Stamp Tax on Urban Properties in Total Ownership with Independent Units – CAAD 473/2016-T

ARBITRAL DECISION

The Arbitrators constituting this Tribunal hereby agree:

A…, NIF …, with headquarters at … no. …, …, …-…, Lisbon (hereinafter referred to as the "Petitioner"), has, pursuant to and for the purposes of the provisions of articles 2, no. 1, paragraph a) and 10, no. 1, paragraph a), of Decree-Law no. 10/2011, of 20 January, submitted a REQUEST FOR CONSTITUTION OF AN ARBITRAL TRIBUNAL, in which the Tax and Customs Authority is the Respondent.

This request concerns, according to the Petitioner, an arbitral determination regarding:

1. The legality of the acts of assessment of Stamp Tax, dated 05.04.2016, relating to the year 2015 (see copies of the assessments now attached under the designation of Document no. 1 to 16), based on item 28.1 of the General Table of Stamp Tax, relating to an urban property in full ownership with sixteen floors or divisions susceptible of independent use, of which the Petitioner is the owner, property registered under the new matriculation article …, of the parish of …, municipality of Lisbon, from which resulted a total tax collection assessed at the amount of €20,148.10;

2. The legality of the acts of additional assessment of Stamp Tax, dated 31.05.2016, relating to the year 2013 (see copies of the assessments now attached under the designation of Document no. 17 to 32), from which resulted a total tax collection assessed at the amount of €20,148.10;

3. The legality of the acts of additional assessment of Stamp Tax, dated 31.05.2016, relating to the year 2014 (see copies of the assessments now attached under the designation of Document no. 33 to 48), from which resulted a total tax collection assessed at the amount of €20,148.10.

The Petitioner alleges, in essence:

It is the owner of the urban property in full ownership, dedicated to housing, registered under the matriculation article …, of the parish of …, municipality of Lisbon (former matriculation article …), situated at … no. …;

On 01.03.2013, the Petitioner was notified of the General Assessment of each one of the sixteen divisions susceptible of independent use that comprise the property in full ownership.

On 17.07.2013, the Respondent assessed Stamp Tax relating to the year 2012, for each one of the sixteen divisions susceptible of independent use, based on item 28.1, applying a rate of 1% on the respective tax asset value of each floor, which became final in view of no second assessment having been requested.

Dissatisfied with the legality of the aforementioned tax act, the Petitioner filed a gracious claim against those ex officio assessments, which proceedings were conducted at the Lisbon Finance Directorate, under process no. …2014…, and were subject to an express dismissal.

Again dissatisfied with the content of that decision, the Petitioner appealed to this Arbitral Tribunal to review the legality and constitutionality of the aforementioned tax acts – proceedings that were conducted under no. 781/2014-T.

On 16.10.2015, a learned arbitral decision was rendered (see copy now attached under the designation of Document no. 49), having found the petition for annulment of the Stamp Tax assessments relating to the year 2012 to be well-founded, with that decision having become final.

The assessments were annulled due to a defect of violation of substantive law, based on two distinct material grounds (see arbitral decision):

"The State Budget Law for 2012, Law no. 64-B/2011 of 30 December, repealed the Cooperative Tax Status, which provided certain exemptions applicable to cooperatives, and added article 66-A to the Tax Benefits Status. This article 66-A, in its no. 12, provides as follows: 'cooperatives are exempt from stamp tax on acts, contracts, documents, titles and other facts, including gratuitous transfers of property, when this tax constitutes their burden.' From the wording of the law results a subjective exemption of cooperatives regarding stamp tax, provided in sufficiently broad terms to cover the exemption relating to item 28.1 of the GTST. The exemption results from the wording of the law without any need for recourse to analogy. Being the stamp tax in question in these proceedings a burden of the cooperative, the latter shall be exempt from the same by virtue of the wording of no. 12 of art. 66-A of the TBS (see judgment of the Central Administrative Court South of process no. 04457/11 of 30-04-2013, which states that 'cooperatives are exempt from stamp tax when the stamp constitutes their burden'). Thus, the Petitioner is exempt from the stamp tax corresponding to item 28.1 of the GTST."

"Even if this could not be so understood, the assessments of stamp tax in question in these proceedings would nevertheless have to be annulled, for the legal prerequisite of incidence of Stamp Tax provided for in Item 28 of the GTST is not satisfied," (…) In the case at hand, the property in question is in vertical ownership and contains sixteen floors and divisions with independent use intended for housing, as was proven above. Given that none of the floors intended for housing has a tax asset value equal to or exceeding one million euros (€1,000,000.00), as results from the documents attached to the proceedings, it is concluded that the legal prerequisite of incidence of Stamp Tax provided for in Item 28 of the GTST is not satisfied. Looking now at the ratio legis of the provision in question in item 28.1 GTST and citing CAAD judgment no. 50/2013-T 'the legislature, in introducing this legislative innovation, considered as the determining element of taxpaying capacity urban properties with housing dedication, of high value (luxury), more precisely, of value equal to or exceeding one million euros (€1,000,000.00), upon which it proceeded to impose a special rate of stamp tax, intending to introduce a principle of taxation on wealth manifested in the ownership, usufruct or right of superficies of urban properties of luxury with housing dedication. Therefore, the criterion was the application of the new rate to urban properties with housing dedication, whose TPV be equal to or exceeding one million euros (€1,000,000.00). Clearly the legislature understood that this value, when attributed to a dwelling (house, autonomous fraction or floor with independent use) reflects a taxpaying capacity above average and, as such, capable of determining a special contribution to ensure fair distribution of the tax burden.' Already when applied to a part or fraction that does not exceed the said value of one million euros the incidence norm will not be satisfied.

