Stamp Tax on Vertical Property: CAAD Ruling on Article 28 TGIS Exemption (449/2015-T)

REPORT

A - PARTIES

A, taxpayer no. ..., resident in ..., …, parish of ..., municipality of ..., hereinafter referred to as the Claimant or taxable person.

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

The request for constitution of the arbitral tribunal was accepted by the President of CAAD, and the Arbitral Tribunal was duly constituted on 01-10-2015, to examine and decide upon the subject matter of the present proceedings, and was automatically notified to the Portuguese Tax and Customs Authority on 01-10-2015, as appears from the respective minutes.

The Claimant did not proceed to appoint an arbitrator, wherefore, under the provisions of no. 1 of article 6 and sub-paragraph b) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council designated His Excellency Dr. arbitrator Paulo Ferreira Alves, the appointment having been accepted in accordance with legal provisions.

On 16-09-2015 the parties were duly notified of such appointment and manifested no intention to refuse the appointment of the arbitrator, in accordance with article 11 no. 1, sub-paragraphs a) and b), of the RJAT and articles 6 and 7 of the Code of Ethics.

In accordance with the provision of sub-paragraph c) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the single arbitral tribunal is duly constituted on 01-10-2015.

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

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

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

The proceedings do not suffer from defects that would render it invalid.

B – CLAIM

1. The present Claimant seeks a declaration of illegality of the tax assessment acts in Stamp Duty: no. 2015 ... and following, which fixed a total tax payable in the amount of € 3,839.68 (three thousand eight hundred and thirty-nine euros and sixty-eight cents).

C – GROUNDS FOR THE CLAIM

1. To support its request for an arbitral ruling, the Claimant alleged, with a view to declaration of illegality of the tax assessment acts in Stamp Duty, already described in point 1 of this Award, in summary, the following:

2. The claimant alleges that it is the owner of 1/3 of the property located in …, parish of ..., municipality of ..., registered in the property registry of the parish of ..., municipality of ..., under article ..., former article ..., property which, despite not being formally constituted in horizontal property regime, merely by choice of the owners, is in fact composed of 24 apartments, which are individually leased.

3. For each of the 24 apartments in question, the Tax Administration assigned a separate taxable property value (VPT), as appears from the assessment acts above identified, all of them below € 1,000,000.00, with only the sum of the 24 exceeding € 1,000,000.00, and of which the present Claimant is only the owner of 1/3, this 1/3 being equally below € 1,000,000.00.

4. The property is not yet formally constituted in horizontal property regime.

5. On 13 February 2013 an update of the taxable property value of the property in question was made.

6. The Claimant bases its request for annulment of the Stamp Duty assessment acts no.s 2015 ... and following, performed on 20/03/2015, by His Excellency the Director-General of Taxation, under item 28.1 of the General Table annexed to the Stamp Duty Code, on the following:

7. In no part of the complained assessment acts were explained, nor, likewise, were the factual and legal reasons that determined their issuance explained, in particular the nature and purpose of the properties therein better identified and the reason for their subsumption under item 28.1 of the General Table annexed to the Stamp Duty Code, with the consequent determination of a total amount of € 3,839.69.

8. Since the acts in question do not reveal, from the point of view of legal grounds, the elements that served as the basis or justification for the assessment of the tax in question, it was not possible for the present Claimant to perceive the cognitive path of the services, insofar as not all necessary elements were indicated, terms in which the assessment acts suffer from the defect of lack of grounds, by violation of articles 77, no. 1, of the General Tax Law and 125, no. 1, of the Administrative Procedure Code.

9. Given that the present Claimant was not notified in accordance with the provisions of sub-paragraph a), of no. 1, of article 60 of the General Tax Law, there occurs the omission of an essential legal formality, in accordance with article 99, sub-paragraph d) of the Administrative Procedure Code for Tax Purposes, applicable by virtue of article 70 of the same Code.

10. The urban property in question, of which the Claimant is only the owner of 1/3, is in vertical property, being however composed of 24 apartments, which as referred to in the respective urban property record are all susceptible of independent use and which are individually leased.

