ARBITRAL DECISION

The arbitrators José Poças Falcão (presiding arbitrator), Ana Teixeira de Sousa and Ricardo Rodrigues Pereira, appointed by the Ethics Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, agree as follows:

I. REPORT

1. On 10 July 2014, the commercial company A..., S.A., Tax Identification Number ..., with registered office at Rua ... (hereinafter, the Claimant), filed a request for the constitution of an arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 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), seeking a declaration of illegality and annulment of the Stamp Tax assessment acts issued under item 28.1 of the General Table of the Stamp Tax Code (hereinafter, TGIS), with reference to the year 2013 and the urban properties registered under article ... in the urban property matrix of the parish of ... (...), municipality of ..., district of ... and under article ... in the property matrix of the parish of ..., municipality and district of ..., both owned by the Claimant, with the Respondent being AT – the Tax and Customs Authority (hereinafter, Respondent or AT). The Claimant attached 309 (three hundred and nine) documents and did not list witnesses or request the production of any other evidence.

In essence and in brief summary, the Claimant alleged the following:

It is a credit institution and, in the course of its business, owns various properties, both residential and commercial, as well as land for construction. Specifically, it owns two urban properties which constitute properties in vertical co-ownership with storeys or units susceptible to independent use, located in the district of ..., one of which is composed of a total of 52 storeys and units with independent use, 40 of which are allocated to housing, and the other of a total of 38 storeys and units with independent use, all allocated to housing.

Each of the storeys and units with independent use of said properties has its own tax property value, assessed in accordance with the Property Tax Code (IMI), all of which are less than €1,000,000.00.

The same properties, being in full ownership, have their own tax property value, resulting from the sum of the tax property values of each of their storeys or units susceptible to independent use; specifically, one of these properties has a total tax property value of €2,560,780.00 and the other a total tax property value of €4,429,240.00.

In relation to these two urban properties, the Claimant was notified of Stamp Tax assessments relating to the year 2013, which resulted from the application of Article 1, paragraph 1, of the Stamp Tax Code, combined with item 28.1 of the TGIS and Article 6 of Law No. 55-A/2012, of 29 October.

The Claimant takes the position that the two aforementioned properties cannot be included within the scope of the objective ambit of item 28.1 of the TGIS, and therefore the mentioned Stamp Tax assessments should be annulled, for errors in the factual and legal assumptions and for illegality, including unconstitutionality, due to direct violation of Article 103 of the Constitution.

Inasmuch as the Stamp Tax assessments in question resulted from consideration of the total tax property value of the storeys and units with independent use allocated to housing in each of said properties, the tax property value of each of the storeys and units with independent use allocated to housing was not considered individually.

However, in the Claimant's view, this approach cannot be accepted as illegal, including on grounds of unconstitutionality due to direct violation of the principles of tax equality and taxpaying capacity, contained in Articles 103 and 104 of the Constitution and also contrary to the principle of equality, enshrined in Article 13 of the Constitution.

In the Claimant's view, those storeys and units with independent use have an individual or own tax property value, calculated in accordance with the Property Tax Code, which should be considered for the application, or not, of item 28.1 of the TGIS. Indeed, if for purposes of taxation of urban properties in horizontal co-ownership, under item 28.1 of the TGIS, the tax property value of each autonomous fraction, considered separately, is considered, then likewise in respect of properties in vertical co-ownership, the individual tax property value of each of its storeys or units susceptible to independent use should be considered.

Therefore, item 28.1 of the TGIS may only be applied to storeys or units with independent use of a property in vertical co-ownership with residential allocation which, considered individually, have a tax property value exceeding €1,000,000.00. Accordingly, the Tax and Customs Authority cannot, for purposes of applying item 28.1 of the TGIS, consider the tax property value of the property in which the dwellings are situated, if such value exceeds €1,000,000.00, and, based on such global value, tax in Stamp Tax each of the dwellings, all of which have an individual tax property value less than €1,000,000.00.

