Stamp Tax Verba 28 TGIS on Vertical Property: CAAD Arbitral Decision 465/2016-T

ARBITRAL DECISION

1. REPORT

1.1. A…, S.A., taxpayer no. …, with registered office at Avenue …, no. …, …, in Lisbon (hereinafter referred to as "Claimant"), filed on 29/07/2016 a request for arbitral determination for the purpose of assessing and declaring unlawful the assessment of Stamp Tax for the year 2015, concerning the application of Item no. 28.1 of the General Table of Stamp Tax (General Table), in the total amount of € 4,258.98 (four thousand two hundred and fifty-eight euros and ninety-eight cents) to a property of which it is the owner.

1.2. The Honorable President of the Ethics Council of the Administrative Arbitration Center (CAAD) designated, on 30/08/2016, the signatory of this decision as sole arbitrator.

1.3. On 19/10/2016 the arbitral tribunal was constituted.

1.4. In compliance with the provisions of article 17, no. 1 of the Legal Regime of Tax Arbitration (LRTA), the Tax and Customs Authority (TCA) was notified on 19/10/2016 to, if it so wished, submit its response and request the production of additional evidence.

1.5. On 22/11/2016 the TCA submitted its response, defending itself by way of exception and by way of contestation, in which it further requested the waiver of the hearing provided for in article 18 of the LRTA and, likewise, the production of successive written submissions.

1.6. Being a matter of law exclusively, the arbitral tribunal on 22/11/2016 decided to waive the hearing to which article 18, no. 1 of the LRTA refers, on the basis of the principle of autonomy of the arbitral tribunal in the conduct of proceedings, inviting both parties to, if they so wished, submit successive written submissions and set the date for the pronouncement of the final decision.

1.7. On 02/12/2016, the Claimant submitted successive written submissions.

2. DISMISSAL OF OBJECTIONS

The arbitral tribunal was duly constituted and is materially competent.

The parties have legal personality and legal capacity and are legitimate, with no defects in representation.

The proceedings are not affected by defects that impair their validity.

Consequently, the conditions for the pronouncement of the final decision are met.

3. POSITIONS OF THE PARTIES

There are two positions in conflict, that of the Claimant, as set out in the request for arbitral determination (and in the subsequent written submissions) and that of the TCA in its response.

In summary, the Claimant alleges that:

a) The property is registered in the property registry as a property in full ownership with floors or divisions susceptible of independent use, that is, it is not constituted in the horizontal property regime and, therefore, corresponds to a single property matrix entry.

b) The TCA understood that, for the purposes of the assessment of Stamp Tax, 14 out of 19 floors or divisions with independent use have residential use and the sum of their respective taxable asset values totals the amount of € 1,277,664.92.

c) That is, according to the TCA, for a property not constituted in the horizontal property regime, the criterion for the determination of Stamp Tax is the total taxable asset value of the floors or divisions intended for residential use.

d) Nevertheless, in accordance with the principle of universality of taxable asset value, the valuation carried out under the Municipal Property Tax Code (MPT) is fully applicable to the remaining taxes, including Stamp Tax.

e) The law itself expressly establishes, in the final part of Item no. 28.1 of the General Table, that it concerns the "(…) taxable asset value used for purposes of MPT.".

f) In the view of the legislator, what matters is not the legal-formal rigor of the specific situation of the property, but rather its normal use, the purpose for which the property is intended.

g) For this reason, it does not refer to, nor distinguish, in this context, full ownership and horizontal property, rather what is relevant is the material reality underlying its existence as an urban property and its respective use.

h) In this sense, for purposes of taxation under the MPT, each independent unit, even if forming part of the same property, is considered separately, being assigned its own taxable asset value and being taxed autonomously.

i) Indeed, the property in question is an example of the possibility of an urban property being composed of several independent units, with some having residential use and others having non-residential use.

j) Arbitral case law has held that, in the case of an urban property without constituted horizontal property, but with floors or divisions with independent residential use, Stamp Tax at the rate of 1% applies to each floor or division, if it individually equals or exceeds the amount of € 1,000,000.00, and not to the whole of the property or a large part thereof.