(…) Thus, and in line with CAAD jurisprudence, we conclude by the violation of the principle of fiscal equality and taxpaying capacity."

Following a repeated and firm jurisprudential current (whether of the CAAD, or of the Central Administrative Courts and the Supreme Court of Justice), the annulment of the Stamp Tax assessments was determined on the grounds of error regarding the prerequisites of incidence, violation of the principles of equality and taxpaying capacity, and also, in the particular case of the Petitioner herein, on the grounds of her (subjective) exemption from Stamp Tax.

Subsequently, and after the Petitioner raised the matter of reformation of the arbitral decision, circumscribed to the question of not condemning the Respondent in the claim made for payment of compensatory interest, a decision was rendered, on 25.01.2016, which also found such claim to be well-founded (see copy now attached under the designation of Document no. 50).

This particular segment of the decision (limited to the question of compensatory interest) was thereafter subject to challenge by the Respondent, challenge that is presently pending in the 2nd Court – 2nd Section of Tax Litigation of the Central Administrative Court South, under process no. 09375/16.

As a consequence of the arbitral decision annulling the Stamp Tax assessments relating to the year 2012, the Respondent complied with the decision rendered, having to that effect proceeded to the restitution of the amounts paid, both those relating to Stamp Tax for the year 2012, and, obviously, those relating to Stamp Tax for the years 2013 and 2014 (meanwhile assessed by the Respondent, pending the arbitral proceedings, and paid by the Petitioner, to avoid their coercive collection).

It was, then, with surprise that the Petitioner received the notifications, dated 05.04.2016 relating to the collection of Stamp Tax relating to the year 2015, as well as the notifications of the offsetting acts that resulted in the additional assessments of Stamp Tax relating to the years 2013 and 2014 (which, it is reiterated, had previously been annulled by the Respondent and the amount of tax refunded – following the arbitral decision),

And whereas the additional assessments of Stamp Tax relating to the years 2013 and 2014 were not even subject to prior hearing, or presented any explanatory justification, as results expressly and clearly from the content of documents no. 17 to 48.

As for the tax acts of Stamp Tax relating to the year 2015, and by way of synopsis, the respective table of the sixteen assessments is presented, which replicates, in an absolutely identical manner, the content of the Stamp Tax assessments relating to the year 2012 (already subject to judicial annulment), only changing the document number and the date of assessment:

The Petitioner considers there to be a violation of res judicata, considering, in particular, that the illegality of Stamp Tax based on item 28.1 of the GTST constitutes material res judicata, and such question cannot be re-examined.

The present assessments of Stamp Tax for the years 2013, 2014 and 2015 violate, from the outset, the material res judicata formed by the decision tenor of the arbitral judgment rendered on 16.10.2015, presenting themselves, consequently, as null acts, by virtue of the provision of article 161, no. 2, i), of the Code of Administrative Procedure (CAP), a declaration of nullity expressly requested herein.

Having violated further the provision of article 205, no. 2 (by virtue of no. 2 of article 209), article 266, no. 1, both of the Fundamental Law, article 100 of the General Tax Law, article 24, no. 1, paragraphs c) and d) of Decree-Law no. 10/2011, given that to arbitral decisions is recognized, without controversy, the same binding validity as judicial decisions and the same executability that attaches to those (cf. no. 7 of article 42 of Law no. 63/2011, of 14 December).

And against the foregoing it is entirely sterile to contend that the tax period is distinct, for that, having no alteration occurred in the legal framework, the taxation prerequisites are (or the lack thereof), inherently, the same, under the risk that the same law could be interpreted in one manner (in one year) and differently (in another year), to then be interpreted again in the original manner (in yet another year).... pretensions that neither the principle of legality authorizes, nor the constitutional principle of tax specificity permits (there must be limits to decency and propriety of tax revenue collection, especially when the Respondent enjoys the privilege of prior execution, with the consequent grave subjections to which the taxpayer becomes bound – either pay the tax (provide security) or see one's patrimony attacked).

Subsidiarily, it alleges a defect due to error regarding the factual and legal prerequisites, considering, in a very summary manner, that the Petitioner is the owner of the property in question and, as such, is the passive subject of the present Stamp Tax assessments now under scrutiny, as well as the entity that bears the burden of the tax.

However, while a housing cooperative, it is a passive subject of stamp tax, but exempt from it by virtue of the provision of article 66-A, no. 12, of the TBS, thus establishing the illegality of the present assessments.

