Stamp Tax on Mixed Acoustic Zone Land: CAAD Ruling 481/2015-T Annuls Assessment

ARBITRAL DECISION

I. REPORT

At page 2, A…, SA, NIPC…, with registered office at Rua…, …, …-… PORTO, requests the establishment of a Singular Arbitral Tribunal and presents its petition for Arbitral Pronouncement for appraisal of the (il)legality of the assessments expressed in collection notices no. 2015… and no. 2015…, in the total amount of € 4,156.56, of STAMP TAX, foreseen in item 28.1 of the General Table of Stamp Tax, as amended by article 194 of Law no. 83-C/2013, of 31 December (State Budget) relating to the year 2014 and to the urban property registered in the urban property register under article U…, of the parish of…, municipality of Porto and, consequently, annulment of these taxes as well as refund of what was paid, plus respective interest.

1. The petition for establishment of the Arbitral Tribunal was accepted by His Excellency the President of the CAAD and notified to the Tax and Customs Authority (hereinafter designated as "TA" or "Respondent") on that date.

2. The Petitioner did not proceed to nominate the arbitrator, wherefore, pursuant to the provisions of article 6, no. 2, of the RJAT the undersigned was designated by the President of the Deontological Board of the CAAD to be part of this arbitral tribunal, which he accepted in accordance with legal provisions.

3. The parties, duly notified of this designation, having not manifested a will to refuse the designation of the arbitrator, in accordance with the provisions of article 11, no. 1 items a) and b) of the RJAT, combined with articles 6 and 7 of the Deontological Code.

4. Thus, in conformity with the precept in item c) of no. 1 of art. 11 of the RJAT, the Tribunal was constituted on 06-10-2015, having been issued an arbitral order on 07-10-2015 to notify the Petitioner to, in accordance with the provisions of article 17, no. 1, of the RJAT, submit a response within a maximum period of 30 days and, if desired, request the production of additional evidence.

5. On 09-11-2015 the Respondent presented its response, by exception and challenge.

6. The Arbitral Tribunal is duly constituted.

7. The parties are legitimate and enjoy legal personality and capacity.

8. No nullities are apparent.

II. STATEMENT OF FACTS

1. In deciding the facts, the Tribunal formed its conviction based on documentary analysis taking into account the general rules on burden of proof.

2. The following facts are considered proven:

11.1 The Petitioner is the legitimate co-owner of the urban property located at rua…, …, and described in the Registry Office of the Property Register of… under no. … of the parish of… and registered in the urban property register under art. …

11.2 The assessment under review concerns the property identified above, and although the collection notices refer to the first and second installments, the petition covers all installments.

11.3 The property identified above is classified and described as "land for construction" and has a taxable patrimonial value (TPV) of € 4,156.56, with the tax payable in installments.

11.4 Based on this TPV the Tax and Customs Authority proceeded to assess Stamp Tax from item 28.1 of the GTST, now contested by the Petitioner, in the total amount of € 4,156.56.

1. As appears from the Certificate issued by the Municipal Council on 27/11/2009, said urban property "is defined in accordance with the MDM, Zoning Plan – Land Qualification Map in an area of Continuous and Consolidated Urban Front and located in U… (…), in the extract of the Zoning Plan – Road Hierarchy Map part of the land is located in Mixed Acoustic Zone".

2. "Given the constraints provided for in the Municipal Master Plan, said property is located in an area subject to certain 'rules of use, occupation and transformation of land' duly provided for in its own regulation and whose extract is an integral part of Doc. 3 already attached".

3. Therefore, according to the Petitioner, the property in question could never be covered by the incidence rule provided for in item 28.1 of the GTST.

4. The Petitioner was notified of the assessment of the 1st and 2nd Installments of Stamp Tax, under item 28.1 of the GTST, each in the equal amount of € 2,078.28, paid on 27/04/2015 and 22/07/2015.

5. However, as these assessments do not meet with the Petitioner's agreement, it requests their annulment.

6. Facts not proven.

II. PROCEDURAL ASSESSMENT

The Tribunal is competent and duly constituted.

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

There are no preliminary questions to be analyzed nor defects that invalidate the proceedings.

Therefore, it is appropriate to assess the merits of the petition.

III. ERROR AS TO THE PRESUPPOSITIONS

1. Item 28.1 of the GTST, as amended by art. 194 of Law no. 83-C/2013, of 31 December (State Budget for 2014) provides:

"Per residential property or land for construction the building of which, authorized or foreseen, is for housing, in accordance with the provisions of the Municipal Property Tax Code - 1%"

1. Neither in the Stamp Tax Code nor in the legislative framework is there any definition of the concepts of "residential property" or "land for construction the building of which, authorized or foreseen, is for housing", wherefore the legislator himself – filling the existing legal gap in the wording – came to clarify that these should be filled with recourse to the Municipal Property Tax Code.