k) That is, if a floor or division with independent residential use has, considered individually, a taxable asset value equal to or greater than € 1,000,000.00, it is subject to the rate of 1%, with no taxation on the entire property or on the sum of the taxable asset values of the floors or divisions with independent use and residential use.

l) On the other hand, the constitution of horizontal property implies merely a legal alteration of the property which does not even impose a new valuation for purposes of tax reality.

m) Otherwise, the rule of incidence would depend exclusively on the civil legal regime chosen by the owner: if he maintained the property in full ownership, it would be taxed; if he adopted the horizontal property regime, he would avoid such taxation.

n) Now, the formal divergence between full ownership and horizontal property cannot imply an arbitrary and more unfavorable tax treatment of independent residential property realities.

o) In light of the foregoing, faced with two identical properties it is unlawful to impose Stamp Tax only on the one that does not have horizontal property; it would be treating two equal situations differently, thereby disrespecting the principle of equality and tax justice.

Otherwise, the TCA, defending itself by way of exception and by way of contestation, sustains that:

By way of exception:

On the incompetence of the arbitral tribunal

a) The TCA alleges that the Claimant does not contest the tax assessment act, but rather the payment of three installments of the assessment act stated in collection notices.

b) That is, the subject matter of the proceedings is not the annulment of a tax act, but rather of collection notices for the payment of the 1st, 2nd and 3rd installment of a tax.

c) A matter which is in no way contained in the rule that delimits the competence of tax arbitral tribunals, as stated in article 2 of the LRTA.

d) Therefore the act which is the subject matter of the request for arbitral determination falls outside the competence of the arbitral tribunal.

On the uncontestability of the acts

a) The TCA also states that the Claimant contests the installments relating to the payment of a unit value of tax.

b) However, the Stamp Tax referred to in Item no. 28.1 of the General Table is assessed annually, and payment in installments is no more than a collection technique for the tax and not a partial payment thereof.

c) For which reason, the payment of one of the installments of the assessment made under the provision in Item no. 28.1 of the General Table does not constitute a partial payment of that assessment, but merely a collection technique for the assessed tax.

d) It thus appears that there is a single assessment and its payment is made in installments, which does not allow the contestation of only one installment or collection document in that partial amount.

e) The TCA therefore understands that the collection documents in question are not contestable per se, for which reason the exception invoked should be upheld and the TCA should be absolved of the claim.

By way of contestation:

a) The Claimant is the owner of a property in the regime of full or vertical ownership, with floors or divisions susceptible of independent use.

b) To the whole of the property is assigned a taxable asset value of € 1,513,964.92 the valuation of the property in question in the present proceedings took place in 2011 and was carried out under the Municipal Property Tax Code, with the Claimant having submitted no complaint, nor requested a new valuation.

c) According to the TCA, the subjection to Stamp Tax of Item no. 28.1 of the General Table [1] results from the combination of two facts, namely, residential use and the taxable asset value of the urban property registered in the registry being equal to or greater than € 1,000,000.00.

d) It further adds that the concept of property is defined in article 2, no. 1 of the Municipal Property Tax Code, establishing in its no. 4 that, in the horizontal property regime, each autonomous unit is deemed to constitute a property.

e) Being the property in the full ownership regime, there are no autonomous units to which the tax law can assign the qualification of property.

f) In this respect, for purposes of MPT and Stamp Tax, the Claimant is not the owner of autonomous units, but rather of a single property.

g) The Claimant thus seeks to have the TCA consider, for purposes of the assessment of Stamp Tax, that there exists an analogy between the full ownership regime and the horizontal property regime, since there should be no discrimination in the legal-tax treatment of these two property regimes, as this would be unlawful.

h) Now, the unity of the urban property in vertical ownership composed of several floors or divisions is, however, not affected by the fact that all or part of those floors or divisions are susceptible of independent economic use.

i) On the other hand, the fact that the MPT has been calculated based on the taxable asset value of each part of property with independent economic use equally does not affect the application of Item no. 28.1 of the General Table, since the determining fact of its application is the total taxable asset value of the property and not separately that of each of its parts.

j) Any other interpretation would violate the letter and spirit of Item no. 28.1 of the General Table and the principle of legality of the essential elements of taxation constitutionally enshrined.

