Summary
Full Decision
ARBITRAL DECISION
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REPORT
1.1. The Claimants A… and B…, married, taxpayers nos. … and …, respectively, resident at Rua …, in Lisbon and C…, taxpayer no. …, resident at Rua…, in Viseu, filed on 24/07/2015 a request for arbitral pronouncement in order to assess and declare the illegality of the acts of Stamp Duty assessment for the year 2014, relating to the application of Item 28.1 of the General Stamp Duty Table (General Table), in the total amount of € 10,984.16 (ten thousand nine hundred and eighty-four euros and sixteen cents) to real properties of which they are owners.
1.2. His Excellency the President of the Ethics Council of the Administrative Arbitration Center (CAAD) appointed, on 11/08/2015, as sole arbitrator the signatory of this decision.
1.3. On 06/10/2015 the arbitral tribunal was constituted.
1.4. In compliance with the provision of no. 1 of article 17 of the Legal Regime of Tax Arbitration (RJAT), the Tax and Customs Authority (AT) was notified on 06/10/2015 to, if it wished, submit a response and request the production of additional evidence.
1.5. On 10/11/2015 the AT submitted a response, defending itself by way of exception and by objection, in which it further requested dispensation from the meeting provided for in article 18 of the RJAT.
1.6. The arbitral tribunal on 11/11/2015 decided to dispense with the holding of the meeting to which no. 1 of article 18 of the RJAT refers, on the basis of the principle of the tribunal's autonomy in the conduct of the proceedings, inviting both parties to, if they wished, submit optional written submissions and scheduled the date for the issuance of the final decision.
1.7. On 16/11/2015 the Claimants submitted written submissions.
1.8. The AT submitted no written submissions.
1.9. On 07/12/2015, the AT requested the attachment to the case file of a Constitutional Court Decision, in which it concludes that Item 28 of the General Table is not subject to any unconstitutionality, with no violation whatsoever of the constitutional principles that shape tax law, specifically the principles of tax equality, contributive capacity and proportionality.
1.10. On 16/12/2015, the Claimants submitted a motion, ruling that the Constitutional Court Decision in question should not apply to the situation sub judice, in so far as the reality in question – property used for housing and services – cannot be subsumed under the norm whose constitutionality was assessed.
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CASE MANAGEMENT
The arbitral tribunal was regularly constituted and is materially competent.
The parties have legal standing and capacity and are entitled to appear, with no defects in representation.
The proceedings are not vitiated by defects that affect their validity.
Consequently, the conditions for issuing the final decision are met.
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POSITIONS OF THE PARTIES
There are two opposing positions: that of the Claimants, set forth in the request for arbitral pronouncement (and in subsequent written submissions) and that of the AT in its response.
To substantiate their request, the Claimants argue, in summary:
a) "The urban real property on which Stamp Duty is assessed is composed of several floors with independent use, namely: 1st floor right side intended for housing, 1st floor left side intended for housing, 2nd floor right side intended for housing, 2nd floor left side intended for housing, 3rd floor right side intended for housing, 3rd floor left side intended for housing, basement with entrance at no. 17 B intended for housing, shop with entrance at no. 17 A intended for commercial use, ground floor right side intended for housing, and ground floor left side intended for housing (…).";
b) "As is evident in the property register, the real property subject to the taxation now in dispute is not a property for housing: part of it is for commercial use (shop with entrance at no. 17)." [emphasis and underlining by the Claimants];
c) "Each of the floors referred to is subject to independent use, constitute independent units, endowed with economic autonomy, distinct and isolated from each other, with their own access to a common part of the property or with direct access to the public highway.";
d) "(…) the units are not all intended for housing because one of them - the shop with no. … - is intended for commercial use. This shop is an integral part of the property, as it is described in the register and in the land registry office: located at «…, no. … to …»." [emphasis and underlining by the Claimants];
e) "(…) it should be noted that the property (…) is not intended for housing, but rather for housing and commercial use." [emphasis and underlining by the Claimants];
f) "According to the evaluation carried out and recorded in the property register and evidenced in the property registration certificate of the property (…), the tax asset values were assigned to each of the floors with independent use." [emphasis and underlining by the Claimants];
g) "Therefore, if one wished to indicate the sum of the tax asset values of all the floors with independent use, it would have to include therein the value of the shop intended for commercial use.";
h) "(…) the property of which the floors described above is entirely composed of parts endowed with economic autonomy and susceptible of independent use, being - and susceptible of being - leased to different lessees and are all endowed with economic autonomy and susceptible of independent use.";
i) "This autonomy is highlighted by J. SILVÉRIO MATEUS, when he refers that «Another aspect that should be evidenced in the register concerns the need to make clear the autonomy that within the same property can be attributed to each of its parts, functionally and economically dependent. In these cases, the property registration not only must make reference to each of these parts, but must make express reference to the asset value corresponding to each of them.