2. No. 1 of art. 6 of the CIMI establishes that "urban properties" are divided into:

a) residential;

b) commercial, industrial or for services;

c) land for construction;

d) others.

1. No. 3 of the same article 6 establishes that "land for construction shall be considered as lands situated within or outside an urban agglomeration, for which a building permit or authorization has been granted, preliminary notification admitted or favorable preliminary information issued for a subdivision or construction operation, and also those which have been so declared in the acquisition title, excepting lands in which the competent entities prohibit any of those operations, namely places or zones in green areas, protected areas or which, in accordance with municipal land management plans, are destined for public spaces, infrastructure or equipment".

2. As to the taxable value of land for construction, art. 45 of the CIMI establishes that:

"1 – The taxable patrimonial value of land for construction is the sum of the value of the building implantation area to be constructed, which is that situated within the perimeter of the building's fixation to the ground, measured by the outer part, added to the value of the land adjacent to the implantation.

2 – The value of the implantation area varies between 15% and 45% of the value of authorized or foreseen buildings.

3 – In setting the percentage of the value of the land for implantation, account is taken of the characteristics referred to in no. 3 of article 42.

4 – The value of the area adjacent to the construction is calculated in accordance with no. 4 of article 40.

5 – When the document evidencing constructive viability to which article 37 refers contains only a reference to the MDM indices, the expert valuers must estimate, with grounds, the respective construction area, taking into account, in particular, the average construction areas of the surrounding zone."

1. It thus results that the evaluation regime of the taxable patrimonial value of land for construction provided for in art. 45 of the CIMI is similar to that of constructed buildings, although it is based on the building to be constructed, taking as its basis the respective project or the type of building foreseen in territorial management instruments.

2. The value of land for construction corresponds to a legal expectation, which is reflected in a right to construct thereon a property with certain characteristics and value.

3. The notion of dedication of urban property, provided for in art. 38 of the CIMI, applicable to land for construction, is inherent in the very evaluation of properties and corresponds to the value incorporated into the property as a function of the use to which it will be put in the future, constituting a determining distinguishing fact for evaluation purposes.

4. In the evaluation of land for construction the legislator wished for the evaluation methodology of urban properties in general to be applied, thus taking into account all the coefficients identified in no. 2, in particular the dedication coefficient provided for in art. 41 of the CIMI (cf. Decision of the Central Administrative Court of the South handed down on 2012/02/14 in the scope of case no. 04950/11).

5. The Central Administrative Court of the South, in the Decision of 15-11-2011, holds that "the fiscally relevant classification of a property depends, first and foremost, on what derives from its respective licensing or, whenever the dedication to one of the activities does not derive from its respective licensing, whatever the reason, the dedication must be seen from the perspective of activity typically considered.

6. It thus follows that the sole relevant criterion for the classification of urban properties is the definition given to it by article 6 of the CIMI, which should be reflected in the description in the register that identifies the species of the urban property in question.

7. Such methodology in fact results from the legal requirement provided for in no. 2 of art. 45 of the CIMI, in referring to the value of buildings authorized or foreseen on the land for construction.

IN OTHER WORDS

1. For determination of the Taxable Patrimonial Value (TPV) of land for construction, the application of the dedication coefficient is clear – considering whether we are dealing with housing, commerce, services or industry – in the evaluation process, wherefore its consideration for purposes of applying item no. 28 of the GTST cannot be "disregarded".

In light of the above

1. We must conclude that the use of the dedication coefficient in determining the TPV of land for construction results directly from the Law in establishing that the value of the implantation area is determined based on the value of authorized or foreseen buildings.

2. Confronting the nature of the property with the legal definition resulting from the CIMI and with the incidence rule provided for in item 28.1 of the GTST, it is readily apparent that the assessments in question incurred a clear error as to the presuppositions.

3. The urban properties on which the taxation in the context of Stamp Tax is based are, with regard to their classification as "land intended for construction".

4. As appears from the urban property record, the article of the urban property register … is, as concerns its description, one of "land for construction whose constructive capacity is defined by application of the formula for determination of the TPV in the chapter dedicated to 'Areas' as appears from the register certificate".

5. In this context it is appropriate to clarify that currently no buildings have yet been constructed on the said urban article, this being part of the assets of the Petitioner company, with the purpose of carrying out in the future a real estate development operation in the exact terms as shall be approved in the future project to be presented in accordance with the constraints provided for in the respective territorial management instruments.

6. Thus, in 2014, the year of the taxable event of the Stamp Tax, they were classified as "Land for construction" in accordance with the provisions of the CIMI.

