Summary
Full Decision
ARBITRAL DECISION
REPORT
A…, S.A., taxpayer no.…, headquartered in …, no.…–…, …– … …, Lisbon, hereinafter designated as Claimant, filed on 01/08/2017 a request for arbitral pronouncement in which it seeks the declaration of illegality of the act of express rejection of the administrative complaint presented on 26/08/2016 and, consequently the annulment of the acts of assessment of Stamp Tax, relating to the year 2015 and the real property described below, in the total amount of € 13,931.80 due to errors in the factual and legal assumptions.
The Honorable President of the Ethics Council of the Administrative Arbitration Centre (CAAD) appointed Francisco Nicolau Domingos as arbitrator on 17/10/2017.
On 09/11/2017 the arbitral tribunal was constituted.
Pursuant to the provisions of art. 17, no. 1 of Decree-Law no. 10/2011, of 20 January (RJAT), the Respondent was notified on 09/11/2017 to, if it so wished, file a response, request the production of additional evidence and attach the Administrative File (PA) to the records.
On 05/12/2017 the Respondent filed its response in which it maintains that the assessments in question should be upheld in the legal order, not acknowledging any error in the factual or legal assumptions.
The tribunal on 05/12/2017 decided to dispense with the holding of the meeting referred to in art. 18, no. 1 of RJAT, since its purposes had been exhausted, based on the principle of the autonomy of the arbitral tribunal in the conduct of the proceedings and in the determination of the rules to be observed in order to obtain, within a reasonable time, a substantive pronouncement on the claims formulated, cfr. art. 16, al. c) of RJAT, granted a period of 8 days for the parties, if they so wished, to submit successive written final arguments and scheduled 19/01/2018 as the date for issuing the arbitral decision.
The parties submitted written final arguments on 14/12/2017 and 20/12/2017, respectively, maintaining entirely their initial positions.
The tribunal on 03/01/2018, by order, brought forward the date for issuing the arbitral decision.
POSITION OF THE PARTIES
The Claimant alleges that it is the owner of the urban real property registered in the property matrix under article … of the parish of …, being composed of eight floors, having seventeen divisions susceptible to independent use and having a total tax patrimonial value (VPT) of € 1,428,220.00.
Of the aforementioned seventeen divisions susceptible to independent use, fifteen are allocated to residential purposes, with the aggregate VPT of these divisions being € 1,393,180.00.
As to the matter of law, it contends that the assessments sourced from item 28.1 of the General Table of Stamp Tax (TGIS), relating to the divisions: CV E; RC E; RC D; 1st E; 1st D; 2nd E; 2nd D; 3rd E; 3rd D; 4th E; 4th D; 5th E; 5th D; 6th E and 6th D of such real property and for the year 2015 are illegal.
More specifically, it contends that the assessments in question embody a misinterpretation of item 28.1 of TGIS by the Tax and Customs Authority (AT), since they are based on the understanding that the VPT relevant for tax purposes will be that resulting from the sum of the VPT of the divisions susceptible to independent use, allocated to residential purposes and when the result of the operation exceeds € 1,000,000.00.
In fact, it concludes that the real property subject to the scope of item 28.1 of TGIS is each one of the units with individual economic value and the VPT to be considered is that of each of those units designated for residential purposes, with none existing with a value exceeding € 1,000,000.00.
It further alleges that the difference in treatment between real properties in full ownership and real properties in condominium ownership collides with the Constitution of the Portuguese Republic (CRP), by violation of the principle of tax equality. In its view, it is not defensible to consider that condominium ownership reveals greater tax capacity relative to full ownership or, vice versa, since the difference existing between the two legal realities is merely formal and does not affect the tax capacity of the respective owners.
It petitions for the reimbursement of the Stamp Tax amounts paid and the payment of indemnatory interest, since in relation to the second request, the assessments in question embody an error imputable to the services.
For its part, the Respondent contends that the Claimant has no grounds, because the subjection to Stamp Tax results from the conjunction of two facts: i) the residential allocation and ii) the VPT of the urban real property registered in the matrix being equal to or exceeding € 1,000,000.00.
