Stamp Tax on Building Land & Undivided Properties: CAAD Ruling on Unconstitutionality of Clause 28.1 TGIS (472/2018-T)

ARBITRAL DECISION

I. REPORT

1. On 24 September 2018, A..., S.A., NIPC..., with registered office at Rua ...,..., Lisbon, (hereinafter, Claimant), filed a request for constitution of an arbitral tribunal, under the combined provisions of articles 2, no. 1, paragraph a), and 10, nos. 1, paragraph a), and 2, of Decree-Law no. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters, as amended by article 228 of Law no. 66-B/2012, of 31 December (hereinafter, abbreviated as RJAT), with a view to this Tribunal's ruling on:

• Declaration of illegality and annulment of the following decisions denying applications for official review and assessments of Stamp Tax (IS): (i) the decision denying the official review request no. ...2016..., handed down by the Head of the Tax Management and Assistance Division of the Large Taxpayers Unit, by dispatch of 20.06.2018, relating to the tax act embodied in the IS assessment no. 2014..., of 24.03.2015, and in collection notices no. 2015..., no. 2015... and no. 2015..., which concerned ownership of the urban property located in the parish of ..., municipality of Funchal, registered in the property matrix under article..., with reference to the year 2014; (ii) the decision denying the official review request no. ...2018..., handed down by the Head of the Tax Management and Assistance Division of the Large Taxpayers Unit, by dispatch of 16.07.2018, relating to the tax act embodied in the IS assessment no. 2014..., of 24.03.2015, and in collection notices no. 2015..., no. 2015... and no. 2015..., which concerned ownership of the urban property located in the Union of parishes of ..., ..., ..., registered in the property matrix under article..., with reference to the year 2014; (iii) the decision denying the official review request no. ...2018..., handed down by the Head of the Tax Management and Assistance Division of the Large Taxpayers Unit, by dispatch of 16.07.2018, relating to the tax act embodied in the IS assessment no. 2014..., of 24.03.2015, and in collection notices no. 2015..., no. 2015... and no. 2015..., which concerned ownership of the urban property located in the Union of parishes of ... and ..., municipality of Cascais, registered in the property matrix under article..., with reference to the year 2014; (iv) the decision denying the official review request no. ...2018..., handed down by the Head of the Tax Management and Assistance Division of the Large Taxpayers Unit, by dispatch of 16.07.2018, relating to the tax act embodied in the IS assessment no. 2014..., of 24.03.2015, and in collection notices no. 2015..., no. 2015... and no. 2015..., which concerned ownership of the urban property located in the Union of parishes of ... and ..., registered in the property matrix under article..., with reference to the year 2014;

• Restitution of the amounts of tax unduly paid, plus compensatory interest, in accordance with legal provisions.

The Claimant attached 24 (twenty-four) documents, having not requested the production of any other evidence.

The Respondent is the AT – Tax and Customs Authority (hereinafter, Respondent or AT).

As results from the request for arbitral ruling, the Claimant bases the challenge of the disputed tax acts, summarily, on the following:

In the year 2014 the Claimant was the owner of four urban properties, three of them composed of land for construction and one composed of property in sole ownership without divisions capable of independent use.

With reference to the date of the facts, the construction to be erected on one of the land parcels for construction will have multiple uses (residential, commercial and parking) and not solely residential.

Another land parcel for construction integrates, in part, an area classified as green space for protection and conservation and, in the remainder, area classified as National Ecological Reserve (REN), permitting construction of buildings for public purposes for approximately 5% of the land.

In April 2016, the Claimant was notified of the IS assessments relating to ownership of the aforementioned urban properties, as the AT considered that they are covered by the objective scope of entry 28.1 of the General Stamp Tax Table (TGIS), as worded by Law no. 83-C/2013, of 31 December.

The Claimant made voluntary payment of the aforementioned IS assessments, despite being convinced of their illegality, which is why it filed an application for official review of those same assessments.

The AT denied the applications for official review concerning the challenge to the legality of the aforementioned IS assessments.

The Claimant's disagreement regarding the referenced IS assessments stems, primarily, from the following reasons:

a) Entry 28.1 of the TGIS provides for taxation of residential properties or land for construction whose authorized or planned building is for residential purposes, and whose PTU, determined in accordance with the IMI Code, is equal to or greater than €1,000,000, therefore, with respect to properties with multiple uses (residential and non-residential), such as is the case with two of the aforementioned properties, that entry cannot be applied, and the respective assessments should be annulled;

b) From the purpose of entry 28.1 of the TGIS it is unequivocal that the legislature did not intend to tax ownership of urban properties with residential use, nor of land for construction, when used for the exercise of an economic activity, for this reason the IS assessments in question cannot fail to be annulled for errors in the material and legal assumptions;

c) IS on ownership as defined in entry 28.1 of the TGIS suffers from material unconstitutionality, due to violation of the principle of equality provided for in articles 13, 103, no. 1 and 104, no. 3, all of the Constitution of the Portuguese Republic (CRP);

d) Finally, IS on ownership, as defined in entry 28.1 of the TGIS, also suffers from material unconstitutionality, due to violation of the principle of progressivity provided for in articles 103, no. 1 and 104, no. 3, both of the CRP.

The Claimant understands, finally, that given that the present request for arbitral ruling is proceeded with, it should be reimbursed for the amounts of tax unduly paid, plus compensatory interest.

1. The request for constitution of an arbitral tribunal was accepted and automatically notified to the AT on 1 October 2018.

The Claimant did not proceed with the appointment of an arbitrator, therefore, pursuant to the provisions of no. 1 of article 6 and paragraph a) of no. 1 of article 11 of the RJAT, the President of the CAAD Ethics Council designated the undersigned as arbitrator of the single Arbitral Tribunal, who communicated acceptance of the duty within the applicable period.

On 15 November 2018, the Parties were duly notified of that appointment, and did not manifest any intention to challenge the appointment of the arbitrator, in accordance with the combined provisions of article 11, no. 1, paragraphs b) and c), of the RJAT and articles 6 and 7 of the CAAD Code of Ethics.

Thus, in accordance with the provision of paragraph c) of no. 1 of article 11 of the RJAT, the single Arbitral Tribunal was constituted on 5 December 2018.

1. On 21 January 2019, the Respondent, duly notified for that purpose, filed its Reply in which it raised the exception of material incompetence of the Arbitral Tribunal and specifically challenged the arguments raised by the Claimant.

In essence and also briefly, it is important to extract the most relevant arguments on which the Respondent based its Reply:

In order to support the alleged material incompetence of the Arbitral Tribunal, the AT asserts that the nature of a property (which is what, according to the AT, mediately or immediately the Claimant intends to question here) is not susceptible to being discussed in arbitral proceedings, since there are specific procedures for that contained in the tax law regulations, and moreover, the nature of properties is fixed documentarily.