From another perspective, item 28.1 of the TGIS does not subject to taxation urban properties that are not allocated to housing, even if these have a tax property value far exceeding €1,000,000.00, and this differentiates taxpayers without regard to their respective taxpaying capacity (see Article 104, paragraph 3, of the Constitution). Furthermore, this taxation, as implemented, does not effectively burden all owners who have high-value real estate assets and who, as such, demonstrate superior taxpaying capacity. The application of item 28.1 of the TGIS therefore generates situations in which unequal treatment is given to factually equal situations, infringing the general principle of equality and the principle of taxpaying capacity, the presupposition and criterion of taxation.

The Claimant further alleges that, as the aforementioned Stamp Tax assessments are illegal, it should be fully reimbursed for the amount of tax assessed on the basis thereof, as this was not owed, requesting its refund. The Claimant also petitions that it be paid the respective compensatory interest, at the legal rate, for wrongful payment of the tax obligation, calculated from the date of payment of the Stamp Tax until its complete refund.

The Claimant concludes its request for arbitral decision by proposing that it "should be decided that the request for a declaration of illegality of the tax acts of Stamp Tax assessment sub judice is well-founded" and, consequently, formulates the following requests:

"a) The tax acts that constitute its object, relating to the Stamp Tax assessments identified above, should be annulled, for the defect of violation of law, for errors in the factual and legal assumptions;

b) The Tax and Customs Authority should be ordered to reimburse the Claimant for the amount of Stamp Tax paid and to be paid until the final decision regarding the assessments challenged here;

c) The Tax and Customs Authority should be ordered to pay to the Claimant compensatory interest, at the legal rate, until complete reimbursement of the amount paid and to be paid until the arbitral decision."

1. The request for constitution of an arbitral tribunal was accepted and automatically notified to AT on 15 July 2014.

2. The Claimants did not proceed to appoint an arbitrator, therefore, under the provisions of subparagraph a) of paragraph 2 of Article 6 and subparagraph a) of paragraph 1 of Article 11 of the RJAT, the President of the Ethics Council of the CAAD appointed as arbitrators of the collective Arbitral Tribunal Dr. José Poças Falcão (presiding arbitrator), Dr. Diogo Feio and Dr. Ana Teixeira de Sousa (member arbitrators), who communicated acceptance of the office within the applicable period.

3. On 28 August 2014, the parties were duly notified of this appointment and did not manifest an intention to refuse the appointment of the arbitrators, in accordance with the combined provisions of Article 11, paragraph 1, subparagraphs b) and c) of the RJAT and Articles 6 and 7 of the Ethics Code of the CAAD.

4. Thus, in accordance with the provision of subparagraph c) of paragraph 1 of Article 11 of the RJAT, the collective Arbitral Tribunal was constituted on 12 September 2014.

5. On 10 October 2014, the Respondent, duly notified for this purpose, filed its Reply in which it specifically challenged the arguments raised by the Claimant and concluded by asserting the lack of merit of the present action, with its consequent dismissal of the claim. The Respondent attached no documents and did not request the production of any other evidence. On the same occasion, the Respondent attached to the file the respective administrative file (hereinafter, abbreviated as PA).

In essence and also in brief form, it is important to extract the most relevant arguments upon which the Respondent based its objection:

With reference to the year 2013 and in compliance with Article 6, paragraph 2, of Law No. 55-A/2012, of 29 October, which added item 28 to the TGIS, as amended by Law No. 83-C/2013, of 31 December, whose respective scope of application refers to urban properties, assessed in accordance with the Property Tax Code, with a tax property value equal to or exceeding €1,000,000.00 and, under paragraph 1 thereof, residential allocation, AT proceeded to the assessments at issue in this arbitral process. What is at issue here is, in fact, an assessment that results from the direct application of the legal norm, which translates into objective elements, without any subjective or discretionary assessment.

The concept of property is defined in Article 2, paragraph 1, of the Property Tax Code, and it is established in paragraph 4 thereof that, in the horizontal co-ownership regime, each autonomous fraction is regarded as constituting a property. Therefore, a property in full ownership with storeys or units susceptible to independent use is, unequivocally, different from a property under horizontal co-ownership, consisting of autonomous fractions, that is, several properties.

