Stamp Tax Verba 28.1 TGIS on Full Property Ownership and Compensatory Interest – CAAD 457/2016-T

ARBITRAL DECISION

Claimant: A…, SA

Respondent: Tax and Customs Authority

I – REPORT

A) The Parties and the Constitution of the Arbitral Tribunal

A…, SA., taxpayer number…, with registered office at… no.…, …, Lisbon (hereinafter referred to as the "Claimant"), requested the constitution of a collective Arbitral Tribunal, pursuant to Article 2, no. 1, subsection a) and Article 10, nos. 1 and 2 of Decree-Law no. 10/2011, of 20 January, hereinafter referred to as "RJAT" and of Regulation no. 112-A/2011, of 22 March, for the challenge and declaration of the illegality of Stamp Duty (IS) assessments issued in application of item 28.1 of the General Stamp Duty Schedule (TGIS) relating to the year 2015, in the total amount of €15,518.40, seeking their annulment, with reference to the urban property located in the Parish of …, Municipality of Portimão, described in the Property Registry Office of Portimão, under no.…, registered in the urban property register under article….

In the present arbitral request the Claimant challenges the following Stamp Duty assessments, provided for in item 28.1 of the TGIS, relating to the year 2015, detailed below:

Stamp Duty Assessments nos. 2016…, in the amount of €2,296.10; 2016…, in the amount of €1,959.70; 2016…, in the amount of €1,777.90; 2016…, in the amount of €1,976.30; 2016…, in the amount of €1,777.90; 2016…, in the amount of €1,976.30; 2016…, in the amount of €1,777.90; 2016…, in the amount of €1,976.30.

The total amount of duty assessed is €15,518.40, which was paid in full by the Claimant. These assessments are properly identified and attached to the file, and proof of payment has been certified.

The request for constitution of the Arbitral Tribunal was presented by the Claimant on 28-07-2016, was accepted by His Excellency the President of CAAD and notified to the Tax and Customs Authority on 29-07-2016. The Claimant opted not to appoint an arbitrator, and therefore, pursuant to Article 6, no. 1 of the RJAT, the undersigned was appointed by the Ethics Council of the Administrative Arbitration Centre on 03-10-2016 as arbitrator and to constitute the singular Arbitral Tribunal. Thus, in compliance with the provision in subsection c), no. 1 of Article 11 of the RJAT, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the Arbitral Tribunal was constituted on 19-10-2016. On 26-10-2016 an arbitral order was issued, requiring the Tax and Customs Authority (AT) to submit its reply within the legal period, pursuant to nos. 1 and 2 of Article 17 of the RJAT.

On 24-11-2016 the Respondent attached to the file its reply and the respective Administrative Process (PA), which are deemed to be fully reproduced. In its reply, the Respondent contends that the issues in dispute in the proceedings are merely matters of law and that, therefore, it sees no interest in producing the witness evidence indicated, and the meeting referred to in Article 18 of the RJAT could be dispensed with. On 22-12-2016 an arbitral order was issued requiring the Claimant to take a position on the waiver requested by the AT, on the interest in maintaining the examination of the indicated witnesses and the requested waiver of holding the meeting. On 03-01-2017 the Claimant pronounced favourably on this waiver. Thus, by arbitral order issued on 05-01-2017, pursuant to Articles 16, subsection c), 19 and 29, no. 2 of the RJAT, the holding of the aforesaid meeting was dispensed with, a period for pleadings was fixed and a date for issuing the arbitral decision was set for 28-02-2017, which was subsequently extended by a further fifteen days. The Claimant was also notified to make payment of the subsequent arbitration fee.

B) THE REQUEST FORMULATED BY THE CLAIMANT:

The Claimant formulates the present request for arbitral pronouncement seeking the declaration of illegality of the IS assessments, determined under item 28.1 of the TGIS, as set out in the arbitral request, which relate to the urban property with residential purpose, above identified, which is in a regime of full (or vertical) ownership. This concerns an unfinished urban residential property that has not yet been occupied, due to the insolvency proceedings of the construction company and former owner, and the Claimant acquired the property within that same process and awaits municipal authorization for the constitution of horizontal property ownership. Meanwhile, the legal situation of the property is that of full ownership, consisting of eight units or sections susceptible to independent use. With respect to this property, the AT proceeded to assess Stamp Duty, pursuant to item 28.1 of the TGIS, taking as reference the total tax property value (VPT), corresponding to the sum of the VPT attributed to each part or independent division, which amounts to €1,551,840.00. In accordance with this understanding the IS due in the year 2015 for the property described above is €15,518.40.