Finally, it is also sterile and spurious to adduce the provision of article 7, no. 6, of the Stamp Tax Code to eventually hinder the full application of the alleged exemption, given that such provision aims to extend or inflate expressly the situations of exemption also to the factual situation mentioned in article 44 of the TBS, whose leitmotif rests on the concrete ownership of certain properties intended for determined purposes,

From which it does not follow, as is axiomatic, that one is excepting the application of other tax benefits already granted in other exclusive legal seats and for the specific grounds there raised,

Moreover, as is known, tax benefits result from a deliberate choice of the legislature, directly committed to the defense of certain interests, in order to pursue certain public policies, which prove to be superior and prevalent over the very purpose of taxation.

It should also be noted that the tax benefit provided for in article 66-A, no. 12, of the TBS is of automatic recognition, for it results directly and immediately from law, not being dependent on any subsequent act of recognition by the Tax Authority (cf. article 5 of the TBS), nor being waivable.

In view of the foregoing, and on the grounds ventilated, annulment is requested of the Stamp Tax assessments (2013, 2014 and 2015), based on item 28.1 of the General Table of Stamp Tax, due to manifest and ostensive violation of articles 2 and 66-A, no. 12, of the TBS, insofar as the Petitioner, notwithstanding being a passive subject of Stamp Tax, is expressly exempt from it by virtue of the aforementioned norms, constituting such benefit a direct and immediate attribution of law,

On the other hand further, in reinforcement of position, note that the legislature expressly came to embrace the exemption status that already existed for cooperatives, through the addition of no. 14 to article 66-A of the TBS, through Law no. 7-A/2016, of 30 March: "14 - Housing and construction cooperatives are exempt from stamp tax provided for in item 28.1 of the General Table of Stamp Tax."

Subsidiarily, it invokes VIOLATION OF THE PRINCIPLES OF TAXPAYING CAPACITY; OF EQUALITY, OF LEGALITY AND OF TAX JUSTICE.

It further invokes the jurisprudence of our superior courts:

"Regarding properties in vertical ownership, for purposes of incidence of Stamp Tax (Item 28.1 of the GTST, in the wording of Law no. 55-A/2012, of 29 October), subjection is determined by the combination of two factors: housing dedication and the TPV listed in the matrix equal to or exceeding €1,000,000.

Being a property constituted in vertical ownership, the incidence of ST must be determined, not by the TPV resulting from the sum of the TPV of all divisions or floors susceptible of independent use (individualized in the matriculation article), but by the TPV attributed to each one of those floors or divisions intended for housing" (Judgment of the Supreme Administrative Court, 09.09.2015, Process no. 047/15).

"Regarding properties in vertical ownership, for purposes of incidence of Stamp Tax (Item 28.1 of the GTST, in the wording of Law no. 55-A/2012, of 29 October), subjection is determined by the combination of two factors: housing dedication and the TPV listed in the matrix equal to or exceeding €1,000,000. Being a property constituted in vertical ownership, the incidence of ST must be determined, not by the TPV resulting from the sum of the TPV of all divisions or floors susceptible of independent use (individualized in the matriculation article), but by the TPV attributed to each one of those floors or divisions intended for housing" (Judgment of the Supreme Administrative Court, 02.03.2016, Process no. 01354/15).

"The norms of incidence of taxes as well as those granting exemptions or exclusions from taxation must be interpreted in their exact terms, without recourse to analogy, rendering prevalent certainty and security in their application.

Item no. 28, added to the General Table of Stamp Tax (G.T.S.T.) by art. 4 of Law 55-A/2012, of 29/10, subjects to the incidence of stamp tax, among other matters, ownership of urban properties whose tax asset value (tpv) listed in the matrix, calculated in accordance with the Code of Municipal Property Tax (CMPT), be equal to or exceeding €1,000,000.00, on such tpv imposing a rate of 1%.

Using the criterion that the law itself introduced in art. 67, no. 2, of the Stamp Tax Code, to matters not regulated in the present code relating to item 28 of the General Table applies, subsidiarily, the CMPT. That is, taking into account that the registration in the matrix of properties in vertical ownership, for purposes of the CMPT Code, follows the same rules of registration of properties constituted in horizontal ownership, and the respective CMPT, as well as the new ST, are assessed individually in relation to each one of the parts (cf. art. 12, no. 3, of the CMPT), it does not appear, to this Court, that there exists any doubt that the legal criterion to define the incidence of the new tax must be the same. In this context, if the law establishes, regarding CMPT, the issuance of individualized assessment notes for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, such perspective is equally required, and from the outset, by virtue of the principle of tax legality, regarding the rule of incidence of item no. 28 of the G.T.S.T. And recall that the scope of this incidence norm is to tax independent realities, individualized and not resulting from an aggregation or sum, even if legal. The uniform criterion that is required is, therefore, the one that determines that the incidence of the norm in question only covers in its provision some of the parts, floors or divisions with independent use, of property in horizontal or full ownership with housing dedication, which possesses a tpv exceeding €1,000,000.00.

Notwithstanding the legal existence of a single property, in the civil law sense of the term, for purposes of taxation of patrimony, the legislature imposes the autonomous consideration of each one of the independent fractions, which is valid in the context of CMPT and Stamp Tax, a tax that refers to the concept of property contained in the CMPT regime." (Judgment of the Central Administrative Court South, 29.06.2016, Process no. 09640/16).