On the other hand, although the Stamp Tax assessment in the situations provided for in item 28.1 of the TGIS is processed in accordance with the rules of the Property Tax Code, the legislator safeguards those aspects that require appropriate adaptations, that is, those in which, as is the case with properties in full ownership, even though with storeys or units susceptible to independent use, for purposes of Stamp Tax the property as a whole is relevant, since the units susceptible to independent use are not regarded as property, but only autonomous fractions in the horizontal co-ownership regime; and this is so despite the fact that the Property Tax is assessed in relation to each part susceptible to independent use. The tax property value relevant for purposes of the incidence of Stamp Tax is, therefore, the total tax property value of the urban property and not the tax property value of each of the parts that make it up, even when susceptible to independent use.

Within this framework, the Respondent takes the position that the defect of violation of law due to error in the legal assumptions should be judged to lack merit, with the challenged assessments remaining in the legal order as they constitute a correct application of the law to the facts.

From another perspective, the AT considers that the provision of item 28.1 of the TGIS does not constitute any violation of the principle of equality, there being no discrimination in the taxation of properties constituted in horizontal co-ownership and properties in full ownership with storeys or units susceptible to independent use, or between properties with residential allocation and properties with other allocations.

Horizontal co-ownership and vertical co-ownership are different legal institutions and tax law respects them. Consequently, the different valuation and taxation of a property in full ownership in relation to a property constituted in horizontal co-ownership derives from the different legal effects inherent to these two institutions.

The Respondent further emphasises that taxation under Stamp Tax complies with the criterion of appropriateness, insofar as it aims at the taxation of wealth embodied in the ownership of high-value properties, arising in a context of economic crisis that cannot be ignored.

1. On 12 November 2014, the meeting of the collective Arbitral Tribunal provided for in Article 18 of the RJAT was held, at which it was decided, after hearing the parties and with their agreement, that there would be no submission of pleadings.

At that same meeting, Dr. Diogo Feio, member arbitrator, declared that he had become aware of the possible existence of a ground of recusal with respect to the Claimant, and stated that he would submit this matter to the consideration of the Ethics Council of the CAAD.

1. On 13 November 2014, the Claimant attached to the file the proof of payment of the 2nd instalment of Stamp Tax "whose annulment it seeks to obtain in the present arbitral action and for purposes of recognition of the compensatory interest requested in subparagraph c) of the claim in the arbitral action".

2. On 26 November 2014, the parties were duly notified of the resignation of Dr. Diogo Feio from the functions of arbitrator in this arbitral process, and of the appointment, in his place, of Dr. Ricardo Rodrigues Pereira.

II. SANATION

The Arbitral Tribunal was regularly constituted and is competent.

The process does not suffer from any nullities.

The parties enjoy legal personality and capacity, are duly represented and are legitimate.

The joinder of claims is admitted on the grounds that the success of the claims formulated by the Claimant depends essentially on the consideration of the same factual circumstances – rooted in the Claimant's ownership of two urban properties in vertical co-ownership with storeys or units susceptible to independent use – and the interpretation and application of the same legal principles or rules – in this case, item 28.1 of the TGIS (see Article 3, paragraph 1, of the RJAT).

There are no exceptions or other preliminary matters that preclude consideration of the merits and which it is necessary to consider.

III. REASONING

III.1. FACTS

§1. PROVED FACTS

With regard to factual matters, it is important first to note that the Tribunal does not have to pronounce on everything that was alleged by the parties, but rather has the duty to select the facts that matter for the decision and to distinguish between proved and unproved facts (see Article 123, paragraph 2, of the Tax Procedural Code and Article 607, paragraphs 3 and 4, of the Civil Procedure Code, applicable by virtue of Article 29, paragraph 1, subparagraphs a) and e), of the RJAT). In this manner, the facts relevant to the judgment of the case are chosen and defined according to their legal relevance, which is established in light of the various plausible solutions to the question(s) of law.