In this context, the AT also alleges that the facts that the Claimant intends now to question, without having done so timely and in the proper venue, allowing all the periods it had at its disposal to lapse, are settled in the legal order.

In summary, the AT considers that the arbitral jurisdiction is not competent to know of the claim underlying the request made by the Claimant, which implies the correction/alteration of the property matrices in question, since said rectification – even if it had been requested timely by the Claimant, which it was not – does not constitute a tax assessment act.

If not understood thus – says the AT – the normative interpretation advocated by the Claimant, which conflicts with the provision of article 2, no. 1, of the RJAT and article 2 of Ordinance no. 112-A/2011, is unconstitutional due to violation of article 212, no. 3, of the CRP and likewise due to violation of the principle of free access to courts, in the aspect of the right to a second tier of jurisdiction. Moreover, if the Claimant's thesis were to be accepted, the AT asserts that the principles of effective judicial protection and justice would still be violated, particularly in the normative dimension that challenging an immediately harmful act presents itself as a true duty and not a mere option which, if omitted, forecloses the challenge of the corresponding assessment based on that defect.

In another order of considerations, the AT alleges that entry 28.1 of the TGIS, whose unconstitutionality is raised, passed, more than once, through the Constitutional Court's scrutiny.

It further alleges that if the property certificates delivered by the Claimant were to be disregarded, which by mere academic exercise is conceded, the Tribunal would overlook and disregard the references made in those certificates to declarations Model 1 and corresponding evaluation sheets which determined that the properties be assigned a PTU equal to or greater than €1,000,000 and that those same properties be described and registered as land for construction with residential use; descriptions made in accordance with the Claimant's requests and declarations. Never did the Claimant, as the taxpayer subject, challenge those certificates and/or evaluations, through the procedural and/or legal means available to it, which established that those properties were land for construction with residential use, with PTU equal to or greater than €1,000,000.00.

The AT further proposes that if the Tribunal were to accept the Claimant's understanding regarding the alleged multiple use of some of the aforementioned immovable properties, the Tribunal cannot disregard that the assessment act is by nature divisible, therefore, to the extent, it would have to rule on the possibility of a mere partial annulment thereof. On this point, the AT considers that entry 28.1 of the TGIS is unconstitutional, when interpreted to mean that the norm of incidence does not include land for construction with building thereon authorized or planned that is not exclusively for residential purposes, that is, with any non-residential component or, in the words of the Claimant, with "multiple use and not solely residential," as it violates the constitutional principle of separation and interdependence of powers, enshrined in articles 2 and 111 of the CRP, constituting itself as a reference and limit to the powers of cognition of courts in the exercise of their function within the Rule of Law (cf. articles 202 and 203 of the CRP), as well as the constitutional principle of equality (cf. article 13 of the CRP) and, likewise, the principle of legality formulated in no. 2 of art. 103, paragraph i) of no. 1 of art. 165 all of the CRP.

With regard to the request for payment of compensatory interest made by the Claimant, the AT considers that, if granted, it is only framed in paragraph c) of no. 3 of article 43 of the LGT, which determines that in situations of revision of the tax act on the initiative of the taxpayer, compensatory interest is only due from one year after the submission of the official review request.

The Respondent attached 12 (twelve) documents, having not requested the production of any other evidence; at the same occasion, the Respondent proceeded with attachment to the record of its respective administrative file (hereinafter, PA).

1. The Claimant made submissions on the matter of the exception raised by the AT, arguing for the inadmissibility of the invoked dilatory exception of material incompetence of the Arbitral Tribunal, in accordance with the provisions contained in the petition filed on 4 February 2019 and which is hereby given as fully reproduced.

2. On 4 February 2019, a dispatch was issued dispensing with the holding of the meeting referred to in article 18 of the RJAT, setting a deadline for the submission of arguments and determining, as the final date for handing down the arbitral decision, 31 May 2019.

3. Both Parties submitted written arguments, in which they reiterated the positions previously taken in their respective pleadings.

II. CASE MANAGEMENT

1. The Arbitral Tribunal was regularly constituted (cf. article 5 of the RJAT).

The request for arbitral ruling is timely, as it was filed within the period provided for in article 10, no. 1, paragraph a), of the RJAT.

The parties have legal personality and capacity, have standing and are duly represented (cf. articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

The proceedings do not suffer from any nullities.

The joinder of claims is admitted – there are several tax acts relating to Stamp Tax, with requests for declaration of illegality and annulment of each of them – in light of the fact that the success of the claims formulated by the Claimant depends essentially on the assessment of the same factual circumstances and the interpretation and application of the same principles or rules of law (cf. article 3, no. 1, of the RJAT).

The Respondent invokes the exception of material incompetence of the Arbitral Tribunal to examine and decide the present proceedings, for which examination and decision it becomes, however, necessary to first establish the proven and unproven facts, after which a decision will be made.

There are no other exceptions or preliminary questions that preclude knowledge of the merits and that require examination.

III. REASONING

III.1. FACTS

§1. ESTABLISHED FACTS

1. The following facts are considered established:

a) The Claimant is a credit institution that, in the context of its commercial activity, is engaged in banking business, namely in the granting of credit.

b) In the context of its credit-granting activity and owing, in particular, to credit recovery processes, the Claimant acquires properties of different kinds.

c) In the year 2014, the Claimant was the owner of the following urban properties:

i) quota share (74/100) of the urban property located in the municipality of Funchal, parish of ..., registered in the urban property matrix with no. ... (prior matrix entries nos...., ... and ...), composed of land for construction, with the patrimonial tax value of €1,120,190.00 [cf. document no. 1 attached to PPA];

ii) urban property located in the municipality of Caldas da Rainha, Union of Parishes of ... - ..., ... and ... (extinct parish of...), registered in the urban property matrix with no. ... (prior matrix entry no...), composed of land for construction, with the patrimonial tax value of €1,572,280.00 [cf. document no. 2 attached to PPA];

iii) urban property located in the municipality of Cascais, Union of Parishes of ... and ... (extinct parish of ...), registered in the urban property matrix with no. ... (prior matrix entry no...), composed of land for construction, with the patrimonial tax value of €1,308,500.00 [cf. document no. 3 attached to PPA]; and

iv) urban property located in the municipality of Sintra, Union of Parishes of ... and ... (extinct parish of ...), registered in the urban property matrix with no. ... (prior matrix entry no...), composed of property in sole ownership without divisions capable of independent use, intended for residential purposes, with the patrimonial tax value of €1,091,630.00 [cf. documents nos. 4 and 10 attached to PPA].