In this conformity, and all the more so because these are null acts, due to violation of res judicata, it is necessary to declare their nullity (cf. article 161, no. 2, paragraph i), of the CAP, applicable by virtue of article 2, paragraph d), of the TCPT), and the Petitioner should also be reimbursed of the amount of tax already borne (2013, 2014 and 2015), increased by the amount relating to compensatory interest, computed from the date of the respective payments until effective and complete restitution (cf. article 24, no. 5 of Decree-Law no. 10/2011).

Finally, it invokes the violation of the right to prior hearing and the duty of substantiation of the additional assessments of Stamp Tax (years 2013 and 2014).

CONSTITUTION OF THE ARBITRAL TRIBUNAL

The arbitrators were designated by the president of the Deontological Council of CAAD, as the Petitioner did not wish to use the faculty of designating an arbitrator [cf. articles 6-2/a) and 11-1/b), of DL no. 10/2011], with the Tribunal being constituted on 11-11-2016.

RESPONSE OF THE TAX AUTHORITY

The Tax and Customs Authority presented a response, contesting the thesis defended by the Petitioner of violation of res judicata and, on the other hand, reiterating that the exemption provided for in article 66-A / no. 12, of the TBS does not apply to the tax facts to which article 28.1 of the GTST refers, and that only on 30-3-2016 was this exemption introduced by Law no. 7-A/2016 which added a no. 14, to the cited article 66-A, of the TBS.

It further reiterates the position assumed in the administrative phase, in particular that the property in question is constituted by 16 independent and autonomous parts intended for housing that were assessed in the light of the provision of article 7-2/b), of the CMPT, totaling that assessment at the amount of €2,014,810.00; thus it was on this value that the TA assessed the stamp tax at the amount of €60,444.30, and this burden of the Petitioner Cooperative is not covered by the exemption norm of no. 12 of article 66 of the TBS.

PRELIMINARY DISPOSITION OF THE CASE

The Tribunal is competent.

The parties are legitimate and capable, and the proceedings are proper.

The Petitioner raises the exception of res judicata.

The exception lacks merit, as infra, in the appraisal of the merits, will be better substantiated.

There are no other exceptions or preliminary questions to be decided.

The merits of the petition must be reviewed.

GROUNDS

1. FACTS

§1. PROVEN FACTS

The following facts are considered proven:

a) The Petitioner is a housing and construction cooperative.

b) In the years 2013, 2014 and 2015, the Petitioner was the owner of the urban property in full ownership, dedicated to housing, registered under the article … of the parish of …, municipality and district of Lisbon, with the tax asset value of €2,014,810.00.

c) The said property is constituted by 16 floors or divisions susceptible of independent use, intended for housing, all with their own tax asset value, determined in accordance with the Municipal Property Tax Code, less than €1,000,000.00. [cf. documents no. 1 to 48 attached to the P. I.]

d) On 5 April 2016, the TA assessed Stamp Tax, reported to the year 2015 and relating to the floors or divisions with independent use mentioned in the previously proven fact, with the total tax collection amounting to €20,148.10. [cf. documents no. 1 to 16 attached to the P. I.]

e) On 31 May 2016, the TA made the additional assessment of Stamp Tax, reported to the year 2013 and relating to the floors or divisions with independent use mentioned in proven fact c), with the total tax collection amounting to €20,148.10. [cf. documents no. 17 to 32 attached to the P. I.]

f) On 31 May 2016, the TA made the additional assessment of Stamp Tax, reported to the year 2014 and relating to the floors or divisions with independent use mentioned in proven fact c), with the total tax collection amounting to €20,148.10. [cf. documents no. 33 to 48 attached to the P. I.]

g) The assessments of Stamp Tax referred to in proven facts d), e) and f) resulted from the application of item 28.1 of the GTST to all and each one of the floors or divisions with independent use mentioned in proven fact c).

h) On 27 April 2016, the Petitioner proceeded to timely and complete payment of the Stamp Tax assessed by the TA, relating to the year 2015, in the amount of €20,148.10. [cf. documents no. 1 to 16 attached to the P. I.]

i) On 29 July 2016, the Petitioner proceeded to timely and complete payment of the Stamp Tax assessed by the TA, relating to the years 2013 and 2014, in the amount of €20,148.10 for each year. [cf. documents no. 17 to 48 attached to the P. I.]

j) On 29 July 2016, the Petitioner filed the request for constitution of an arbitral tribunal that gave rise to the present proceedings. [cf. CAAD procedural management information system]

§2. UNPROVEN FACTS

With relevance to the appraisal and decision of the case, there are no facts that have not been proven.

§3. STATEMENT OF REASONS ON MATTERS OF FACT

As regards the proven facts, the conviction of the Tribunal was based on the facts alleged by the Parties, whose adherence to reality was not disputed, and on the documents attached to the proceedings.

2. LAW

The Petitioner alleges the existence of various defects, on which it grounds the petition for declaration of illegality of the Stamp Tax assessments in dispute.

Specifically, the Petitioner invokes:

• the violation of material res judicata;

• the violation of the norm contained in article 66-A, no. 12, of the TBS, which provides for exemption of Stamp Tax for cooperatives, when this tax constitutes their burden;

• the violation of the tax incidence norm contained in item 28.1 of the GTST;

• the unconstitutionality of the same tax incidence norm, due to violation of the principles of taxpaying capacity, equality, legality and tax justice; and

• as regards the additional assessments of Stamp Tax, relating to the years 2013 and 2014, the violation of the right to prior hearing and the duty of substantiation.