k) According to the TCA, it is unconstitutional, as it offends the principle of tax legality, the interpretation of Item no. 28.1 of the General Table, according to which the taxable asset value on which its incidence depends is to be determined floor by floor or floor or division by division, and not globally.

l) It further adds that the registration of each part susceptible of independent use is not autonomous by property, but is contained in a description in the registry of the property as a whole.

m) In this respect, the procedural rules of valuation, registry registration and assessment of the parts susceptible of independent use do not permit to affirm that there exists an equation of the property in the full ownership regime to the vertical property regime.

n) The TCA concludes that there are reasonable grounds for the legislator to have taxed this economic reality capacity that support the different treatment of situations that legally are different, with there being no violation of the constitutional principle of equality.

4. SUBJECT MATTER OF THE REQUEST

In the case in question, the issues to be decided are:

To rule on the exceptions of incompetence of the arbitral tribunal and of uncontestability of the collection documents;

To determine whether Item no. 28.1 of the General Table, in the case of properties not constituted in horizontal property, applies to the sum of the taxable asset value assigned to the different parts or floors, or rather to the taxable value of each part of the property with independent economic use.

5. FACTUAL MATTERS

5.1. FACTS CONSIDERED PROVED

In light of the documents filed with the proceedings, the following facts are deemed proved:

5.1.1. The Claimant is the owner of the urban property located on Street …, no. … to no. …, turning onto the Street of …, no. … to no. …, registered in the property registry of the parish of …, municipality of Lisbon under property matrix article no. … and described in the Land Registry Office of Lisbon under no. … (of the extinct parish of …).

5.1.2. The property is in full ownership with floors or divisions susceptible of independent use and is composed of 6 floors and 19 divisions with independent use, of which only 14 are devoted to residential use, whose taxable asset value, determined under the Municipal Property Tax Code, varies between € 60,000.30 and € 166,391.43.

5.1.3. The property in question was registered in the matrix in 2010 and the sum of the taxable asset values of the aforementioned autonomous units devoted to residential use amounts to € 1,277,664.92, each one of them individually having a taxable asset value less than € 1,000,000.00.

5.1.4. The Claimant was notified of the Stamp Tax assessment act for the year 2015, carried out under Item no. 28.1 of the General Table, on the floors and divisions with independent use devoted to residential use, in the amount of € 4,258.98 (four thousand two hundred and fifty-eight euros and ninety-eight cents), namely:

5.1.5. On 29/07/2016, the Claimant filed the request for arbitral determination that gave rise to the present proceedings.

5.1.6. At the date of the filing of the request for arbitral determination that gave rise to the present proceedings, the collection documents corresponding to the second installment were due, which fell due at the end of the month of July 2016, and the collection documents corresponding to the third installment were still forthcoming, which fell due at the end of the month of November 2016.

5.2. FACTS NOT CONSIDERED PROVED

There are no facts with relevance to the decision that have not been deemed proved.

6. THE LAW

6.1. ON THE INCOMPETENCE OF THE ARBITRAL TRIBUNAL
AND ON THE UNCONTESTABILITY OF THE ASSESSMENT ACTS

Although the TCA makes the invoked exceptions autonomous, it appears that the facts invoked to substantiate one and the other are the same, for which reason they will be assessed simultaneously here.

Thus,

The TCA bases its claim, as regards the exception of incompetence of the arbitral tribunal, on the fact that a tax act was not contested, but rather the payment of an installment of Stamp Tax embodied in the respective collection notices.

The subject matter of the proceedings thus corresponds, according to the TCA, not to the annulment of a tax act, but rather of a mere collection notice.

Now, in the view of the TCA, this matter does not fall within the scope of competence of tax arbitral tribunals, as provided in article 2 of the LRTA, and thus the subject matter of the request for arbitral determination falls outside the scope of competence of the arbitral tribunal.

Let us examine this.

Article 2, no. 1, paragraph a) of the LRTA establishes that arbitral tribunals are competent to assess claims for a declaration of unlawfulness of tax assessment acts, self-assessments, withholding at source and payment on account.