d) The evaluation data for the urban properties identified in the preceding established fact, contained in the respective urban property record cards [cf. documents nos. 1 to 4 attached to PPA], result from the following evaluation operations carried out by the AT:

i) urban property located in the municipality of Funchal, parish of ..., registered in the urban property matrix with no...: evaluation carried out on 08.01.2015, following the delivery of IMI Model 1 declaration, on 22.12.2014, in which such evaluation was requested [cf. documents nos. 1 and 2 attached to Reply];

ii) urban property located in the municipality of Caldas da Rainha, Union of Parishes of ... - ..., ... and ... (extinct parish of...), registered in the urban property matrix with no...: evaluation carried out on 13.01.2014, following the delivery of IMI Model 1 declaration, on 28.11.2013, in which such evaluation was requested [cf. documents nos. 4 and 5 attached to Reply];

iii) urban property located in the municipality of Cascais, Union of Parishes of ... and ... (extinct parish of ...), registered in the urban property matrix with no...: evaluation carried out on 29.12.2014, following the delivery of IMI Model 1 declaration, on 22.12.2014, in which such evaluation was requested [cf. documents nos. 7 and 8 attached to Reply];

iv) urban property located in the municipality of Sintra, Union of Parishes of ... and ... (extinct parish of ...), registered in the urban property matrix with no...: evaluation carried out on 28.01.2016, following the delivery of IMI Model 1 declaration, on 23.12.2015, in which evaluation was requested [cf. documents nos. 10 and 11 attached to Reply];

e) With respect to the land for construction that comprises the urban property identified at point iii) of the established fact c), the Urban Licensing Division (DLUR) of the Territorial Management Department of the Cascais Municipal Council, on 09.08.2016, issued an opinion regarding the respective constructive viability, having determined a maximum building index of 306.00 m2 and an equal maximum implantation index, with the remaining area classified as green space for protection and conservation and as National Ecological Reserve (REN). [cf. document no. 6 attached to PPA, by request of 11.01.2019]

f) On the urban property identified at point iii) of the established fact c), no building is planned for residential purposes. [cf. document no. 6 attached to PPA, by request of 11.01.2019]

g) On 24.03.2015, the AT assessed IS, reported to the year 2014 and relating to each of the urban properties identified in the established fact c), and the following IS assessments were issued [cf. PA]:

PROPERTY (ARTICLE) ASSESSMENT PTU COLLECTION AMOUNT

... 2014 ... €1,445,804.78 €10,698.96 [74/100]

... 2014 ... €1,572,280.00 €15,722.80

... 2014 ... €1,618,351.65 €16,183.52

... 2014 ... €1,091,630.00 €10,916.30

h) The aforementioned IS assessments resulted from the application of entry 28.1 of the TGIS to each of the urban properties identified in the established fact c). [cf. PA and documents nos. 7 to 10 attached to PPA]

i) As a consequence of the evaluation operation referenced at point i) of the established fact d), the PTU of the urban property located in the municipality of Funchal, parish of ..., registered in the urban property matrix with no..., was updated in the matrix to the amount of €1,120,190.00, which led to the total collection passing from €10,698.96 to €8,289.41 (74/100), which was reflected in the amounts of the 2nd and 3rd installments of IS to be paid. [cf. documents nos. 7 and 15 attached to PPA and PA]

j) As a consequence of the evaluation operation referenced at point iii) of the established fact d), the PTU of the urban property located in the municipality of Cascais, Union of Parishes of ... and ... (extinct parish of...), registered in the urban property matrix with no..., was updated in the matrix to the amount of €1,308,500.00, which led to the total collection passing from €16,183.52 to €13,085.00, which was reflected in the amounts of the 2nd and 3rd installments of IS to be paid. [cf. documents nos. 9 and 15 attached to PPA and PA]

k) Following the aforementioned IS assessments, the collection notices were issued which form documents nos. 7 to 10 attached to PPA and which are hereby given as fully reproduced, with final dates for voluntary payment in April/2015 (1st IS installment), July/2015 (2nd IS installment) and November/2015 (3rd IS installment), with the Claimant making timely voluntary payment of the total amount of assessed Stamp Tax which amounted to €48,013.52. [cf. documents nos. 11 to 14 attached to PPA]

l) On 6 January 2016, the Claimant filed an application for official review concerning the aforementioned IS assessments, in accordance with the terms and grounds contained in the respective initial petition which is contained in the PA and which is hereby given as fully reproduced, which gave rise to the institution by the AT of four official review procedures (one for each IS assessment and property), which were registered under no. ...2016... (IS assessment relating to the property at point i) of the established fact c)), no. ...2018... (IS assessment relating to the property at point ii) of the established fact c)), no. ...2018... (IS assessment relating to the property at point iii) of the established fact c)) and no. ...2018... (IS assessment relating to the property at point iv) of the established fact c)) [cf. PA].

m) In the context of said official review procedures, draft decisions were issued as contained in documents nos. 15, 17, 18 and 19 attached to PPA and PA, which are hereby given as fully reproduced and from which, in addition, the following is contained [cf. document no. 15 attached to PPA and PA]:

"§ V. EXAMINATION

Having examined the official review request, here under examination, as well as the evidence documents brought into the record and after consultation of the AT's information system database, it must be said:

The question centers on whether, within the scope of the incidence of stamp tax referred to in Entry 28 of the TGIS, are included or not land for construction, that is, whether for such purpose, land that integrates this species can or cannot be considered as 'urban properties with residential use.'

In this respect, it must be added that the Applicant comes to these proceedings to project an entire theory that is already settled and well-established, both by the Ombudsman, and by the Secretary of State for Tax Affairs, as well as by the Supreme Administrative Court, as well as by the Administrative and Fiscal Arbitration Centre, as well as by the Constitutional Court and finally through the reform in the legal text, specifically with the State Budget Law of 2014.

Notwithstanding all this jurisprudential source and this legislative amendment, it is found that the Applicant intends to come to create and raise the doubts that previously existed regarding the interpretation and application of the concept of property, for the period of 2014, which, with all due respect for contrary opinion, cannot proceed with the Applicant's claim, and there is manifest probability of serious non-existence of the right claimed by it.

Let us see:

What is at stake in the present proceedings is the period of 2014.

It is an established fact that indeed for the periods of 2012 and 2013, through Law no. 55-A/2012, of 29 October, Entry 28.1 was added to the General Stamp Tax Table, subjecting to this tax urban properties whose patrimonial tax value contained in the matrix, in accordance with the Property Tax Code (CIMI), was equal to or greater than €1,000,000.00 (one million) on which the rate of 1% applied, for property with residential use.