Article 124 of the TCPT, applicable by virtue of article 29, no. 1, paragraph a), of the RJAT, establishes that the court must appraise priority the defects that lead to the declaration of non-existence or nullity of the impugned act and, subsequently, the defects that lead to its annulment (no. 1). Concerning the defects that constitute non-existence or nullity, the judge must know priority of the defects whose procedence determines, according to his prudent discretion, more stable or effective protection of the interests offended. Regarding the defects that constitute voidability, the same criterion is established, which will not apply only if the challenging party has established a relationship of subsidiarity among the defects attributed to the act – which is permitted by article 101 of the TCPT – for in that case priority is given to its will, provided that the Public Ministry has not raised other defects (no. 2).

The rules emanating from this legal norm concerning the order of knowledge of defects are intended to protect the interest of the challenging party with maximum procedural economy, omitting pronouncement on defects invoked when the defect or defects already recognized prevent the renewal of the act with the same tenor. Effectively, the establishment of this order of knowledge of the defects presupposes that, knowing of a defect that leads to the legal elimination of the impugned act, the court will cease to know of the remaining ones, for, if the judge were to know of all the defects attributed to the act, it would be indifferent the order of knowledge.

The protection of the interests offended is more stable when the decision prevents the renewal of the act injurious to the interests of the challenging party and will be more effective when it permits the interested party, in execution of judgment, to obtain better satisfaction of its interests, offended by the annulled act.

Thus, if it concerns, for example, a defect of violation of law, the annulment of the act will prevent the practice of a new tax act in which the same norm that was at issue in the previous act is applied or not applied, which will translate into the impossibility of practicing a new act that imposes taxation on the challenging party.

As can be inferred from what has just been said, it is taking into account the execution of the annulling judgment and the influence that the type of defect that founded the annulment has on it that the establishment of an order of knowledge of the defects of the impugned act is justified.

In the concrete case, examining the petition for arbitral determination, we find that the Petitioner alleged a defect generating nullity, being all other defects generating voidability, having established a relationship of subsidiarity between that and these, but not as to these.

Thus, we will begin by knowing of the alleged defect of violation of material res judicata (generating nullity) and, should this not succeed, we will subsequently know of the other defects (generating voidability), in an order that has as its criterion the most stable or effective protection of the interests of the Petitioner.

We will thus initially appraise the defect of violation of the tax incidence norm contained in item 28.1 of the GTST, for it will only matter to proceed to the appraisal of the indicated defect of unconstitutionality and the violation of the norm contained in article 66-A, no. 12, of the TBS, if and insofar as the interpretation and implementation of the solution resulting from the mentioned item of the GTST involve the subsumption to the respective legal provision of the situation sub judice. As for the additional assessments of Stamp Tax, relating to the years 2013 and 2014, the violation of the right to prior hearing and the duty of substantiation – which, in this case, reduce to mere form defects – are relegated to the end and will only be subject to pronouncement if, obviously, the need to know those defects comes to be verified.

§1. VIOLATION OF MATERIAL RES JUDICATA

The Petitioner grounds the occurrence of this defect on the arbitral sentence rendered, on 16 October 2015, in process no. 781/2014-T of the CAAD, which found the respective petition for arbitral determination to be well-founded and, consequently, declared illegal, due to defect of violation of law, the assessments of Stamp Tax, relating to the year 2012 and resulting from the application of item 28.1 of the GTST to the floors or divisions with independent use, of the same urban property in question in the present proceedings, having annulled them [cf. document no. 50 attached to p. i.].

The Petitioner alleges that, "in view of the material nature of the grounds that dictated the judicial annulment of Stamp Tax, which concern the very intrinsic validity related with the legitimacy of taxation, it is necessary to recognize that the illegality of Stamp Tax, based on item 28.1 of the GTST constitutes material res judicata, and such question cannot be re-examined."

Therefore, says the Petitioner, the "assessments of Stamp Tax for the years 2013, 2014 and 2015 violate, from the outset, the material res judicata formed by the decision tenor of the arbitral sentence rendered on 16.10.2015, presenting themselves, consequently, as null acts, by virtue of the provision of article 161, no. 2, i), of the Code of Administrative Procedure (CAP), a declaration of nullity expressly requested herein."

The Petitioner further sustains that it violated "the provision of article 205, no. 2 (by virtue of no. 2 of article 209), article 266, no. 1, all of the Fundamental Law, article 100 of the General Tax Law, article 24, no. 1, paragraphs c) and d) of Decree-Law no. 10/2011, given that to arbitral sentences is recognized, without controversy, the same binding validity of judicial decisions and the same executability that attaches to those (cf. no. 7 of article 42 of Law no. 63/2011, of 14 December)."

The violation of res judicata occurs when a decision of the TA is incompatible with what was decided by a court, through a decision that has become final.

The attribution of the qualification of nullity to the defect of the tax act that violates res judicata (cf. article 161, no. 2, paragraph i), of the CAP) is an implementation of the constitutional principle of the binding nature of judicial decisions and their prevalence over those of any other authorities (cf. article 205, no. 2, of the CRP).