An example that can illustrate this situation is the case of an urban real property, not constructed under the horizontal property regime and which is composed of several floors. Legally this property constitutes a single entity and its ownership cannot be attributed to more than one owner, without prejudice to the co-ownership regime. However, as each of these units can be subject to lease or any other use by its respective owner, the register must evidence these units and asset value must be assigned to each of them (…)» (…)" [underlining by the Claimants];
j) "It should further be noted that as referred to in the Letter sent by the Ombudsman to the Secretary of State for Tax Affairs (SEAF) requesting urgent clarification on this matter, «the registration in the register of real properties in vertical ownership, composed of parts susceptible of independent use, follows the same rules as the registration of real properties held in horizontal ownership, and the respective IMI [Municipal Property Tax], as well as the new Stamp Duty, are assessed individually in relation to each of the parts» (…)" [emphasis by the Claimants];
k) Now, "(…) the legal regime of horizontal property is solely aimed at granting legal autonomy to the fractions of the property, so that they can belong to more than one owner, and is not in itself attributive of any economic meaning to these fractions." [emphasis by the Claimants];
l) "Indeed, and as seen for purposes of IMI (and of Stamp Duty), what is relevant is the economic autonomy of the floor resulting from its being susceptible of independent use (and not the legal autonomy granted by the horizontal property mechanism), which leads to the discrimination of its tax asset value separately in the property registration of the property (…), and to the individual assessment of IMI in relation to each autonomous floor.";
m) "This is what occurs in relation to all the floors of the property described above: not only was the IMI assessed on these fractions individually (and not on the overall value of the property), but its tax asset value was recently subject to general evaluation (…)";
n) "There should, therefore, prevail an interpretation in accordance with article 11 no. 3 of the LGT [General Tax Law], and the expression «properties» provided for in item no. 28 of the TGIS [General Stamp Duty Table] should be interpreted to cover any and all floor or part of property endowed with economic autonomy and susceptible of independent use, and not only the autonomous fractions in the horizontal property regime, «taken as constituting a property» (…)";
o) "In this sense, the analysis of the incidence (or not) of Stamp Duty on each of the floors under item 28.1 of the TGIS should have been carried out separately in light of the tax asset value of each of these fractions, and not on the asset value of €1,098,400.00 - which is not even the tax asset value of the property - resulting from the sum of the asset values of all the residential floors of the property excluding the floor intended for commercial use." [emphasis and underlining by the Claimants];
On the alleged lack of jurisdiction of the arbitral tribunal
p) "In the present proceedings, the Claimants request from this Arbitral Tribunal the assessment of the legality of the Stamp Duty assessment notices in dispute, which are formalized by the documents attached to the petition and which are the only documents that formalize the assessment act whose appraisal of legality and annulment are requested." [emphasis and underlining by the Claimants];
q) "Notwithstanding the designation given by the AT to the documents that formalize the assessment act («collection notes for payment of the 1st and 2nd installment of a tax» and «installments» (…), the Claimant was not notified of any other document to formalize the tax now in dispute." [emphasis and underlining by the Claimants];
r) "Indeed, with respect to the assessment for Stamp Duty purposes - «Item 28.1» of the General Stamp Duty Table – relating to the year 2014 on the property better identified in the petition, the only documents formalizing such assessment are those attached thereto (petition) (…)";
s) "Given the foregoing, the jurisdiction of the Arbitral Tribunal is verified, in accordance with article 10, no. 1, paragraph a) of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration on Tax Matters (…) and articles 1 and 2 of Order no. 112-A/2011, of 22 March.";
On the alleged non-contestability of the assessment acts
t) "As referred to above, the only documents of which the Claimants were notified with respect to the Stamp Duty in question are those that constitute Docs. nos. 1 to 41 of the petition.";
u) "The Claimants were not notified of any other document that formalizes the assessment of the tax whose appraisal of legality and annulment are requested in the present arbitral action.";
v) "What actually appears in the Request of these proceedings, made by the Claimants (…) is «a) the declaration of illegality of the Stamp Duty assessment acts for 2014 identified in this request; b) the reimbursement of the amount of € 10,984.16, paid improperly by the claimants and of all amounts that may be paid in the course of this action relating to any of the tax assessments subject to the same; c) the payment of indemnification interest calculated on the amount paid and to be paid improperly by the claimants.», it being certain that such assessment acts were exclusively formalized by Docs. 1 to 41." [emphasis and underlining by the Claimants];
By another token, the AT, defending itself by exception and by objection, sustains, in summary, the following:
By exception:
On the lack of jurisdiction of the arbitral tribunal
a) "The Claimant does not challenge the tax assessment act, but rather the payment of two installments of the assessment act contained in collection notices, that is to say,";
b) "The subject matter of the proceedings is the annulment not of a tax act (or of 1/3 of a tax act, which would not be legally possible), but rather of collection notices for payment of the 1st and 2nd installment of a tax.";
c) "A matter which is in no way part of the set of rules delimiting the jurisdiction of tax arbitral tribunals, contained in article 2 of the RJAT.".