However, with Law no. 83-C/2013, of 31 December (State Budget Law for 2014), the wording of Entry 28.1 of the TGIS was amended in order to expressly contemplate the incidence of stamp tax on land for construction whose building, authorized or planned, is for residential purposes, so from the year 2014 onwards, in accordance with this new wording, the ownership, usufruct, or surface right of urban properties whose patrimonial tax value contained in the matrix, in accordance with the CIMI, is equal to or greater than €1,000,000.00 (one million) incurring the rate of 1% for residential property or for land for construction whose building, authorized or planned, is for residential purposes, in accordance with the CIMI.

Given that no interpretive effect was conferred on this new wording and the unanimity of arbitral jurisprudence and the uniform jurisprudence of the Supreme Administrative Court profess the understanding that the norm of incidence in the wording prior to the State Budget Law for 2014 did not include land for construction, these cannot be considered, for the purposes of incidence of stamp tax, as 'properties with residential use.'

In these terms, and in compliance with Dispatch no. 6/2017-XXI, of 13 January, of the Secretary of State for Tax Affairs, with a view to standardizing the AT's actions regarding decisions within the scope of procedures that have as their object stamp tax assessments of Entry 28.1 of the General Stamp Tax Table (TGIS) prior to the amendment introduced by Law no. 830/2013, of 31 December, land for construction were not subject to stamp tax.

In accordance with the understanding emanated by service instruction no. 40047 — Series I, of 16.02.2017, issued in compliance with the aforementioned Dispatch, it must be concluded that land for construction were not subject to stamp tax, and the services should follow this understanding for all procedures that are in a procedural phase.

Now, there are no doubts that, in compliance with the aforementioned instruction, land for construction subject to assessments relating to the periods of 2012 and 2013 are not included in the norm of incidence of entry 28.1 of the TGIS (in the original wording given by Law 55-A/2012, of 29 October) and, therefore, the Stamp Tax assessments - Entry 28.1 of the TGIS will be annulled, reiterated, with respect to the periods of 2012 and 2013.

In the present case, we are before an assessment of the year 2014, therefore the position set out does not even appear to be capable of application to the position expendied by the Applicant.

As already stated in the sequence of the intention manifested by the XXI Constitutional Government to eliminate the pernicious effects of the application of Entry 28.1 of the TGIS, the Ombudsman brought the matter to the knowledge of the Secretary of State for Tax Affairs in order to clarify the question, of course, without failing to take into account the position of the Constitutional Court, in particular in the positions taken and fixed by judgments no. 320/2015, of 3 December and no. 690/2015, of 16 December.

Thus, having framed the legal basis of the tax and considering that only with the amendment introduced by article 194 of Law no. 83-C/2013, of 31 December, was a new wording given to Entry 28.1 of the TGIS, where the issue of the applicable regime for land for construction was addressed and which now provides as follows:

'For residential property or for land for construction whose building, authorized or planned, is for residential purposes, in accordance with the Property Tax Code - 1% (Wording of Law no. 83-C/2013 of 31 December).'

In this sequence, it is necessary to note that, given also the classification in article 6 of the CIMI, which in its number 1 subdivides urban properties into 'a) residential; b) commercial, industrial or for services; c) land for construction; d) others,' in no. 2 considers as 'Residential, commercial, industrial or for services are buildings or constructions for which such licensing is provided or, in the absence of a license, which have as their normal destination each of these purposes'; and, in its no. 3 'Land for construction shall be considered to be land located within or outside an urban agglomeration, for which a construction or subdivision license has been granted or authorization has been given, prior notification has been admitted or favorable prior information has been issued for a subdivision or construction operation, and also those that have been so declared in the acquisition title,' the Ombudsman considered that land for construction did not fall within the incidence of Entry 28.1 of the TGIS, in the wording in force in the years 2012 and 2013 and, only for these periods would the assessments made with respect to this species of urban property and these years lack legal foundation.

To say with this that the amendment of the text of Entry 28.1 of the TGIS thus clarified all understanding, being clear that the tax referred to in Entry 28.1 of the TGIS would be assessed in relation to land for construction with PTU greater than one million euros, whose building, authorized or planned, is for residential purposes and when the taxable facts are found to be verified in the years 2014 and onwards.

The sense and scope of the allegations of the Applicant are therefore not apparent, as on this matter, any doubt has already been overcome, and it is clear that the incidence of stamp tax was expanded to cover property rights, usufruct, or surface rights of such land for construction.

b) Regarding the alleged violation of the principles of Equality, Taxable Capacity and Progressivity

The Applicant 'A..., S.A.,' NIPC..., further alleges violation of the above principles, however, we will always say:

It is reiterated that with the State Budget Law for 2014, entry 28.1 of the TGIS was expressly amended, so as to include, from 01.01.2014, land for construction, as follows:

'28. I For residential property or for land for construction whose building, authorized or planned, is for residential purposes, in accordance with the Property Tax Code – 1%.'

In the case in question, the wording introduced by the State Budget Law for 2014 in Entry 28.1 of the TGIS applies:

'...for land for construction whose building, authorized or planned, is for residential purposes, in accordance with the Property Tax Code - 1%'.

And on this the Constitutional Court has already pronounced itself on Entry 28.1 of the TGIS, including with the wording given to it by the State Budget Law for 2014, applicable to the situation under adjudication.

Since the constitutional principle of equality is translated into the principle of generality and the principle of taxable capacity, and the principle of equality does not prevent the legislator from freely choosing and treating situations that it considers as taxable facts, provided that they reveal the taxable capacity of the taxpayer subject.

Moreover, as the Applicant correctly argues, it was decided in Constitutional Court Judgment no. 590/2015, of 11 November, that the taxation of ownership of residential urban properties and land for construction whose building, authorized or planned, is for residential purposes, with PTU equal to or greater than 1,000,000.00, 'as a fiscal measure aimed at more intensely affecting those holding rights of enjoyment over urban properties of residential vocation and of higher value, accessible only to those possessing high economic force,' reveals unequivocal taxable capacity, as it relates to properties of significantly higher value than that of the generality of urban properties with residential use, even if only potential, 'capable of founding the imposition of increased contribution for the sanitation of public accounts to its holders, in realization of the aforementioned 'principle of equity in austerity.'

Having made it clear that 'what the Constitution of the Republic requires is that what is necessarily equal be treated equally and what is essentially different be treated differently, not preventing differentiation of treatment, but only arbitrary, unreasonable discriminations, that is, distinctions in treatment that do not have sufficient material justification and grounds.'

And just as has been the uniform understanding of the Constitutional Court, the principle of equality, as a limit to legislative discretion, does not prohibit making choices, what it prohibits is promoting distinctions devoid of objective and rational justification, only being able to 'be censured, on the grounds of violation of the principle of equality, the choice of regime made by the ordinary legislator in those cases where it is proven that resulting differences in treatment between persons do not find justification in reasonable grounds, which is not verified in the situation under adjudication.