With regard to the binding of the TCA to the jurisdiction of arbitral tribunals, article 4, no. 1 of the LRTA provides that this depends on a decree of the members of the Government responsible for the areas of finance and justice.

In this respect, the competence of the arbitral instance is thus delimited by the decree binding the TCA to the jurisdiction of the Administrative Arbitration Center (CAAD). [2]

In accordance with article 2 of the said decree, the Directorate-General for Taxes and the Directorate-General for Customs and Special Taxes on Consumption (currently, TCA) bind themselves to the jurisdiction of arbitral tribunals functioning in the CAAD which have as their object the assessment of claims relating to taxes whose administration is entrusted to them, under article 2, no. 1 of the LRTA, in which are expressly included claims for a declaration of unlawfulness of tax assessment acts, self-assessments, withholding at source and payment on account.

It is thus concluded that the tax arbitral proceedings have as their object, directly or indirectly, the tax assessment act, as an act of determination of the quantitative amount of tax to be paid (assessment), by application of a rate to the taxable matter.

Now, the assessment of the exceptions raised depends therefore on the question of whether the Claimant contests the Stamp Tax assessment act or whether, on the contrary, it merely contests each of the Stamp Tax installments per se.

Proceeding further.

In cases where the tax is to be paid in installments, the assessment is notified to the taxpayer together with the notification for payment of each of the installments, and can only be contested in its entirety and not installment by installment. [3]

In this regard, José Casalta Nabais argues that "Assessment in the broad sense, that is to say, as the sum of all operations intended to ascertain the amount of tax, comprises: 1) Subjective assessment designed to determine or identify the taxpayer or tax obligor of the legal-tax relationship, 2) Objective assessment through which the taxable matter of the tax is determined and the rate to be applied is also determined, in the case of plurality of rates, 3) Assessment in the strict sense translated in the determination of the assessment through the application of the rate to the taxable matter, and 4) (possible) deductions to the assessment.". [4]

For each taxable event there shall, in principle, be a single assessment, by which the assessment to be paid shall be determined.

Article 23, no. 7 of the Stamp Tax Code further provides that "in the case of tax due for the situations provided for in item no. 28 of the General Table, the tax is assessed annually (…) applying, with the necessary adaptations, the rules contained in the MPTC".

In the same sense, article 44, no. 5 of the Stamp Tax Code establishes that "where there is an assessment of the tax referred to in item no. 28 of the General Table, the tax is paid within the periods, terms and conditions defined in article 120 of the MPTC".

That is, in light of article 113, no. 2 of the Municipal Property Tax Code, "the assessment (…) is carried out in the months of February and March of the following year", and the tax must be paid in three installments in the months of April, July and November, respectively, depending on its quantitative amount. [5]

In summary, and by the combination of the legal provisions referred to above, it is possible to conclude that Stamp Tax is assessed annually, and payment in installments is no more than a collection technique for the tax and not a partial payment thereof. [6]

Accordingly, the assessment is a single one and it alone constitutes an injurious act, susceptible of being contested.

Having said this,

From the analysis of the request for arbitral determination it results that the Claimant requests the constitution of the arbitral tribunal for the purpose of "(…) the annulment of the Stamp Tax assessment under Item TGIS 28.1, based on an error concerning the legal presuppositions and consequent unlawfulness of the act (…)".

That is, it requests the declaration of unlawfulness of the tax assessment acts of Stamp Tax, to which the respective payment installments correspond.

From all the foregoing it results that, contrary to what the TCA states, the subject matter of the request for arbitral determination is the tax assessment act and not each of the stamp tax installments individually considered.

This is evidenced by the fact that the Claimant, in the delimitation of the subject matter of the arbitral action, circumscribes the institution of the respective proceedings to the annulment of the Stamp Tax assessment for the year 2015.

Moreover, the Claimant expressly requests that "The effects of the present action must extend to the three installments, which result from the same taxation, as well as to any other assessment that may occur in the following tax years.".

Thus, although the Claimant associates the tax assessment act with the installment(s) of Stamp Tax, proceeding with their joinder and identification, the fact is that it does not circumscribe the subject matter of the request for arbitral determination to any of the Stamp Tax installments in particular, but rather to the assessment of Stamp Tax considered as a whole.