11. And each of those apartments has its own VPT, below € 1,000,000.00, and should not be relevant, as it was not relevant for the legislator, whether the property in question is constituted in horizontal or vertical property, whereby the same should be excluded from the tax base of Stamp Duty referred to in item 28.1 of the General Table annexed to the Stamp Duty Code.

12. The Stamp Duty assessments made on 20 March 2015 and paid on 22 April 2015 totalling € 3,839.69 (relating to the year 2014 - 1st instalment) were made in accordance with articles 6, no. 1, sub-paragraph f), sub-sub-paragraph i), of the Stamp Duty Code item 28.1 of the TGIS, as amended by Law no. 55-A/2012, of 29 October.

13. The essential question to be decided is whether, with reference to properties not constituted under the horizontal property regime, composed of various storeys and divisions with independent use, some of which with residential purpose, what is the relevant VPT.

14. That is, whether the relevant VPT as the criterion for tax incidence is that corresponding to the sum of the taxable property value attributed to the different parts or storeys (global VPT) or, rather, the VPT attributed to each of the parts or residential storeys.

15. In effect, the subjection to Stamp Duty contained in item no. 28.1 of the TGIS is determined by the combination of two facts: residential purpose and the VPT contained in the registry equal to or exceeding €1,000,000.00.

16. In the case of the property with the characteristics of the present Claimant, subjection to Stamp Duty is determined, not by the VPT of the property, but by the VPT attributed to each of those storeys or divisions of which the present Claimant is the owner.

D - RESPONDENT'S REPLY

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

2. The claimant is the holder of a mere ideal share of the said property and not of any part of property susceptible of independent use, in accordance with article 7°, no. 1, sub-paragraph b), of the Municipal Property Tax Code (C.I.M.I.).

3. It alleges that co-ownership translates into joint holding of real rights, and in accordance with article 1405°, no. 1, of the Civil Code (C.C.), co-owners exercise, collectively, all rights that belong to the sole owner.

4. The shares of co-owner cannot, in fact, be equated with parts of properties susceptible of independent use.

5. Each co-owner may, in fact, exercise, collectively with the others, the right of ownership over the entirety of the property.

6. The collective of co-owners is, on the other hand, responsible for the payment of the tax, in accordance with article 21°, no. 1, of the General Tax Law (LGT).

7. Item 28 annexed to the General Table of the Stamp Duty Code states that stamp duty is levied "on the taxable property value used for the purpose of IMI".

8. For the purposes of IMI the VPT to be taken into account is the global VPT of the property that corresponds to each of the co-owners.

9. Thus, in the present case, the claimant is only responsible for the payment of stamp duty in proportion to its share, as attested by the collection notes issued by the AT.

E - FACTUAL FINDINGS

1. Before entering into the examination of these issues, it is appropriate to present the factual matters relevant for their understanding and decision, which was done on the basis of documentary evidence and having regard to the facts alleged.

2. In matters of factual relevance, this tribunal establishes the following facts as proven:

3. The Claimant is the owner of 1/3 of the property located in ..., …, parish of ..., municipality of ..., registered in the property registry of the parish of ..., municipality of ..., under article ..., former article ..., property which despite not being formally constituted in horizontal property regime, merely by choice of the owners, is, in fact, composed of 24 apartments, which are individually leased.

4. The claimant proceeded to pay the first instalment of stamp duty in the assessment acts with the following numbers Stamp Duty, no. 2015 ..., 2015 ..., 2015 ..., 2015 ..., 20150 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., totalling €3,839.68.

F - UNPROVEN FACTS

1. Of the facts with interest for the decision of the case, contained in the challenge, all objects of concrete analysis, those that do not appear in the factuality described above were not proven.

G - ISSUES TO BE DECIDED

1. Given the positions of the parties assumed in the arguments presented, the following constitute central issues to be decided, which it is therefore necessary to examine and decide:

a. Those alleged by the Claimant:

(i) The declaration of illegality of the tax assessment acts in Stamp Duty, no. 2015 ... and following, which fixed a total tax payable of € 3,839.68.

(ii) Payment of compensatory interest, for payment of undue tax.