A judicial decision becomes final when it is not susceptible to ordinary appeal or claim, as prescribed by article 628 of the CPC; and once final, the judicial decision forms res judicata within the precise limits and terms in which it judges (cf. article 621 of the CPC), having binding force both within the process and outside it, as follows from the provision of article 619, no. 1, of the CPC.

However, as this last norm determines, by referral to articles 580 and 581 of the same legal code, such binding force is subjectively and objectively limited, covering only the parties in the process and the claims based on the same legal fact.

This is called material res judicata, by contrast with the so-called formal res judicata; the latter, as provided by article 620, no. 1, of the CPC, refers to judgments and orders that concern solely the procedural relationship – understood as such, those which, at any procedural moment, decide a question that is not of merit – which have binding force only within the process.

Being the judicial decision a judgment that addresses the substantive matter of the action, its binding force is not limited to the process in which it was rendered, manifesting itself outside of it. Such binding force outside of the respective process constitutes an impediment to another identical action being brought, with the same subjects, claim and cause of action. It is this binding nature within the process and outside of it that characterizes material res judicata, with the prevailing jurisprudential understanding that res judicata does not cover the legal grounds of the decision, but only the decision itself.

Therefore, "the tax administration is not prevented from applying in relation to a taxpayer a legal understanding that is in disagreement with what was decided in a judicial process in which the same question was examined in which another taxpayer was a party or even what was decided in a judicial process in which the same taxpayer was a party, but in which a distinct tax fact was examined, even if the essential legal question is identical."

Thus, the determination of the scope of res judicata requires the prior interpretation of the decision, that is, the determination of its exact content, or that is, the precise limits and terms in which it judges.

Said this and returning to the concrete case, as has already been said, that other arbitral process dealt with the (il)legality of the assessments of Stamp Tax relating to the year 2012; and what is now in question are the assessments of Stamp Tax relating to the years 2013, 2014 and 2015, these being the tax acts whose (il)legality is relevant here to review.

Therefore, it is evident that we are not, certainly, in the presence of a situation in which the decision rendered in that other action should have binding force outside the process in which it was rendered.

In truth, the decision rendered in process no. 781/2014-T of the CAAD "constitutes res judicata within the precise limits and terms in which it judges," as the law says. And the fact is that this decision judged only and solely the (il)legality of the assessments of Stamp Tax for the year 2012, not having judged the (il)legality of the assessments of Stamp Tax for the years 2013, 2014 and 2015.

In this framework, the situation of material res judicata does not occur, by which, it is important to conclude, to terminate, that the arbitral decision rendered in process aimed at the impugnation of the assessments of Stamp Tax for the year 2012 cannot constitute material res judicata neither as to the TA, preventing it from practicing acts of assessment of Stamp Tax relating to the years 2013, 2014 and 2015, nor in relation to the decision to be rendered in arbitral process in which the impugnation of these same assessments of Stamp Tax is aimed, given the diversity of cause of action and claim.

§2. INTERPRETATION AND DELIMITATION OF THE SCOPE OF OBJECTIVE INCIDENCE OF ITEM 28.1 OF THE GTST

At the epicenter of the disagreement that opposes the parties in this process is the tax incidence norm contained in Item 28.1 of the GTST, by which it is necessary, naturally, to begin by proceeding to the interpretation of this norm, with a view to ascertaining its scope and, thereby, delimiting what is its field of application.

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

"28 — Ownership, usufruct or right of superficies of urban properties whose tax asset value listed in the matrix, pursuant to the Code of Municipal Property Tax (CMPT), be equal to or exceeding €1,000,000 — on the tax asset value used for purposes of Municipal Property Tax:

28.1 — For property with housing dedication — 1%;

28.2 — For property, when the passive subjects who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by decree of the Minister of Finance — 7.5%."

Subsequently, Law no. 83-C/2013, of 31 December (State Budget Law 2014), amended the wording of item 28.1 of the GTST (cf. article 194), which then came to have the following tenor:

"28.1 — For residential property or for land for construction whose authorized or planned building is for housing, pursuant to the provision of the Municipal Property Tax Code — 1%"

The interpretation of the incidence norm contained in item 28.1 of the GTST cannot fail to be effected on the basis of the hermeneutical guidelines that emanate from article 11 of the General Tax Law and article 9 of the Civil Code, norms that provide as follows:

Article 11 [General Tax Law]

Interpretation

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

2. Whenever, in tax norms, terms specific to other branches of law are employed, such terms should be interpreted in the same sense as that which they have there, unless something else derives directly from law.

3. Persisting doubt about the meaning of the incidence norms to be applied, account should be taken of the economic substance of the tax facts.

4. Gaps resulting from tax norms covered by the reservation of law of the Assembly of the Republic are not susceptible of analogical integration.

Article 9 [Civil Code]

Interpretation of law

1. Interpretation should not be confined to the wording of the law, but should reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

2. However, the interpreter cannot consider legislative intent that does not have in the wording of the law a minimum of verbal correspondence, even if imperfectly expressed.

3. In fixing the meaning and scope of the law, the interpreter shall presume that the legislature established the most correct solutions and was able to express its thought in adequate terms.