7. This is the nature/species of property that determined the assessment of the First and Second installments of Stamp Tax.

8. Such facts are objective, derive from the Law and the species of property, which constitutes the taxable event of Stamp Tax, is identified in the register as an official element.

Now,

1. Item 28.1 of the GTST has broadened the objective scope of Stamp Tax to include land for construction, the building of which, authorized or foreseen, is for housing, in accordance with the provisions of the CIMI.

2. Land for construction shall be considered as "lands situated within or outside an urban agglomeration, for which a building permit or authorization has been granted (…) for subdivision and construction operations".

3. From the analysis of the certificate issued by the Municipal Council of … and of the Regulation that serves as a reference for determining the rules of use, occupation and transformation of land applicable to the zone in which the property is classified, it is clear that "the use should be predominantly residential and small industry".

4. It thus follows that the concept of "land for construction the building of which, authorized or foreseen, is for housing, in accordance with the provisions of the CIMI" which appears in item 28.1 is not unequivocal.

5. The legislator omitted these realities in which we are dealing with properties whose foreseen buildings are dedicated to diverse purposes, which is not understood given that this reality is frequent, especially in large urban centers as is verified in the present case, or whether the legislator intended – deliberately – to exclude from the objective base of incidence of said tax these realities because they do not reveal realities that he intended directly to reach (those buildings revealing an exceptional contributing capacity).

6. The urban property which, in the logic of the TA, legitimates the assessment of Stamp Tax, is constituted by land for construction without any building situated in an urban agglomeration and which has construction aptitude, in accordance with the municipal norms in force for the location, for housing, but it deliberately disregarded the fact that in addition to housing fractions being foreseen for construction in it, it also has foreseen the dominant building of small industry, not excluding any other purpose, namely commerce and services.

IN THE CASE AT HAND

1. The register description perfectly identifies the existing physical reality – it is land for construction – given that no construction of any kind, whether residential, services or other nature, is implemented thereon.

2. The TA does not invoke as the basis of the assessments the fact that we are dealing with land for construction with dedication foreseen or approved for housing, in accordance with the provisions of the CIMI, wherefore in addition to error as to the presuppositions, an error for lack of reasoning would always have occurred.

That is to say.

1. Considering that item 28 of the GTST is incided upon "residential property or land for construction the building of which, authorized or foreseen, is for housing, in accordance with the CIMI, not excluding, moreover, any other purpose, namely commerce and services, a situation which, in fact, neither the text nor the intent of the incidence rule contemplates.

2. In the case at hand:

a) the register description identifies the reality of the property which gave rise to Stamp Tax – it is land for construction;

b) which coincides with the existing physical reality, given that no construction of any kind, whether residential, services or other nature, is implemented thereon;

c) The TA does not invoke as the basis of the assessments the circumstance that we are dealing with land for construction with dedication foreseen or approved for housing in accordance with the provisions of the CIMI.

1. Thus, in addition to error as to the presuppositions, an error for lack of reasoning would always have occurred.

2. Considering that item 28 of the GTST is incided upon "residential property or land for construction the building of which, authorized or foreseen, is for housing, in accordance with the CIMI.

3. Properties shall be considered as such provided they meet the presuppositions of article 6 of the CIMI, that is to say, provided that the property in question is effectively "land for construction, provided that the construction whose identification has been authorized and/or foreseen is intended for housing.

4. However, with regard to the buildings foreseen in territorial management instruments (notably Municipal Master Plan and Detailed Plan) in the urban article at hand, it is not found to be dedicated solely to housing in accordance with the CIMI.

5. Although the construction of buildings for housing is foreseen, the fact is that in it ALSO the building dedicated to small industry is foreseen.

6. Considering that, given the provisional nature, land for construction cannot be classified, "ab initio", as if a concretized and consolidated reality were involved, being unable therefore to assert that they can be destined, jointly or separately, to many other purposes (commerce, services, (small) industry, covered parking, etc.).

7. Which is what is verified in the case at hand.

8. In this measure, it will be necessary to conclude that an error as to the presuppositions occurred. Of the assessments, given that the TA assessed Stamp Tax on urban properties which fall, in accordance with their species, in accordance with the CIMI, as land for construction, but whose buildings foreseen in territorial management instruments are dedicated to housing, but also to small industry.

9. When it is certain that the rule of real incidence typifies as taxable event, in the case of the same land for construction, buildings foreseen SOLELY for housing, in accordance with the CIMI.