Within this framework, taking into account in particular the positions adopted by the parties, the documentary evidence produced and the administrative file attached to the record, the following facts are considered proved as being relevant to the decision:

1. The Claimant is a credit institution, whose business purpose consists of the carrying out of the operations described in Article 4, paragraph 1, of the General Framework for Credit Institutions and Financial Companies, approved by Decree-Law No. 298/92, of 31 December – see Article 8 of the initial petition (factual matter accepted by agreement).

2. In the course of its business, the Claimant owns various properties, including residential and commercial properties and also land for construction – see Article 8 of the initial petition (factual matter accepted by agreement).

3. In the year 2013, the Claimant owned the urban property, in full ownership with storeys or units susceptible to independent use, located at Rua do ..., ..., Union of Parishes of ... (...), municipality of ..., district of ..., registered in the respective property matrix under article ... – see Article 13 of the initial petition and document No. 308 attached to the initial petition (factual matter accepted by agreement).

4. Said urban property was then composed of 8 (eight) storeys and 52 (fifty-two) units or divisions with independent use, 40 (forty) of which are allocated to housing, and was assigned in 2013 a total tax property value of €2,560,780.00 – see Articles 14 and 18 of the initial petition and document No. 308 attached to the initial petition (factual matter accepted by agreement).

5. Each of the storeys or units with independent use that make up that same urban property has its own tax property value, assessed in accordance with the Property Tax Code, and to the storeys or units with independent use allocated to housing were assigned in 2013 the following unit tax property values, all less than €1,000,000.00 – see Articles 16 and 17 of the initial petition and document No. 308 attached to the initial petition (factual matter accepted by agreement):

[Table with unit designations and corresponding values omitted for brevity but preserved in structure]

1. In the year 2013, the Claimant owned the urban property, in full ownership with storeys or units susceptible to independent use, located at ..., parish of ..., municipality and district of ..., registered in the respective property matrix under article ... – see Article 13 of the initial petition and document No. 309 attached to the initial petition (factual matter accepted by agreement).

2. That same urban property was then composed of 7 (seven) storeys and 38 (thirty-eight) storeys or units with independent use, all allocated to housing, and was assigned in 2013 a total tax property value of €4,429,240.00 – see Articles 15 and 18 of the initial petition and document No. 309 attached to the initial petition (factual matter accepted by agreement).

3. Each of the storeys or units with independent use that make up that same urban property has its own tax property value, assessed in accordance with the Property Tax Code, and were assigned in 2013 the following unit tax property values, all less than €1,000,000.00 – see Articles 16 and 17 of the initial petition and document No. 309 attached to the initial petition (factual matter accepted by agreement):

[Table with unit designations and corresponding values omitted for brevity but preserved in structure]

1. On 4 July 2014, the Claimant petitioned the Finance Service of ... for the conversion of that same urban property to the horizontal co-ownership regime, and for this purpose presented the respective deed of constitution of horizontal co-ownership, executed on 2 July 2014 in the Notarial Office of ..., by Notary ..., at folio ... of book ... – see PA attached to the file.

2. The Claimant was notified of Stamp Tax assessments as follows detailed, in the total amount of €22,027.50, all relating to the year 2013 and referring to the storeys or units with independent use allocated to housing, integrated in the urban property supra identified in proved fact 3 – see Article 10 of the initial petition and documents Nos. 1 to 115 attached to the initial petition (factual matter accepted by agreement):

[Detailed table of assessments omitted for brevity but structure preserved]

1. The Claimant was notified of Stamp Tax assessments as follows detailed, in the total amount of €44,292.41, all relating to the year 2013 and referring to the storeys or units with independent use allocated to housing, integrated in the urban property supra identified in proved fact 6 – see Article 11 of the initial petition and documents Nos. 116 to 229 attached to the initial petition (factual matter accepted by agreement):

[Detailed table of assessments omitted for brevity but structure preserved]

1. The Stamp Tax assessments detailed in proved facts 9 and 10 result from the application of item 28.1 of the TGIS to each and every one of the storeys or units with independent use referred to therein, integrated in the urban properties identified in proved facts 3 and 6 – see Article 12 of the initial petition and documents Nos. 1 to 229 attached to the initial petition (factual matter accepted by agreement).