(iii) Condemnation of the Tax Administration to pay the fees paid by the Claimant to its lawyers for discussion of the legality of the acts sub judice and, likewise, condemnation to pay the procedural costs due within the scope of the present proceedings.

(iv) Condemnation of the Tax Administration to no longer assess similar Stamp Duty acts to those now discussed, in particular, the second instalment relating to the year 2014 and following.

H - LEGAL MATTERS

1. Having regard to the positions of the parties assumed in the pleadings presented, the central issue to be determined by the present arbitral tribunal consists of examining the legality of the stamp duty assessment acts that fell upon the claimant's residential units in the urban property described above, by violation of law, due to the erroneous interpretation and application of item 28.1 of the TGIS in the amendments introduced by article 4 of Law no. 55-A/2012, of 29 October.

2. In the present case, it falls to determine whether the units subject to the tax are covered by the criteria for stamp duty incidence, in accordance with item no. 28 of the TGIS, in the amendments introduced by article 4 of Law no. 55-A/2012, of 29 October.

3. It is necessary to verify in the first place whether the units have residential purpose, and in the second place whether the VPT of the units contained in the registry is equal to or exceeding €1,000,000.00, for which it is necessary to examine the fundamental question of what is the VPT of a property in vertical property (that is, not horizontal) to be considered for the purposes of the said item. Whether the VPT that corresponds to each of the parts of the property with residential purpose individually, or whether, instead, it is determined by the global VPT of the property, which would correspond to the sum of all VPTs of the residential units that compose it.

4. The factual matter is fixed and proven, which is why we now determine the law applicable to the disputed facts, giving priority, in compliance with the provision of sub-paragraph a) of no. 2 of article 124 of the Administrative Procedure Code for Tax Purposes, to the defects whose merits determine a more stable and effective protection of the interests of the Claimant, as to the defect of law due to error regarding the presuppositions of the right of assessment, as to the question of the classification of urban properties under total or vertical property regime, within the scope of incidence of article 28 no. 1 of the TGIS, introduced by the Regime of Law no. 55-A/2012, of 29 October.

5. The amendment of the regime regarding the subjection to stamp duty of properties with residential purpose by the addition of item 28 to the General Table of the Stamp Duty Code, effected by article 4 of Law 55-A/2012, of 29/10 and amended by Law no. 83-C/2013, of 31 December, came to typify the following tax facts, through the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable property value contained in the registry, in accordance with the Municipal Property Tax Code (CIMI), is equal to or exceeding (euros) 1,000,000 – on the taxable property value used for the purpose of IMI:

28.1 – For residential property or land for construction whose building, authorized or foreseen, is for residential purposes, in accordance with the provisions of the IMI Code - 1%;

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

1. The transitional provisions are contained in article 6 of Law no. 55-A/2012, which established the rules relating to the assessment of the tax provided for in that item:

"1 – In 2012, the following rules must be observed by reference to the assessment of stamp duty provided for in item no. 28 of the respective General Table:

a) The tax fact occurs on 31 October 2012;

b) The taxable person of the tax is the one mentioned in no. 4 of article 2 of the Stamp Duty Code on the date referred to in the preceding sub-paragraph;

c) The taxable property value to be used in the assessment of the tax corresponds to that resulting 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 Portuguese Tax and Customs Authority must be effected by the end of November 2012;

e) The tax must be paid, in a single instalment, by the taxable persons by 20 December 2012;

f) The applicable rates are as follows:

i) Properties with residential purpose assessed in accordance with the IMI Code: 0.5 %;

ii) Properties with residential purpose not yet assessed in accordance with the IMI Code: 0.8 %;

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

2 – In 2013, the assessment of stamp duty provided for in item no. 28 of the respective General Table must fall upon the same taxable property value used for the purposes of assessment of municipal property tax to be effected in that year.

3 – The failure to deliver, in whole or in part, within the indicated period, of the amounts assessed as stamp duty constitutes a tax infraction, punished in accordance with the law."