This position is based on the following premises: i) the concept of real property is provided for in art. 2, no. 1 of the Code of the Municipal Tax on Real Property (CIMI), with its no. 4 providing that under the condominium ownership regime, each autonomous unit is exceptionally deemed to constitute a real property; ii) reality distinct in light of the article would be that of "real property in full ownership with floors or divisions susceptible to independent use", with the real property being its whole and no longer each of the divisions; iii) the fact that each floor/division appears separately in the matrix registration and with the respective tax patrimonial values does not contradict the preceding conclusion, since such discrimination is only relevant for tax purposes, in view of the concept of property matrices contained in art. 12 of CIMI; iv) the imposition of organizing the matrices in this manner is due to the need to reflect the autonomy that, within the same real property, pertains to each one of its parts, which may be economically independent and v) this autonomization is only justified because in the same real property the use for commerce or residential purposes may occur, with or without lease, which is decisive in the rules of fiscal assessment within CIMI, given the different allocation coefficients provided for in art. 41. That is, to contend otherwise is to confuse teleologically distinct realities, full ownership on one hand and, on the other, condominium ownership.
It concludes that the Claimant, for purposes of IMI and Stamp Tax, by force of item 28 of TGIS, is not the owner of autonomous units, but of a single real property, therefore it does not acknowledge any error in the factual or legal assumptions in the Stamp Tax assessments and, consequently, the taxpayer has no right to indemnatory interest.
As to the question of constitutionality, it observes that item 28 and 28.1 of TGIS is not unconstitutional, insofar as it imposes equal taxation on the ownership of urban real properties with residential allocation, whose VPT is equal to or exceeding € 1,000,000.00.
In summary, it contends for the complete dismissal of the request for arbitral pronouncement.
Thus, the tribunal must determine the following issues:
whether the Stamp Tax assessments are illegal due to errors in the factual and legal assumptions;
whether the interpretation of item 28.1 of TGIS in the sense that it includes residential urban real properties constituted in full ownership, with divisions susceptible to independent use should be considered unconstitutional, by violation of the principle of equality, in its aspect of tax capacity;
whether the Claimant should be reimbursed for the amounts of Stamp Tax paid;
whether the Claimant is entitled to indemnatory interest.
3. ADMISSIBILITY
The cumulation of claims underlying these proceedings is admissible, since there is identity between the factual matter and the merits thereof depend on the interpretation of the same principles and rules of law, cfr. art. 3, no. 1 of RJAT. Furthermore, the object of the proceedings concerns the same tax, that of Stamp Tax.
The proceedings do not suffer from nullities, no issues have been raised that prevent the examination of the merits of the case, the arbitral tribunal is regularly constituted and is materially competent to hear and decide the claims, and consequently the conditions for issuing the arbitral decision are met.
4. FACTUAL MATTER
4.1. Facts considered proven
4.1.1. The Claimant is the owner of the building registered in the matrix under article …, urban, parish of …, Lisbon.
4.1.2. Such building comprises, in particular, fifteen divisions with independent use, registered as follows:
a) CV E, with a VPT of € 27,790.00, residential;
b) RC D, with a VPT of € 93,890.00, residential;
c) RC E, with a VPT of € 93,890.00, residential;
d) 1st D, with a VPT of € 100,810.00, residential;
e) 1st E, with a VPT of € 94,510.00, residential;
f) 2nd D, with a VPT of € 100,040.00, residential;
g) 2nd E, with a VPT of € 93,890.00, residential;
h) 3rd D, with a VPT of € 101,040.00, residential;
i) 3rd E, with a VPT of € 94,830.00, residential;
j) 4th D, with a VPT of € 101,040.00, residential;
l) 4th E, with a VPT of € 93,890.00, residential;
m) 5th D, with a VPT of € 102,040.00, residential;
n) 5th E, with a VPT of € 95,770.00, residential;
o) 6th D, with a VPT of € 103,040.00, residential;
p) 6th E, with a VPT of € 96,710.00, residential.
4.1.3. The Claimant was notified of the Stamp Tax assessments, relating to the year 2015, in relation to each of such divisions, with residential allocation, in the total amount of € 13,931.80 and which break down as follows:
a) CV E, € 277.90, residential;
b) RC D, € 938.90, residential;
c) RC E, € 938.90, residential;
d) 1st D, € 1,008.10, residential;
e) 1st E, € 945.10, residential;
f) 2nd D, € 1,000.40, residential;
g) 2nd E, € 938.90, residential;
h) 3rd D, € 1,010.40, residential;
i) 3rd E, € 948.30, residential;
j) 4th D, € 1,010.40, residential;
l) 4th E, € 938.90, residential;
m) 5th D, € 1,020.40, residential;
n) 5th E, € 957.70, residential;
o) 6th D, € 1,030.40, residential;
p) 6th E, € 967.10, residential.