On the non-contestability of the acts
a) "The Claimant challenges the installments relating to the payment of a single unit value of tax.";
b) "This is evident from the combination of articles 120 and 113, no. 1, both of the IMI Code, in addition to no. 7 of article 23 of the Stamp Duty Code, as amended by Law no. 55-A/2012, of 29 October.";
c) "In that, the Stamp Duty referred to in item 28 of the TGIS is assessed annually, payment in installments being nothing more than a collection technique for the tax and not a partial payment thereof.";
d) "Reason being, the payment of one of the installments of the assessment carried out under the provision of item 28.1 of the TGIS is not a partial payment of that assessment, but only a collection technique for the assessed tax.";
e) "Read no. 4 of article 120 of the IMI Code, applicable by analogy, according to which «In the case provided for in nos. 1 and 3, the non-payment of an installment or an annual payment within the established period implies the immediate maturity of the remaining installments».";
f) "Thus, it is verified that there is a single assessment and its payment is implemented in installments, which does not allow for the challenge of a single installment or collection document at that partial value.";
g) "(…) the AT therefore understands that these collection documents are not contestable per se, reason being the exception invoked should be upheld and the AT should be absolved of the claim.".
By objection:
a) "In the respective property register, the real property is described as held in full ownership, with floors or divisions susceptible of independent use.";
b) "It is composed in particular of «basement no. … with 5 divisions, shop no. … with 2 divisions, porter's dwelling with 4 divisions, Ground Floor Right with 11 divisions, Ground Floor Left with 9 divisions, 1st Right with 11 divisions, 1st Left with 11 divisions, 2nd Right with 11 divisions, 2nd Left with 11 divisions, 3rd Right with 11 divisions and 3rd Left with 11 divisions», in a total of 5 floors and 10 divisions susceptible of independent use.";
c) "The entire property is assigned a tax asset value of € 1,141,550.00.";
d) "Of the 10 divisions susceptible of independent use, 9 are intended for housing and 1 is allocated to commercial use, as can be inferred from its respective property register.";
e) "The subjection to Stamp Duty of item 28.1 of the General Table results from the combination of two facts, namely, the residential allocation and the fact that the tax asset value of the urban property registered in the matrix is equal to or exceeds € 1,000,000.00.";
f) "The claimants are now owners of a property under a regime of full or vertical ownership.";
d) "The property being held under a full ownership regime, there are no autonomous fractions to which tax law can attribute the qualification of property.";
e) "Thus, the claimants, for purposes of IMI and Stamp Duty, by force of the wording of the referred item, are not owners of 10 autonomous fractions, but rather of a single property";
f) "Having established this fact, what the claimants seek is that the AT consider, for purposes of assessment of this tax, that there is analogy between the regime of full ownership and that of horizontal ownership, as there should be no discrimination in the legal-tax treatment of these two property ownership regimes, as it would be illegal.";
g) "We cannot, therefore, accept that it be considered, for purposes of item 28.1 of the General Table attached to the Stamp Duty Code, that the parts susceptible of independent use have the same tax regime as the autonomous fractions of the horizontal ownership regime.";
h) In reality, "(…) the unity of the urban property in vertical ownership composed of several floors or divisions is, however, not affected by the fact that all or part of these floors or divisions are susceptible of independent economic use.";
i) Moreover, "(…) the fact that the IMI has been calculated based on the tax asset value of each part of property with independent economic use does not similarly affect the application of item 28 no. 1 of the General Table.";
j) "The determining fact for the application of this item of the General Table is therefore the total tax asset value of the property and not separately that of each of its parcels.";
k) "Any other interpretation would violate, indeed, the letter and spirit of item 28.1 of the General Table and the principle of legality of the essential elements of the tax provided for in article 103, no. 2 of the Constitution of the Portuguese Republic (CRP).";
l) "It is therefore unconstitutional, as offensive of the principle of tax legality, the interpretation of item 28.1 of the General Table, to the effect that the tax asset value on which its incidence depends is ascertained floor by floor or floor or division by division, and not globally.";
m) "Finally, it should be noted that the property registration of each part susceptible of independent use is not autonomous by matrix, but is included in a description in the matrix of the property in its entirety - see the property register of this property, which represents the owner's document containing the property registration elements of the property." [emphasis by the Respondent];
n) "It is thus evident that these procedural rules of evaluation, property registration and assessment of the parts susceptible of independent use do not permit us to affirm that there is an assimilation of property under full ownership to the regime of vertical ownership, precisely because, and as already referred, they are different civil-law regimes and thus tax law treats them as such.";
o) "In conclusion the tax acts challenged, in terms of substance, did not violate any legal or constitutional provision and should be upheld in the legal order.".
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ISSUES TO BE DECIDED
In the present proceedings the issues to be decided are:
a) To rule on the exceptions of lack of jurisdiction of the arbitral tribunal and of non-contestability of the Stamp Duty assessment acts;
b) To determine whether Item 28.1 of the General Table, in the case of properties not held in horizontal ownership, applies to the sum of the tax asset values attributed to the different parts or floors, or rather, to the tax value of each part of the property with independent economic use.
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FACTUAL MATTERS
5.1. FACTS DEEMED TO BE PROVEN
In light of the documents presented in the case, the following facts are deemed proven:
5.1.1. The Claimants are owners of a property located in Lisbon, with 5 floors, registered in the urban property matrix of the parish of …, Council of Lisbon, under property article no. … (current article … of the parish of …).
5.1.2. The property subject to these proceedings is held in full ownership with floors or divisions susceptible of independent use, in a total of 10 divisions with independent use, namely: 1st floor right, 1st floor left, 2nd floor right, 2nd floor left, 3rd floor right, 3rd floor left, basement with entrance at no.…, shop with entrance at no. … intended for commercial use, ground floor right and ground floor left.