All assessments issued were paid by the Claimant, which are properly identified and attached to the file, as well as the proof of payment, contained in the assessments themselves, as evidenced by the official stamp attesting payment.

In summary, to substantiate its request the Claimant alleges that the assessment of IS on the sum of the VPT of divisions susceptible to independent use that form part of the property in a regime of full or vertical ownership, identified in the file, is illegal. It should be considered that the incidence of IS provided for in item 28.1 of the TGIS should be determined in function – and only in function – of each division susceptible to independent use and not of the property in which these are integrated. Thus, given that the VPT attributed to each of the parts or divisions susceptible to independent use intended for housing is less than €1,000,000, they are not subject to IS, pursuant to item 28.1 of the TGIS, and therefore the challenged assessments should be deemed illegal, for violation of the provision in the aforesaid item 28.1 of the TGIS, as well as in Articles 23, no. 7, of the Stamp Duty Code and in Articles 6, 7, no. 2, subsection d) and 12, no. 3 of the Property Tax Code (Código do Imposto Municipal sobre Imóveis), these latter applicable by virtue of Article 67, no. 2, of the Stamp Duty Code.

It also invokes, in support of this understanding, numerous arbitral precedents, confirmed by the jurisprudence of our superior courts and, also, by the understanding that the Constitutional Court has been assuming regarding the principle of equality and contributory capacity. It therefore alleges the illegality and unconstitutionality underlying the understanding of the AT that led to the challenged assessments.

It concludes by petitioning for the annulment of all the tax assessments challenged, with all legal consequences, namely, pursuant to Article 43 of the General Tax Law (LGT), the processing of reimbursement of the amount paid plus statutory interest.

C – THE RESPONDENT'S REPLY

The Respondent AT, duly notified for this purpose, timely submitted its reply in which it alleged, in summary, that the challenged assessments do not suffer from any illegality, nor from unconstitutionality, and that they are the direct consequence of the direct application of the legal norm, which is translated into objective elements, without any subjective or discretionary assessment. It argues that the AT merely complied with and in accordance with Article 6, no. 2 of Law no. 55-A/2012, of 29/10, which added item no. 28 to the TGIS, with the amendment made by Law no. 83-C/2013 of 31/12 and whose respective incidence norm refers to urban properties, assessed pursuant to the Property Tax Code (CIMI), with VPT equal to or greater than €1,000,000.00 and, pursuant to its item 28.1, with residential purpose. It also invokes the provision in Article 44, no. 5, of the Stamp Duty Code (CIS) and that in light of the concept of property defined in Article 2, no. 1 of the CIMI it is inferred that a "property in full ownership with apartments or divisions susceptible to independent use" is, unequivocally, different from a property in a regime of horizontal ownership, consisting of autonomous units, that is, of several properties. It concludes that the challenged assessments are legal and that no statutory interest is due as there is no error attributable to the services, which merely complied with the strict application of the legal norm. Finally, regarding the constitutionality issues raised by the Claimant, the AT responds, invoking the jurisprudence of the Constitutional Court, set forth in Decisions nos. 542/14, of 11-11-2015 and nos. 51/2014, of 16-12-2015, in which it was decided, in the specific cases, not to declare unconstitutional the incidence norm contained in item 28.1 of the TGIS.

It concludes by contending for the legality of the IS assessments challenged and the dismissal of the arbitral request.

II - PROCEDURAL PREREQUISITES

The Arbitral Tribunal is regularly constituted. It is materially competent, pursuant to Article 2, no. 1, subsection a) of the RJAT. The Parties have legal personality and legal capacity, are legitimate and are legally represented (see Articles 4 and 10, no. 2 of the RJAT and Article 1 of Regulation no. 112/2011, of 22 March).

The process is not affected by vices that invalidate it.

Having regard to the administrative tax procedure, the documentary evidence attached to the file, it is necessary to establish the relevant facts for understanding the decision, which are established as follows.