The argument invoked by the TCA regarding the incompetence of the arbitral tribunal therefore fails, as does that regarding the uncontestability of the acts, for which reason the exceptions in question are deemed to be unfounded.

6.2. ON THE INCIDENCE OF ITEM NO. 28.1 OF THE GENERAL TABLE

In the case in question, the fundamental issue under assessment by the arbitral tribunal consists in knowing whether the tax assessment act of Stamp Tax is unlawful, due to an erroneous interpretation and application of Item no. 28.1 of the General Table, amended by Law no. 55-A/2012, of 29 October, in considering that the taxable asset value of an urban property constituted in the regime of full ownership, with floors or divisions of independent use devoted to residential use that is relevant for purposes of incidence is constituted by the value resulting from the sum of the taxable asset value attributed to each of those floors or divisions.

There is already abundant case law on this matter from the Supreme Administrative Court [7] (SAC) and, as well, arbitral case law, which we indicate, by way of example, in proceedings no. 277/2013-T, no. 291/2013-T, no. 35/2014-T, no. 464/2014-T, no. 639/2014-T, no. 724/2014-T, no. 245/2014-T, no. 152/2015-T and no. 21/2015-T, which we follow. [8]

In accordance with the established facts, the TCA assessed Stamp Tax by considering that the taxable asset value of the urban property constituted in the regime of full ownership is greater than € 1,000,000.00, taking into account the sum of the taxable asset value of each of the 14 floors or divisions with independent use devoted to residential use, which compose the said property.

Let us see.

In accordance with the provision in Item no. 28 of the General Table, Stamp Tax covers:

"Ownership, usufruct or right of superficies of urban properties whose taxable asset value stated in the registry, under the Municipal Property Tax Code (MPTC), is equal to or greater than € 1,000,000 - on the taxable asset value used for purposes of MPT:

28.1 For a residential property or for land for construction whose building, authorized or planned, is for residential use, as provided for in the Municipal Property Tax Code - 1%. [9]

28.2 - For a property, when the tax obligors who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, listed in a decree of the Minister of Finance - 7.5%".

The presuppositions of incidence of Item no. 28.1 of the General Table are thus urban properties, with residential use, whose taxable asset value stated in the registry and used for purposes of the assessment of MPT, is equal to or greater than € 1,000,000.00.

However, Law no. 55-A/2012, of 29 October, says nothing as to the qualification of the concepts in question, in particular, as to the concept of "property with residential use.", which is of interest here.

Now, Law no. 55-A/2012, of 29 October, by reference to Item no. 28 of the General Table, has furthermore brought several amendments to the Stamp Tax Code, in particular, as to its assessment and payment, expressly referring to the rules provided for in the Municipal Property Tax Code [10] with the necessary adaptations, and also providing in article 67, no. 2 of the Stamp Tax Code that, "For matters not regulated in this Code concerning item no. 28 of the General Table, the provisions of the MPTC are applied, subsidiarily.".

From the analysis of the said rules, it thus appears that the concept of "property with residential use" provided for in Item no. 28.1 of the General Table is not defined in the Stamp Tax Code, nor in the said Law no. 55-A/2012, of 29 October, nor either in the Municipal Property Tax Code, whose rules are of subsidiary application, bearing in mind the provision in article 67, no. 2 of the Stamp Tax Code.

It is thus unambiguous that a property in full ownership or in the vertical property regime constitutes an urban property, as provided for in article 2, no. 1 and article 4, no. 1 of the Municipal Property Tax Code, applicable subsidiarily, and it is also true that, both for purposes of the incidence of Item 28.1 of the General Table and for purposes of the classification of urban properties [11], the legislator makes no distinction between properties constituted in vertical ownership and in the horizontal property regime (as mentioned in the arbitral decisions rendered in proceedings no. 50/2013-T and no. 132/2013-T), being the tax presupposition of Item no. 28.1 of the General Table urban properties that are actually already devoted to residential use, since what is relevant is the actual and current use of each of the properties.

What then shall be the taxable asset value relevant in the case of urban properties in the full ownership regime composed of floors or divisions susceptible of independent use with "residential use", for purposes of the incidence of Item 28.1 of the General Table?

