Summary
Full Decision
ARBITRAL DECISION
The Arbitrators José Baeta de Queiroz, António Alberto Franco and Nuno de Oliveira Garcia, appointed by the Ethics Council of the Centre for Administrative Arbitration to form the present Arbitral Tribunal, hereby decide as follows:
I – REPORT
-
A…, SA, NIPC…, with registered office at …, no.…, …-… Lisbon, in representation of B…, NIPC … (hereinafter referred to only as Claimant), presented, on 28-07-2016, a request for constitution of the arbitral tribunal, pursuant to Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in conjunction with Article 102 of the Tax Code of Tax Procedure and Process (CPPT), in which the Tax and Customs Authority is named as Respondent (hereinafter referred to only as Respondent).
-
The Claimant seeks, through its request, a declaration of illegality of the stamp tax assessment acts, relating to the year 2015, bearing nos. 2016…, 2016… and 2016…, with the consequent reimbursement of the tax improperly paid, as well as recognition of the right to compensatory interest.
-
The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 29-07-2016.
3.1. The Claimant did not proceed with the appointment of an arbitrator, therefore, pursuant to paragraph a) of subsection 2 of Article 6 and paragraph b) of subsection 1 of Article 11 of RJAT, the President of the Ethics Council appointed the undersigned arbitrators of the collective arbitral tribunal, who communicated their acceptance of the appointment within the prescribed period.
3.2. On 03-10-2016 the parties were notified of the appointment of the arbitrators, with no impediment being raised.
3.3. In accordance with the provision in paragraph c) of subsection 11 of RJAT, the collective arbitral tribunal was constituted on 19-10-2016.
3.4. Accordingly, the Arbitral Tribunal is regularly constituted to hear and decide the subject-matter of the proceedings.
- To support the request for arbitral ruling the Claimant alleges, in summary, the following:
a) In the context of its activities, it is the owner of various properties, including residential buildings, commercial properties and land for construction.
b) The assessments in question concern the urban property with registration number…, in the parish of…, municipality of Porto, which, as results from the respective property record was registered in the matrix as "land for construction".
c) The stamp tax assessments in question, all relating to the year 2015, result (allegedly) from the application of Article 1, subsection 1 of the Stamp Tax Code, combined with item 28.1 of TGIS and with Article 6 of Law No. 55-A/2012, of 29 October, which provides for the taxation of "Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value contained in the matrix, pursuant to the Code of Municipal Tax on Real Estate (CIMI), is equal to or exceeding € 1,000,000 - on the tax patrimonial value used for the purpose of IMI - per residential property or per land for construction whose construction, authorized or planned, is for housing, pursuant to the provisions of the IMI Code" (cited) – with the new wording conferred on the item.
d) Law No. 55-A/2012, of 29-10-2012, among other amendments, added to TGIS the respective item 28, pursuant to which Stamp Tax became to apply to:
- "ownership, usufruct or right of superficies of urban properties whose tax patrimonial value contained in the matrix, pursuant to the Code of Municipal Tax on Real Estate (CIMI), is equal to or exceeding € 1,000,000:
28.1 - Per residential property or per land for construction whose construction, authorized or planned, is for housing, pursuant to the provisions of the IMI Code - 1%;
28.2 - Per property, when taxpayers that are not residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ministerial decree of the Minister of Finance - 7.5%".
e) Through item 28 of TGIS, the Government intended to institute a special taxation that applies only to urban properties with a value exceeding one million euros.
f) From a teleological perspective, the said item aimed to tax wealth and the economic capacity of taxpayers.
g) Item 28.1 of TGIS, in its current wording, provides for the taxation of "land for construction whose construction, authorized or planned, is for housing" whose tax patrimonial value is equal to or exceeding € 1,000,000.00, which resulted from the amendments introduced by Law No. 83-C/2013, of 31 December, which came into force on 1 January 2014.
h) The taxable event generating Stamp Tax is constituted by three cumulative requirements, specifically:
i. Ownership of the real right over the property;
ii. The tax patrimonial value of the property; and,
iii. An "authorized or planned construction" for "housing".