FURTHERMORE

1. In favor of this conclusion, an additional argument militates.

2. The legislator of Law 55-A/2012, with the amendment to the GTST intended, in a context of national emergency, to tax taxpayers holding enhanced contributing capacity, in this concrete case, through taxation of luxury properties (during the discussion of the legislative bill that added to the initial version of item 28 of the GTST in the words of the State Secretary for Tax Affairs, who will have expressly referred, as is gathered from the Official Parliamentary Record (DAR I Series no. 9/XII – 2, of 11 October, p. 32) that "The Government proposes the creation of a special tax on residential urban properties of higher value. It is the first time that in Portugal a special taxation on ownership of high value properties intended for housing is created. This rate shall be 0.5% to 0.8% in 2012 and 1% in 2013, and shall apply to houses with a value equal to or higher than 1 million euros.

3. The reality to be taxed in the legislator's mind was, in common language, houses and not other realities.

4. Following the same reasoning in the State Budget for 2014, the legislator extended the same "intent" to tax land for construction. Nothing having been said to the contrary, the legislator merely intended to subject to tax solely houses whose construction has been approved or foreseen in accordance with the CIMI.

That is to say,

1. In the legislator's option, luxury properties are thus those which, having residential dedication or in which the authorized or foreseen housing is for housing in accordance with the CIMI (and not any other type of property), that is, a HOUSE, their TPV is equal to or greater than 1,000,000 euros.

2. It occurs that land for construction the building of which, authorized or foreseen, is for housing, in accordance with the CIMI, are not considered luxury goods, as they constitute mere legal expectations, wherefore they are considered investment goods destined for real estate development operations.

3. While ownership of residential properties with a fiscal value greater than 1,000,000 euros evidences a higher contributing capacity, legitimating a "solidarity tax".

4. This does not derive from ownership of properties by a real estate company which holds in its legal sphere land for construction destined to carry out its corporate purpose and develop real estate development activity.

5. In that it does not represent a luxury patrimony and much less an additional or exceptional contributing capacity.

6. Wherefore the assessments of the tax apart from literally not observing compliance with the rules of real incidence, clearly affects the ratio legis represented in the addition introduced to the General Table with the wording given by the State Budget of 2014.

7. There is furthermore a good reason for leaving out land for construction in the case of investment goods, since although by their area they may have a significant value, after construction, the imputation to each fraction shall be of value less than 1,000,000 euros and could even come to be constructed a building of modest value depending on the promoter's option.

8. For that reason it is not similar to tax a property destined for housing with a value of 1,000,000 euros because its configuration is definitive and represents for its owner an enhanced contributing capacity.

9. and land for construction, although the building, authorized or foreseen, is also for housing.

10. constituting an investment good capable of carrying out a real estate operation, configures a property whose species or nature is provisional, constituting per se merely a legal expectation, given that its natural destination will be the construction of fractions whose TPV shall be fractioned or divided by the number of fractions resulting from the construction process, but of value certainly less than 1,000,000 euros.

11. The principle of tax equality may be materialized through diverse aspects: a first, lies in the generality of the tax law, in its application to all without exception; a second, the uniformity of the tax law, in treating equally taxpayers who are in equal situations and differently those who are in different situations, to the extent of the difference, to be assessed by contributing capacity; a last, lies in the prohibition of arbitrariness, in preventing the introduction of discriminations between taxpayers that are devoid of rational foundation.

12. There is moreover the principle of contributing capacity that must be made compatible with other principles with constitutional dignity, such as the principle of the Social State, the legislator's conformation, and certain requirements of practicability and cognoscibility of the taxable event, also indispensable for compliance with the objectives of the tax system (cf. Decision of the Constitutional Court no. 142/04).

13. That is to say, the principle of contributing capacity implies equal tax for those who have equal contributing capacity and different tax for those who have different contributing capacity, although to the extent of the difference.

14. In the tax sphere, what is sought is to tax the contributing capacity evidenced by the taxpayer.

15. It is a relevant element from the point of view of company income taxation, which, by constitutional requirement, shall apply to its real income, and not a legal expectation, as is verified in the present case.

With effect,

1. The fact that we are dealing with land for construction and whose building, authorized or foreseen, is ALSO for housing, it cannot be disregarded that we are dealing with an act that does not reveal contributing capacity, wherefore it should not be positively discriminated in accordance with the law.

2. Beyond the defects pointed out to the assessment act, considering that the legislator intended to tax taxpayers who demonstrate an exceptional contributing capacity, given the houses of which they are owners, the fact that the TA intends to assess Stamp Tax with respect to investment goods, reveals a clear violation of the principle of equality and of contributing capacity, principles which are constitutionally provided for.

3. In this measure the principle of the contributing capacity of the taxpayer company should prevail over the fiction of objective subjection to Stamp Tax as a pseudo (but not effective) materialization of the principle of equality.