1. On the interpretation of this decree, award 53/2013-T has already pronounced itself, which states:

"The term used in item 28.1 and in sub-sub-paragraphs i) and ii) of sub-paragraph 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, which is that of 'property with residential purpose'. Specifically in the CIMI, which in several provisions of the Stamp Duty Code referred to by that Law is indicated as a diploma of subsidiary application with respect to the tax provided for in the said item no. 28 [articles 2, no. 4, 3, no. 3, sub-paragraph u), 5, sub-paragraph u), 23, no. 7, and 46 and 67 of the Stamp Duty Code], a concept defined in those terms is not used."

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

Article 2

Concept of Property

1 – For the purposes of this Code, property is any parcel of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or established thereon, with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are located, although situated on a parcel of territory that constitutes an integral part of a different patrimony or does not have a patrimonial nature.

2 – Buildings or constructions, although movable by nature, are deemed to have a character of permanence when intended for non-transitory purposes.

3 – The character of permanence is presumed when the buildings or constructions are established at the same location for a period exceeding one year.

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

Article 3

Rural Properties

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

They are intended for or, in the absence of concrete purpose, have as their normal destination a use generating agricultural income, such as are considered for the purposes of the tax on income of natural persons (IRS);

Not having the purpose indicated in the preceding sub-paragraph, they are not built upon or have only buildings or constructions of an ancillary character, without economic autonomy and of reduced value.

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

3 – Lands are still rural properties:

Buildings and constructions directly intended for the production of agricultural income, when situated on the lands referred to in the preceding numbers;

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

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

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

Article 6

Species of Urban Properties

1 - Urban properties are divided into:

Residential;

Commercial, industrial or for services;

Land for construction;

Others.

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

3 – Lands for construction are considered to be lands situated within or outside an urban agglomeration, for which a license or authorization has been granted, admitted prior notification or issued favourable prior information of subdivision or construction operation, and also those which have been so stated in the acquisition title, excepting lands in which the competent entities prohibit any of those operations, specifically those located in green areas, protected areas or which, in accordance with municipal land management plans, are intended for public spaces, infrastructure or equipment. (Wording of Law no. 64-A/08, of 31-12)

4 – Lands situated within an urban agglomeration that are not land for construction nor are covered by the provision of no. 2 of article 3 are encompassed in the provision of sub-paragraph d) of no. 1, and also buildings and constructions licensed or, in the absence of license, which have as their normal destination other purposes than those referred to in no. 2 and also those of the exception of no. 3.

1. On the interpretation of Tax Standards, for the present case, article 11 of the General Tax Law tells us, which establishes the essential rules for the interpretation of tax laws, doing so in the following terms:

Article 11

Interpretation

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

Whenever, in tax provisions, terms specific to other branches of law are employed, they should be interpreted in the same sense as they have there, unless otherwise follows directly from the law.

If doubt persists regarding the meaning of the incidence provisions to be applied, account should be taken of the economic substance of the tax facts.

Gaps resulting from tax provisions covered by the legislative reserve of the National Assembly are not capable of analogical integration.

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

Article 9

Interpretation of Law

1 - Interpretation must not be confined to the letter of the law, but must reconstruct from the texts the legislative thought, 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.

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

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

1. Faced with the legal grounds already exposed, and having regard to the articles transcribed and stated, the following hypotheses for the interpretation of the concept of "property with residential purpose" arise, as to the Concept of "property with residential purpose" as referring to residential properties, and as to the Concept of "property with residential purpose" as a concept distinct from "residential properties".

2. It results from articles 2 to 6 CIMI above transcribed that the legislator does not use, in the classification of properties, the concept of "property with residential purpose", neither is this concept, with this terminology, found in any other decree.

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

4. The text of the law, being the starting point for the interpretation of the expression "properties with residential purpose", being on the basis of it that the "legislative thought" must be reconstructed, as imposed by no. 1 of article 9 of the Civil Code, applicable by virtue of the provision of article 11, no. 1, of the General Tax Law, already transcribed.

5. On the interpretation of the concept of "property with residential purpose", it is important to cite award 53/2013-T which has already pronounced itself on this matter. Award that equally sustains two interpretative hypotheses of the concept of "property with residential purpose", respectively in the same sense of the present decision, as to the concept of "property with residential purpose" as referring to residential properties, and as to the Concept of "property with residential purpose" as a concept distinct from "residential properties".