2. The Claimant duly and timely paid the full amounts corresponding to the 1st instalment of the aforementioned Stamp Tax assessments, whose voluntary payment period ended in April/2014, in the total amount of €22,512.12 – see Article 21 of the initial petition and documents Nos. 230 to 307 attached to the initial petition (factual matter accepted by agreement).

3. The Claimant duly and timely paid the full amounts corresponding to the 2nd instalment of the aforementioned Stamp Tax assessments, whose voluntary payment period ended in July/2014, in the total amount of €21,296.29 – see the documents accompanying the application submitted by the Claimant on 13 November 2014 (factual matter accepted by agreement).

4. On 10 July 2014, the Claimant filed the request for constitution of an arbitral tribunal that gave rise to the present process – see the information system for procedural management of the CAAD.

§2. UNPROVED FACTS

With regard to matters of relevance to the assessment and decision of the case, there are no facts that have not been proved.

§3. REASONING AS TO FACTS

With respect to the proved factual matters, the Tribunal's conviction was based on the statements made in the pleadings, in the points indicated, where the accuracy thereof in relation to reality was not questioned, the documents attached to the file, referenced in relation to each of the points, whose correspondence to reality was not challenged, and the administrative file attached to the record.

III.2. LAW

The issue to be decided

In essence, the Tribunal is called upon to decide the question of taxation, under Stamp Tax, in the case of properties with a global tax property value exceeding one million euros each, but composed of divisions or fractions with autonomy, some allocated to residential purposes but which individually considered do not represent a tax property value (TPV) exceeding one million euros.

Let us now examine the question.

Article 4 of Law 55-A/2012, of 29 October, added to the General Table of the Stamp Tax Code, annexed to the Stamp Tax Code, approved by Law No. 150/99, of 11 September, item No. 28, with the following wording (as amended by the State Budget Law for 2014 – Law 83-C/2013, of 31.12 – Article 194):

"28 – Ownership, usufruct or right to build on urban properties whose tax property value recorded in the matrix, in accordance with the Property Tax Code (CIMI), is equal to or exceeding €1,000,000 – on the tax property value used for purposes of Property Tax:

28.1 – For each residential property or for land for construction whose authorised or intended construction is for housing, in accordance with the provisions of the Property Tax Code – 1%;

28.2 – For each property, when the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favourable tax regime, listed in the list approved by decree of the Minister of Finance – 7.5%."

It follows from the above that in item 28 of the TGIS and in Article 6 of Law 55-A/2012, of 29 October, an innovative concept was used, which is not used by any other tax legislation: the concept of property with residential allocation.

Nor is any such concept defined in the Property Tax Code, indicated by said Law 55-A/2012 as the legislation applicable on a subsidiary basis with respect to the tax introduced by the addition of item 28 to the TGIS.

Indeed, the Property Tax Code defines the concept of property, defines the various types of properties and identifies the categories of urban properties.

According to Article 2 of the Property Tax Code, "property is any portion of land, including waters, plantations, buildings and constructions of any nature incorporated or built thereon, of a permanent character, provided it forms part of the assets of a natural or legal person and, under normal circumstances, has economic value".

Paragraph 4 of that same Article 2 expressly prescribes that each autonomous fraction, under the horizontal co-ownership regime, is regarded as constituting a property.

Properties are divided into rural (Article 3), urban (Article 4) or mixed (Article 5), with urban properties being subdivided into 4 categories: residential; commercial, industrial or for services; land for construction and others (Article 6).

In turn, paragraph 2 of Article 6 of the Property Tax Code clarifies that "residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a licence, which have as their normal destination each of these purposes".

From the combined analysis of said provisions it appears that the Property Tax Code makes no distinction between properties constituted under a horizontal co-ownership regime or full ownership. Indeed, although paragraph 4 of Article 2 expressly refers to autonomous fractions of properties constituted under a horizontal co-ownership regime as constituting, each one of them, a property, the truth is that it does not exclude from such classification the units with independent use of properties constituted under a full or vertical co-ownership regime.