4.1.4. The payment of the assessments described in 4.1.3 was made as follows:
i) 1st installment:
a) CV E, € 138.95 on 20/04/2016;
b) RC D, € 312.98 on 20/04/2016;
c) RC E, € 312.98 on 20/04/2016;
d) 1st D, € 336.04 on 20/04/2016;
e) 1st E, € 315.04 on 20/04/2016;
f) 2nd D, € 333.48 on 20/04/2016;
g) 2nd E, € 312.98 on 20/04/2016;
h) 3rd D, € 336.80 on 20/04/2016;
i) 3rd E, € 316.10 on 20/04/2016;
j) 4th D, € 336.80 on 20/04/2016;
l) 4th E, € 312.98 on 20/04/2016;
m) 5th D, € 340.14 on 20/04/2016;
n) 5th E, € 319.24 on 20/04/2016;
o) 6th D, € 343.48 on 20/04/2016;
p) 6th E, € 322.38 on 20/04/2016.
ii) 2nd installment:
a) CV E, € 138.95 on 18/11/2016;
b) RC D, € 312.96 on 15/07/2016;
c) RC E, € 312.96 on 15/07/2016;
d) 1st D, € 336.03 on 15/07/2016;
e) 1st E, € 315.03 on 15/07/2016;
f) 2nd D, € 333.46 on 15/07/2016;
g) 2nd E, € 312.96 on 15/07/2016;
h) 3rd D, € 336.80 on 15/07/2016;
i) 3rd E, € 316.10 on 15/07/2016;
j) 4th D, € 336.80 on 15/07/2016;
l) 4th E, € 312.96 on 15/07/2016;
m) 5th D, € 340.13 on 15/07/2016;
n) 5th E, € 319.23 on 15/07/2016;
o) 6th D, € 343.46 on 15/07/2016;
p) 6th E, € 322.36 on 15/07/2016.
iii) 3rd installment:
a) RC D, € 312.96 on 21/11/2016;
b) RC E, € 312.96 on 21/11/2016;
c) 1st D, € 336.03 on 21/11/2016;
d) 1st E, € 315.03 on 21/11/2016;
e) 2nd D, € 333.46 on 21/11/2016;
f) 2nd E, € 312.96 on 21/11/2016;
g) 3rd D, € 336.80 on 21/11/2016;
h) 3rd E, € 316.10 on 21/11/2016;
i) 4th D, € 336.80 on 21/11/2016;
j) 4th E, € 312.96 on 21/11/2016;
l) 5th D, € 340.13 on 21/11/2016;
m) 5th E, € 319.23 on 21/11/2016;
n) 6th D, € 343.46 on 21/11/2016;
o) 6th E, € 322.36 on 21/11/2016.
4.1.5. The building identified in 4.1.1 was not constituted under the condominium ownership regime on 31/12/2015.
4.1.6. The Claimant filed on 26/08/2016 an administrative complaint of the Stamp Tax assessment acts identified above.
4.1.7. The administrative complaint was expressly rejected by order dated 28/06/2017 of the Honorable Head of the Financial Services Office of Lisbon….
4.1.8. The request for arbitral pronouncement was filed on 01/08/2017.
4.2. Facts considered not proven
There are no other facts with relevance for the arbitral decision that have not been established as proven.
4.3. Reasoning of the factual matter considered proven
The factual matter established as proven is based on the documents used for each of the facts alleged and whose authenticity was not questioned.
5. ON THE LAW
The first issue the tribunal must address consists in ascertaining whether subjection to the scope norm of item 28.1 of TGIS should be concretized by the VPT corresponding to each one of the divisions susceptible to independent use, or if, on the contrary, by the sum of the VPT of each of such divisions.
To accomplish such task, one must search for the norm regarding which the parties disagree in its interpretation.