6. Award 53/2013-T writes, on the concept of "property with residential purpose" as referring to residential properties:

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

If it is understood that the expression 'property with residential purpose' coincides with that of 'residential properties', it is manifest that the assessments will suffer from error regarding the factual and legal presuppositions, for all properties with respect to which Stamp Duty has been assessed under the said item no. 28.1 are lands for construction, without any building or construction required to fulfill that concept of 'residential properties'.

For this reason, if one adopts the interpretation that 'property with residential purpose' means 'residential property', the assessments whose declaration of illegality is sought will be illegal, because there is in none of the lands any building or construction.

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

1. On the interpretation of the second hypothesis: Concept of "property with residential purpose" as a concept distinct from "residential properties", reference is again made to award 53/2013-T, in which it states:

"The word 'purpose', in this context of use of a property, has the meaning of 'action of destining something to a determined use'. ( [3] )

'When, as is usually the case, the norms (legislative formulas) contain more than one meaning, then the positive function of the text translates into giving stronger support to or more strongly suggesting one of the possible meanings. For among the possible meanings, some will correspond to the most natural and direct significance of the expressions used, whereas others will only fit within the verbal framework of the norm in a forced, artificial manner. Now, in the absence of other elements that induce the election of the less immediate sense of the text, the interpreter should opt in principle for that meaning which best and most immediately corresponds to the natural significance of the verbal expressions used, and in particular to their technical-legal significance, in the assumption (not always exact) that the legislator knew how to express correctly its thought'. ( [4] )

The relevance of the text of the law is especially emphasized in the matter of interpretation of Stamp Duty incidence norms, which are reducible 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 interpretative criterion, which is the unity of the legal system, which demands its overall coherence.

The recognized lack of coherence of Stamp Duty is particularly exuberant in the case of this item no. 28.1, hastily included at the margin of the General State Budget, by a fiscal legislator without perceivable global fiscal direction, which successively implements norms of fiscal aggravation according to the vicissitudes of budgetary execution, the impositions of international institutional creditors (represented by the 'troika') and the oversight of the Constitutional Court.

In truth, although in the 'Statement of Reasons' of Bill no. 96/XII/2.ª ( [5] ), on which Law no. 55-A/2012 was based, reference is made to the praiseworthy concern of the Government to 'reinforce the principle of social equity in austerity, ensuring an effective distribution of sacrifices necessary for compliance with the adjustment program' and its commitment 'to ensure that the distribution of these sacrifices will be made by all and not just by those who live from the income of their work', it is manifest, on the one hand, that these 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 entered into force, and on the other hand, that the scope of item no. 28.1, by taxing additionally properties with residential purpose and not also properties that do not have it, reveals that the concerns of social equity and the proclaimed intention of distribution of sacrifices to all, affects much more some than properly all.

In this context, there being no safe interpretative elements that allow for 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 interpretative purposes in light of no. 3 of article 9 of the Civil Code), the content of the legal text must be the primordial element of interpretation, in accordance with the presumption, imposed by the same no. 3 of article 9, that the legislator knew how to express its thought in adequate terms.

In light of those meanings of the words 'purpose' and 'to purpose', which are 'to give destination' or 'to apply', the formula used in that item no. 28.1 of the TGIS manifestly encompasses properties that are already applied to residential purposes, whereby it is important to inquire whether it will also encompass properties that, despite not yet being applied to residential purposes, are destined for them and those whose destination is unknown. (…)

For this reason, it will be necessary to clarify when it can be understood that a property is intended for residential purpose, specifically whether it is when this destination is fixed for it in a 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, manifestly points towards the need for an effective purpose.