As results from the very Item no. 28.1 of the General Table and from article 6, no. 1 of Law no. 55-A/2012, of 29 October, Stamp Tax shall apply to the taxable asset value used for purposes of MPT.

Let us thus examine what the taxable asset value used for purposes of MPT is.

The taxable asset value of each property is determined in accordance with article 38 and following of the Municipal Property Tax Code, in conformity with what is provided for in article 7, no. 1 of the Municipal Property Tax Code.

In the case of a property in the regime of full ownership or vertical, each floor or division with independent use that comprises it is equally subject to valuation, being assigned a taxable asset value to each of those floors or divisions, in conformity with the provisions of articles 12 and 38 of the Municipal Property Tax Code.

Indeed, article 12, no. 1 of the Municipal Property Tax Code establishes that "the property registries are registers which state, inter alia, the characterization of properties, their location and their taxable asset value, the identification of the owners (…)", further providing in its no. 3 that, "Each floor or part of property susceptible of independent use is considered separately in the registry entry, which also discriminates the respective taxable asset value", and in conformity with the provision in article 119, no. 1 of the Municipal Property Tax Code, it is on that taxable asset value separately considered that the MPT shall be ascertained and assessed in relation to each floor or part with independent use that comprise an urban property in the regime of vertical or full ownership, bearing in mind the autonomy of each of those units.

This understanding is also shared by J. Silvério Mateus and L. Corvelo de Freitas [12] according to whom, "Another aspect that should be highlighted in the registry has to do with the need to make apparent the autonomy that, within the same property, can be assigned to each of its parts, functionally and economically independent. In these cases, the registry entry not only must make reference to each of these parts but must make express reference to the taxable asset value corresponding to each of them. An example that can illustrate this situation is the case of an urban property, not constituted in the horizontal property regime and that is composed of several floors. (…) However, since each of these units can be the subject of lease or any other use by the respective owner, the registry must make apparent these units and a taxable asset value must be assigned to each of them." [emphasis ours].

On the other hand, and as highlighted in the arbitral decision rendered in proceedings no. 194/2014-T, which we also follow, "the Municipal Property Tax Code consecrates, both as to the registry entry and discrimination of the respective taxable asset value, and as to the assessment of the tax, the autonomization of the parts of urban property susceptible of independent use and the segregation/individualization of the TAV relating to each floor or part of property susceptible of independent use.

Thus each property, under the concepts defined by article 2 of the MPTC, corresponds to a single entry in the registry (no. 2 of article 82 of the MPTC) but, according to no. 3 of art. 12 of the same Code, referring to the concept of property registry (…), "each floor or floor or part of property susceptible of independent use is considered separately in the registry entry, which also discriminates the respective taxable asset value (…).

That is, the rule is the autonomization, the characterization as "property" of each part of a building, as long as it is functionally and economically independent, susceptible of independent use, in accordance with the concept of property defined already in no. 1 of article 2 of the MPTC: property is any fraction (of land, encompassing waters, plantations, buildings and constructions of any kind incorporated therein or erected thereon, with a permanent character) provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the aforementioned circumstances, endowed with economic autonomy.".

Bearing in mind that in light of the Municipal Property Tax Code, the floors or divisions with independent use that comprise an urban property in the regime of full ownership or vertical are taxed autonomously, since the MPT is assessed individually on the taxable asset value attributed to each of those floors or divisions with independent use, bearing in mind the relevance of their autonomy, necessarily, the principles and rules must be the same in the context of Stamp Tax (in particular, as to what is prescribed regarding the registry entry and the assessment of MPT), both because this is what Item no. 28.1 of the General Table at the end commands, and through subsidiary application, by virtue of the provision in article 67, no. 2 of the Stamp Tax Code.

Consequently, and, on the assumption that the legislator in question "adopted the most accurate solutions and knew how to express his thinking in adequate terms" (cfr. what is provided for in article 9, no. 3 of the Civil Code ("CC"), by referral of article 11 of the General Tax Law), only those floors, parts or divisions with independent use with residential use whose taxable asset value is equal to or greater than € 1,000,000.00 are covered by the rule of incidence of Item no. 28.1 of the General Table.