III – Findings of Fact

A) Proven Facts

As relevant facts, the present tribunal establishes the following facts as proven:

a) The Claimant is the owner of the urban property located at …, Plot …, parish of …, Municipality of Portimão, described in the Property Registry Office of Portimão, under no.…, registered in the urban property register under article …;

b) At the date of the taxable event in question, the Claimant was the owner of this property, which it acquired by deed of purchase and sale executed on 20-12-2013, the Claimant having acquired the property within an insolvency proceeding of the original constructor, as results from document no. 3 attached to the arbitral request;

c) The property in question is in full ownership and is composed of ground floor, 1st, 2nd and 3rd floors, with two independent units on each floor (left and right), intended for housing;

d) With respect to this property the AT assessed IS, with reference to the year 2015, pursuant to item 28.1 of the TGIS, considering the total VPT calculated on the basis of the sum of the VPT attributed to each part or independent division with residential purpose, which is €1,551,840.00, thus exceeding €1,000,000.00;

e) The challenged assessments total €15,518.40, as detailed below:

i. Assessment no. 2016…, in the amount of €2,296.10;

ii. Assessment no. 2016…, in the amount of €1,959.70;

iii. Assessment no. 2016…, in the amount of €1,777.90;

iv. Assessment no. 2016…, in the amount of €1,976.30;

v. Assessment no. 2016…, in the amount of €1,777.90;

vi. Assessment no. 2016…, in the amount of €1,976.30;

vii. Assessment no. 2016…, in the amount of €1,777.90;

viii. Assessment no. 2016…, in the amount of €1,976.30.

f) For purposes of Property Tax each part or division susceptible to independent use has an individual VPT attributed to it, fixed at values ranging from a minimum value of €177,790.00 and maximum of €229,610.00, as shown in the respective property register attached to the file, which is deemed to be fully reproduced;

g) The property was acquired by the Claimant while still unfinished and awaits the corresponding municipal license to be able to constitute the corresponding horizontal property ownership.

h) The Claimant paid all the challenged IS assessments.

B) UNPROVEN FACTS

With relevance to the decision, there are no facts that should be considered as unproven.

C) REASONING OF THE PROVEN FACTS

The facts deemed as proven are based on the documentary evidence that the parties attached to the present proceedings. The Tribunal does not have to pronounce on everything that was alleged by the parties, and should select the facts that matter for the decision and distinguish the proven matters from the unproven matters [see Article 123, no. 2, of the Tax Procedure Code (CPPT) and Article 607, no. 3 of the Civil Procedure Code (CPC), applicable by virtue of Article 29, no. 1, subsections a) and e), of the RJAT]. In this manner, the facts pertinent to the judgment of the case are chosen and delineated according to their legal relevance, which is established in view of the various plausible solutions to the question(s) of Law [see former Article 511, no. 1, of the CPC, corresponding to the current Article 596, applicable by virtue of Article 29, no. 1, subsection e), of the RJAT]. Taking into account the positions assumed by the parties, the documentary evidence and the PA attached to the file, the facts listed above were deemed proven, with relevance to the decision, which are moreover consensually recognized and accepted by the parties.

IV – ON THE LAW

Having established, as stated above, the findings of fact, it is necessary to address the legal question raised by the Claimant, which consists in assessing the terms of the configuration of the subject matter incidence of IS provided for in item 28 of the TGIS, in the specific case of the property described in the present proceedings.

This is a property in a regime of full (or vertical) ownership, composed of various floors, with divisions or parts susceptible to independent use, intended for housing. It is thus described in the Property Register and, regardless of whether it is awaiting the necessary municipal authorization for the constitution of horizontal property ownership, what is relevant is its legal nature at the date of the taxable event.

The central issue in the proceedings is whether a property in full (or vertical) ownership, consisting of divisions susceptible to independent use, whose VPT was determined separately, pursuant to Article 7, no. 2, subsection b) of the CIMI, is subject to the incidence of IS, by virtue of the provision in item 28.1 of the TGIS, on the sum of the VPT of those divisions, when none of the said divisions possess a VPT exceeding €1,000,000.00, but the sum of their respective VPT exceeds this amount.

From the argumentative framework presented by the parties, it is concluded that for the AT, the criterion for determining the incidence of IS provided for in item 28.1 of the TGIS for properties in full (or vertical) ownership, with apartments and divisions with independent use with residential purpose, corresponds to the sum of the respective VPT attributed to the parts or divisions. This understanding is what led to the IS assessments challenged here and which the Claimant contests, by contending that such judgment is illegal, which motivated the submission of the present request for constitution of an Arbitral Tribunal.