This means the principle of tax equality does not result in the prohibition of freedom on the part of the legislator who can choose to tax certain facts and not others, but rather the prohibition of arbitrariness, so there remains no alternative but that of the constitutionality of the norm in question, in the case now under analysis, for the tax period in question - 2014.

The alleged illegality of the tax act here in dispute is thus dispelled, as the norm in question is considered constitutional.

In summary and in conclusion, with the amendment introduced by Law no. 83-C/2013, of 31/12, the IS provided for in entry 28.1 of the TGIS now also applies to residential properties and land for construction 'whose building, authorized or planned, is for residential purposes,' so after the entry into force of this norm, it became clear that the definition of residential property for the purposes of subjection to IS is that which results from no. 1 of article 2 in conjunction with no. 1 of article 6, both of the CIMI, and it is verified that the assessment now in question does not violate any constitutional parameter, specifically the principle of equality and taxable capacity.

Entry 28.1 of the TGIS, in addition to being an instrument for obtaining the fiscal revenue necessary for the budgetary consolidation effort provided for in the Economic and Financial Adjustment Program (PAEF), was also a measure that the Government implemented, conceiving it as 'a measure of equality, which was intended to strengthen the principle of equity in austerity, guaranteeing an effective sharing of the necessary sacrifices to comply with the adjustment program,' with equality in the sharing of sacrifices aimed at entry 28.1 of the TGIS by the 'fiscal effort required' of the owners of 'high-value residential urban properties' compared with 'those who live on the income of their work.'

It was concluded that taxation under stamp tax contained in Entry 28.1 of the TGIS complies with the criterion of suitability, as it aims to tax the wealth embodied in the ownership of high-value immovable property, whose acquisition evidences implicitly a certain economic capacity, and the legislative option of Entry 28.1 of the TGIS is constitutionally legitimate, justified by the principle of tax equality and taxable capacity, not constituting violation of any constitutional command nor giving rise to any censure from the standpoint of constitutional parameters.

In light of the above, it is concluded that entry 28.1 of the TGIS is not susceptible to the constitutional censure sought by the Applicant, as there is no violation of the principles of equality or taxable capacity, or progressivity, in any of the aspects raised."

n) Given its specificity, it is important to extract the following segment from the draft decision relating to official review of the IS assessment concerning the urban property mentioned at point iv) of the established fact c) [cf. document no. 18 attached to PPA and PA]:

"29. In this sense, the building that is constituted in sole ownership with parts or divisions capable of independent use integrates the legal concept of 'property,' that is, a single unit, and the patrimonial tax value thereof is determined by the sum of the parts with residential use, and being that value equal to or greater than €1,000,000.00, there will be subjection to Stamp Tax of Entry 28 of the TGIS.

1. That is, in the case under analysis, being a property in the regime of sole ownership without floors or divisions susceptible to capable of independent use, the question does not even arise, since it is a property, namely a 'T3' unit.

2. It is settled jurisprudence, particularly of the Supreme Administrative Court, that being a property constituted in vertical ownership, the incidence of IS is determined by the PTU attributed to the floor intended for residential use.

3. In the present case, we are before an assessment of the year 2014, relating to a property intended for residential purposes in the regime of Sole Prop. Without Floors or Div. Suscept. to Capable of Independent Use, with patrimonial value greater than one million euros, therefore the position set out does not even appear to be capable of application to the position expendied by the Applicant.

4. The sense and scope of the allegations of the Applicant are therefore not apparent, as on this matter, there has never been any doubt."

o) The Claimant was notified of those draft decisions and to, if it so wished, exercise its respective right to be heard, which the Claimant did only in the context of official review procedure no. ...2016..., in accordance with the terms contained in document no. 16 attached to PPA and which is hereby given as fully reproduced.

p) Subsequently, by official communications dated 22.06.2018 (official review procedure no. ...2016...) and 17.07.2018 (official review procedures nos. ...2018..., no. ...2018... and no. ...2018...), sent by registered mail, the Claimant was notified of the respective denial decisions handed down by the Head of the Tax Management and Assistance Division of the Large Taxpayers Unit, on 20.06.2018 (official review procedure no. ...2016...) and on 16.07.2018 (official review procedures nos. ...2018..., no. ...2018... and no. ...2018...), the reasoning of which is that contained in the draft decisions to which reference was made in established facts m) and n), which are contained in documents nos. 20, 21, 22 and 23 attached to PPA and PA and are hereby given as fully reproduced.

q) On 24 September 2018, the Claimant filed the request for constitution of an arbitral tribunal that gave rise to the present proceedings. [cf. CAAD case management information system]

§2. UNESTABLISHED FACTS

1. With relevance to the examination and decision of the case, the following facts were not established:

a) With reference to the date to which the facts relate, the building to be erected on the urban property located in the municipality of Caldas da Rainha, Union of Parishes of ... - ..., ... and ..., registered in the property matrix under article no..., will have multiple uses and not solely residential, since the building to be erected on that land will be composed of floors for residential purposes, for commerce and parking.

b) The building permitted on the urban property located in the municipality of Cascais, Union of Parishes of ... and..., registered in the property matrix under article no. ..., is for buildings with public utility purposes.

§3. MOTIVATION REGARDING FACTUAL MATTERS

1. The facts pertinent to the judgment of the case were selected and delineated according to their legal relevance, in light of the plausible solutions of the legal questions, in accordance with the combined application of articles 123, no. 2, of the CPPT, 596, no. 1 and 607, no. 3, of the CPC, applicable ex vi article 29, no. 1, paragraphs a) and e), of the RJAT.

The Tribunal's conviction was based on the facts alleged by the Parties, whose adherence to reality was not challenged and on critical examination of the documentary evidence in the record, including the administrative file.

1. With respect to the unestablished facts, it must be said that they were so considered due to the absence of any evidence supporting them, with particular emphasis on documents nos. 5 and 6 attached to PPA.

On the one hand, document no. 5 does not contain any suitable element to establish a complete correspondence between the immovable property referenced therein and the urban property located in the municipality of Caldas da Rainha, Union of Parishes of ... - ..., ... and ... (extinct parish of...), registered in the property matrix with no...; on the other hand, from said document no. 6 we were unable to extract any element supporting that on that urban property the permitted building is for buildings with public utility purposes.