Thus, and as referred to in the arbitral decision rendered in proceedings no. 132/2013-T, "The uniform criterion that is thus required is that which determines that the incidence of the rule in question only takes place when one of the parts, floors or divisions with independent use of property in horizontal or full ownership with residential use, possesses a TAV greater than € 1,000,000.00" and not when this value results from the sum of the taxable asset value attributed to each floor or division with independent use.

As also mentioned in the arbitral decision rendered in proceedings no. 50/2013-T, "The criterion sought by the TCA, of considering the value of the sum of the TAV attributed to the parts, floors or divisions with independent use, with the argument that the property is not constituted in the horizontal property regime, finds no legal basis and is contrary to the criterion that applies in the context of MPTC and, by referral, in the context of ST. To which is added the fact that the law itself expressly establishes, in the final part of item 28 of the GITS, that the ST to apply to urban properties of value equal to or greater than € 1,000,000.00 – "on the taxable asset value used for purposes of MPT.".

From all the foregoing, we cannot agree with the understanding of the TCA.

Indeed, if it is the very rule provided for in Item no. 28.1 of the General Table at the end that determines that Stamp Tax applies "on the taxable asset value used for purposes of MPT", what is relevant for purposes of tax incidence is the taxable asset value individualized for each of the parts, floors or divisions with independent use on which the MPT is assessed annually, that is, the assessment of Stamp Tax obeys the rules provided for in the Municipal Property Tax Code, by express referral of the aforementioned Item no. 28 of the General Table and of article 67, no. 2 of the Stamp Tax Code.

This is evidenced by the fact that the TCA, in order to assess Item no. 28.1 of the General Table under review, starts from each of those floors or divisions with independent use, making the respective rate apply to the taxable asset value attributed to each of those divisions with residential use, in accordance with the rules of the Municipal Property Tax Code, and then adds that taxable asset value.

The interpretation to the effect that what is relevant in the rule of incidence of Item no. 28.1 of the General Table is the taxable asset value attributed to each of the autonomous parts, floors or divisions with independent use with residential use and not the value resulting from the sum of those taxable asset values is that which likewise results from its ratio legis, as required by article 9, no. 1 of the CC, applicable by virtue of the provision in article 11 of the General Tax Law.

Indeed, in the presentation and discussion of Bill no. 96/XII/2.ª [13] in the National Parliament, the Secretary of State for Tax Affairs declared as follows:

"This is the first time in Portugal that a special taxation on high-value properties intended for residential use is created. This rate will be 0.5% to 0.8% in 2012, and 1% in 2013, and will apply to homes worth equal to or more than 1 million euros. With the creation of this additional tax rate, the tax effort required of these owners will be significantly increased in 2012 and 2013" [emphasis ours].

In this regard, we follow the arbitral decision rendered in proceedings no. 50/2013-T in stating that "The legislator, in introducing this legislative innovation, considered as the determining element of tax-paying capacity urban properties, with residential use, of high value (luxury), more precisely, of value equal to or greater than € 1,000,000.00, on which it then imposed a special stamp tax rate, seeking to introduce a principle of taxation on wealth manifested in the ownership, usufruct or right of superficies of high-value urban properties with residential use. For this reason, the criterion was the application of the new rate to urban properties with residential use, whose TAV is equal to or greater than € 1,000,000.00.

This same conclusion is drawn from the analysis of the discussion of bill no. 96/XII in the National Parliament, available for consultation in the Parliamentary Record, Series I, no. 9/XII/2, of 11 October 2012.

The rationale for the measure designated "special rate on high-value residential urban properties" is thus based on the invocation of the principles of social equity and tax justice, calling upon owners of high-value properties intended for residential use to contribute in a more intense manner, making the new special rate apply to "homes worth equal to or more than 1 million euros".

Clearly the legislator understood that this value, when attributed to residential use (home, autonomous unit or floor with independent use) manifests a tax-paying capacity above the average and, as such, capable of determining a special contribution to ensure fair distribution of the tax burden.".

From all the foregoing, and in accordance with the established facts, the taxable asset value of each of the 14 floors or divisions with independent use devoted to residential use, which comprise the property constituted in full ownership and which was determined in accordance with the rules of the Municipal Property Tax Code, is less than € 1,000,000.00, and thus the presuppositions of taxation of Item no. 28.1 of the General Table are not met.