This question has already been subject to recurrent consideration in arbitral proceedings, and there is consistent jurisprudence to the effect of a negative response, which may be seen, by way of example, in the decisions issued in cases nos. 48/2013-T, 49/2013-T, 50/2013-T, 53/2013-T, 132/2013-T, 181/2013, 183/2013-T, 248/2013-T and 280/2013-T, 30/2014-T, 497/2014-T, 575/2014-T, among others. And, with heightened relevance to the decision of the case in question in the proceedings, the recent arbitral decision no. 740/2014-T is noteworthy, in which an identical question of law and fact was decided, relating to IS assessed to this same property with reference to the year 2014. We adhere, without doubt, to the jurisprudence contained in the arbitral decisions above referenced, which are merely illustrative of the direction of decision that has been followed on this same issue.

Moreover, on the same basis the Supreme Administrative Court (STA) has pronounced, in Decision of 09-09-2015, with His Excellency Judge Counselor Francisco Rothes as rapporteur, in which it was decided:

"I - With respect to properties in vertical ownership, for purposes of incidence of Stamp Duty (Item 28.1 of the TGIS, as amended by Law no. 55-A/2012, of 29 October), the subjection is determined by the combination of two factors: residential purpose and the VPT shown in the register equal to or exceeding € 1,000,000.

II - Where a property is constituted in vertical ownership, the incidence of IS should be determined, not by the VPT resulting from the sum of the VPT of all divisions or floors susceptible to independent use (individualized in the registry entry), but by the VPT attributed to each of these floors or divisions intended for housing."[1]

Notwithstanding the above, the Respondent AT has maintained the understanding set forth in the present proceedings, contending for an interpretation based on formal concepts, particularly with respect to the concept of property for purposes of IS incidence.

Now, on the fundamental question at hand, it should be said that the first limit of interpretation is the letter of the law, but not the only one. The interpretive task requires something more, that is, from the text of the norm one must undertake the discovery of the "ratio legis" underlying it, a "task of interconnection and assessment that escapes the literal domain"[2], in other words "the jurist must always have before his eyes the purpose of the law, that is, the practical result that it proposes to achieve".[3] In this conformity, the question centers on the interpretation of the incidence norm, as it is expressed in the legal provision of items 28 and 28.1 of the TGIS, referring to the "ownership, usufruct or right of superficies of urban properties, with residential purpose (28.1) whose tax property value shown in the register, pursuant to the CIMI, is equal to or greater than 1,000,000.00 euros – on the tax property value used for purposes of Property Tax".

Now, it appears that such legal provision does not support the understanding adopted by the AT, insistent and repeatedly, according to which as to properties "with residential purpose" in vertical ownership, with apartments or divisions susceptible to independent use, the VPT on which the IS rate should be applied should be the total VPT, corresponding to the sum of the VPT individually attributed to each unit, part or independent division. Such understanding is, from the outset, contradicted by the very letter of the law, when it unequivocally refers to the application of the principles in effect for purposes of Property Tax, which means that the incidence for purposes of IS – items 28 and 28.1 of the TGIS – should apply to each apartment or division susceptible to independent use (similarly to what occurs with properties in a regime of horizontal ownership), as occurs for purposes of Property Tax.

For purposes of Property Tax, each part or division susceptible to independent use is, as we know, taxed individually, based on the individual VPT attributed for this purpose. The reference to the CIMI, which the legislator introduced, expressly and unequivocally, in the letter of the law (items 28 and 28.1 of the TGIS) can only have one meaning, which offers no doubt: it is that same VPT (individual, of each part or independent division) that is the reference for purposes of the IS incidence established in items 28 and 28.1 of the TGIS.

On this point, recall the reasoning contained in Arbitral Decision no. 280/2013-T, particularly synthetic and precise, to which we adhere:

"The legal question to be resolved in the first place is whether, in accordance with the provision in item 28.1 of the TGIS, the sum of the VPT of each of the parts or divisions susceptible to independent use should be considered, since none of them has a value equal to or exceeding €1,000,000.00;

Having in mind that the CIS refers to the CIMI for the regulation of the concept of property and of matters not regulated regarding item 28 of the TGIS (no. 6 of Article 1 and no. 2 of Article 67, both of the CIS), it is in the CIMI that we must observe the concepts that will allow us to resolve the question; (our emphasis)