III.2. LAW

§1. THE ARBITRAL TRIBUNAL'S INCOMPETENCE RATIONE MATERIAE

1. Given that the scope of the tribunal's material jurisdiction is of public order and its examination precedes that of any other matter (article 13 of the CPTA applicable ex vi article 29, no. 1, paragraph c), of the RJAT) and that the violation of the rules of jurisdiction ratione materiae determines the absolute incompetence of the tribunal, which must be examined ex officio (article 16 of the CPPT applicable ex vi article 29, no. 1, paragraph a), of the RJAT), it is necessary to examine this question primarily.

2. The Respondent supports the allegation of material incompetence of the Arbitral Tribunal, essentially, on the following argument:

The AT begins by asserting that the nature of a property (which is what, according to the AT, mediately or immediately the Claimant intends to question here) is not capable of being discussed in arbitral proceedings, as there are specific procedures for that contained in the tax law regulations, and moreover, the nature of properties is fixed documentarily in the record.

It is added that, according to the AT, the complaint regime provided for in article 130 of the Property Tax Code constitutes a true duty – and not an option – that must be observed by taxpayers, should they intend to enforce the right they claim, that is, the justified necessity of promoting the alteration in the matrix of the property or properties of which they are owners.

Moreover, judicial challenge provided for in articles 129 and 130 of the Property Tax Code is not capable of being replaced by arbitral challenge provided for in the RJAT, given that, within the Property Tax Code, the act to be reviewed is situated in the denial of an administrative-tax act that does not involve the examination of the legality of an assessment.

On the other hand, the facts that the Claimant intends now to question, without having done so timely and in the proper venue, allowing all the periods at its disposal to lapse, are settled in the legal order.

Even if it were considered that we are faced with a fact susceptible to review at the CAAD, the same would have to, in accordance with the terms and for the purposes of no. 7 of article 134 of the CPPT, have all the discretionary means foreseen for the evaluation procedure exhausted, which has not occurred, resulting in clear incompetence of the arbitral tribunal.

Thus, this arbitral jurisdiction is not competent to know of the claim underlying the request made by the Claimant, which implies the correction/alteration of the property matrices in question, since said rectification – even if it had been requested timely by the Claimant, which it was not – does not constitute a tax assessment act.

It is not consistent with the RJAT, nor with any procedural tax rules, that the Claimant proposes and attempts to contradict what is set out in official documents and for which all periods of reaction have lapsed and whose description, evaluation and subsequent registration were carried out and brought into the matrix in accordance with the documents and information provided by the latter.

If not understood thus – says the AT – the normative interpretation advocated by the Claimant, which collides with the competences attributed to the CAAD in accordance with the provision of article 2, no. 1, of the RJAT and article 2 of the aforementioned Ordinance, is unconstitutional due to violation of article 212, no. 3, of the CRP and likewise due to violation of the principle of free access to courts, in the aspect of the right to a second tier of jurisdiction. Moreover, if the arbitral decision were to accept the Claimant's thesis, rejecting the application of article 54, no. 1, first part, of the CPPT, the principles of effective judicial protection and justice, particularly in the normative dimension that challenging an immediately harmful act presents itself as a true duty and not a mere option, which, if omitted, forecloses the challenge of the corresponding assessment based on that defect, would still be violated.

1. The Claimant made submissions on this exception, arguing for its rejection, alleging essentially the following:

The Claimant states that what is at stake in the proceedings, and never has been, the description of the properties resulting from their respective urban property record cards or any other evaluations.

According to the Claimant, taxation under Stamp Tax does not derive from the description of the properties in their respective urban property record cards, but rather from the effective and real use – whether residential or not – of the same, with its claim residing solely in the elimination from the legal order of the disputed tax acts, under paragraph a) of no. 1 of article 2 of the RJAT.

What is at stake in the proceedings – says the Claimant – is the objective incidence in Stamp Tax and the subjection to entry 28.1 of the TGIS and what is discussed is whether immovable property whose real and effective use is not exclusively residential should or should not be included in that entry; thus, it is a matter of interpretation of the legal norms and the field of incidence of the tax and not of alteration of matrix registrations or the results of real estate evaluations.

The Claimant further states that for entry 28.1 of the TGIS to apply what matters is that the use of the property be residential, not that the property record card attests to this, that is, what matters is the economic substance of the taxable facts. The Claimant notes that the law provides for taxation of ownership of land for construction whose building, authorized or planned, is for residential purposes; now, in the concrete case, it is already authorized or planned that the building will also be for non-residential purposes, so it would be irrelevant in any case what is currently contained in the property record cards, since it is the law itself that is not limited to what they contain, contemplating the possibility of the existence of other documents that prove a nature (even if only projected) different from that resulting from the property record cards.

The Claimant concludes by saying that the request for arbitral ruling is for annulment of the Stamp Tax assessments, so the Arbitral Tribunal is competent to decide, in accordance with article 2, no. 1, paragraph a), of the RJAT; consequently, the dilatory exception invoked by the Respondent should be judged inadmissible.

1. That being so. In the legislative authorization on which the Government based itself to approve the RJAT, granted by article 124 of Law no. 3-B/2010, of 28 April, the primary guideline is proclaimed that "the tax arbitral process must constitute an alternative procedural means to the judicial challenge process and to the action for the recognition of a right or legitimate interest in tax matters."

The judicial challenge process is a procedural means that has as its object an act in tax matters, aiming to examine its legality and decide whether it should be annulled or its nullity or non-existence should be declared, as results from article 124 of the CPPT.

By examining articles 2 and 10 of the RJAT, it is verified that only questions of the legality of assessment acts or acts of determination of the taxable matter and second-tier acts that have as their object the examination of the legality of acts of those types were included in the competences of the arbitral tribunals established under the aegis of the CAAD, acts whose examination is inserted within the scope of judicial challenge processes, as results from paragraphs a) to d) of no. 1 of article 97 of the CPPT.

That is, it is verified that the legislator did not implement in the legislative authorization, as far as concerns the part in which the extension of the competences of the arbitral tribunals to questions that are examined in tax courts through action for recognition of a right or legitimate interest was provided for.

But, in harmony with the intention underlying the legislative authorization to create an alternative means to the judicial challenge process, it should be understood that, regarding requests for declaration of illegality of acts of the types referred to in its article 2, the arbitral tribunals functioning in the CAAD have the same competences that state tribunals have in the judicial challenge process, within the limits defined by the binding that the Tax and Customs Authority made through Ordinance no. 112-A/2011, of 22 March, pursuant to article 4, no. 1, of the RJAT.

Despite there being no express legal rule to that effect, it has long been pacifically understood that although the judicial challenge process has as its primary object the declaration of nullity or non-existence or annulment of acts of the types referred to, therein may be pronounced condemnations of the Tax Administration to pay compensatory interest and indemnification for undue guarantee.