4. In these terms, in the sphere of taxation in Stamp Tax, the company is no more than a fiscal unit by means of which contributing capacity arises with the effective exercise of its activity in which the result is determined based on the gains of the company obtained in a given taxation period.

5. There being no preponderant motivation that legitimates in strict compliance and respect for the principle of contributing capacity and of equality in the tax sphere, the assessment of Stamp Tax in accordance with item 28.1 of the GTST is illegal by violation of the principle of legality with foundation in article 13 of the CRP and violation of the principle of contributing capacity, based on the abusive distortion of the fiscal principles underlying taxation.

DEFECT OF REASONING

1. Apart from being illegal due to error as to the presuppositions, the assessments under challenge are equally illegal due to a defect of reasoning.

2. To sustain the assessments in question, the TA would have had to invoke that we are dealing with land for construction the building of which, authorized or foreseen, is for housing, in accordance with the CIMI.

Now,

1. The duty of reasoning is a requirement directly derived from art. 268 of the Constitution, which provides that "administrative acts are subject to notification of interested parties (…) and require express and accessible reasoning when they affect rights or interests legally protected" and has consecration in the Administrative Procedure Code (APC) in articles 124 and 125.

That is to say,

1. It should not be left to the addressee to discover the reasons for the decision;

2. the grounds cannot be obscure or difficult to understand;

3. nor suffer logical defects;

4. the reasoning must be adequate to the importance and circumstances of the decision;

5. The reasoning of administrative acts (…) aims to respond to the need to clarify the administrated, informing them of the cognitive and evaluative itinerary followed by the administrative authority, so that they may sufficiently opt for acceptance of the act or for its legal challenge (Decision of the Northern Administrative Court of 2-10-2008).

6. According to Casalta Nabais "the decisions of tax proceedings are always reasoned, through succinct exposition of the facts and legal reasons that motivate them, and their effectiveness depends on notification" in accordance with article 77 of the General Tax Law (GTL).

7. The legal rule establishes a legal regime of reasoning that binds the TA in the duty to provide the taxpayer with information that permits them to decide in good conscience on the acceptance or not of the tax act, apart from preventing discriminatory treatment and allowing the administrated the use of all procedural means of defense in relation to the TA, a defense which is only capable of being successful if they are made aware of the reason for the procedure.

8. The reasoning of the tax act must, therefore, permit the exercise of an informed right of opposition by the taxpayer, should they so wish.

9. On the other hand, it must demonstrate a necessary explicit reflection and consideration of the reasons and arguments in question, thus making transparent the administrative activity.

10. The TA is bound by the duty of reasoning of all decisions in tax matters, being untenable the creation of situations of uncertainty and indefinition as is configured in the present case.

IN THESE TERMS

1. In accordance with articles 77 of the GTL and 125 of the APC, if the reasoning does not clarify the motivation of the act by obscurity, contradiction or insufficiency, the act is considered not reasoned.

2. In the "Annotated GTL" Benjamin Silva Rodrigues, Vasilia, 1999, clarifies the following terms:

a) there shall be obscurity when the statements made by the decision maker do not make clear what the reasons were why they decided as they did;

b) contradiction of the reasoning shall occur when the reasons invoked to decide would justify not the decision handed down, but a decision of different sense and when grounds are invoked that are in opposition with others;

c) the reasoning is insufficient if its content is not sufficient to explain the reasons why the decision was taken".

1. In order not to be tainted with illegality due to lack of reasoning, the tax assessment act now being challenged had to "contain a concrete clarification sufficiently apt to sustain the decision, being unable to rest on mere conclusory judgments or on facts that do not support them, under penalty of impairing the understanding of its motivation and, consequently, any one of its functions (Decision of the Central Administrative Court of the South – 14/02/2006).

FURTHERMORE

1. In this regard, the settled jurisprudence on the matter – cf. for example, the decisions of the Full Bench of the Supreme Administrative Court, of 15/02/1990 and of 11/07/1990, no. 343, page 990 et seq. and 353, page 658 et seq., concludes: "in light even of the constitutional requirement that reasoning be express, in the same must be referred to explicitly the concordance with the grounds of previous opinions, information or proposals".

2. The tax act, as emphasized by José Carlos Vieira de Andrade in his "The Duty of Express Reasoning of Administrative Acts", pages 153-155, must be sustained by a minimum sufficient of express reasoning, even if operated in a massive form and being a legally bound product, aspects which can only be valued within the degree of exigibility of the declaration of reasoning, both because massiveness intuits a greater possibility of understanding by the addressees, and because binding dispenses with the enunciation of the motivation of the agent that shall follow immediately from the mere description of the fact-presuppositions of the act.