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

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

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

That this is the meaning of the expression 'purpose', in the same context of classification of properties that the CIMI makes, is confirmed by article 3 in which, with respect to rural properties, reference is made to those 'that are intended for or, in the absence of concrete purpose, have as their normal destination a use generating agricultural income', which makes evident that purpose is concrete, effective. In truth, as can be seen from the latter part of this text, a property may have as its destination a determined use and be or not be intended for it, which makes evident that purpose is, at the level of the link of a property to a determined use, something more intense than mere destination and which may or may not occur, downstream of this and not upstream. ( [6] )

The correctness of this interpretation in the sense that only properties that are effectively intended for residential use are encompassed within the scope of incidence of item no. 28.1 of the TGIS is also confirmed by the perceivable ratio legis of the restriction of the field of application of the norm to properties with residential purpose, in the context of the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', which article 9, no. 1, of the Civil Code also establishes as interpretative elements. ( [7] ).

From the outset, the limitation of taxation in Stamp Duty to 'properties with residential purpose' reveals that it was not intended to encompass within the scope of incidence of the tax properties intended for services, industry or commerce, that is, properties intended for economic activity, which is understood in a context in which, as is notorious, the economy finds itself in a recessional spiral, publicly proclaimed at the highest level, with unemployment rates reaching maximum historical levels, with an avalanche of business closures resulting from economic unsustainability. (emphasis added)

Bearing in mind this situation and it being well known and public that the revitalization of economic activity and the increase of exports are the doors of exit from the crisis, it is understood that no legislative measures would be taken that would hinder economic activity, specifically the aggravation of the fiscal burden that hinders it and affects competitiveness in international terms.

For this reason, it should be concluded that the available interpretative elements, including the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', clearly point towards the sense that it was not intended to encompass within the scope of incidence of item no. 28.1 the situations of properties that are not yet intended for residential use, in particular lands for construction held by companies. ( [8] )"

1. In light of the above, it is verified that the 39 units intended for residential purposes are encompassed by the norm of incidence of item 28.1, as they are urban properties and properties with residential purpose, the concept of which results from article 2 of the CIMI.

2. It is necessary, however, now to decide for the purposes of application of item no. 28 of the TGIS, which VPT to consider in properties under vertical regime (that is, not horizontal) if individually determined by the VPT that corresponds to each of the parts of the property with residential purpose, or if determined by the global VPT of the property, which would correspond to the sum of all VPTs of the residential units that compose it.

3. On this issue, the Arbitral Tribunal of CAAD has already decided through decision no. 50/2013-T, and 132/2013 - T.

4. It is important for the purposes of the present case to refer, as to decision 50/2013-T, which tells us, on the treatment to be conferred for the purposes of item 28.1 of the TGIS to properties in vertical property and cumulatively which VPT (individual or global) to consider:

"From this we can conclude that, in the view of the legislator, what matters is not the legal-formal rigor of the concrete situation of the property but rather its normal use, the purpose for which the property is intended. We further conclude that for the legislator the situation of the property in vertical property or in horizontal property regime did not matter, as no reference or distinction is made between one and the other. What matters is the material truth underlying its existence as an urban property and its use."

1. It is also important to refer from the respective decision:

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

Well then, being so, considering that the registration in the property registry of properties in vertical property regime, composed of different parts, storeys or divisions with independent use, in accordance with the CIMI, follows the same registration rules as properties constituted in horizontal property regime, their respective IMI, as well as the new Stamp Duty, being assessed individually with respect to each of the parts, there is no doubt that the legal criterion for defining the incidence of the new tax must be the same. (…)

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

Thus, the new stamp duty would only be incidable if any of the parts, storeys or divisions with independent use presented a VPT greater than €1,000,000.00.

The AT cannot, therefore, consider as the reference value for the incidence of the new tax the total value of the property, when the legislator itself established a different rule under IMI, and this is the code applicable to matters not regulated with regard to item 28 of the TGIS

The criterion sought by the AT, of considering the value of the sum of the VPTs attributed to the parts, storeys or divisions with independent use, on the argument that the property is not constituted under the horizontal property regime, finds no legal support and is contrary to the criterion applicable under IMI and, by referral, under Stamp Duty.

To which is added the fact that the law itself expressly establishes, in the final part of item 28 of the TGIS, that the Stamp Duty to fall upon urban properties of value equal to or exceeding €1,000,000.00 – "on the taxable property value used for the purpose of IMI." .