5.1.3. The property in question was registered in the matrix in 1989 and the tax asset value ("VPT") as of the date of the assessments in question ranged between € 79,910.00 and € 128,660.00, with the total of the 10 divisions amounting to € 1,098,400.00.
5.1.4. The Claimants were notified of the Stamp Duty assessment acts for the year 2014, contained in the collection documents for payment of the first installment of the tax assessed for each floor or division with independent use allocated to housing of the mentioned urban property, at the rate of 1%, with the payment deadline of 30/04/2015, as follows detailed:
DOCUMENT IDENTIFICATION
PROPERTY DESCRIPTION
TAX ASSET VALUE
RATE (%)
TAX
1ST INSTALLMENT
2015 …
1D
128,660.00
1%
643.30
214.44
2015…
1D
128,660.00
1%
643.30
214.44
2015 …
1E
128,660.00
1%
643.30
214.44
2015 …
2D
128,660.00
1%
643.30
214.44
2015 …
2D
128,660.00
1%
643.30
214.44
2015 …
2E
128,660.00
1%
643.30
214.44
2015 …
2E
128,660.00
1%
643.30
214.44
2015 …
3D
128,660.00
1%
643.30
214.44
2015 …
3D
128,660.00
1%
643.30
214.44
2015 …
3E
128,660.00
1%
643.30
214.44
2015 …
3E
128,660.00
1%
643.30
214.44
2015 …
CV 17 B
79,910.00
1%
399.55
199.78
2015 …
CV 17 B
79,910.00
1%
399.55
199.78
2015 …
RC/D
128,660.00
1%
643.30
214.44
2015 …
RC/D
128,660.00
1%
643.30
214.44
2015 …
RC/E
117,870.00
1%
589.35
196.45
2015 …
RC/E
117,870.00
1%
589.35
196.45
5.1.5. The Claimants were notified of the Stamp Duty assessment acts for the year 2014, contained in the collection documents for payment of the second installment of the tax assessed for each floor or division with independent use allocated to housing of the mentioned urban property, at the rate of 1%, with the payment deadline of 31/07/2015, as follows detailed:
DOCUMENT IDENTIFICATION
PROPERTY DESCRIPTION
TAX ASSET VALUE
RATE (%)
TAX
2ND INSTALLMENT
2015 …
1D
128,660.00
1%
643.30
214.43
2015 …
1D
128,660.00
1%
643.30
214.43
2015…
1E
128,660.00
1%
643.30
214.43
2015 …
1E
128,660.00
1%
643.30
214.43
2015 …
2D
128,660.00
1%
643.30
214.43
2015 …
2D
128,660.00
1%
643.30
214.43
2015 …
2E
128,660.00
1%
643.30
214.43
2015…
2E
128,660.00
1%
643.30
214.43
2015 …
3D
128,660.00
1%
643.30
214.43
2015 …
3D
128,660.00
1%
643.30
214.43
2015 …
3E
128,660.00
1%
643.30
214.43
2015 …
3E
128,660.00
1%
643.30
214.43
2015 …
RC/D
128,660.00
1%
643.30
214.43
2015 …
RC/D
128,660.00
1%
643.30
214.43
2015 …
RC/E
117,870.00
1%
589.35
196.45
2015 …
RC/E
117,870.00
1%
589.35
196.45
5.1.6. The Claimants were notified of the Stamp Duty assessment acts for the year 2014, contained in the collection documents for payment of the third installment of the tax assessed for each floor or division with independent use allocated to housing of the mentioned urban property, at the rate of 1%, with the payment deadline of 30/11/2015, as follows detailed:
DOCUMENT IDENTIFICATION
PROPERTY DESCRIPTION
TAX ASSET VALUE
RATE (%)
TAX
3RD INSTALLMENT
2015 …
1D
128,660.00
1%
643.30
214.43
2015 …
1E
128,660.00
1%
643.30
214.43
2015…
2D
128,660.00
1%
643.30
214.43
2015 …
2E
128,660.00
1%
643.30
214.43
2015 …
3D
128,660.00
1%
643.30
214.43
2015 …
3E
128,660.00
1%
643.30
214.43
2015 …
CV 17 B
79,910.00
1%
399.55
199.77
2015 …
RC/D
128,660.00
1%
643.30
214.43
5.1.7. As of the date of filing the request for arbitral pronouncement, the total amount of € 7,189.54 (€ 3,594.77 plus € 3,594.77 assessed by Claimants C… and B…, respectively) had been paid, relating to payment of the 1st and 2nd installments of the Stamp Duty.
5.1.8. Subsequently, the Claimants submitted, on 13/11/2015, proof of payment of the three installments of the Stamp Duty, in the total amount of € 10,984.16.
5.2. FACTS NOT DEEMED TO BE PROVEN
There are no facts relevant to the decision that have not been deemed proven.
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THE LAW
6.1. ON THE LACK OF JURISDICTION OF THE ARBITRAL TRIBUNAL AND THE NON-CONTESTABILITY OF THE STAMP DUTY ASSESSMENT ACTS
Although the AT distinguishes between the exceptions invoked, it is verified that the facts invoked to substantiate each one are the same, and will therefore be assessed simultaneously here.