On this interpretive task, with respect, we here appropriate the following considerations set forth in the arbitral decision rendered in process no. 53/2013-T of the CAAD:

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

The recognized lack of coherence of Stamp Tax is particularly exuberant in the case of this item no. 28.1, hastily included at the margin of the General State Budget, by a fiscal legislator without perceptible global fiscal orientation, who is implementing successively norms of fiscal aggravation as the setbacks of budget execution, the impositions of international institutional creditors (represented by the 'troika') and the supervision of the Constitutional Court dictate.

In truth, although in the 'Statement of Reasons' of the Bill 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 social equity in austerity, ensuring an effective distribution of the sacrifices necessary for the fulfillment of the adjustment program' and its commitment 'to ensure that the distribution of these sacrifices will be made by all and not only by those who live from the income of their work,' it is manifest, on the one hand, that such reasons of equity, 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 item no. 28.1, in taxing additionally properties with housing dedication and not also properties that do not have it, lets it be seen that the concerns of social equity and the proclaimed intention of distribution of sacrifices by all, affects much more some than properly all.

In this context, not existing interpretive elements ensuring that permit detecting legislative coherence in the solution adopted in the said item no. 28.1 or the correctness or incorrectness of the adopted solution (relevant for interpretive purposes in light of no. 3 of article 9 of the Civil Code), the tenor 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 legislature was able to express its thought in adequate terms."

Said this. Analyzed the wording – both the original and the current – of Item 28.1 of the GTST, we find that this norm possesses a fundamentally remissive character, for its respective regulatory content depends on the normativity ad quam contained in the Municipal Property Tax Code.

In truth, whether as regards objective incidence, with the reference to "urban properties" and to the "tax asset value listed in the matrix, pursuant to the Code of Municipal Property Tax," or as regards the fixing of the taxable matter, with the reference to "the tax asset value used for purposes of Municipal Property Tax," the regulatory tenor of this Item 28 of the GTST results from the delegation – in the terms of a general remission – to the regulatory set that is found in the Municipal Property Tax Code.

Indeed, 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 Item 28 of the GTST applies, subsidiarily, the provision of the Municipal Property Tax Code.

In this framework, it is necessary then to gather the norms of the Municipal Property Tax Code that appear relevant to the understanding and, therefore, to the application of Item 28.1 of the GTST.

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

1. For purposes of this Code, property is every fraction of territory, embracing waters, plantations, buildings and constructions of any nature incorporated in it or resting on it, with character of permanence, provided that it makes 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 circumstances above, endowed with economic autonomy in relation to the land where they are implanted, although situated in a fraction of territory that constitutes an integral part of a diverse patrimony or does not have patrimonial nature.

2. Buildings or constructions, even if mobile by nature, are had as having character of permanence when devoted to non-transitory purposes.

3. The character of permanence is presumed when the buildings or constructions are situated in the same place for a period exceeding one year.

4. For purposes of this tax, each autonomous fraction, in the horizontal ownership regime, is had as constituting a property.

Subsequently, in articles 3 to 5 of the CMPT, the species of properties existing are enumerated, to wit:

Rural Properties (article 3):

Rural properties are lands situated outside of an urban agglomeration that are not to be classified as lands for construction, pursuant to no. 3 of article 6, provided that:

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

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

2 – Lands situated within an urban agglomeration are also rural properties, provided that, by virtue of legally approved provision, they cannot have use generating any income or can only have use generating agricultural income and are in fact having this devotion.

3 – Rural properties are also:

a) Buildings and constructions directly devoted to the production of agricultural income, when situated in 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 purposes of this Code, urban agglomerations are considered, beyond those situated within legally fixed perimeters, nuclei with a minimum of 10 dwellings served by public use roads, with their perimeter delimited by points distanced 50 m from the axis of the roads, in the transversal direction, and 20 m from the last building, in the direction of the roads.

None of the floors or divisions with independent use, described in the property register as devoted to housing, of the urban property in question, possesses a tax asset value equal to or exceeding €1,000,000.00.

In that measure and attentive to the above, once the tax asset value of each of the indicated floors or divisions with independent use devoted to housing is less than that value to which item 28.1 of the GTST refers, it follows that such floors or divisions do not come within the tax incidence norm contained in that item 28.1, by which the disputed assessments suffer from a defect of violation of law, due to error regarding the legal prerequisites, embodied in the erroneous interpretation and application of item 28.1 of the GTST, which implies the declaration of its illegality and consequent annulment.

Given the procedence of the requested declaration of illegality of the disputed Stamp Tax assessments, due to a defect that prevents the renewal of the acts, becomes prejudiced, as useless, the knowledge of the remaining questions and defects invoked by the Petitioner.

§4. REIMBURSEMENT OF AMOUNTS PAID AND PAYMENT OF COMPENSATORY INTEREST

The Petitioner also petitions the condemnation of the TA to the reimbursement of the tax paid improperly, in the total amount of €60,444.30, increased by the respective compensatory interest.