3. Hence the necessity that the act results from a clear communication – i.e., not indistinct, confused, doubtful, obscure and ambiguous –, coherent – i.e. that is reflected in a coherent and sensible logical process, justificatory and with aptness by itself to sustain the act, of the facts and reasons of law – all apprehensible from the justificatory discourse and without it being dispensed a certain analysis or interpretation thereof" (Decision of the Central Administrative Court of the South 29-06-2004).

4. The reasoning must, therefore, include in a clear, sufficient and concrete manner, the factual and legal reasons that presided over the assessment decision now being challenged.

That is to say,

1. It must include, not only the law that serves as the basis of taxation, but also the interpretation that the Administration made thereof, the description of the factual reality and the evaluative process that presided over the decision to submit these to those.

2. As has already been referred to, this obligation constitutes a guarantee of a fair decision process.

3. "It is not sought, therefore, merely, that the individual become aware of the reasons why the Administration decided in one way and not in another; it is also sought to impose on the Administration, by this means, a necessary explicit reflection and consideration of the reasons and arguments in question, which the reasoning of the act must demonstrate, thus making transparent the administrative activity."

4. It is not decisive the argument, moreover frequent, that according to which the mere fact that the act was contentiously appealed, with the imputation of defects, already demonstrates that it was duly reasoned.

5. Leite de Campos elucidates, regarding the paradigm of reasoning: "it should be divided into three parts – a report consisting of a brief interpretation of the petition or problem to be resolved; verification of the state of affairs, that is, of the facts verified concretely and their probative value, a legal part reflected in the solution of the legal question and its respective justification.

Now

1. Analyzing the Stamp Tax assessment notices in question, it is concluded that the reasoning contained therein is nonexistent.

2. Not permitting the taxpayer, or a normal addressee, the reconstruction of the cognitive and evaluative itinerary of the TA.

3. It does not incorporate any elements that permit ascertaining what evaluative course the TA took that culminated with the decision to tax the property of which the taxpayer company is the owner.

4. It did not consider the factual reality of the property or, alternatively, did not correctly identify the incidence of the tax determined by law, extending it to realities that are not included therein.

5. The TA does not explain nor reason the assessments of a tax which in the letter of the incidence rule falls on residential properties or land for construction whose building foreseen or approved for housing in accordance with the CIMI.

6. But which in the case at hand is being required based on the ownership of "land for construction" without clarifying nor reasoning its dedication and the reason why the same are subject to said tax.

7. The TA (even if not fully corresponding to the material reality of the urban articles under analysis) should have stated and did not state that the land for construction has building foreseen or authorized for housing.

8. In the case at hand, there was an increased duty of reasoning given that the assessment proceeded from an error as to the qualification of the property.

9. It behooved the TA to explain why it assessed Stamp Tax on land for construction with the diverse types of authorized dedication, when it is certain that the enabling rule limits taxation to the sphere of land for construction whose building foreseen is SOLELY for housing.

10. Also for this reason the assessments at issue are illegal due to a defect of reasoning.

11. Jurisprudence has established a school of thought in this direction, a paradigmatic example being recent decisions on Municipal Property Tax matters, it having been considered that Municipal Property Tax assessments did not contain sufficient information on the reasons for the assessments.

12. The reasoning of the act of fixation of the TPV, whether it results from an appraisal or results from an update, must be communicated to the Municipal Property Tax taxpayer to be taxed based on such taxable matter.

13. If this has not been done, and also the assessment of Municipal Property Tax does not make known the manner in which the TPV was determined, such assessment cannot be considered sufficiently reasoned, all the more so since no. 2 of art. 77 of the GTL requires that the reasoning of tax acts be integrated, among other things, by the operations of determination of the taxable matter.

14. Based on all that has been said, it must be concluded that the acts under review are tainted with illegality by:

Error as to the presuppositions

Violation of the principle of equality and of contributing capacity

Defect of reasoning

1. Which in accordance with art. 99 of the Tax Procedure and Litigation Code generates their voidability, wherefore they cannot be maintained in the Legal Order that was violated.

2. In accordance with no. 1 of art. 43 of the GTL, indemnificatory interest is owed in favor of the taxpayer, when as a result of illegal taxation, undue tax has been paid.

3. The right to indemnificatory interest depends on the verification of a twofold requirement:

a) that a factual error has occurred in the taxation;

b) that this error is imputable to the tax services.

1. In the case at hand, the TA, incurring in error as to the presuppositions, subjected to item 28.1 of the GTST realities not foreseen in the objective incidence, an error which can only be imputed to the Administration.

2. Thus the petitioner has the right to be indemnified in that the tax unduly paid became unproductive for it.

WHEREFORE.