And, where the law has not distinguished, the interpreter cannot do so.

Now: analysed the definition of property contained in paragraph 1 of Article 2 of the Property Tax Code, we discern no reason not to include therein the units with independent use of properties constituted under a full co-ownership regime, since these constitute a portion of land that forms an integral part of the assets of a natural or legal person and which has economic value.

It should be noted that to each of these units or fractions is assigned a tax property value.

Once established is the classification of the units with independent use of properties constituted under a full co-ownership regime as properties, in accordance with and for the purposes of the Property Tax Code, it seems evident to us that each of these units constitutes a property with residential allocation, a matter upon which diverse arbitral case law has already considered and to which reference will be made below.

"Property with residential allocation" can have no other meaning than the act of giving to a determined property (or fraction) the purpose of housing.

Finally, bearing in mind the provision of paragraph 2 of Article 6 of the Property Tax Code, which invokes the notion of "normal purpose" of the property, it appears that there can be no doubt as to the identity, despite the difference in terminology, between the concepts of "residential property" and "property with residential allocation".

In the case at issue, each of the units of the aforementioned urban properties are susceptible to independent use, with 40 fractions of one of the properties allocated to housing and 38 (the entirety) of the other property equally allocated to housing (See above, list of proved facts).

Indeed, were the units in question in the present matter not individually classified as "properties", it would make no sense or logic to draw up, in this case, a Stamp Tax assessment notice for each of these units (As appears from the proved facts the claimant was notified of the Stamp Tax assessments, relating to the year 2013, as a result of the application by AT of Article 1-1 of the Stamp Tax Code, combined with item 28.1 of the TGIS and Article 6 of Law No. 55-A/2012, of 29 October).

Indeed, if these units were not classified, individually, as properties, then only two assessment notices, relating to each of the two properties, should have been drawn up.

It is true that the subsidiary application of the Property Tax Code could suggest the idea that only autonomous fractions, under the horizontal co-ownership regime, are regarded as properties in light of the provision of Article 2-4 of the Property Tax Code.

However, if one attends to the wording of the cited Article 2-4, it will immediately be seen that the presupposition of the constitution of the horizontal co-ownership regime is necessary only for purposes of taxation under Property Tax [Article 2-4, Property Tax Code: "(...) for purposes of this tax, each autonomous fraction, under the regime of horizontal co-ownership, is regarded as constituting a property (...)"].

It should be noted, moreover, that pursuant to Article 12-3 of the Property Tax Code, "(...) each storey or part of the property susceptible to independent use is considered separately in the property record, which also discriminates its respective tax property value (...)"

Furthermore, as regards the spirit of the law, it is important to note that, as has been maintained by the most recent arbitral case law which we follow very closely, the introduction of item 28 into the TGIS was intended to tax urban properties of high value with residential allocation, taxing the wealth, manifested in the ownership, usufruct or right to build on urban "luxury" properties, or their autonomous fractions or units, with residential allocation [See, at www.caad.org.pt the decisions rendered by Arbitral Tribunals constituted within the scope of the CAAD, in case numbers 50/2013-T, 132/2013-T, 181/2013-T, 182/2013-T, 183/2013-T, 185/2013-T, 100/2014-T, 238/2014-T, 290/2014-T and 428/2014-T).

It is further worth noting that, should there exist (or could there exist) in the same building, fractions (in horizontal co-ownership or not), with allocation different or other than residential, only the objective sought by said Article 28.1 will be achieved when each of the fractions per se has a tax property value exceeding €1,000,000.[1]

Indeed, as appears from the analysis of the discussion of Bill No. 96/XII in the National Assembly (Parliamentary Records, Series I, No. 9/XII/2, of 11.10.2012), the justification for the measure referred to as the special rate on urban residential properties of higher value rests on the invocation of the principles of social equity and fiscal justice, calling upon the holders of high-value properties intended for housing to contribute in a more intense manner, with the new special rate applying to homes valued at equal to or exceeding 1 million euros.

Now, if the objective of the law was to adjust taxation under Stamp Tax to the taxpaying capacity of taxpayers, it appears that the distinction between properties constituted under a horizontal co-ownership regime or vertical co-ownership would be of no relevance.