Article 24, no. 1, paragraph b), of the RJAT provides that the arbitral decision on the merits of the claim against which no appeal or challenge is available binds the tax administration from the end of the term provided for appeal or challenge, and this must, in the exact terms of the procedence of the arbitral decision in favor of the passive subject and until the end of the term provided for spontaneous execution of the sentences of the tax judicial courts, restore the situation that would have existed by adopting the acts and operations necessary for the purpose, which must be understood, in conformity with the provision of article 100 of the General Tax Law, applicable by virtue of paragraph a) of no. 1 of article 29 of the RJAT, as embracing the payment of compensatory interest, in consonance, moreover, with the provision of no. 5 of the same article 24 of the RJAT.

Article 43, no. 1, of the General Tax Law provides that "compensatory interest is owed when it is determined, in gracious claim or judicial challenge, that there was error imputable to the services from which results payment of the tax debt in an amount exceeding the legally due," providing no. 5 of article 61 of the TCPT that "interest is counted from the date of improper payment of the tax until the date of processing of the respective credit note, in which they are included."

In the concrete case, it is verified that the illegality of the disputed assessments, due to error in the legal prerequisites, is imputable to the TA for, in those assessments of Stamp Tax, having proceeded to the incorrect interpretation and application of the provision contained in item 28.1 of the GTST, by which the Petitioner is entitled, in conformity with the provision of articles 24, no. 1, paragraph b), of the RJAT and 100 of the General Tax Law, to the reimbursement of the tax improperly paid, increased by the respective compensatory interest, pursuant to the provision of articles 43, no. 1, of the General Tax Law and 61 of the TCPT, calculated from the dates of the respective payments – 27/04/2016 and 29/07/2016 – at the rate resulting from no. 4 of article 43 of the General Tax Law, until the date of processing of the respective credit note, in which they are included.

DECISION

In light of the foregoing, the arbitrators constituting this Collective Tribunal hereby decide:

a) To find the petition entirely well-founded;

b) To declare the illegality of the acts of assessment of Stamp Tax:

(i) dated 05.04.2016, relating to the year 2015 (see copies of the assessments attached under the designation of Document no. 1 to 16), from which resulted a total tax collection assessed at the amount of €20,148.10;

(ii) dated 31.05.2016, relating to the year 2013 (see copies of the assessments attached under the designation of Documents no. 17 to 32), from which resulted a total tax collection assessed at the amount of €20,148.10;

(iii) dated 31.05.2016, relating to the year 2014 (see copies of the assessments attached under the designation of Document no. 33 to 48), from which resulted a total tax collection assessed at the amount of €20,148.10.

c) To annul, in consequence, the aforementioned assessments;

d) To condemn the Tax and Customs Authority (TA) to the restitution of the amounts paid by the Petitioner resulting from these aforementioned assessments, increased by compensatory interest, in the terms set forth above, from the dates of the payments until the date of the credit note in which they are included; and

e) To condemn the TA to the costs of this process.

Value of the Case

In accordance with the provision of no. 2 of article 306 of the CPC, paragraph a) of no. 1 of article 97-A of the TCPT and also no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €60,444.30.

Costs

For the purposes of the provision of no. 2 of article 12 and no. 4 of article 22 of the RJAT and no. 4 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €2,448.00.

Notice be given

Lisbon, 21 March 2017

The Arbitral Tribunal

José Poças Falcão
(Arbitrator President)

Ricardo Rodrigues Pereira
(Assistant Arbitrator)

Ricardo Marques Candeias
(Assistant Arbitrator)

[1] Even if partially, for it never made the payment of the corresponding compensatory interest in favor of the passive subject – resulting from direct legal imposition, therefore, nor requiring judicial recognition, given the substantive grounds of violation of law.

[2] The norm in question provides that "the exemptions provided for in article 44 of the Tax Benefits Status are also applicable to the situations provided for in item no. 28 of the General Table."

[3] See in this regard the Judgment of the Central Administrative Court South, 02.03.2004, Process no. 00199/03. "The attribution of tourist utility to a hotel establishment had the effect of an associated set of benefits, in particular at the fiscal level, which did not depend on recognition by the TA in an autonomous request of the interested party, arising by mere effect of that attribution;

A tax benefit thus not dependent on an autonomous request of the interested party should be qualified as automatic for deriving directly from law without need for any other mediating act, pursuant to the TBS, as opposed to those that need recognition in a request and of a concrete case-by-case decision;

A tax benefit thus of automatic granting, pursuant to the same TBS, cannot be waivable."

[5] As a matter of interest, note the short validity of this addition. In truth, this no. 14 of article 66-A of the TBS came to be revoked by the new wording given to the article by Law no. 42/2016, of 28/12 (State Budget for 2017).

[6] On the invoked violation of the TBS norm and its knowledge, it is important to emphasize that, from a legal standpoint, and in the perspective of the tax legal relationship, tax benefits embody, first and foremost, facts that being subject to taxation, are impeditive of the birth of the tax obligation or, at least, of the same arising in fullness. In truth, while an impeditive fact, the tax benefit translates always into situations that are subject to taxation, that is, that are subsumable to the legal rules that define the objective and subjective incidence of the tax.

[7] Jorge Lopes de Sousa, Code of Procedure and Tax Procedure, Annotated and Commented, Volume II, 6th edition, Áreas Editora, Lisbon, 2011, p. 338.