The generalist concept of property is contained in Article 2 of the CIMI. In Article 3 of the same decree the legislator, using criteria of purpose and location, established the concept of rural properties, subsequently, in a classification by negation, in Article 4 thereof, establishing that urban properties will be all those that should not be classified as rural;

In no. 2 of Article 5 of the same Code the legislator establishes the concept of mixed properties which will be those in which there exist distinct rural and urban economic realities and there is no subordination of one to the other;

Article 6 of the cited CIMI divides urban properties into: residential, commercial, industrial or service properties, building land and others;

In the specific case we are in the presence of an urban property with parts or divisions susceptible to independent use with residential purpose and others with commercial purpose, it is a property with parts that can be classified in the residential division of subsection a) of no. 1 of Article 6 and with parts that can be classified in subsection b) of the same no. and article, but by no means will it be a mixed property in the concept established in the already cited Article 5 of the CIMI;

Each of the parts or divisions susceptible to independent use that compose the property in question meets the concept of property established in Article 2 of the CIMI, they are physically and economically independent and form part of the assets of a legal entity;

Indeed the AT in excluding the VPT of parts or divisions with purpose other than residential, for purposes of taxation in IS, did nothing more than use the criterion defined in no. 4 of Article 2 of the CIMI for properties in a regime of horizontal ownership;

In other words, the AT, in order to make that exclusion, considered that the parts or divisions susceptible to independent use were true autonomous parts of property in vertical ownership meeting the concept of property;

And did nothing more than comply with what is provided in no. 3 of Article 12 of the CIMI: "each floor or part of property susceptible to independent use is considered separately in the registry entry, which also identifies its respective tax property value.

Likewise the AT in making the taxation in Property Tax did so by separately taxing the VPT of each of the parts or divisions susceptible to independent use;

The AT used the same criterion in the taxation in IS, in calculating it on the VPT of each of the parts or divisions with independent use with residential purpose, except that finally it considered the global VPT, finding it to be greater than €1,000,000.00 and summed the IS amounts calculated individually;

But this procedure has no legal support, since none of the parts or divisions with independent use with residential purpose, each one meeting the concept of property enunciated in Article 2 of the CIMI, has a VPT equal to or exceeding € 1,000,000.00, a requirement necessary for there to be taxation in IS;

Making the taxation in IS considering the global VPT of the property, even excluding the VPT of the parts or divisions not intended for housing, as the respondent contends, finds no support in the CIMI, pursuant to the reference in no. 2 of Article 67 of the CIS;

Nor should it be said that there is a different assessment and taxation of a property in full ownership with parts or divisions susceptible to independent use, compared to a property in horizontal ownership. In truth, it does not exist in Property Tax just as it cannot exist in IS, since, as has been said, the applicable legislation is the same;

In this perspective and considering that none of the parts or divisions susceptible to independent use intended for or intended for housing has VPT equal to or exceeding €1,000,000.00, it is necessary to conclude that the acts of assessment of IS are illegal for not having observed the conditions defined in item 28 of the TGIS."

The same understanding results from the Decision of the STA, of 09-09-2015, already mentioned above, and therefore the thesis defended by the AT cannot prevail.

A proper reading of the scope of the provision of the incidence norm of items 28 and 28.1 of the TGIS, in light of what no. 7 of Article 23 of the CIS permits to conclude regarding the determination of the taxable matter and the subsequent operation of duty assessment: "Where the duty is due for the situations provided for in item no. 28 of the General Schedule, the duty 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 CIMI."

Now, no. 3 of Article 11 of the LGT further provides: "where doubt persists about the meaning of the incidence norms to apply, regard must be had to the economic substance of the taxable facts".

In the case in question, the correct interpretation of the legal norm contained in items 28 and 28.1 of the TGIS must have regard to the "economic substance of the taxable facts" to properly implement the "necessary adaptations of the rules contained in the CIMI" for the adequate appreciation of the matter of law in discussion. Not forgetting respect for the "unity of the legal system", which is required, from the outset, by the coherent or axiomatic evaluation of the legal order". This is, without doubt, a determining factor for a correct interpretation of the legal norm. Now, the legislator expressed coherently its thinking on this matter by introducing a comprehensive reference to the principles contained in the CIMI.

