Summary
Full Decision
ARBITRAL DECISION
I – REPORT
1. On 28 July 2016, the company "A… S.A.", with registered address at Rua …, no. …, …, …-… Lisbon, registered in the Commercial Registry Conservatoria of Lisbon under the single registration and legal person number … (hereinafter referred to as the "Claimant"), submitted to the Administrative Arbitration Center (CAAD) a request for the establishment of an arbitral tribunal with a view to obtaining an arbitral decision, in accordance with the provisions of articles 2, no. 1, paragraph a), 3, no. 1 and 10 of Decree-Law no. 10/2011, of 20 January (hereinafter referred to as RJAT), following the tax acts of assessment of Stamp Duty (IS) for the year 2015, dated 5 April 2016, on each of the floors with independent use that make up the urban property registered under the article …, in the real estate register of the parish of …, in the municipality of Lisbon, in the total amount of € 11,399.20 (eleven thousand, three hundred and ninety-nine euros and twenty cents).
2. In the request for arbitral decision, the Claimant chose not to appoint an arbitrator.
3. Pursuant to no. 1 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, as worded by article 228 of Law no. 66-B/2012, of 31 December, the Ethics Council appointed the undersigned as sole arbitrator, who accepted the position within the legally established period.
4. The arbitral tribunal was constituted on 25 October 2016.
5. On 04 November 2016, the Respondent, duly notified for that purpose, submitted its reply.
6. The meeting provided for in article 18 of the RJAT, as well as the arguments, at the request of the Respondent, were dispensed with, which the Tribunal accepted for reasons of procedural efficiency and celerity and the prohibition of useless acts, with the Parties having expressed no opposition.
7. The position of the Claimant, expressed in the request for arbitral decision, is, in summary, as follows:
7.1. The assessment acts which are the subject of this arbitral decision are vitiated by error concerning the factual and legal premises, and by a violation of law.
7.2. In the case of a property such as that in the present proceedings, comprising floors or divisions with independent use, the subjection to stamp duty is determined, not by the total patrimonial tax value (VPT) of the property, as understood by the Respondent, but by the VPT attributed to each of its floors or divisions.
7.3. Indeed, taking into account the rules of the IMI Code applicable to matters not regulated in the IS Code concerning item 28 of the General Table (see article 67, no. 2 of the IS Code), each floor or division of property capable of independent use is considered separately in the real estate registration (see article 12, no. 3 of the IMI Code).
7.4. As such, since the VPT of any of the sixteen housing fractions contained in the register of the property referred to in these proceedings, in accordance with the IMI Code, is less than € 1,000,000.00, stamp duty under item no. 28.1 of the General Table of IS does not apply to it.
7.5. Indeed, the Respondent cannot sustain the view that the cause of the tax base of item no. 28.1 of the General Table of IS is the failure to constitute a property such as that in these proceedings, comprised of sixteen housing fractions, in a horizontal property regime, nor can the legal form of property ownership be determinative of such tax base.
7.6. Indeed, if the property in question were constituted under a horizontal property regime, none of its housing fractions would be subject to the new IS.
7.7. For which reason, the material truth is what must prevail in this matter as the criterion determining tax capacity and not the mere legal-formal reality of the property, with the discrimination exercised by the Respondent constituting an arbitrary and illegal discrimination.
7.8. For this reason, the Claimant considers that the premises upon which the application of Item no. 28 of the General Table of IS depends are not met, with the Respondent violating the principles of tax legality, justice, equality, tax proportionality and the prevalence of material truth over legal-formal reality.
7.9. For all the foregoing, the IS assessments, referring to the year 2015, in the total amount of € 11,399.20, corresponding to the property in question, must be annulled, with all legal consequences.
8. The position of the Respondent expressed in its reply is, in brief summary, as follows:
8.1. What is at issue are assessments that result from the direct application of item 28.1 of the General Table of IS, which provides that Stamp Duty shall apply to the ownership, usufruct or surface right of urban properties whose patrimonial value contained in the register, in accordance with the IMI Code, is equal to or greater than € 1,000,000.00.