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

The fiscal legislator in article 12, no. 3 of the CIMI says that 'each storey or part of a property susceptible of independent use is considered separately in the matricial registration which also discriminates its respective taxable property value' , makes no distinction as to the regime of properties that are constituted in horizontal or vertical property regime, if the property were constituted in horizontal property regime, none of its residential units would suffer the incidence of the new tax, whereby the AT cannot treat equal situations differently.

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

"Moreover, admitting a differentiation of treatment could produce results incomprehensible from a legal point of view and contrary to the objectives that the legislator said to have for adding item no. 28. By way of example, suppose the following hypothesis, which seems plausible in light of the interpretation made by the now respondent: a citizen who is the owner of a property constituted in total property intended for residential use, the global value of the autonomous units being equal to or exceeding €1,000,000.00 and the VPT of each one less than €1,000,000.00, is subject to annual taxation of 1% of that value (as happened in the situation under analysis); already another citizen who holds a property with the exact same characteristics as the preceding one but which has been constituted in horizontal property regime, the global value of the autonomous units being equally equal to or exceeding €1,000,000.00 and the VPT of each one less than €1,000,000.00, will not be subject to taxation in accordance with the mentioned item no. 28...

On the other hand, one could ask: if such units have the same owner, why does it not make sense to aggregate, for taxation purposes, their respective VPTs? The answer can be illustrated through another hypothesis: a citizen who is the owner of a property in horizontal property regime, in which each of its 20 units possesses a VPT less than €1,000,000.00, would be subject to taxation if – if such aggregation were admitted – the global VPT exceeded that value; already another citizen with identical 20 units distributed by 5, 10 or 20 properties would not be subject to any taxation in accordance with the said item no. 28...

If this line of reasoning makes sense – justifying, therefore, the non-aggregation of the VPTs of units of properties in horizontal property regime –, no plausible reason is seen why the same should not be applied to the autonomous units of properties in total property regime.

Observing, now, the case under analysis, it is found that the VPTs of the storeys (autonomous units) of the property with residential purpose vary between €104,140.00 and €113,780.00, whereby any one of them is less than €1,000,000.00. From this it is concluded, as a result of what was mentioned, that the stamp duty referred to in item no. 28 of the TGIS cannot fall upon them, therefore being illegal the assessment acts challenged by the claimant."

1. In light of the above, and applying what the above transcribed decisions tell us to the present case, it results that for the purposes of application of item 28 of the TGIS to properties in vertical property regime, the same rules of the CIMI that apply to properties in horizontal property regime are applied, and in the same sense the VPT for purposes of application of item is the individual VPT of each independent residential unit, and in the present case none of the units exceeds the criterion of incidence of 1,000,000.00€.

2. The material truth is what is imposed as the determining criterion of taxpaying capacity and not the mere legal-formal reality of the property, seeing that constitution of horizontal property regime implies a mere legal alteration of the property not even requiring a new assessment which now, such finding does not appear coherent with the decision of the AT to tax the residential parts of a property in vertical property regime, based on the global VPT of the property and not on what is actually attributed to each part.

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

4. Since none of the residential units has a taxable property value equal to or exceeding €1,000,000.00, as results from the documents attached to the file, it is concluded that the legal presupposition for the incidence of the Stamp Duty provided for in Item 28 of the TGIS is not met.

5. In this manner, the present tribunal concludes with the declaration of illegality of the assessments sub judice, for suffering from the defect of violation of that item no. 28.1, due to error regarding the legal presuppositions, which justifies the declaration of its illegality and annulment (article 135 of the Administrative Procedure Code).

ON COMPENSATORY INTEREST.

The claimant also petitions for the payment of compensatory interest.

1. In light of the above, the assessment of the Stamp Duty, in the part encompassed by the annulment that will be decreed, results from errors of fact and law attributable exclusively to the fiscal administration, insofar as the Claimant complied with its obligation of disclosure and were committed by it and could not the same be unaware of different understandings.