The delimitation of the scope of the incidence norm of this new tax should follow the guidance of the letter and spirit of the law. In the first place, regard must be had, therefore, to what is expressly provided in items 28 and 28.1 of the TGIS, with the "necessary adaptations of the rules contained in the CIMI", as results from the provision in no. 7 of Article 23 of the CIS. It is also important to note that the subjection to IS of properties with residential purpose resulted from the addition of item 28 to the TGIS, made by Article 4 of Law 55-A/2012, of 29/10, which typified the following taxable facts:

"28 – Ownership, usufruct or right of superficies of urban properties whose tax property value shown in the register, pursuant to the Property Tax Code (CIMI), is equal to or greater than € 1,000,000.00 – on the tax property value for purposes of Property Tax:

28-1 – For property with residential purpose – 1%

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

Law 55-A/2012 says nothing about the qualification of the concepts in question, in particular regarding the concept of "property with residential purpose." But Article 67, no. 2 of the CIS, added by the said Law, provides that "for matters not regulated in the present code concerning item 28 of the General Schedule, the CIMI applies subsidiarily." (our emphasis)

The incidence norm therefore refers to urban properties, the concept of which results from Article 2 of the CIMI, with the determination of the VPT following the terms of Article 38 and following of that code. Consulting the CIMI it is found that its Article 6 merely indicates the different types of urban properties, among which it mentions residential (see subsection a) of no. 1), clarifying in no. 2 of the same article that "residential, commercial, industrial or service properties are buildings or constructions licensed for such purpose or, in the absence of a license, that have as their normal purpose each of these ends."

From the regulatory provisions referenced we can conclude that, from the legislator's point of view, what matters is not the legal-formal accuracy of the concrete situation of the property (it is immaterial whether it is in vertical or horizontal ownership) but rather its normal use, the purpose to which the property is actually intended.

It thus follows that, for the legislator, the situation of the property in vertical or horizontal ownership did not matter, since no reference or distinction is made between them. The same conclusion is drawn from the reference that the legislator introduced regarding IS to the CIMI. Now, this tax establishes as a criterion for properties in vertical ownership the attribution of a VPT to each one of the independent parts or divisions. What matters is, therefore, the material truth underlying its existence as an urban property and its use, that is, "with residential purpose".

Using the criterion that the law itself introduced in Article 67, no. 2 of the CIS, "for matters not regulated in the present code concerning item 28 of the General Schedule, the CIMI applies subsidiarily."

From the provision in no. 4 of Article 2 of the CIMI, it results that "For purposes of this tax, each autonomous unit, in a regime of horizontal ownership, is deemed to constitute a property." Adding further, no. 3 of Article 12 of the CIMI that "Each floor or part of property susceptible to independent use is considered separately in the registry entry, which also identifies the respective tax property value".

Thus, the understanding adopted by the AT appears to be nonconformant with the letter and spirit of the norm, and therefore the challenged assessments are tainted by a defect of violation of law, by manifest error as to the factual and legal presuppositions. Moreover, this solution is the one that results from the application of the infraconstitutional rules themselves, and therefore the alleged unconstitutionality is not relevant to the legal decision, as indeed results from the constitutional jurisprudence invoked by the AT, mentioned above in the present proceedings.

Thus, what is in question is the interpretation that the AT makes of the incidence norm, which is not in accordance with what is established in the incidence norm. Moreover, the practical result of this interpretation, recommended by the AT, would lead, for example, to the taxation of a property in vertical ownership by virtue of the sum of the individual values of its independent parts or divisions (as occurs in the case of the proceedings) whereas, if it were constituted in a regime of horizontal ownership, none of its units would be taxed. Moreover, by the AT's understanding we would be led to tax apartments or divisions (units) susceptible to independent use of modest values (example of the proceedings) knowing that the same legislator excluded from taxation units of properties constituted in a regime of horizontal ownership, even if each unit had a VPT of €999,999.00. Such interpretation, besides being absurd, is totally contrary to the purpose that led the legislator to insert item 28 in the TGIS. In other words, the historical element also leads us to an understanding different from that defended by the AT.[4]

The resort to the ratio legis and to the principles of interpretation above set forth point in the direction opposite to that defended by the Respondent. If the property in question in the present proceedings were already constituted in a regime of horizontal ownership, none of its residential units would suffer the incidence of the tax. And, as has been stated, the legislator's thinking expressed in the incidence norm, by referring to the application of the CIMI, was clear and unequivocal, following the principle of the prevalence of material truth over legal-formal reality and the uniformity of the legal system.