Art. 1, no. 1 of the Stamp Tax Code (CIS) and item 28 of TGIS (in force at the date of the tax event) provide that the following are subject to taxation: "Ownership, usufruct or right of surface of urban real properties whose tax patrimonial value contained in the matrix, pursuant to the Code of the Municipal Tax on Real Property (CIMI), is equal to or exceeding € 1,000,000 – based on the tax patrimonial value used for purposes of IMI:
28.1 - For residential real property (…) – 1%...".
Thus, it is necessary to examine the concept of "residential real property" to which the norm under interpretation refers and that of "tax patrimonial value used for purposes of IMI". Now, as it is not possible to resolve the issue by recourse to CIS, by force of the provision of art. 67, no. 2 of such statute it is necessary to apply the norms of CIMI.
Consequently, art. 2 of CIMI provides on the concept of real property:
"1 - For purposes of this Code, real property is any fraction of territory, including waters, plantations, buildings and constructions of any nature incorporated therein or situated thereon, with a character of permanence, provided it is part of the assets 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 located in a fraction of territory that constitutes an integral part of a different patrimony or does not have a patrimonial nature.
2 - Buildings or constructions, even if movable by nature, are deemed to have a character of permanence when devoted to non-transitory purposes.
3 - The character of permanence is presumed when buildings or constructions are situated at the same location for a period exceeding one year.
4 - For purposes of this tax, each autonomous unit, under the condominium ownership regime, is deemed to constitute a real property".
The concept of real property under IMI is, as we know, endowed with greater breadth in relation to that set forth in art. 204, no. 2 of the Civil Code (CC) and encompasses three elements, more specifically, one of a physical nature, the second of a legal character and the last of an economic nature, J. SILVÉRIO MATEUS/L. CORVELO DE FREITAS, The taxes on real property assets. The Stamp Tax, Engisco, 2005, p. 101 to 103 and JOSÉ MARTINS ALFARO, Code of the Municipal Tax on Real Property – Commented and Annotated, Áreas Editora, 2004, p. 118 to 123. The first requires reference to a fraction of territory, including, in particular, buildings and constructions therein incorporated with a character of permanence. The element of a legal character requires that the thing, movable or immovable, belong to the assets of a natural or legal person. Third, the element of an economic nature requires that the thing have economic value.
With regard to the concept of urban real property, art. 6 of CIMI describes its various categories, with the fundamental factor for subsumption in each of them being the nature of the use, that is, the purpose for which it is intended. And nothing in the economy of art. 6, no. 1, al. a) of CIMI prevents the classification of the parts of a real property in vertical ownership, with divisions susceptible to independent use, with a residential use, as "residential real property".
Relevant is, it is repeated, its use. And a different conclusion is not possible to reach by interpretation of art. 2, no. 4 of CIMI which elevates each autonomous unit, under the condominium ownership regime, to the category of real property. In fact, in this latter norm also no basis can be found to discriminate between real properties in condominium ownership and real properties in vertical ownership, with divisions susceptible to independent use, as regards their subsumption as urban and residential real properties in accordance with the entire economy of item 28 of TGIS. In other words, if the legislator did not treat differently real properties in vertical ownership in relation to those constituted in condominium ownership, neither should the interpreter do so[1].
On the contrary, the matrix registration and the determination of VPT demonstrate the similarity of legislative treatment. Indeed, the parts endowed with economic independence must, each one of them, be the subject of separate matrix registration and, consequently, the respective VPT should appear autonomously, cfr. art. 2, no. 4; art. 7, no. 2, al. b) and art. 12, no. 3, all of CIMI. Which has refraction in the assessment, in that there will be one for each division subject to separate use.
Reverting such interpretation to these proceedings, there are fifteen divisions of the building with independent residential use which, at the date of the tax event, 31 December 2015, was not constituted in condominium ownership and, consequently, no doubt exists that they must be classified as residential real properties of an urban nature.
It is further important to clarify the other textual segment of the item of the CIS under interpretation, that is, the "tax patrimonial value used for purposes of IMI".