i) The taxation in question will only be applicable in situations where the actual construction of the land has been authorized or planned in the specific case and that such construction is intended for housing, therefore, and contrary to the understanding of the Tax and Customs Authority, the mere registration of the property in the matrix as "land for construction" does not justify the application of item 28 of TGIS.
j) In fact, and although the Tax and Customs Authority has come to apply this taxation – in a blanket manner – to any and all property registered as "land for construction", a prior analysis will always be necessary to conclude, on a case-by-case basis, whether there exists for each land an actual construction authorized or planned for housing.
k) The fact that a "land for construction" is located in an area where – according to the respective Municipal Master Plan – it is possible to construct and that such (permitted) constructions can be intended for housing, cannot by itself generate the application of item 28 of TGIS, because, as José Manuel Fernandes Pires states, Lectures on Taxes on Assets and Stamp, Coimbra, Almedina, 3rd Edition, pp. 110-111:
"The right to construct is not inherent to the right of ownership, but only arises anew in the property of the owner when an administrative act of the competent public entity recognizes and authorizes it" (cited).
l) With regard to the property in question in the present request, it did not have in 2015 – and does not currently have – an "authorized or planned construction" for housing, as required by item 28.1 of TGIS, nor any valid building license/authorization or any approved project, to which is added the circumstance that the Claimant has no intention of devoting this property to any type of construction or urban planning project.
m) In these circumstances, attending to the situation of the property in question, the taxation provided for in item 28.1 of TGIS could not have been applied in this case, given that its requirements of application were not met.
n) In accordance with decisions rendered by an Arbitral Tribunal, "the incidence of the tax, for the purposes of item 28.1, is only materialized with the verification of 'actual allocation'".
o) Without dispensing with the foregoing, the Claimant alleges that, given the activities it develops, it is the owner of multiple real estate properties, which are used by it in the context of its activities, being intended only to be (re)sold in the exact terms in which they were acquired.
p) The ownership of the right of property over these real estate properties – namely, land for construction – cannot ever represent a superior contributory capacity of the Claimant, as the Tax and Customs Authority contends.
q) It invokes, as a subsidiary argument, that the special taxation provided for in item 28.1 of TGIS, when applied to land for construction, is contrary to the fundamental principle of equality, enshrined in Article 13 of the Constitution of the Portuguese Republic and, in parallel, contrary to the principle of fiscal equality and contributory capacity enshrined in Article 104, subsection 3 of the same statute.
r) In matters of fiscal equality, contributory capacity is assumed to be an essential element to be weighed, insofar as the actual fiscal equality of treatment of taxpayers will depend on the existence of identical taxation for identical contributory capacities.
s) It is constitutionally forbidden to the ordinary legislator to create norms arbitrarily, and the same must be submitted to the requirements of equalization and positive discrimination, as the case may be.
t) In the terms set forth, item 28 of TGIS and the special taxation resulting therefrom promote differentiated treatment and an unjustified inequality among taxpayers, in manifest violation of the principle of equality enshrined in Article 13 of the CRP.
u) It highlights, among the extensive case law of the Constitutional Court, that:
"only those choices of regime made by the ordinary legislator can be censured on the grounds of infringement of the principle of equality in those cases where it is proved that they result in different treatment between persons that does not find justification in reasonable, perceptible or intelligible grounds, having regard to the constitutional purposes that, with the measure of the difference, are pursued" (cited).
v) The ownership of 'high-value properties' allocated/intended for housing does not by itself reveal greater contributory capacity than the ownership of 'high-value properties' allocated/intended for other purposes, and moreover this special taxation, in the manner in which it was implemented – by applying to urban properties, taken individually – fails to effectively penalize or aggravate all owners who have a real estate portfolio of high value and who, as such, demonstrate a superior contributory capacity.
w) Furthermore, item 28 TGIS in question also collides with the constitutional principle of fiscal equality by determining a manifest situation of double taxation, by determining double taxation of the same taxable event: the ownership of a real right (taxation in IMI and in Stamp Tax).