Finally, it should only be added this: even if, hypothetically, it were concedible that in cases of properties in full (or vertical) ownership, consisting of divisions susceptible to independent use, one could require IS by the entirety of the property, if the value fixed in item 28.1 of the TGIS were reached, always such value would have to be fixed autonomously, through its own assessment, and not through the sum of the values in which each one of the parts susceptible to independent use was autonomously assessed. Indeed, and as is easy to see, the "market value" of the whole will not necessarily – and will not be, as a general rule – equal the sum of the parts, it being notoriously easier and more lucrative (which may even constitute part of the economic basis of the institute of horizontal ownership) to sell "in parts" than to sell the whole as a whole, foremost from the enlargement of the market, which the substantially lower price of the parts in relation to the whole brings. Indeed, it is this increase in economic value resulting from the division that will justify an independent assessment of each autonomous part of the property in vertical ownership, so as to ensure that there is no less fiscal revenue in Property Tax and Property Transfer Tax, due to the fact that the division of the property does not have a legal counterpart in the form of horizontal ownership. In other words, the partition of the property always carries an increase in the value of the whole, since the "market value" of the whole will be (at least) generally lower than the "market value" of the parts, separately. Wherefore, at the limit, if the AT purported legitimately to apply item 28.1 of the TGIS to a property in full (or vertical) ownership, consisting of divisions susceptible to independent use, it would always be obliged to make an assessment of it as a whole (which was a credible approximation to its "market value" in "gross") and not as a sum of the parts (in "retail"), foremost because these are not susceptible to being validly placed on the "market" separately.

Returning to the case of the present proceedings, the property in question is in vertical ownership and contains apartments and divisions with independent use, intended for housing, as was proven. Given that none of the independent parts intended for housing has a tax 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 of incidence of IS provided for in item 28.1 of the TGIS has not been met.

Thus, presenting the AT no basis and not discerning officiosamente any reason to depart in a reasoned manner from the arbitral jurisprudence cited, as well as from the jurisprudence of the STA already mentioned, with the additions formulated above, we adhere, without further consideration, to the cited jurisprudence, finding the arbitral request formulated in the present case to be well-founded.

V - Statutory Interest

The Claimant accumulates, with the request for annulment of the tax acts object of the present proceedings, the request for condemnation of the AT in the payment of statutory interest.

Given the success of the request for annulment, the amounts paid should be reimbursed to the Claimant, relating to the tax acts annulled. In the case in question, it is manifest that the illegality of the assessment acts, whose amount the Claimant paid, is attributable to the AT, which by its initiative carried them out without legal support.

Consequently, the Claimant is entitled to statutory interest, pursuant to Articles 43, no. 1, of the LGT and 61 of the CPPT. Statutory interest is due from the date of the payments made and calculated on the basis of the respective amount, until full reimbursement to the Claimant, at the legal rate, pursuant to Articles 43, nos. 1 and 4, and 35, no. 10, of the LGT, 61 of the CPPT and 559 of the Civil Code and Regulation no. 291/2003, of 8 April (without prejudice to any subsequent changes to the legal rate).

In accordance with the provision in subsection b) of Article 24 of the RJAT, the arbitral decision on the merits of the claim to which no appeal or challenge is available binds the tax administration from the end of the period provided for the appeal or challenge, and this, in the exact terms of the success of the arbitral decision in favor of the taxpayer and up to the end of the period provided for the spontaneous execution of the decisions of the judicial tax courts, must "re-establish the situation that would have existed if the tax act object of the arbitral decision had not been carried out, adopting the acts and operations necessary for this purpose", which is in keeping with the provision in Article 100 of the LGT [applicable by virtue of the provision in subsection a) of no. 1 of Article 29 of the RJAT] which establishes that "the tax administration is obliged, in case of total or partial success of a claim, judicial challenge or appeal in favor of the taxpayer, to immediately and fully re-establish the legality of the act or situation object of the dispute, comprising the payment of statutory interest, if applicable, from the end of the period for execution of the decision".

Although Article 2, no. 1, subsections a) and b), of the RJAT uses the expression "declaration of illegality" to define the competence of arbitral tribunals operating in the CAAD, making no reference to condemnatory decisions, it should be understood that the competences include those powers that in judicial challenge proceedings are attributed to tax courts, and this is the interpretation that is consonant with the direction of the legislative authorization on which the Government based the approval of the RJAT and in which it proclaims, as a first guideline, that "the arbitral tax procedure must constitute an alternative procedural means to the judicial challenge procedure and to the action for recognition of a right or legitimate interest in tax matters".