In this regard, as already described, CIMI provides for the autonomization of parts of urban real property susceptible to independent use as regards matrix registration and the specification of the respective VPT. Such observation is equally valid with respect to the consequent assessment, as provided by art. 113, no. 1 and art. 119, no. 1, both of the latter cited statute. Indeed, if the tax is assessed "...based on the tax patrimonial values of the real properties (our emphasis) and in relation to the taxpayers that appear in the matrices (our emphasis)..." and the collection document must contain the "...discrimination of the real properties, their parts susceptible to independent use, respective tax patrimonial value and tax collection...", this means that not only is the VPT for purposes of application of item 28.1 of TGIS to be considered that subject to separate matrix registration, but also nothing prevents the qualification as "residential real property" of divisions with independent use.
Now, if none of the divisions with residential allocation exceeded the VPT of € 1,000,000.00 on 31 December 2015, the scope norm in question cannot be applicable to the case sub judice, under penalty of illegality. It is repeated, relevant is, in order to delimit the scope of such norm: i) that the division susceptible to independent use has a VPT exceeding € 1,000,000.00 and ii) that it has a residential allocation.
This is also the conclusion of state jurisprudence with regard to the delimitation of the scope of item 28.1 of TGIS when it observes that: "In the case of a real property constituted in vertical ownership, the incidence of IS must 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 matrix article), but by the VPT attributed to each of those floors or divisions designated for residential purposes", as per the Decision of the Supreme Administrative Court of 09/09/2015, delivered in the context of case no. 047/15 and in which Counsellor FRANCISCO ROTHES was the rapporteur.
Such interpretation is also reflected in the following: "I – Item 28 of the General Table of Stamp Tax (TGIS) added by art. 4 of Law no. 55–A/2012, of 29/10, does not apply to urban real properties, with one matrix article but constituted by parts with independent allocation and use to which independent VPT were attributed, each of these of value less than one million euros...", Decision of the Supreme Administrative Court of 04/05/2016, delivered in the context of case no. 0166/16 and in which Counsellor ANA PAULA LOBO was the rapporteur.
Consequently, the assessments which are the object of these proceedings suffer from the defect of violation of law and, as such, cannot subsist in the legal order, which is hereby declared.
Thus, the Claimant is entitled to be reimbursed for the amounts of Stamp Tax paid, with the question of constitutionality being moot.
Finally, the Claimant petitions for the payment of indemnatory interest by the Respondent on the basis of an error imputable to the services.
In fact, art. 43, no. 1 of the General Tax Law (LGT) provides that: "Indemnatory interest is due when it is determined, in an administrative complaint or judicial challenge, that there was an error imputable to the services resulting in payment of the tax debt in an amount exceeding that legally due". In other words, there are three requirements for the right to such interest: i) the existence of an error in a tax assessment act imputable to the services; ii) determination of such error in a process of administrative complaint or judicial challenge and iii) payment of tax debt in an amount exceeding that legally due.
Thus, it is immediately possible to formulate a question: is it admissible to determine the payment of indemnatory interest in tax arbitral proceedings? The answer to the question is in the affirmative. Indeed, art. 24, no. 5 of RJAT provides 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 Code of Tax Procedure and Process".
In determining the issue, the illegality of the acts in question is imputable to the Respondent, given the lack of normative support when they were made. Consequently, the request for payment of indemnatory interest is justified, calculated at the legal rate, in accordance with the provision of art. 43, no. 4 of LGT, from the date when the undue payment was made until full reimbursement.
6. DECISION
In these terms and with the reasoning described above, the tribunal decides to rule the request for arbitral pronouncement entirely justified, annulling the acts which are the object of the pronouncement, with all legal consequences, including the return of the Stamp Tax paid by the Claimant and the payment of indemnatory interest, from the date of the undue payment until the effective reimbursement.
7. VALUE OF THE CASE
The value of the case is fixed at € 13,931.80 (corresponding to the sum of the assessments which are the object of the pronouncement), in accordance with art. 97-A of the Code of Tax Procedure and Process (CPPT), applicable by force of the provision of art. 29, no. 1, al. a) of RJAT and art. 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).
8. COSTS
Costs at the charge of the Respondent, in the amount of € 918, cfr. art. 22, no. 4 of RJAT and Table I attached to RCPAT, in that the claim succeeded entirely.
Let notification be made.
Lisbon, 4 January 2018
The arbitrator,
Francisco Nicolau Domingos
[1] See in this sense the arbitral decision of 29/10/2013 delivered in case no. 50/2013 – T in which Dr. MARIA DO ROSÁRIO ANJOS assumed the function of arbitrator.
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