Indeed, it is not discernible how the ownership of certain units in a property under a full co-ownership regime could mean greater wealth and greater taxpaying capacity than the ownership of the same number of fractions in a property under a horizontal co-ownership regime.

Manifestly, it is not by this distinction that greater or lesser taxpaying capacity is revealed, all the more so since, as is known, horizontal co-ownership is a relatively recent legal institution, and it is certain that a large part of older properties are not even constituted under this regime, even though they function in practice as such.

Now, the principle of the prevalence of substance over form requires that the tax administration value material truth. And, in the case at issue, material truth consists of the non-existence of any substantial difference between the units owned by the Claimant and the fractions of a property constituted in horizontal co-ownership.

All the more so since, in this case, the units of the property in question constitute true autonomous fractions, the property having, very recently and already after the assessments in question in the present matter, been constituted under the horizontal co-ownership regime (See above, list of proved facts).

Or, put another way: the constitution of horizontal co-ownership being merely a juridical operation and not a factual one, no reasons are discernible for differences in taxation in this respect, since what will always be relevant is the individual value of each of the fractions, whether or not the property is constituted under the horizontal co-ownership regime.

To distinguish, for purposes of subjection or not to Stamp Tax, the autonomous fractions of properties constituted under a horizontal co-ownership regime from the units with independent use of properties constituted under a full ownership regime, represents a clear violation of the principles of justice, fiscal equality and proportionality, material truth and taxpaying capacity, and cannot therefore be accepted.

Thus, the thesis defended by the Respondent that the fact that the property is not constituted under a horizontal co-ownership regime prevents the application of its regime cannot be accepted.

In the case at issue, as appears from the proved facts, none of the units with independent use, or rather, none of the "properties" owned by the Claimant, has a tax property value equal to or exceeding one million euros, and therefore these are not covered by the scope of application provided for in item 28 of the TGIS.

In light of all that has been set out above, there can be no doubt that the tax property value relevant for purposes of the incidence of Stamp Tax in the cases of properties constituted under a full co-ownership regime, composed of various units with independent use, some of which with residential allocation, is the tax property value of each of the units of the property and not, as defended by the Respondent, the global tax property value of the property, corresponding to the sum of all the tax property values of the units that make it up.

In light of all that has been set out above, as there is no legal basis for the assessment acts carried out, their annulment is required as a result of violation of law, errors in the factual and legal assumptions, and consequent refund of all amounts paid to the respondent as a consequence of those assessment acts.

COMPENSATORY INTEREST

In accordance with the provision of subparagraph b) of Article 24 of the RJAT the arbitral decision on the merits of the claim which is not subject to appeal or challenge binds the tax administration from the end of the period provided for appeal or challenge, and such administration must, in the exact terms of the success of the arbitral decision in favour of the taxpayer and until the end of the period provided for voluntary compliance with the decisions of the tax courts, "restore the situation that would exist if the tax act which is the object of the arbitral decision had not been carried out, adopting the acts and operations necessary for this purpose", which is consistent with the provision of Article 100 of the General Tax Law [applicable by virtue of the provision of subparagraph a) of paragraph 1 of Article 29 of the RJAT] which establishes that "the tax administration is obliged, in case of total or partial success of objection, judicial challenge or appeal in favour of the taxpayer, to the immediate and complete restoration of the legality of the act or situation that is the object of the dispute, including the payment of compensatory interest, if applicable, from the end of the period of compliance with the decision".

Although Article 2, paragraph 1, subparagraphs a) and b), of the RJAT uses the expression "declaration of illegality" to define the competence of the arbitral tribunals operating within the CAAD, making no reference to condemnatory decisions, it should be understood that the competences include the powers that in judicial challenge proceedings are attributed to the tax courts, and this is the interpretation that is in keeping with the sense of the legislative authorisation on which the Government based itself for the approval of the RJAT, in which it proclaims, as the first guideline, that "the tax arbitral process must constitute an alternative procedural means to judicial challenge proceedings and to the action for the recognition of a right or legitimate interest in tax matters".