But, in the absence of any legal provision allowing conclusion to the contrary, the scope of the judicial challenge process and of the arbitral processes is restricted to questions of the legality of acts of the types referred to in article 2 that are covered by the binding made in Ordinance no. 112-A/2011.

1. Returning to the concrete case and once the request for arbitral ruling has been examined, we find that, already in article 1, the Claimant delimits its object by saying that "The present request for arbitral ruling aims at (...) the declaration of illegality of the IS assessments better identified in the foreword, as well as the decisions denying the applications for official review relating to such assessments."

It is added that we were unable to find any segment in which the Claimant intends, directly or indirectly, to challenge, in any of its elements, the descriptions of the properties resulting from their respective urban property record cards or their respective evaluations.

In fact, throughout that pleading, the Claimant discusses the scope of the objective incidence of entry 28.1 of the TGIS, specifically regarding immovable property with multiple uses (residential and non-residential) and regarding immovable property with residential use and land for construction, when used for the exercise of an economic activity; moreover, the Claimant further alleges that entry 28.1 of the TGIS suffers from material unconstitutionality, due to violation of the principles of equality, taxable capacity and progressivity.

Thus, we find no basis for what is invoked in this respect by the AT, as, with due respect, it is plainly evident that what the Claimant submits for examination to the Arbitral Tribunal is the legality of the aforementioned Stamp Tax assessments, concluding its pleading with the request for declaration of illegality of such assessments and the consequent restitution of the tax paid, plus compensatory interest.

In conclusion, what is at stake here is not any alteration to either the content of the property matrices or the evaluations of the urban properties in question in these proceedings, particularly regarding their nature.

Consequently, knowledge of the unconstitutionality questions raised, in this specific context, by the AT, is foreclosed, since the same are based on presuppositions which, as we have seen, do not exist.

1. In these terms, the dilatory exception of material incompetence of the Arbitral Tribunal fails.

§2. ON THE MERITS

§2.1. DELIMITATION OF THE CLAIM

1. The Claimant raises the existence of various defects – without a relationship of subsidiarity having been established between them – on which it bases the request for declaration of illegality of the disputed Stamp Tax assessments and the acts denying the aforementioned applications for official review.

Specifically, the Claimant invokes:

(a) Violation of the norm of tax incidence contained in entry 28.1 of the TGIS, in that it is not applicable:

• to urban properties with multiple uses (residential and non-residential); and

• to urban properties with residential use and land for construction that are used for the exercise of an economic activity.

(b) Material unconstitutionality of the norm of tax incidence contained in entry 28.1 of the TGIS, due to violation:

• of the principles of equality and taxable capacity, provided for in articles 13, 103, no. 1 and 104, no. 3, all of the CRP; and

• of the principle of progressivity, provided for in articles 103, no. 1 and 104, no. 3, both of the CRP.

1. Article 124 of the CPPT provides the following:

Article 124

Order of examination of defects in the decision

1. In the decision, the tribunal shall examine as a priority the defects that lead to the declaration of non-existence or nullity of the act challenged and, thereafter, the defects argued that lead to its annulment.

2. Within the said groups, the examination of defects is carried out in the following order:

a) In the first group, that of defects whose success would determine, according to the prudent judgment of the judge, more stable or effective protection of the offended interests;

b) In the second group, that indicated by the challenger, provided that the latter establishes among them a relationship of subsidiarity and no other defects are argued by the Public Ministry or, in other cases, that fixed in the previous paragraph.

This rule establishes a priority for the examination of defects whose success would determine, according to the prudent judgment of the judge, more stable or effective protection of the offended interests.

Turning to the case at hand, we have that none of the defects invoked by the Claimant can be considered as stemming from situations that might determine the nullity of the challenged tax act in light of the legal criteria that characterize it, nor has the Claimant established an order of priority for that examination.

Accordingly, we will begin with the examination of the defects of violation of the norm of tax incidence contained in entry 28.1 of the TGIS, since it will only be important to proceed with the examination of the indicated defects of unconstitutionality if and insofar as the interpretation and implementation of the solution from the aforementioned entry of the TGIS involves subsumption to its legal provision of the situation sub judice.

§2.2. INTERPRETATION AND DELIMITATION OF THE SCOPE OF OBJECTIVE INCIDENCE OF ENTRY 28.1 OF THE TGIS

1. At the epicenter of the disagreement opposing the parties in this process is the norm of tax incidence contained in entry 28.1 of the TGIS – in force at the date of the facts, and subsequently repealed by article 210, no. 2, of Law no. 42/2016, of 28 December – therefore, it is necessary to begin by interpreting this rule, with a view to determining its scope and, thereby, delimiting what is its field of application.

2. Law no. 55-A/2012, of 29 October, introduced several amendments to the Stamp Tax Code and added to the TGIS entry 28, with the following wording (cf. article 4):

28 – Ownership, usufruct or surface right of urban properties whose patrimonial tax value contained in the matrix, in accordance with the Property Tax Code (CIMI), is equal to or greater than €1,000,000 – on the patrimonial tax value used for the purposes of IMI:

28.1 – For property with residential use – 1%;

28.2 – For property, when the taxpayer subjects that are not individual persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in a list approved by ordinance of the Minister of Finance – 7.5%.

Subsequently, Law no. 83-C/2013, of 31 December (State Budget Law 2014), amended the wording of entry 28.1 of the TGIS (cf. article 194), the latter having passed to have the following tenor (wording applicable to the situation sub judice):

28.1 – For residential property or for land for construction whose building, authorized or planned, is for residential purposes, in accordance with the provisions of the Property Tax Code – 1%

1. The interpretation of the norm of incidence contained in entry 28.1 of the TGIS cannot fail to be carried out on the basis of the hermeneutical guidelines that flow from article 11 of the LGT and article 9 of the Civil Code:

Article 11

Interpretation

1. In determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

2. Whenever in tax norms are employed terms specific to other branches of law, they must be interpreted in the same sense in which they have there, unless otherwise directly follows from the law.

3. If doubt persists regarding the meaning of the applicable norms of incidence, regard shall be had to the economic substance of the taxable facts.

4. Gaps resulting from tax norms covered by the reserve of law of the Assembly of the Republic are not susceptible to integration by analogy.

Article 9

Interpretation of the law

1. Interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative thought, taking into account especially the unity of the legal system, the circumstances in which the law was drawn up and the specific conditions of the time in which it is applied.

2. However, the interpreter cannot take into account legislative thought that does not have in the letter of the law a minimum verbal correspondence, even if imperfectly expressed.

3. In fixing the meaning and scope of the law, the interpreter shall presume that the legislator enshrined the most correct solutions and knew how to express its thought in appropriate terms.

