payment was made until the date of complete reimbursement thereof.
6. VALUE OF THE CASE:
In accordance with the provision in article 315, paragraph 2, of the Civil Procedure Code and 97-A, paragraph 1, subsection a) of the TCCP and 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the action is fixed at 28,814.00 €.
7. COSTS:
In accordance with article 22, paragraph 4, of the ARTM, and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 1,530.00, owed by the Tax and Customs Authority.
Notify.
Lisbon, 18 April 2017.
Text prepared by computer, in accordance with article 138, paragraph 5 of the Civil Procedure Code (CPC), applicable by remission of article 29, paragraph 1, subsection e) of the Tax Arbitration Rules, reviewed by me.
The Arbitrator
Suzana Fernandes da Costa
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