x) By making it depend only on the tax patrimonial value of the land itself, without providing any limitation to its application depending on the value of the authorized or planned housing, item 28.1 of TGIS should be judged materially unconstitutional, for infringement of the principle of equality enshrined in Article 13 of the CRP, because it seeks to apply to "land for construction" with tax patrimonial value equal to or exceeding € 1,000,000.00, for which the authorized or planned construction does not include any real estate (independent fraction or other) with tax patrimonial value equal to or exceeding that amount.
y) The case law of the Constitutional Court that has already pronounced itself on the compliance of item 28.1 of TGIS with the CRP cannot be considered in the present proceedings, since it concerns the assessment of the (un)constitutionality of the norm when applied to residential properties – and not when applied to "land for construction", as the properties in question here.
z) Concludes, therefore, the Claimant by the illegality of the assessments subject to the arbitral request.
- The Tax and Customs Authority submitted a reply, invoking in summary, the following:
a) Stamp Tax is defined as an indirect tax that applies to the formalization of legal acts or to taxable events, provided for in TGIS and practiced in the national territory, thus presenting itself today as a "tax on operations which, regardless of their materialization, reveal income or wealth" (cited).
b) With regard to item 28.1 of TGIS it is an undeniable fact that its new wording, amended by Law No. 83-C/2013, of 31 December, expressly expanded its scope of application to land for construction, which had not been the case with Law No. 55-A/2012, of 29 October.
c) To this new wording, predictably for reasons of legal certainty and security, no interpretative nature was attributed, which prevents its application to taxable events occurring prior to the date of its entry into force (which is not the case in the present matter).
d) What Law No. 55-A/2012 aimed to tax was the wealth arising from real estate ownership by subjecting Stamp Tax to the ownership and other real rights over urban properties with tax patrimonial value equal to or exceeding 1,000,000.00 € and not properly luxury, this because wealth and luxury are concepts that do not necessarily overlap.
e) Through Article 192 of the Bill for the State Budget for 2014, the legislator amended item 28 of TGIS, to expand its objective scope of application, there being expressly determined that the Stamp Tax of 1% on the ownership, usufruct or right of superficies of urban properties with residential allocation, with tax patrimonial value exceeding one million euros, should equally apply to land for construction, whose authorized or planned construction is for housing.
f) The assessment in question was promoted already within the scope of the new legal framework, that is, the expression "land for construction" which did not appear in Law No. 55-A/2012 now expressly appears in Law 83-C/2013, no interpretive difficulties resulting from this amendment as to the subjection of the same to taxation.
g) Since, in light of Article 9 of the Civil Code, the interpreter cannot consider the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, albeit imperfectly expressed.
h) Moreover, in determining the meaning and scope of the law, the interpreter will presume that the legislator adopted the most appropriate solutions and knew how to express his thinking in adequate terms.
i) Furthermore, not only is the TA bound by the principle of legality, but also taxpayers must conform to the existence of the factual requirements described in the law and to the recognition of the legal effects that, according to it, derive therefrom.
j) As to the question of the alleged lack of coherence of the tax system resulting from the simultaneous taxation – in the person of the same taxpayer – of real rights in IMI and in Stamp Tax and consequent unconstitutionality for violation of the principles of equality and contributory capacity, the allegations of the claimant should fail.
k) We are in situations where the legislator intended that the same taxable event be subject to the incidence of more than one tax, which is not only non-illegal, but can be desired by the legislator.
l) The new wording of item 28 of TGIS was intended to be a measure of redistribution of wealth, however, although the object of taxation is the same – the urban property – the fact is that the taxes in question have distinct bases and objectives, and it is certain that there are other realities subject to diverse taxes.
m) One cannot, therefore, speak of incoherence of the system because what systemic coherence requires is that taxes can be organized and have internal logic in the tax system and, in this case, it is not foreseeable how this same logic is impaired.
n) On the other hand, the prevalence of equality as a supreme value of the legal order must be reconciled in each case with the freedom that is held by the legislator to weigh the various interests at stake and differentiate their treatment in the event that it is deemed justified.
o) Item 28 of TGIS is a general and abstract norm, applicable uniformly to all cases in which the same factual and legal requirements are met and is applied uniformly to all owners of real estate with residential allocation worth more than 1,000,000.00 € that applies, therefore, to the wealth embodied and manifested in the value of real estate.
p) The principle of equality, interpreted in material terms, is not violated, but rather is furthered in all cases in which the legal order gives equal treatment to those who, as stated in Article 161 of CPTA, are in the same legal situation.
q) Concludes, therefore, the Respondent by the legality of the Stamp Tax assessment acts contested by the Claimant which should, therefore, be maintained.