On the subject of this interpretive task, dating from ancient times, we here appropriate the following considerations set out in the arbitral decision handed down on 02.10.2013 in case no. 53/2013-T:

"The relevance of the wording of the law is especially emphasized in the matter of interpretation of norms of incidence of Stamp Tax, which are reduced to an amalgamation, under a common denomination, of an incongruous set of tributes of completely distinct natures (on income, on expenditure, on patrimony, on acts, etc.), which leaves no appreciable margin for application of the primary interpretive criterion, which is the unity of the legal system, which calls for its overall coherence.

The recognized lack of coherence of Stamp Tax is particularly exuberant in the case of this entry no. 28.1, hastily included at the margin of the General State Budget, by a tax legislator without perceptible global fiscal orientation, which is implementing successive norms of fiscal burden as the reverses of budgetary execution are experienced, the impositions of international institutional creditors (represented by the 'troika') and the oversight of the Constitutional Court.

In fact, although in the 'Statement of Reasons' of the Proposal for Law no. 96/XII/2nd, on which Law no. 55-A/2012 was based, reference is made to the praiseworthy concern of the Government to 'strengthen the principle of equity in austerity, guaranteeing an effective sharing of the necessary sacrifices to comply with the adjustment program' and its commitment 'to ensure that the sharing of these sacrifices will be done by all and not only by those who live on the income of their work,' it is clear, on the one hand, that these equity reasons, certainly existing, did not begin to apply in mid-2012, already existing at the beginning of the year, when the General State Budget came into force and, on the other hand, that the scope of entry no. 28.1, by taxing additionally properties with residential use and not also properties that do not have it, suggests that the concerns of social equity and the proclaimed intention of sharing sacrifices by all, affects much more some than it does all.

In this context, with no secure interpretive elements allowing the detection of legislative coherence in the solution adopted in said entry no. 28.1 or the accuracy or inaccuracy of the solution adopted (relevant for interpretive purposes in light of no. 3 of article 9 of the Civil Code), the content of the legal text must be the primary element of interpretation, in accordance with the presumption, imposed by the same no. 3 of article 9, that the legislator knew how to express its thought in appropriate terms."

1. Having examined the wording – both the original and the current – of entry 28.1 of the TGIS, we find that this rule has a fundamentally remissive character, as its relevant regulatory content depends on the normativity ad quam contained in the Property Tax Code.

In fact, both as to objective incidence, with the reference to "urban properties" and to "patrimonial tax value contained in the matrix, in accordance with the Property Tax Code," as to the determination of taxable matter, with the reference to "patrimonial tax value used for IMI purposes," the regulatory tenor of this Entry 28 of the TGIS results from devolution – in accordance with a general reference – to the entire regulatory body found in the Property Tax Code.

Moreover, this aspect is reinforced by no. 2 of article 67 of the Stamp Tax Code, which determines that to matters not regulated in the Stamp Tax Code relating to entry 28 of the TGIS, the provisions of the Property Tax Code are applied, subsidiarily.

In this conformity, it is therefore necessary to collate the norms of the Property Tax Code that appear pertinent for the understanding and, therefore, for the application of entry 28.1 of the TGIS.

In the Property Tax Code, the concept of "property" is thus defined in article 2:

1. For the purposes of this Code, property is any portion of territory, encompassing waters, plantations, buildings and constructions of any kind incorporated therein or resting thereon, with a character of permanence, provided that it forms part of the patrimony of an individual or legal person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the preceding circumstances, endowed with economic autonomy in relation to the land on which they are located, although situated in a portion of territory that constitutes an integral part of a diverse patrimony or does not have a patrimonial nature.

2. Buildings or constructions, although movable by nature, are deemed to have a character of permanence when used for non-transitory purposes.

3. The character of permanence is presumed when the buildings or constructions have been resting in the same location for a period exceeding one year.

4. For the purposes of this tax, each autonomous floor, under the horizontal property regime, is deemed to constitute a property.

Next, in articles 3 to 5 of the Property Tax Code, the species of property that exist are enumerated, namely:

Rural properties (article 3):

1 – Rural properties are lands located outside an urban agglomeration that are not to be classified as land for construction, in accordance with no. 3 of article 6, provided that:

a) They are used or, in the absence of concrete use, have as their normal destination a use generating agricultural income, such as are considered for the purposes of personal income tax (IRS);

b) Not having the use indicated in the previous paragraph, they are not constructed or have only buildings or constructions of an accessory character, without economic autonomy and of reduced value.

2 – Rural properties are also lands located within an urban agglomeration, provided that, by force of a legally approved provision, they cannot have use generating any income or can only have use generating agricultural income and are, in fact, having this use.

3 – Rural properties are also:

a) Buildings and constructions directly used for the production of agricultural income, when located on the lands referred to in the preceding numbers;

b) Waters and plantations in the situations to which no. 1 of article 2 refers.

4 – For the purposes of this Code, urban agglomerations are considered, in addition to those located within legally fixed perimeters, nuclei with a minimum of 10 dwellings served by public roads, with their perimeter delimited by points distanced 50 m from the axis of the roads, in the transverse sense, and 20 m from the last building, in the sense of the roads.

Urban properties (article 4):

Urban properties are all those that should not be classified as rural, without prejudice to the provision of the following article.

Mixed properties (article 5):

1. Whenever a property has rural and urban parts it is classified, in its entirety, according to the main part.

2. If neither of the parts can be classified as main, the property is deemed to be mixed.

In article 6 of the Property Tax Code, the species of urban properties are indicated:

1. Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Land for construction;

d) Other.

1. Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, which have as their normal destination each of these purposes.

2. Land for construction shall be considered to be land located within or outside an urban agglomeration, for which a building license or authorization has been granted or prior notification has been admitted or favorable prior information has been issued for a subdivision or building operation, and also lands that have been so declared in the acquisition title, except for lands in which the competent entities prohibit any of those operations, in particular those located in green areas, protected areas or which, in accordance with municipal land use planning plans, are used for spaces, infrastructure or public equipment.

3. The provision of paragraph d) of no. 1 includes lands located within an urban agglomeration that are not land for construction nor are covered by the provision of no. 2 of article 3 and also buildings and constructions licensed for or, in the absence of a license, which have as their normal destination purposes other than those referred to in no. 2 and also those of the exception of no. 3.

On "patrimonial tax value," article 7 of the Property Tax Code provides the following:

1. The patrimonial tax value of properties is determined in accordance with this Code.

2. The patrimonial tax value of urban properties with parts classifiable under more than one of the classifications of no. 1 of the preceding article is determined:

a) If one of the parts is main and the other or others merely accessory, by application of the evaluation rules of the main part, taking into account the appreciation resulting from the existence of the accessory parts;

b) If the different parts are economically independent, each part is evaluated by application of the corresponding rules, and the value of the property is the sum of the