2. In truth, it being demonstrated that the claimant paid the impugned tax in the part superior to that which is due, by force of the provisions of articles 61 of the Administrative Procedure Code for Tax Purposes and 43 of the General Tax Law, the Claimant has the right to compensatory interest due, such interest to be counted from the date of payment of the undue tax (annulled) until the date of issuance of the respective credit note, counting the period for such payment from the beginning of the period for voluntary execution of the present decision (article 61, nos. 2 to 5, of the Administrative Procedure Code for Tax Purposes), all at the rate calculated in accordance with the provision of no. 4 of article 43 of the General Tax Law.

3. The claimant's request is granted.

ON CONDEMNATION OF THE TAX ADMINISTRATION TO PAY FEES AND NOT TO ASSESS SIMILAR STAMP DUTY ACTS

1. The claimant petitions for condemnation of the Tax Administration to pay the fees paid by the Claimant to its lawyers for discussion of the legality of the acts sub judice and, likewise, condemnation of the Tax Administration not to assess similar Stamp Duty acts to those now discussed, in particular, the second instalment relating to the year 2014 and following.

2. In this regard, it is necessary to decide on the competence of the arbitral tribunals, as is defined in article 2 of the RJAT, from whose no. 1, sub-paragraphs a) and b) it follows that the arbitral tribunals are competent for the examination of the request for declaration of illegality of acts of assessment and self-assessment of taxes, withholding at source, payment on account, acts of fixing the taxable subject matter when it does not give rise to the assessment of any tax, acts of determination of the taxable matter and acts of fixing taxable property values.

3. The request of the Claimant is not included and foreseen in the competences attributed by Decree-Law no. 10/2011, of 20 January (RJAMT), whereby it exceeds the powers attributed to arbitral tribunals.

4. Contrary to what occurs with the payment of interest and in which the respondent was attributed the error for purposes of the right to compensatory interest, which is expressly provided for in the RJAMT, article 24 no. 5, the same does not occur regarding the payment of expenses resulting from litigation.

5. Although the respondent's request is intrinsically linked and dependent on the request for annulment of the assessment act, it is not for the present arbitral tribunal to decide on the same, as it falls outside the scope of its competences.

6. By the above, the present tribunal does not possess competences to pronounce itself on the claimant's request, and to bind either of the parties to its decision on this request.

I - DECISION

Therefore, having regard to all the foregoing, the present Arbitral Tribunal decides:

b. To find the request for declaration of illegality of the tax assessment acts in Stamp Duty, no. 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., 2015 ..., which fixed a tax payable of €3,839.68, merits, due to defect of violation of law regarding the provision contained in item 28 no. 1, due to error regarding the legal presuppositions, which justifies the declaration of its illegality and annulment.

c. Condemns the Respondent to return to the claimant that amount wrongly assessed and paid, plus the payment of compensatory interest already accrued relating to the period that elapsed between the date of payment of the tax calculated on the amount of € 3,839.68 as well as in the payment of compensatory interest accruing from that last date, all in accordance with nos. 2 to 5 of article 61 of the Administrative Procedure Code for Tax Purposes and at the rate calculated in accordance with the provision of no. 4 of article 43 of the General Tax Law until complete reimbursement.

d. To find unfounded the claimant's request for condemnation of the respondent to reimburse the expenses resulting from litigation, with fees of judicial mandataries.

e. To find unfounded the condemnation of the Tax Administration not to assess similar Stamp Duty acts to those now discussed, in particular, the second instalment relating to the year 2014 and following.

The value of the case is fixed at € 3,839.68 of the value of the assessment, having regard to the economic value of the case as measured by the value of the stamp duty assessments impugned, and in accordance therewith the costs are fixed at 612.00€ (six hundred twelve euros), to be borne by the respondent in accordance with article 12, no. 2 of the Tax Arbitration Regime, article 4 of the Tax Procedural Code and Table I annexed thereto. – no. 10 of article 35, and nos. 1, 4 and 5 of article 43 of the General Tax Law, articles 5, no. 1, sub-paragraph a) of the Tax Procedural Code, 97-A, no. 1, sub-paragraph a) of the Administrative Procedure Code for Tax Purposes and 559 of the Code of Civil Procedure).

Notify.

Lisbon, 9 November 2015.

The Arbitrator

Paulo Ferreira Alves