8.2. Thus, there is no error attributable to the tax services, which merely acted, as they should, in strict compliance with the legal norm.
8.3. In fact, for IS purposes, what is relevant is the property as a whole, since divisions capable of independent use are not considered as property, but only autonomous fractions under a horizontal property regime, as stated in no. 4 of article 2 of the IMI Code.
8.4. As such, the VPT upon which the incidence of Stamp Duty under item 28.1 of the General Table depends had to be, as it was, the total patrimonial value of the property and not that of each of its independent parts.
8.5. The unity of an urban property in vertical ownership comprised of several floors or divisions is, however, not affected by the fact that all or some of these floors or divisions are capable of independent economic use. Such property remains a single property, and thus its distinct parts are not legally equivalent to autonomous fractions under a horizontal property regime.
8.6. For this reason, the VPT upon which the incidence of IS under item 28.1 of the General Table of IS depends had to be the total VPT of the property and not that of each of its independent parts. The fact that IMI was calculated based on the VPT of each part of the property with independent economic use does not likewise affect the application of item 28.1 of the General Table of IS.
8.7. On this basis, the Respondent concludes that the request for arbitral decision is entirely without merit, with the legal conformity of the act at issue in these proceedings being evident.
II – QUESTION TO BE DECIDED
10. In light of the foregoing, the principal question to be decided is as follows:
− Are the tax acts of assessment of Stamp Duty under Item 28.1 of the General Table, Annexed to the IS Code, referring to the year 2015, dated 05 April 2016, on each of the floors with independent use that make up the urban property registered under the article …, in the real estate register of the parish of …, in the municipality of Lisbon, in the total amount of € 11,399.20 (eleven thousand, three hundred and ninety-nine euros and twenty cents), issued by the Tax and Customs Authority, vitiated by error concerning factual and legal premises and also by a violation of law?
III – SANITATION OF PROCEEDINGS
11. The Tribunal is regularly constituted and has material jurisdiction, pursuant to articles 2, no. 1, paragraph a), 5, no. 2, and 6, no. 1, of the RJAT.
The request for arbitral decision is timely, in accordance with no. 1 of article 10 of the RJAT.
The parties have legal personality and capacity, are legitimate and are legally represented, pursuant to articles 4 and 10, no. 2, of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.
Taking into account the same factual circumstances and the interpretation and application of the same legal principles and rules, the current joinder of parties is admissible, pursuant to article 3, no. 1 of the RJAT.
The proceedings do not suffer from defects that would render them invalid.
Having considered all the above, a decision must be rendered.
IV – FINDINGS OF FACT
12. Taking into account the tax administrative proceedings and the documentary evidence attached to the file, it is now necessary to present the factual matters relevant to the understanding of this decision, which are established as follows:
− The Claimant "A… S.A." is the legitimate owner of the urban property registered under the article …, in the real estate register of the parish of …, in the municipality of Lisbon, constituted in full ownership with floors or divisions capable of independent use (see document attached to the present proceedings as doc. no. 1 annexed to the Arbitral Petition).
− The Tax Authority attributed to the property in question, for purposes of applying Item 28.1 of the General Table of IS, the "patrimonial value of the property – total subject to tax" of € 1,139,920.00 (one million, one hundred and thirty-nine thousand and nine hundred and twenty euros) – (see stamp duty assessment acts of 2015 attached to the present proceedings as docs. nos. 2 to 17 annexed to the Arbitral Petition).