For which reason the assessment of Stamp Tax, which is the subject matter of the present proceedings for arbitral determination, in the amount of € 4,258.98 (four thousand two hundred and fifty-eight euros and ninety-eight cents), is affected by the defect of violation of the provision in Item no. 28.1 of the General Table and of article 67, no. 2 of the Stamp Tax Code, due to an error concerning its legal presuppositions, and is therefore declared unlawful, with the consequent annulment thereof.

7. DECISION

With the grounds set out above, the arbitral tribunal decides:

a) To uphold the request for arbitral determination and, in consequence, to declare unlawful the Stamp Tax assessment for the year 2015, with all legal consequences;

b) To uphold the claim for recognition of the Claimant's right to payment of compensatory interest;

c) To order the TCA to reimburse the Claimant for the Stamp Tax unduly paid;

d) To order the TCA to pay costs.

8. VALUE OF THE PROCEEDINGS

The value of the proceedings is fixed at € 4,258.98 (four thousand two hundred and fifty-eight euros and ninety-eight cents), in accordance with article 97-A of the Tax Procedure and Process Code (TPPC), applicable by virtue of paragraphs a) and b) of article 29, no. 1 of the LRTA and of article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

9. COSTS

Costs to be borne by the TCA, in the amount of € 612.00 (six hundred and twelve euros), in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, in accordance with article 22, no. 2 of the LRTA.

Notify.

Lisbon, 15 December 2016

The Arbitrator,

(Hélder Filipe Faustino)

Text prepared by computer, in accordance with the provision in article 131, no. 5 of the Code of Civil Procedure (CCP), applicable by referral of paragraph e) of article 29, no. 1 of the LRTA. The text of this decision is governed by the spelling prior to the Orthographic Agreement of 1990.

[1] As amended by Law no. 83-C/2013, of 31 December.

[2] Cfr. Decree no. 112-A/2011, of 22 March.

[3] See the arbitral decision rendered under proceedings no. 27/2015-T, available at www.caad.org.pt.

[4] "Tax Law", 3rd Edition, Almedina, 2005, p. 318 cited in the arbitral decision rendered under proceedings no. 736/2014-T, available at www.caad.org.pt.

[5] Cfr. paragraph c), no. 1, article 120 of the Municipal Property Tax Code.

[6] In this sense, see also the arbitral decision rendered under proceedings no. 408/2014-T, available at www.caad.org.pt.

[7] By way of example, we highlight the Judgment rendered in proceedings no. 047/15, of 09/09/2015, according to which: "I - With respect to properties in vertical ownership, for purposes of the incidence of Stamp Tax (Item 28.1 of the GITS, as amended by Law no. 55-A/2012, of 29 October), the subjection is determined by the combination of two factors: residential use and the TAV stated in the registry equal to or greater than € 1,000,000. II - Being a property constituted in vertical ownership, the incidence of ST must be determined, not by the TAV resulting from the sum of the TAV of all divisions or floors susceptible of independent use (individualized in the property matrix entry), but by the TAV attributed to each of those floors or divisions intended for residential use.", available at www.dgsi.pt

[8] Cfr. Andreia Gabriel Pereira, "The «Luxury Homes» and Stamp Tax. Commentary on the judgment of the Supreme Administrative Court (2nd Section), of 5 February 2015, rendered in proceedings no. 0993/14, Reporter Cons. Francisco Rothes", Journal of Public Finance and Tax Law, Year VII, No. 4, July 2015, pp. 235 et seq.

[9] This wording was amended by Law no. 83-C/2013, of 31 December, without however having great relevance to the case in question.

[10] Cfr. article 23, no. 7, article 44, no. 5, article 46, no. 5 and article 49, no. 3 of the Stamp Tax Code.

[11] Cfr. article 6 of the Municipal Property Tax Code (also of subsidiary application).

[12] "Property Taxes and Stamp Tax, Annotated and Commented", pp. 159 and 160.

[13] Available in the Parliamentary Record DAR, Series I no. 9/XII/2012, of 11/10/2012.