Thus,
The AT bases its claim, regarding the exception of lack of jurisdiction of the arbitral tribunal, on the fact that no tax assessment act was challenged, but rather the payment of two Stamp Duty installments embodied in the respective collection notices.
The subject matter of the proceedings corresponds, thus, according to the AT, not to the annulment of a tax act, but rather to a mere collection notice.
Now, in the AT's view, this matter does not fall within the scope of competence of tax arbitral tribunals, provided for in article 2 of the RJAT, thus extending beyond the object of the request for arbitral pronouncement the scope of competence of the arbitral tribunal.
Let us see.
Paragraph a) of no. 1 of article 2 of the RJAT establishes that arbitral tribunals are competent to assess claims for declaration of illegality of tax assessment acts, self-assessment acts, withholding at source acts and payment on account acts.
For its part, as regards the AT's binding to the jurisdiction of arbitral tribunals, no. 1 of article 4 of the RJAT provides that this depends on an order of the government members responsible for the areas of finance and justice.
To this extent, the competence of the arbitral forum is thus delimited by the order binding the AT to the jurisdiction of the Administrative Arbitration Center. [1]
Pursuant to article 2 of the referred Order, the General Directorate of Taxes and the General Directorate of Customs and Special Consumption Taxes (currently AT) bind themselves to the jurisdiction of the arbitral tribunals operating at CAAD which have as their object the assessment of claims relating to taxes whose administration is entrusted to them, in accordance with no. 1 of article 2 of the RJAT, which expressly include claims for declaration of illegality of tax assessment acts, self-assessment acts, withholding at source acts and payment on account acts.
It is concluded, therefore, that the tax arbitral proceedings have as their object, mediately or immediately, the tax assessment act, as the act determining the amount of the tax to be paid (tax assessment), by application of a rate to the taxable matter.
Now, the assessment of the exceptions raised depends, therefore, on the question of whether the Claimants are challenging the Stamp Duty assessment act or whether, by contrast, they merely challenge each of the Stamp Duty installments individually.
In cases where the tax must be paid in installments, the assessment is notified to the tax subject together with the notification for payment of each of the installments, and may only be challenged in its entirety and not installment by installment. [2]
In this regard, José Casalta Nabais argues that "Assessment in the broad sense, that is, as the set of all operations intended to ascertain the amount of the tax, comprises: 1) Subjective assessment intended to determine or identify the taxpayer or tax subject of the legal-tax relationship, 2) Objective assessment through which the taxable matter or taxable amount of the tax is determined and, likewise, the rate to be applied is determined, in the case of a plurality of rates, 3) Assessment in the strict sense translated into the determination of the tax assessment through the application of the rate to the taxable matter, and 4) the (possible) deductions from the tax assessment.". [3]
For each tax event there will be, in principle, a single assessment, by which the tax assessment to be paid will be determined.
No. 7 of article 23 of the Stamp Duty Code also provides that "in the case of tax owed for the situations provided for in item no. 28 of the General Table, the tax is assessed annually (…)" applying, with the necessary adaptations, the rules contained in the IMI Code".
Similarly, no. 5 of article 44 of the Stamp Duty Code establishes that "where assessment of the tax referred to in item no. 28 of the General Table is to be made, the tax is paid in the periods, terms and conditions defined in article 120 of the IMI Code".
That is, in light of the provision of no. 2 of article 113 of the IMI Code, "the assessment (…) is carried out in the months of February and March of the following year", the tax to be paid in three installments in the months of April, July and November, respectively, based on its amount. [4]
In sum, and from the combination of the legal provisions referred to above, it is possible to conclude that Stamp Duty is assessed annually, payment in installments being nothing more than a collection technique for the tax and not a partial payment thereof. [5]
Accordingly, the assessment is only one and only it constitutes a harmful act susceptible of being challenged.
Said that,
From the analysis of the request for arbitral pronouncement it appears that the Claimants request the constitution of the arbitral tribunal with a view to "(…) the declaration of illegality of the tax assessment acts of Stamp Duty for 2014, formalized by the assessment/collection notices attached (…)".
That is, the declaration of illegality of the tax assessment acts of Stamp Duty is requested, to which correspond the respective installment payments.
From all the foregoing it follows that, contrary to what the AT contends, the subject matter of the request for arbitral pronouncement is the tax assessment act and not each of the Stamp Duty installments individually considered.
This is so evident that the Claimants themselves, in delimiting the object of the arbitral action, circumscribe the institution of the respective proceedings to the annulment of the Stamp Duty assessment acts relating to the year 2014, indicating as the value of the economic benefit of the claim the total value of the assessment in the amount of € 10,984.16.
Thus, although the Claimants associate the tax assessment act with the Stamp Duty installments, proceeding to their attachment and identification, the fact is that they do not circumscribe the object of the request for arbitral pronouncement to any of the Stamp Duty installments in particular, but rather to the Stamp Duty assessment considered as a whole.
The argument invoked by the AT regarding the lack of jurisdiction of the arbitral tribunal is therefore without foundation, as is the non-contestability of the acts, therefore the exceptions in question are deemed without merit.