1. The Petitioner has the right to refund of the amounts paid, plus compensatory interest calculated in accordance with article 43 of the GTL.

RESPONSE OF THE TA

1. The TA presented its response, invoking a dilatory exception because although each tax act originates a sole assessment and only it constitutes a lesive act capable of being challenged, it may be paid in installments, but each installment in which the appraised tax is divisible, is not autonomously challengeable.

2. On the other hand, when the law provides for payment of the assessment amount in various installments, the annulment of the tax act has as a consequence the annulment of all installments.

3. The tax due in accordance with item 28.1 of the CIMI is assessed annually (art. 113, no. 1 of the CIMI) and paid in one, two or three installments, depending on whether its amount is less than € 250.00, from € 250 to €500 or more than € 500 (art. 120 of the CIMI).

4. The assessment act of Stamp Tax from item 28 is single and the fact that it may be paid in installments does not imply that various assessments have occurred, being unable for each installment by itself to be autonomously challenged, as the object is the tax assessment act.

5. Nos. 4 and 5 of art. 15 of Decree-Law no. 287/2003, of 12 November, provided for a maximum period of 10 years after the entry into force of the CIMI to carry out general assessment of urban properties which on 1 December 2011, had still not been assessed in accordance with the CIMI.

6. The period was not met, but as the legal means to argue the irregularity were not activated, all the presuppositions that served as the basis for the assessment of the tax became unattackable.

7. There being, in Stamp Tax, no definition of the concepts provided for in item 28 of the General Table, Law 55-A/2012, of 29 October mandates the subsidiary application of the provisions of the CIMI in which to frame the concept Fiscal of property three attributes are necessary:

(i) a physical attribute – to be a fraction of territory;

(ii) a patrimonial attribute – to form part of the patrimony of a natural or legal person;

(iii) an economic attribute – to have, in normal circumstances, an economic value.

1. In accordance with art. 6, no. 1 of the CIMI, urban properties are divided into residential, commercial, industrial or for services, land for construction and others, complemented by its no. 2 which "residential, commercial or for services, are buildings or constructions so licensed or, in the absence of a license, which have as their normal destination each of these purposes, and "lands situated within or outside an urban agglomeration, for which a building permit or authorization has been granted, preliminary notification admitted or favorable preliminary information issued for a subdivision or construction operation, and also those which have been so declared in the acquisition title, excepting lands in which the competent entities prohibit any of those operations".

2. The notion of dedication of urban property finds its basis in the part relating to assessment of properties as the assessment incorporates value to the property, constituting a determining distinguishing fact for evaluation purposes.

3. The determination of the TPV of land for construction has as a presupposition the determination of the value of buildings authorized or foreseen for which account must be taken, in accordance with art. 38 of the CIMI, of the dedication of these buildings.

4. Municipal Master Plans establish municipal development strategies, municipal land management and urban planning policies and other urban policies. It integrates and articulates the guidelines established by territorial management instruments of national and regional scope and establishes the model of spatial organization of municipal territory.

5. In these terms, well before the actual construction of the property, it is possible to ascertain and determine the dedication of land for construction.

6. Any doubts as to the residential dedication of the land would be dispelled by its normal destination which, as is inferred from the reading of the Municipal Master Plan map, shall presumably be the construction of residential buildings.

7. As to the alleged lack of reasoning because the tax assessment act of item 28.1 of the GTST has a periodic character, its assessment is done annually based on elements pre-established in the register, and the assessments, notifications and payment deadlines of the respective collection documents follow, with the necessary adaptations, the rules provided for the CIMI.

8. And this interpretation is in accordance, among others, with the arbitral decision handed down in case no. 523/2014-T-CAAD which deliberated that the assessment acts now being challenged were not engaged in the context of an administrative procedure in which there was instruction (cf. Decision of 17/12/1997, of the Plenary Session of the Administrative Litigation Section of the SAC, handed down in appeal no. 360/01, published in Official Journal of the Judiciary no. 472, page 246, and in Journals of Administrative Justice, no. 12, page 3), wherefore the procedural rules which the Petitioner considers to have been violated by the Respondent do not apply in the present case, nor is it considered that there has been a lack of reasoning of the acts engaged.

9. Since 1 January 2014, it is expressly provided for in their incidence in taxation of land for construction.

10. The TA finds no violation since all the essential elements that sustain taxation on the basis of the same rule were created in harmony with the Constitution and the Law.

11. In fact, the non-inclusion of industrial or for services properties is intuitive given the historical, political, social and economic circumstances surrounding the creation of item 28.1, as the revitalization of economic activity and the increase of exports are the exits from the crisis, hence understanding it being so that measures have not been taken which would hinder economic activity, notably the aggravation of tax burden which hinders the competitiveness of international exchanges.