-
By order of 12-12-2016, the meeting provided for in Article 18 of RJAT was dispensed with.
-
The date of 31 March was set as the deadline for the rendering of the arbitral decision.
-
The Parties did not submit further pleadings.
II – CASE CLEARANCE
8.1. The tribunal is competent and is regularly constituted.
8.2. The parties have legal personality and capacity, show themselves to be legitimate and are regularly represented (Articles 4 and 10, subsection 2, of RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March).
8.3. The proceedings do not suffer from nullities.
8.4. No exceptions have been raised that prevent consideration of the merits of the case.
III – FACTS AND LAW
III.1. Facts
- Facts
9.1. Given the positions taken by the parties and the documentary evidence joined to the proceedings, the following facts with relevance to the decision are considered proven:
a) In the context of its activities, the Claimant is the owner of various properties, including residential buildings, commercial properties and land for construction;
b) The Stamp Tax assessments in question concern the urban property with registration number…, in the parish of…, municipality of Porto;
c) Property that in the year 2015 was registered in the matrix as land for construction, appearing in the property record: "Type of location coefficient: Housing";
d) Not having, in that year, any construction, authorized or planned for housing, nor any valid building license or authorization or any approved project;
e) The Respondent proceeded, on 24-05-2016 and 03-07-2016, with the payment of the first two installments of the tax assessed, and did not pay the 3rd installment, whose payment deadline ended on 30-11-2016;
9.2. Basis for the facts:
The facts given as proven are based on a critical examination of the documentary evidence presented and not contested, which is hereby reproduced for reference.
9.3. There are no other facts with relevance to the assessment of the merits of the case that have not been proven.
III.2. Legal Issues
As appears from the initial request – in particular p. 11 et seq. – the Claimant manifested its disagreement with the impugned acts, on the grounds that item 28 of TGIS suffers, in the segment that matters to the case, from unconstitutionality, for violation of the principles of equality, contributory capacity, and the prohibition of double taxation, it being relevant for this that what is at issue in the present arbitral proceedings is a real estate investment fund, whereby the property on which the taxation fell is an investment asset, allocated to real estate operations, intended to achieve the object of the fund, and not representing a superior capacity to contribute to the average.
Let us then see:
As is known, properties with residential allocation became subject to Stamp Tax by virtue of item 28 of TGIS, added by Article 4 of Law 55-A/2012, of 29 October, in the following terms:
"28 – Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value contained in the matrix, pursuant to the Code of Municipal Tax on Real Estate (CIMI), is equal to or exceeding € 1,000,000.00 – on the tax patrimonial value used for the purpose of IMI:
28.1 – Per residential property – 1%
28.2 – Per property, when taxpayers that are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ministerial decree of the Minister of Finance – 7.5%" (cited).
It happened that Law No. 83-C/2013, of 31 December, effective as of 1 January 2014 and, therefore, applicable to the present proceedings, amended the wording of item 28.1, which came to read:
"Per residential property or per land for construction whose authorized or planned construction is for housing, pursuant to the provisions of the IMI Code" (cited).
Thus, the controversy was resolved as to whether or not land for construction with residential allocation fell within the said item. That is, as of 2014, it is certain that land for construction are considered properties with residential allocation, subject, pursuant to Ordinary Law, to Stamp Tax.
But this does not mean that the doubt about the constitutionality of the norm has been resolved.