6.2. ON THE ILLEGALITY OF THE STAMP DUTY ASSESSMENT ACT FOR 2014
The issue to be decided is now whether the tax assessment acts of Stamp Duty are illegal, due to erroneous interpretation and application of Item no. 28.1 of the General Table, added by Law no. 55-A/2012, of 29 October, in considering that the tax asset value ("VPT") of an urban property held under a full ownership regime, with floors or divisions allocated to housing susceptible of independent use, which is relevant for purposes of incidence of that item is constituted by the value resulting from the sum of the tax asset value (VPT) attributed to each of those floors or divisions.
Moreover, whether the Stamp Duty assessments further suffer from the defect of unconstitutionality, for violation, among others, of the principles of legality and tax equality.
On this matter, there is already abundant case law of the Supreme Administrative Court (STA) and arbitral case law in cases no. 245/2014-T, 152/2015-T and 021/2015-T, whose arbitral case law we follow. [6]
As follows from the established facts, the AT assessed Stamp Duty considering that the VPT of the urban property held under a full ownership regime exceeds € 1,000,000.00, taking into account the sum of the VPT of each of the 10 floors or divisions with independent use allocated to housing that compose the referred property.
Let us see.
Article 4 of Law no. 55-A/2012, of 29 October made an addition to the General Table of Item no. 28, with the following wording (in its original version):
"28 - Ownership, usufruct or right to build of urban real properties whose tax asset value contained in the matrix, in accordance with the Municipal Property Tax Code (IMI Code), is equal to or exceeds € 1,000,000 - on the tax asset value used for IMI purposes:
28.1 - For property with residential allocation - 1%;
28.2 - For property, when the tax subjects that are not individuals are residents in a country, territory or region subject to a clearly more favorable tax regime, included in the list approved by order of the Minister of Finance - 7.5%."
No. 1 of article 6 of the Law in question provides, regarding the year 2012, that, "the tax asset value to be used in the assessment of the tax corresponds to that which results from the rules provided for in the Municipal Property Tax Code by reference to the year 2011;".
As of the date of the facts, the requirements of incidence of Item 28.1 of the General Table are therefore residential properties or land for construction whose authorized or planned construction is for housing, in accordance with the provision of the IMI Code, whose VPT contained in the matrix is equal to or exceeds € 1,000,000.00.
Law no. 55-A/2012, of 29 October, by reference to item 28 of the General Table, further established several amendments to the Stamp Duty Code, notably regarding its assessment and payment, expressly referring to the rules provided for in the IMI Code [7] with the necessary adaptations, and further providing in no. 2 of article 67 of the Stamp Duty Code that, "For matters not regulated in this Code relating to item no. 28 of the General Table, the provisions of the IMI Code are applied subsidiarily.".
From the analysis of the referred norms, it is verified, therefore, that the concept of "property with residential allocation" provided for in the aforementioned Item no. 28, no. 1 of the General Table is not defined in the Stamp Duty Code, nor in the cited Law no. 55-A/2012, of 29 October, nor in the IMI Code, whose norms are of subsidiary application, given the provision of no. 2 of article 67 of the Stamp Duty Code.
On this matter, the arbitral tribunal has already ruled in the decision issued in case no. 53/2013-T, which we follow, in understanding that a "property with residential allocation" must be "a property that already has effective allocation to that end".
It is, therefore, unequivocal that a property in full or vertical property ownership regime constitutes an urban property, in accordance with the provision of no. 1 of articles 2 and 4 of the IMI Code, applicable subsidiarily, it being equally certain that, both for purposes of incidence of Item 28.1 of the General Table and for purposes of classification of urban properties [8], the legislator makes no distinction between properties held in vertical and horizontal ownership (as mentioned in the arbitral decisions issued in cases no. 50/2013-T and no. 132/2013-T), the tax requirement of Item 28.1 of the General Table being properties that are effectively already allocated to housing, since what is relevant is the effective and current use of each of the properties.
What then will be the relevant tax asset value in the case of urban properties under a full ownership regime composed of floors or divisions susceptible of independent use with "residential allocation", for purposes of incidence of Item 28.1 of the General Table?
As follows from Item 28.1 of the General Table itself (in its original wording) and no. 1 of article 6 of Law no. 55-A/2012, of 29 October, Stamp Duty shall apply to the VPT used for IMI purposes.
Let us see, therefore, what the VPT used for IMI purposes is.
Now, the VPT of each property is determined in accordance with article 38 and following of the IMI Code, in accordance with the provision of no. 1 of article 7 of the IMI Code. In the case of property in a full or vertical ownership regime, each floor or division with independent use that comprises it is equally subject to evaluation, being assigned a tax asset value to each of those floors or divisions, in accordance with the provision of articles 12 and 38 of the IMI Code.
Indeed, no. 1 of article 12 of the IMI Code establishes that "property registers are records which contain, in particular, the characterization of properties, location and their tax asset value, identification of owners (…)", further providing in no. 3 that, "Each floor or part of property susceptible of independent use is considered separately in the property registration, which also discriminates the respective tax asset value", and in accordance with the provision of no. 1 of article 119 of the IMI Code, it is on that separately considered tax asset value that the IMI will be ascertained and assessed in relation to each floor or part with independent use that make up an urban property in a vertical or full ownership regime, given the autonomy of each of those units.