The judicial challenge proceeding, despite being essentially an annulment proceeding for tax acts, admits the condemnation of the Tax Administration to pay compensatory interest, as may be inferred from Article 43, paragraph 1, of the General Tax Law, which establishes that "compensatory interest is owed when it is determined, in gracious objection or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than legally due" and from Article 61, paragraph 4 of the Tax Procedural Code (in the wording given by Law No. 55-A/2010, of 31 December, which corresponds to paragraph 2 in the original wording), which states: "if the decision recognising the right to compensatory interest is judicial, the period for payment is calculated from the beginning of the period for voluntary compliance".

Thus, paragraph 5 of Article 24 of the RJAT, in stating that "payment of interest, regardless of its nature, is due, in accordance with the terms provided for in the general tax law and in the Tax Procedural Code" should be understood as allowing the recognition of the right to compensatory interest in the arbitral process.

In the case at hand, it is manifest that, as a consequence of the illegality of the assessment acts, there is cause for refund of the tax, by virtue of said Articles 24, paragraph 1, subparagraph b), of the RJAT and 100 of the General Tax Law, since this is essential to "restore the situation that would exist if the tax act which is the object of the arbitral decision had not been carried out".

As concerns the compensatory interest, it is also clear that the illegality of the acts is attributable to the Tax and Customs Authority, which, on its own initiative, carried them out without, as has been seen, legal support.

We are dealing, as has also been mentioned, with a defect of violation of substantive law, constituted in error as to the legal assumptions, attributable to the Tax Administration.

Consequently, the banking entity claimant is entitled to compensatory interest, in accordance with Article 43, paragraph 1, of the General Tax Law and Article 61 of the Tax Procedural Code, calculated on the amounts that it wrongfully paid.

Thus, the Tax and Customs Authority must give execution to the present decision, in accordance with Article 24, paragraph 1, of the RJAT, determining the amount to be refunded to the claimant and calculating the respective compensatory interest, at the legal supplementary rate for civil debts, in accordance with Articles 35, paragraph 10, and 43, paragraphs 1 and 5, of the General Tax Law, Article 61 of the Tax Procedural Code, Article 559 of the Civil Code and Decree No. 291/2003, of 8 April (or the legislation that succeeds it).

The compensatory interest is owed from the dates of payment and on the respective amounts, until the date of processing of the credit note in which they are included (Article 61, paragraph 5, of the Tax Procedural Code).

IV DECISION

In light of the above, it is decided:

1. To decide that the request for a declaration of illegality of the Stamp Tax assessment acts in the global amount of €66,319.91 (€22,027.50+€44,292.41) is well-founded, determining the annulment of those tax acts;

2. To decide that the request for refund of the amounts that have been paid as a result of such assessments is well-founded; and

3. To decide that the request for payment of interest at the aforementioned legal rate, calculated on the amounts wrongfully paid, from the dates of the payments and on the respective amounts, calculated until the date of processing of the credit note in which they are included (Article 61, paragraph 5, of the Tax Procedural Code) is well-founded.

PROCESS VALUE

In accordance with the provision of paragraph 2 of Article 306-2 of the Code of Civil Procedure, subparagraph a) of paragraph 1 of Article 97-A of the Tax Procedural Code and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings the process is assigned a value of €66,319.91.

COSTS

Under the provision of paragraph 2 of Article 12 and paragraph 4 of Article 22 of the RJAT and Article 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €2,448.00, in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, which shall be borne entirely by the respondent, the Tax and Customs Authority.

Let notice be given.

Lisbon, 30 March 2015.

The Arbitrators,

(José Poças Falcão)

(Ana Teixeira de Sousa)

(Ricardo Rodrigues Pereira)

[1] Although this may lead to an injustice and even to an unconstitutionality due to violation of the principles of equality and taxpaying capacity to tax in Stamp Tax (28.1 of the TGIS), for example, the holder of a residential property valued at more than 1 million euros and to exclude from such taxation the holder of 2 autonomous fractions with a TPV of 600,000 euros each.