− In conformity with the taxable patrimonial value attributed to the property in question, the Tax Authority proceeded with the respective IS assessments based on Item 28.1 of the General Table of Stamp Duty, dated 05 April 2016, notified to the Claimant in the total amount of € 11,399.20 (eleven thousand, three hundred and ninety-nine euros and twenty cents), having determined the following individual payments for each floor or division capable of independent use:
| Real Estate Registration | VPT | Tax Amount |
|---|---|---|
| …-U-…-…-1ºD | € 67,010.00 | € 670.10 |
| …-U-…-…-1ºE | € 75,480.00 | € 754.80 |
| …-U-…-…-2ºD | € 67,010.00 | € 670.10 |
| …-U-…-…-2ºE | € 75,480.00 | € 754.80 |
| …-U-…-…-3ºD | € 67,010.00 | € 670.10 |
| …-U-…-…-3ºE | € 75,480.00 | € 754.80 |
| …-U-…-…-4ºD | € 67,010.00 | € 670.10 |
| …-U-…-…-4ºE | € 75,480.00 | € 754.80 |
| …-U-…-…-1ºD | € 67,010.00 | € 670.10 |
| …-U-…-…-1ºE | € 75,480.00 | € 754.80 |
| …-U-…-…-2ºD | € 67,010.00 | € 670.10 |
| …-U-…-…-2ºE | € 75,480.00 | € 754.80 |
| …-U-…-…-3ºD | € 67,010.00 | € 670.10 |
| …-U-…-…-3ºE | € 75,480.00 | € 754.80 |
| …-U-…-…-4ºD | € 67,010.00 | € 670.10 |
| …-U-…-…-4ºE | € 75,480.00 | € 754.80 |
(see Stamp Duty assessments attached to the present proceedings as docs. nos. 2 to 17 annexed to the Arbitral Petition).
− The assessments referenced in the preceding paragraph gave rise to notification for payment of the 1st and 2nd instalments, which were paid in full by the Claimant in April and July 2016, respectively (see documents attached to the present proceedings as docs. nos. 2 to 33 annexed to the Arbitral Petition).
13. The facts stated in the preceding number constitute uncontested matter and are documentarily demonstrated in the file.
14. There are no facts established as unproven, because all facts relevant to the assessment of the request were established as proven.
V – LEGAL FINDINGS
15. We shall now determine the law applicable to the underlying facts, in accordance with the question already stated (see above no. 10).
16. Thus, the question that arises is whether the understanding by which Item 28.1 of the General Table of IS should be interpreted (or not) as comprising, within its scope, properties in full ownership with parts or divisions capable of independent use, with residential allocation, characterized by the fact that none of these parts or divisions has been attributed a VPT equal to or greater than € 1,000,000.00, is legal.
17. The subjection to Stamp Duty of properties with residential allocation resulted from the addition of Item 28 to the General Table of IS, effected by article 4 of Law 55-A/2012, of 29 October, which typified the following tax facts, in accordance with the current wording:
"28 – Ownership, usufruct or surface right of urban properties whose taxable patrimonial value contained in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000.00 – on the patrimonial value for purposes of IMI (Added by article 4 of Law no. 55-A/2012 of 29 October):
28.1 – For residential property or land for construction whose building, authorized or planned, is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code (Amended by Law no. 83-C/2013 of 31 December) – 1%
28.2 – For property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the list approved by order of the Finance Minister (Added by article 3 of Law no. 55-A/2012 of 29 October) – 7.5%."
This law came into force on the day following its publication, that is, on 30 October 2012.
18. However, Law 55-A/2012 says nothing regarding the definition of the concepts at issue, in particular, regarding the concept of "property with residential allocation" contained in Item 28.1.
19. In this regard, its true meaning must be determined, in accordance with the techniques and interpretive elements generally accepted by legal doctrine, in accordance with article 9 of the Civil Code and article 11 of the General Tax Law.
20. In this respect, consideration should be given to the concept of property that results from article 2 of the IMI Code – "any portion of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated or situated therein, having a character of permanence, provided that it is 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 situated, although situated in a portion of territory that constitutes an integral part of a diversified patrimony or has no patrimonial nature." – by reference from article 67, no. 2 of the IS Code, added by the aforementioned Law, which provides that "to matters not regulated in this code concerning Item 28 of the General Table, the CIMI shall apply subsidiarily." In this way, the determination of the VPT obeys the terms provided in article 38 and following of that code.