As affirm Silvério Mateus and Corvelo de Freitas [9], "Another aspect that should be highlighted in the register concerns the need to make clear the autonomy that, within the same property, can be attributed to each of its parts, functionally and economically independent.
In these cases, the property registration not only must reference each of these parts but must expressly reference the tax asset value corresponding to each of them. An example that can illustrate this situation is the case of an urban property, not held under horizontal property regime and which is composed of several floors. (…) However, as each of these units can be subject to lease or any other use by its respective owner, the register must evidence these units and tax asset value must be assigned to each of them." [underlining ours].
As highlighted in the arbitral decision issued in case no. 194/2014-T, which we also follow, "the IMI Code establishes, both regarding property registration and discrimination of its respective tax asset value, as well as regarding tax assessment, the autonomization of the parts of urban property susceptible of independent use and the segregation/individualization of the VPT relating to each floor or part of property susceptible of independent use.
Thus each property, in accordance with concepts defined by article 2 of the IMI Code, corresponds to a single article in the matrix (no. 2 of article 82 of the IMI Code) but, according to no. 3 of art. 12 of the same Code, referring to the concept of property register (…), "each floor or part of property susceptible of independent use is considered separately in the property registration, which also discriminates the respective tax asset value (…).
That is, the rule is autonomization, characterization as "property" of each part of a building, provided it is functionally and economically independent, susceptible of independent use, in accordance with the concept of property defined already in no. 1 of article 2 of the IMI Code: property is any fraction (of territory, covering waters, plantations, buildings and constructions of any nature incorporated or based therein, with a character of permanence) provided it forms part of the assets of an individual or legal entity and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy.".
Bearing in mind that under the IMI Code, the floors or divisions with independent use that comprise an urban property in a full or vertical ownership regime are taxed autonomously, as IMI is assessed individually on the VPT attributed to each of those floors or divisions with independent use, given the relevance of their autonomy, necessarily the principles and rules must be the same for Stamp Duty purposes (notably, what is provided regarding registration in the matrix and IMI assessment), both because Item 28.1 of the General Table so requires at the end, and by subsidiary application, by force of the provision of no. 2 of article 67 of the Stamp Duty Code.
Consequently, and, on the premise that the legislator in question "established the most appropriate solutions and knew how to express its thinking in adequate terms" (see the provision of no. 3 of article 9 of the Civil Code ("CC"), by cross-reference of article 11 of the General Tax Law), only floors, parts or divisions with independent use with "residential allocation" whose VPT is equal to or exceeds € 1,000,000.00 are covered by the norm of incidence of Item 28.1 of the General Table.
Thus, and as referred to in the arbitral decision issued in case no. 132/2013-T, "The uniform criterion that is imposed is, therefore, the one that determines that the incidence of the norm in question only takes place when one of the parts, floors or divisions with independent use of property in horizontal or full ownership with residential allocation has a VPT exceeding € 1,000,000.00" and not when this value results from the sum of the VPT attributed to each floor or division with independent use.
As mentioned, equally, in the arbitral decision issued in case no. 50/2013-T, "The criterion sought by the AT, of considering the value of the sum of the VPT attributed to the parts, floors or divisions with independent use, with the argument that the property is not held under horizontal property regime, finds no legal basis and is contrary to the criterion that is applicable for IMI Code purposes and, by cross-reference, for Stamp Duty purposes.
To which must be added the fact that the law itself expressly establishes, at the end of item 28 of the General Stamp Duty Table, that the Stamp Duty to apply to urban properties of value equal to or exceeding €1,000,000.00 – "on the tax asset value used for IMI purposes.".
From all the foregoing, we cannot agree with the AT's understanding.
In fact, if it is the very provision in Item 28.1 of the General Table that determines that Stamp Duty applies "on the tax asset value used for IMI purposes", what is relevant for purposes of tax incidence is the tax asset value individualized for each of the parts, floors or divisions with independent use on which IMI is assessed annually, that is, the assessment of Stamp Duty follows the rules provided for in the IMI Code, by express cross-reference of the mentioned Item 28 of the General Table and no. 2 of article 67 of the Stamp Duty Code.
This is so evident that the AT, in order to assess Item 28.1 of the General Table, under examination, starts from each of those floors or divisions with independent use, applying the respective rate to the tax asset value attributed to each of those divisions with residential allocation, in accordance with the rules of the IMI Code, to then add that tax asset value.
The interpretation to the effect that what is relevant in the norm of incidence of Item 28.1 of the General Table is the VPT attributed to each of the autonomous parts, floors or divisions with independent use with residential allocation and not the value resulting from the sum of those tax asset values is that which results equally from its legislative intent, as required by no. 1 of article 9 of the Civil Code, applicable by force of the provision of article 11 of the General Tax Law.
Indeed, in the presentation and discussion of Bill no. 96/XII/2nd (available in the Diário da Assembleia da República [Official Parliamentary Gazette] DAR, I Series no. 9/XII/2012, of 11-10-2012) in the Parliament, the Secretary of State for Tax Affairs made the following statement:
"It is the first time that a special tax on high-value properties intended for housing has been created in Portugal. This rate will be 0.5% to 0.8%, in 2012, and 1%, in 2013, and will apply to houses of value equal to or exceeding 1 million euros. With the creation of this additional tax rate, the fiscal burden required of these owners will be significantly increased in 2012 and in 2013" [underlining ours].