The judicial challenge procedure, despite being essentially a process of annulment of tax acts, permits the condemnation of the tax administration in the payment of statutory interest, as is deduced from Article 43, no. 1, of the LGT, in which it is established that "statutory interest is due when it is determined, in a gracious claim or judicial challenge, that there was error attributable to the services that resulted in payment of the tax debt in an amount exceeding what was legally due" and from Article 61, no. 4 of the CPPT (as amended by Law no. 55-A/2010, of 31 December, to which corresponds no. 2 in the original version), that "if the decision that recognized the right to statutory interest is judicial, the period for payment is counted from the beginning of the period for spontaneous execution".

Thus, no. 5 of Article 24 of the RJAT in stating that "payment of interest, regardless of its nature, is due in accordance with the terms provided for in the general tax law and in the Tax Procedure and Process Code" should be understood as permitting the recognition of the right to statutory interest in the arbitral process. In the case in question, it is manifest that, following the declaration of illegality and consequent annulment of the challenged assessment acts, there is grounds for reimbursement of the tax, by virtue of the aforementioned Articles 24, no. 1, subsection b), of the RJAT and 100 of the LGT, for this is essential to "re-establish the situation that would have existed if the tax act object of the arbitral decision had not been carried out", in the part corresponding to the correction that was deemed illegal.

The AT should therefore give execution to the present arbitral decision, pursuant to Article 24, no. 1, of the RJAT, and reimburse to the Claimant the amounts paid plus the respective statutory interest, at the legal rate applicable to civil debts, pursuant to Articles 35, no. 10, and 43, nos. 1 and 5, of the LGT, 61 of the CPPT, 559 of the Civil Code and Regulation no. 291/2003, of 8 April (or decree or decrees that supersede it).

Statutory interest is due from the dates of the payments made up to the date of processing of the credit note, in which they are included (Article 61, no. 5, of the CPPT).

VI - DECISION

Accordingly, this Arbitral Tribunal decides:

a) To find the arbitral request formulated well-founded in its entirety and, in consequence, to annul all the assessments object of the present proceedings;

b) To condemn the AT to reimburse to the Claimant the amounts of Stamp Duty paid, plus statutory interest, to be calculated from the date on which payment was made until full reimbursement;

c) To condemn the AT to pay the costs of the proceedings, in the amount of €918.00.

VALUE OF THE PROCEEDINGS

The value of the proceedings is fixed at €15,518.40, pursuant to Article 97-A, no. 1, a), of the CPPT, applicable by virtue of subsections a) and b) of no. 1 of Article 29 of the RJAT and of no. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

COSTS

The amount of the arbitration fee is fixed at €918.00, pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the unsuccessful party, pursuant to Articles 12, no. 2, and 22, no. 4, both of the RJAT, and Article 4, no. 4, of the aforementioned Regulation.

Notify.

Lisbon, 6 March 2017

The Arbitral Tribunal,

(Maria do Rosário Anjos)

[1] See Decision of STA, of 09-09-2015, issued in case no. 047/15, available at www.dgsi.pt)

[2] On this point, see BAPTISTA MACHADO (1983) Introduction to Law and Legitimizing Discourse, Almedina Coimbra, pp. 181 et seq.

[3] On this point, see FRANCESCO FERRARA, Interpretation and Application of Laws – translated by Manuel A. Domingues de Andrade (1978) 3rd edition, Arménio Amado – Editor Successor, Coimbra, p. 137 et seq. Or further, in the same sense, see Manuel A. Domingues de Andrade, in Essay on the Theory of Interpretation of Laws. Collection Stvdivm, Philosophical, Legal and Social Themes (1978) 3rd edition, Arménio Amado – Editor Successor, Coimbra, p. 23 et seq.

[4] This same conclusion is drawn from analysis of the discussion of bill no. 96/XII in the Assembly of the Republic, available for consultation in the Diary of the Assembly of the Republic, I series, no. 9/XII/2, of 11 October 2012. The justification for the measure designated "special tax on urban residential properties of higher value" is based on the invocation of the principles of social equity and fiscal justice, calling on the holders of properties of high value intended for housing to contribute more intensively, applying the new special tax to "houses with value equal to or exceeding 1 million euros."