21. In the IMI Code, there is also reference to article 6, which indicates the different types of urban properties, among which it mentions residential properties in paragraph a) of its no. 1, clarifying in its no. 2 that "residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, which have as their normal destination each of these uses."
22. In a first analysis, we can already conclude that the legislator was concerned with the normal use of the property, the purpose for which it is intended, and not with the rigor of the concept itself.
23. We can further add that "(…) for the legislator, the situation of the property in vertical or horizontal property regime was not relevant, as no reference or distinction is made between them. What is relevant is the material truth underlying its existence as an urban property and its use." Understanding expressed, to which we adhere, in the Arbitral Decision rendered in proceedings no. 50/2013-T.
24. Accordingly, the legislator, in the rule of incidence of Item 28.1 of the General Table of IS, did not consider it relevant to distinguish between properties in horizontal property regime and properties in vertical property regime. Thus, we already advance that the argument put forth by the Respondent as stated in article 6 of its Reply does not hold, when it states that "The interpretation underlying the impugned assessment acts is that the taxable patrimonial value upon which the incidence of stamp duty under item 28.1 of the General Table of Stamp Duty depends must be, as it was in the case of the present proceedings, the total patrimonial value of the property and not that of each of its independent parts."
25. It is also important to consider article 12, no. 3 of the IMI Code, which provides that "each floor or part of property capable of independent use is considered separately in the real estate registration, which also discriminates the respective taxable patrimonial value."
26. And also the provision of article 119, no. 1 of the IMI Code, which determines that "The tax services shall send to each taxpayer, by the end of the month preceding the month of payment, the competent collection document, with discrimination of the properties, their parts capable of independent use, the respective taxable patrimonial value and the tax amount attributed to each municipality of the location of the properties."
27. Now, considering that the registration in the real estate register of properties in vertical ownership, composed of different parts, floors or divisions with independent use, in accordance with the IMI Code, using the criterion already referred to in article 67, no. 2 of the Stamp Duty Code – "to matters not regulated in this code concerning Item 28 of the General Table, the CIMI shall apply subsidiarily." – obeys the same registration rules of properties composed in horizontal property regime, with the respective IMI, as well as IS of Item 28.1, being assessed individually in relation to each of the parts, it is clear that if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal property regime, the same must be observed for the definition of the rule of incidence of Stamp Duty under Item 28.1.
28. Considering what has been stated in the preceding points, stamp duty is only incurred if any of the parts, floors or divisions with independent use presents a VPT greater than € 1,000,000.00, which in the present case does not occur, as stated in the real estate register of the property in question (see point A of no. 12).
29. For which reason, the Tax Authority can never consider as the reference value for the incidence of stamp duty the total value of the property, when the legislator itself established a different rule under the IMI Code. As mentioned, pursuant to that code, there is no difference between a building in horizontal property regime and a building in vertical property regime or full ownership composed of parts or divisions capable of independent use – this being the code applicable to matters not regulated with respect to Item 28 of the General Table of IS (see article 67, no. 2 of Law 55-A/2012, of 29/10).
30. This equal treatment that the legislator did not include in the rule of incidence contained in Item 28.1 of the General Table of IS, it also did in article 119 of the IMI Code, when it establishes that tax shall be assessed individually on each part or division capable of independent use, taking into account the VPT of each of these parts or divisions capable of independent use, individually considered. From which it follows that the VPT to be considered in the application of Item 28.1 of the General Table of IS is that which results from the letter and purpose of articles 2, 6 no. 1 paragraph a), 12 and 119, all of the IMI Code.
31. Let it be clear that this conclusion is in line with the overwhelming majority of known CAAD jurisprudence (see among many, procs. 544/2015-T, 552/2015-T, 554/2015-T, 560/2015-T, 562/2015-T, 573/2015-T, 576/2015-T, 581/2015-T, 589/2015-T, 597/2015-T, 606/2015-T, 632/2015-T, 643/2015-T, 644/2015-T, 651/2015-T, 659/2015-T, 681/2015-T, 718/2015-T, 755/2015-T, 768/2015-T, 777/2015-T, 10-2016-T, 20/2016-T.), and also, in the same sense, proceedings nos. 565/2014-T, 152/2015-T and 503/2015-T, which decided that the requests were entirely well-founded and annulled the stamp duty assessment acts levied on the Claimant for 2012, 2013 and 2014.