To this end, we follow the arbitral decision issued in case no. 50/2013-T in referring that "The legislator in introducing this legislative innovation considered as the determining element of contributive capacity urban properties, with residential allocation, of high value (luxury), more precisely, of value equal to or exceeding € 1,000,000.00, on which a special Stamp Duty rate began to apply, intending to introduce a principle of taxation on wealth externalized in ownership, usufruct or right to build of urban properties of luxury with residential allocation. Therefore, the criterion was to apply the new rate to urban properties with residential allocation whose VPT is equal to or exceeds € 1,000,000.00.
This is equally concluded from the analysis of the discussion of bill no. 96/XII in Parliament, available for consultation in the Diário da Assembleia da República, I series, no. 9/XII/2, of 11 October 2012.
The justification for the measure designated "special rate on the highest value residential urban properties" is therefore based on the invocation of the principles of social equity and tax justice, requiring to contribute more intensively the holders of properties of high value intended for housing, applying the new special rate to "houses of value equal to or exceeding 1 million euros.
Clearly the legislator understood that this value, when attributed to a residence (house, autonomous fraction or floor with independent use) translates a contributive capacity above average and, as such, susceptible of determining a special contribution to ensure fair distribution of the fiscal burden.".
Thus, and according to the established facts, the VPT of each of the 10 floors or divisions with independent use allocated to housing that comprise the property held in full ownership, and which was determined according to the rules of the IMI Code, is less than € 1,000,000.00, the requirements of taxation of Item 28.1 of the General Table not being therefore met.
Therefore, the tax assessment acts of Stamp Duty, subject to the present arbitral pronouncement, in the total amount of € 10,984.16, suffer from the defect of violation of the provision of Item 28.1 of the General Table and no. 2 of article 67 of the Stamp Duty Code, due to error as to their legal requirements, therefore declaring the illegality of those assessment acts, with the consequent annulment thereof.
Indeed, the assessment of the other issues raised by the Respondent is thus made moot, namely the alleged defect of unconstitutionality, as the illegality of the above-identified assessments has been declared, due to a substantive defect that prevents renewal of the acts, effectively ensuring the protection of the rights of the Claimants, in accordance with the provision of article 124 of the Tax and Administrative Court Procedure Code. [10]
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DECISION
With the grounds set out herein, the arbitral tribunal decides:
a) To uphold the request for arbitral pronouncement and, consequently, declare illegal the Stamp Duty assessments, contained in the identified collection documents, with all legal consequences;
b) To uphold the claim for recognition of the Claimant's right to payment of indemnification interest;
c) To order the AT to reimburse the Claimants the Stamp Duty improperly paid, in the amount of € 10,984.16;
d) To order the AT to pay costs.
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VALUE OF THE CASE
The value of the case is fixed at € 10,984.16 (ten thousand nine hundred and eighty-four euros and sixteen cents), in accordance with article 97-A of the Tax and Administrative Court Procedure Code (CPPT), applicable by force of paragraphs a) and b) of no. 1 of article 29 of the RJAT and no. 2 of article 3 of the Rules of Costs in Tax Arbitration Proceedings (RCPAT).
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COSTS
Costs to be borne by the AT, in the amount of € 918.00 (nine hundred and eighteen euros), in accordance with Table I of the Rules of Costs in Tax Arbitration Proceedings, in accordance with no. 2 of article 22 of the RJAT.
Notify.
Lisbon, 17 December 2015
The Arbitrator,
(Hélder Filipe Faustino)
Text prepared by computer, in accordance with the provision of no. 5 of article 131 of the Code of Civil Procedure, applicable by cross-reference of paragraph e) of no. 1 of article 29 of the RJAT. The drafting of this decision is governed by the spelling prior to the 1990 Orthographic Agreement.
[1] See Order no. 112-A/2011, of 22 March.
[2] See arbitral decision issued in case no. 27/2015-T, available at www.caad.org.pt.
[3] See "Tax Law", 3rd Edition, Almedina, 2005, p. 318 by force of the arbitral decision issued in case no. 736/2014-T, available at www.caad.org.pt.
[4] See paragraph c) of no. 1 of article 120 of the IMI Code.
[5] To this effect, see the arbitral decision issued in case no. 408/2014-T, available at www.caad.org.pt.
[6] See Andreia Gabriel Pereira, "Luxury Houses and Stamp Duty. Commentary on the Decision of the Supreme Administrative Court (2nd Section), of 5 February 2015, issued in case no. 0993/14, Rapporteur Cons. Francisco Rothes", Journal of Public Finance and Tax Law, Year VII, No. 4, July 2015, pp. 235 et seq.
[7] See article 23, no. 7, article 44, no. 5, article 46, no. 5 and article 49, no. 3 of the Stamp Duty Code.
[8] See article 6 of the IMI Code (also of subsidiary application).
[9] "Taxes on Real Property and Stamp Duty, Annotated and Commented", pp. 159 and 160.
[10] Subsidiarily applicable by force of the provision of paragraph a) of no. 1 of article 29 of the RJAT.
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