In fact, precisely one arbitral tribunal, constituted within the scope of CAAD, has already decided, in case No. 507/2015-T, that:
"item 28.1 of TGIS, in the wording given by Law No. 83-C/2013, of 31 December, is materially unconstitutional, insofar as it subjects Stamp Tax to taxation on the ownership of land for construction whose tax patrimonial value contained in the matrix, pursuant to the Code of Municipal Tax on Real Estate (CIMI), is equal to or exceeding € 1,000,000, with respect to which the authorized or planned construction does not include any individual housing of equal or greater value, as well as insofar as it applies to situations in which the land for construction belongs to companies that engage in the commercialization of land for resale" (cited).
Other arbitral tribunals, also within the scope of CAAD, have pronounced themselves in the opposite sense – among others and notably, see the awards issued in cases 495, 515 and 516/2015-T.
The question remains, therefore, under controversy, and the case law of the Constitutional Court, which in these cases cannot fail to serve as the principal support, has not been decisive. This venerable Court, having already adjudicated on the constitutionality of the TGIS item in question, has not yet pronounced itself, at least to the knowledge of this Arbitral Tribunal, on the specific case of land for construction with residential allocation…
In any case, it is useful to recall here excerpts of what the Constitutional Court said on 11 November 2015 in case No. 542/14:
"[…) from the inclusion of the taxation in question within the scope of Stamp Tax, and not other types of taxes, does not result, in itself, an infringement of any parameter of constitutionality. Even if it were to conclude that the introduction of a factor of incoherence, or even imbalance, in the system of taxation of real estate property, as the appellant contends, the mere unsystematic nature of the questioned norm is not capable of determining constitutional censure (cf., even if in other fields of regulation, Awards No. 353/2010 and 324/2013)" (...) "Other avenues can certainly be conceived within the reach of the legislator, possibly by resorting to other types of taxes, but it is no less certain that the option taken is inscribed in the broad margin of conformance of the fiscal legislator, being incapable of founding autonomous constitutional censure" (cited).
And:
"Also, in the norm of incidence in question, there is found no arbitrary fiscal measure, because devoid of rational foundation. As seen, the legislative amendment was intended to expand the taxation of property, making it fall more intensely on property that, by its value substantially higher than that of the generality of urban properties with residential allocation, reveals greater indicators of wealth and, as such, is capable of founding the imposition of increased contribution for the sanitation of public accounts to its owners, in realization of the stated principle of social equity in austerity" (cited).
And further:
"It should be noted that the existence of distinct application results in the face of very similar values - in excess or in deficiency - of a quantitative expression stipulated normatively as the limit – positive or negative – of any legal effect is inherent to its establishment by the legislator. Whether in the definition of tax incidence, or in the enactment of exemptions or fiscal benefits based on value criteria, it is always possible to find examples of taxpayers with differentiated treatment based on a variation of very small quantitative expression. Because it is necessarily so, the differentiation contained in the second hypothesis put does not appear to be devoid of rational foundation, in accordance with the scope, structure and nature of the norm in question: aimed at increasing the taxation of properties with residential allocation of high value, the fiscal measure could not fail to determine, by imperative of the principle of fiscal legality, the concrete tax patrimonial value from which to apply such properties a special rate of Stamp Tax, which also eliminates, on this point, the verification of arbitrariness on the part of the legislator" (cited).
Lastly, note should be taken of what was written in the award of CAAD handed down on 17 March 2016 in case No. 507/2015-T, which relied on the same constitutional case law:
"[…] situations of double taxation, translated into the application of two taxes to the same taxable event, are frequent in cases where the public entities that benefit from them are different, as is the case here, since IMI is municipal revenue and Stamp Tax is state revenue. A similar situation occurs with municipal levy which currently applies, like CIT, to the taxable base of this tax (Article 18, subsection 1, of Law No. 73/2013, of 3 September)" (cited).
As is known, the principle of equality, in the aspect of contributory capacity – on which the Claimant bases the essential of its argument – is not an absolute principle, rather it being obliged to coexist with other principles and interests that also merit consideration.
The freedom enjoyed by the legislator, to whom tasks fall beyond those relating to taxation, requires that the principle of contributory capacity have some flexibility and can yield, to a certain limit, before other purposes of the State.