32. Attentive to what we have just set forth, we cannot support, with due respect, the position of the Respondent, since it is not acceptable that the criterion sought, of considering the value of the sum of the VPTs attributed to the parts, floors or divisions with independent use, with the argument that the property is not constituted under a horizontal property regime, finds no legal support and is contrary to the criterion applicable under the IMI Code and, by reference, under IS.
33. In the case at hand, the property in question is in full ownership and contains 16 floors and/or divisions with independent use, allocated for residential purposes, as proven by document no. 1 attached to the Request for Arbitral Decision, and none of these floors has a patrimonial value equal to or greater than € 1,000,000.00, as results from the document attached to the file, from which it is concluded that the legal premise of incidence of IS provided in Item 28.1 of the General Table of IS is not met.
34. Finally, beyond the annulment of the assessments and consequent reimbursement of the amounts unduly paid, the Claimant also petitions for the payment of the corresponding indemnity interest.
35. Pursuant to article 24, no. 5 of the RJAT "interest payment is due, regardless of its nature, in accordance with the terms provided in the general tax law and in the Code of Tax Procedure and Process". This rule allows for recognition of the right to indemnity interest in arbitral proceedings. Thus, the request is decided upon.
36. In accordance with article 43, no. 1 of the General Tax Law, indemnity interest is due when it is determined, in administrative reclamation or judicial challenge, that there has been error attributable to the tax services from which results payment of the tax debt in an amount greater than that legally due.
The right to indemnity interest referred to in the aforementioned rule of the General Tax Law presupposes that tax has been paid in an amount exceeding what is due and that such results from an error, of fact or of law, attributable to the services of the Tax Authority (see Judgment of the Supreme Administrative Court, proceedings no. 01215/12, of 10.04.2013).
37. In the present case, both conditions are met, thus establishing the obligation of indemnity interest in favor of the Claimant, which is hereby declared.
VI – DECISION
The Arbitral Tribunal hereby decides:
a) In favor of the Claimant's request, considering the IS assessment acts in question to be illegal, on the grounds of error concerning factual and legal premises and violation of article 1, no. 1 of the Stamp Duty Code and Item 28.1 of the General Table of IS, with the aforementioned acts to be annulled, given the fact that none of the parts or divisions capable of independent use, subject to the assessment acts at issue in this arbitral decision, have a taxable patrimonial value greater than € 1,000,000.00, as demonstrated in the present proceedings.
b) Condemning the Respondent to refund the amounts unduly assessed and paid by the Claimant, pursuant to article 1, no. 1 of the Stamp Duty Code and item 28.1 of the General Table of IS.
c) Further condemning the Respondent, since we are faced with a defect concerning the tax legal relationship, as the existence of that defect implied the violation of a subjective legal situation, consisting of the imposition on the Claimant of the carrying out of a patrimonial obligation contrary to law, to payment of indemnity interest, in accordance with the terms and conditions provided for by law (see articles 43 and 100 of the General Tax Law and article 61 of the Code of Tax Procedure and Process).
The value of the proceedings is fixed at € 11,399.20, in accordance with article 97-A, no. 1, a), of the Code of Tax Procedure and Process, applicable pursuant to paragraphs a) and b) of no. 1 of article 29 of the RJAT and no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.
The amount of costs is fixed at € 918.00, in accordance with Table I of the Regulation of Costs of Tax Arbitration Proceedings, to be paid by the Tax and Customs Authority, given that the request was entirely well-founded, in accordance with articles 12, no. 2, and 22, no. 4, both of the RJAT, and article 4, no. 4, of the aforementioned Regulation.
Notification to be made.
Lisbon, 21 April 2017.
The Arbitrator
(Jorge Carita)
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