12. It is the difference that justifies and legitimates the difference in criteria which only imposes measures on properties with luxury residential dedication without encompassing owners of properties with non-residential dedication and which are destined for economic activity.

13. As to the principle of equality and of proportionality (or paraphrasing the Constitutional Court), of proportional equality, the Constitutional Court has already pronounced itself several times, as in the already cited Decision no. 183/2013, where the esteemed judges discoursed the following:

"the principle of equality requires that, alongside the existence of a material foundation for the option to differentiate, the differentiated treatment thus imposed be proportionate (…) the inequality of treatment shall, insofar as it arises imposed, be proportional, both as to the reasons that justify the unequal treatment – it cannot be 'excessive', from the point of view of the objective pursued –, and as to the measure of the difference verified to exist between the group of addressees of the differentiating rule and the group of those who are excluded from its effects or scope of application".

The TA continues:

1. Proportional equality implies consideration of the degree of differentiation imposed, both in its relation to the objectives pursued – which presupposes that differentiating measures be imposed in a necessary, adequate and not excessive degree from the point of view of the interest that is sought to be safeguarded (…) – and within the scope of the comparison to be established between the subjects affected by the measure and the subjects who are not, and, from the point of view of that objective, between the ones and the others and the State.

2. It adds that the fact that the legislator established a value of € 1,000,000.00 as the delimitative criterion of the incidence of the tax, below which the prediction of the tax rule is not met, constitutes a legitimate choice of the legislator regarding the fixation of the material scope of luxury residential properties which is sought to tax in a more onerous manner.

3. As the differentiated treatment finds sufficient material justification, it is shown to be respected the principle of equality, both per se, and in its dimension of proportional equality.

4. As to the statement of facts, the Tribunal need not pronounce on all that is alleged by the parties, falling to it, rather, the duty to select the facts that matter for the decision, the proven matters and the not proven ones (art. 123, no. 2 of the Tax Procedure and Litigation Code and art. 607, no. 3 of the Civil Procedure Code, applicable "ex vi" art. 29, no. 1 items a) and e) of the RJAT. In this way, the facts pertinent for judgment of the cause are chosen and selected based on their legal relevance, which is established in attention to the various plausible solutions of the law questions (cf. former art. 511 of the Civil Procedure Code corresponding to the current 596, applicable "ex vi" of art. 29, no. 2 e) of the RJAT).

5. In truth, art. 124 of the Tax Procedure and Litigation Code, subsidiarily applicable by force of art. 29, no. 1 of the RJAT, in establishing an order of knowledge of defects, presupposes that, judgment finding one defect that ensures the effective protection of the rights of the challengers to be justified, it is not necessary to know the others, as, if it were always necessary to appraise all the defects imputed to the acts being challenged, the order of their knowledge would be indifferent.

Finally

1. The question to be decided is already perfectly clear and well delimited.

In accordance with item 28.1 of the General Table of Stamp Tax, as amended by art. 194 of Law 83-C/2013, of 31 December:

28 - Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value registered in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than (euros) 1,000,000 - on the taxable patrimonial value used for purposes of CIMI.

28.1 - Per residential property or per land for construction the building of which, authorized or foreseen, is for housing, in accordance with the provisions of the CIMI - 1%;

1. There is no legal rule that permits determining whether the land in question has building authorized or foreseen, and such building is for housing.

2. Now, in accordance with the certificate issued by the Municipal Council on 27/11/2009 and more concretely the Regulation that serves as a reference for determining the rules of use, occupation and transformation of land applicable to the zone in which the property is located, it is clear that "the use should be predominantly residential, but supplementary activities and other uses are also permitted provided they are compatible with the dominant function, namely small industry".

IV. DECISION

In these terms and with the grounds herein exposed, the Arbitral Tribunal decides:

To judge the petition for arbitral pronouncement well founded, with the consequent annulment, with all legal effects, of the assessment acts under challenge, better identified in the court records.

To judge the petition for indemnificatory interest requested by the Petitioner well founded.

V. VALUE OF THE CASE

The value of the case is fixed at € 4,156.56, in accordance with art. 97-A, no. 1, item a) of the Tax Procedure and Litigation Code and in article 3, no. 2 of the Regulation on Costs in Tax Arbitration Proceedings.

VI. COSTS

In accordance with art. 22, no. 4 of the RJAT, the amount of costs is fixed at € 612.00, in accordance with Table I annexed to the Regulation on Tax Arbitration Proceedings, to be borne entirely by the Respondent.

Let it be notified and registered.

Lisbon, 2016-07-14

The Arbitrator,

(Fernando Pinto Monteiro)