On the other hand, the said principle is also respected when things are treated unequally, which moreover is required when they are unequal. And the truth is that absolutely equal situations, in a way to require strictly equal treatment, are not very frequent. Especially in cases such as the one at hand, in which it is not a matter of taxing equal incomes, nor equal consumption, but mere signs, manifestations of fortune that are not strictly measurable, and that can even mislead about real contributory capacity. Think of the owner and inhabitant of a palace or a seventeenth-century manor house worth more than one million euros who finds himself in great difficulties to maintain it with his income – even substituting himself, in a way, for the State, to which it falls to safeguard historical heritage…
All this to conclude that when an apparently or tendentially equal situation is treated somewhat differently, one can only speak of fiscal inequality if there are no reasonable grounds that have led the legislator to make the choices it made.
That is, what is constitutionally forbidden to the legislator is pure arbitrariness, to treat unequally for the sake of it, but not when it has in view the pursuit of objectives to which it attributes greater value – as is the paradigmatic case of fiscal benefits, in which the legislator prefers to forgo fiscal revenue to achieve other objectives.
The said freedom of the legislator allows, from the outset, that it has made this tax apply only to real estate, leaving out other manifestations of contributory capacity, such as the ownership of art collections, antiquities, vintage automobiles... Here practicability reasons may also weigh, understandable and acceptable.
This same freedom of legislative conformance also allows that it has fixed the matricial value of real estate subject to taxation at one million or more euros. And that it has not considered the sum of real estate assets, precisely because the sum of values, possibly not very high, of several properties does not necessarily reveal the same contributory capacity. And what is true for a natural person does not cease to be true for a legal person.
Still here it can be said that the legislator used its freedom without offending fiscal equality, since it treated equally what was equal and unequally what was unequal.
Moreover, nothing obliged the legislator to institute a general tax on property, as it did not, being able its choice to be limited to some, but not necessarily all, of the real estate of the same owner.
And, if it is true that for the barrier of one million euros no obvious justification appears, still this time it is not a matter of pure arbitrariness, because at some point the threshold necessarily had to be placed, and the legislator placed it where it deemed reasonable, in accordance with what it considered to constitute a manifestation of fortune above the average and adequate to achieve the intended revenue.
Also, when the legislator taxed only residential buildings, refraining from imposing Stamp Tax on those allocated to agriculture, fishing, industry, commerce, it took a measure of distinction of what is unequal, making a choice whose justification seems clear: not to increase the tax burden on the productive sectors, aiming at the much-touted needs for investment and economic growth.
Furthermore, buildings intended for housing constitute goods for enjoyment, and of them it can be said, when valued equal to or greater than one million euros, that they reveal a high standard of living and greater contributory capacity.
Even if the revealed contributory capacity may be equal, no violation of the principle of equality is discerned, considering the reasonableness of the distinction and the intended purposes – although what is stated here does not necessarily hold true for land for construction intended for housing.
Another ground to which an answer can be considered given is that which refers to double taxation.
Contrary to what the Claimant contends, double taxation is not constitutionally forbidden, as stated in the excerpt from the CAAD award reproduced here again:
"[…] situations of double taxation, translated into the application of two taxes to the same taxable event, are frequent in cases where the public entities that benefit from them are different, as is the case here, since IMI is municipal revenue and Stamp Tax is state revenue. A similar situation occurs with municipal levy which currently applies, like CIT, to the taxable base of this tax (Article 18, subsection 1, of Law No. 73/2013, of 3 September)" (cited).
It remains, then, to consider the ground derived from the various references, not all conclusive, relating to the ownership of the property and the "'inevitable consequence' of the Claimant's activities" (cited, p. 11 of the initial request).
The Claimant states that in the context of its activities real estate properties are used, being intended "only to be (re)sold in the exact terms in which they were acquired" (cited, p. 11), further adding that, in this measure, "the ownership of the right of property over [the] real estate properties […] could never represent superior contributory capacity" (cited, p. 12 of the initial request).
On this point it is considered that it is correct,
Making our own the words that can be read in the already cited award of the arbitral tribunal handed down on 17 March 2016 in case No. 507/2015-T.
"It is unequivocal that companies that engage in the commercialization of land for construction are subject to a significant additional burden compared to the generality of companies, based on a hypothetical indicator of contributory capacity that does not necessarily correspond to reality, since the imposition of taxation has no relation whatsoever to the actual income of the activity carried out by the companies and burdens them even if they have negative results, the taxation being accentuated, accumulated annually, precisely in situations where, due to the lack of success of the land commercialization activity, the land is held for several years and, therefore, there would be less justification for the imposition of additional taxation, exclusive to this type of companies.
On the other hand, neither is there any reason to distinguish between companies that commercialize land for construction of residential buildings and those that commercialize land for other purposes.
For this reason, also from this perspective, item 28.1 of TGIS materializes an unjustified negative discrimination of land-commercializing companies for construction, which implies its unconstitutionality material, for infringement of the principle of equality" (cited).
Now, this doctrine is equally applicable to real estate investment funds, autonomous patrimonies that manage this property by acquiring, leasing, renovating and selling real estate.
Moreover, this was the understanding that was subscribed to in arbitral decision No. 2/2016 – T, a decision which, as is perceptible throughout the present text, follows in a committed manner, as we adhere to it without reservation.
It should be added that, as is also stated in arbitral decision No. 2/2016 – T, if we are correct as to the justifying reasons for the non-taxation of land for construction of properties not intended for housing, the legislator will have incurred, here, in some incoherence, since it fails to protect investment and economic activities, contrary to what it does, moreover, also as to the Municipal Tax on Real Estate, in whose Article 9, subsection 1, items d) and e) of its Code it enshrined favorable special regimes for companies that construct for sale or that acquire for resale – activities close to those developed by real estate investment funds.
This is sufficient, this Tribunal understands, for the success of the Claimant's principal claim, and in light of the foregoing, to conclude by the annulment of the assessment acts that are the subject of the present arbitral action.
As to the request for compensatory interest it is denied.
It is true that, without fault on its part, acts were committed which this tribunal now decides to be illegal. But, in order for the Administration to be condemned to pay compensatory interest, it is necessary that "it be determined […] that there was error attributable to the departments from which results payment of the tax debt in an amount greater than that legally owed" – subsection 1 of Article 43 of the General Tax Law.
In this case, the TA did nothing more than act according to the legal determination of Article 1 of the Stamp Tax Code and item 28.1 of its General Table. And it could not act otherwise, considering its binding to the law and the impossibility of disregarding it based on a judgment of unconstitutionality of ordinary law that is not within its remit to make. In short, it did not incur in error from which resulted the payment of undue tax, and cannot, lacking such error, be condemned to pay compensatory interest.
IV. DECISION
Whereupon this Arbitral Tribunal decides:
a) To judge the arbitral claim as well-founded and, in consequence, to annul the Stamp Tax assessment acts, effected under Article 28.1 of TGIS, relating to the year 2015 and to the urban property with registration number…, in the parish of…, municipality of Porto, with the consequent reimbursement of the amount paid by the Claimant.
b) To judge the request for compensatory interest as not well-founded.
c) To condemn the Respondent in the costs of the proceedings in the percentage of 95%, and the Claimant, in the percentage of 5%, considering the respective unsuccessful claim on part.
V. VALUE OF THE PROCEEDINGS
The value of the proceedings is fixed at 170,485.70 €, pursuant to Article 97-A, subsection 1, a), of the Code of Tax Procedure and Process, applicable by virtue of items a) and b) of subsection 1 of Article 29 of the Legal Framework for Tax Arbitration and subsection 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.
VI. COSTS
The value of the arbitration fee is fixed at 3,672.00 €, pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings, pursuant to Articles 12, subsection 2, and 22, subsection 4, both of the Legal Framework for Tax Arbitration, and Article 4, subsection 4, of the said Regulation.
Let notice be given.
Lisbon, 27 March 2017.
The Arbitrator President
(José Baeta de Queiroz)
The Arbitrator Member
(António Alberto Franco)
The Arbitrator Member
(Nuno de Oliveira Garcia)
Frequently Asked Questions
Automatically Created