Summary
Full Decision
The Arbitrator Marisa Almeida Araújo, designated by the Deontological Council of the Administrative Arbitration Centre (CAAD) to form this Singular Arbitral Tribunal, makes the following:
ARBITRAL DECISION
Report:
A…, S.A., a company by quotas with the NIPC…, (hereinafter referred to as "Claimant"), with registered address at Rua…, N.º…, ..., Lisbon, submitted a request for arbitral pronouncement and constitution of a singular arbitral tribunal, on 25 August 2017, pursuant to the provisions of article 4 and no. 2 of article 10 of Decree-law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "RJAT"), in which the Tax and Customs Authority (hereinafter referred to as "Respondent" or "AT") is sued.
The Claimant requests, in the said arbitral pronouncement petition, that the illegality be declared and the consequent annulment of:
Of the stamp duty tax assessment of 05/04/2016, in the amount of € 12,171.00, relating to the 2015 fiscal year;
Of the dismissal of the Administrative Appeal, in the scope of case no. …2016…, which sustained that assessment.
The request for constitution of the Singular Arbitral Tribunal was accepted by the President of CAAD and notified to the Respondent, on 25 August 2017.
The Claimant did not proceed to appoint an arbitrator, whereby, pursuant to the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, the President of the Deontological Council of CAAD designated the undersigned as arbitrator of the singular arbitral tribunal, who communicated acceptance of the task within the applicable period and the parties did not manifest any refusal of the designation, pursuant to article 11, no. 1 paragraphs a) and b) of the RJAT and art. 7 of the Deontological Code.
On 23 November 2017, the arbitral tribunal was constituted.
Notified for this purpose on 23 November 2017, the Respondent submitted, on 5 January 2018, its Reply, having remitted a copy of the administrative file on 9 January 2018.
On 6 January 2018, the Claimant was notified to respond to the preliminary objection raised by the AT, for which a period of 10 days was granted, which the Claimant did on 19 January 2018.
On 22 January 2018, the arbitral hearing provided for in article 18 of the RJAT was dispensed with, and the Claimant and Respondent were invited to make written submissions.
The Claimant presented written submissions on 12 February 2018 and the Respondent presented its submissions on 26 February, maintaining, in essence, positions already assumed.
On 28 February 2018, the deadline for publication of the final decision was set for 9 April 2018.
The Claimant supports its request, in summary, as follows:
The Claimant is engaged in civil construction and public works, acquisition of properties for resale, construction of real estate for sale, leasing of properties and property administration.
The Claimant is the legitimate owner of an urban property registered in the urban property matrix under art. …, being described as land for construction.
On 15/11/2011, a favorable preliminary information regarding the feasibility of construction of a unit of assisted living facilities on the property was issued by the Lisbon City Council.
According to the PDM (Municipal Master Plan), the area where the property is located is qualified as "special use space for consolidated equipment".
The tax property value of the land is € 1,217,100.00, resulting from the appraisal of 15/01/2013.
The Claimant was notified of the Stamp Duty Tax assessed under Item 28.1 of the TGIS, in the amount of € 12,171.00.
The Claimant submitted an administrative appeal against the assessment on 30/11/2016, which was dismissed and notified to the Claimant on 17/04/2017.
The Claimant proceeded to pay the tax.
The Claimant contends that the assessment in question is affected by an error in the interpretation of Item 28.1, insofar as it only taxes land for construction whose authorized or envisaged building is for residential purposes.
The concept of land for construction is that provided for in no. 3 of art. 6 of the CIMI (by virtue of art. 67 of the CIS), that is, for tax purposes, land for construction is a material concept, directed at the realities for which it was formulated, translating, in this case, the potential destination for construction.
Item 28.1 of the TGIS provides, in the new wording, for land for construction but conditioned this inclusion to authorized or envisaged building for residential purposes, that is, according to the Claimant, the legislator restricted the scope of the rule, giving rise to Legislative Proposal no. 96/XII which was at the origin of Law no. 55-A/2012, of 29 October, which added item 28 to the TGIS.
Concluding that what occurred was that taxation would fall on properties valued at or above € 1,000,000.00, intended for residential purposes, commonly referred to as "luxury properties", since it was understood that ownership of real estate for residential purposes of high value was susceptible of justifying a reinforced contribution.
The Claimant contends that the land has no building or construction, and if it did, it would never be for residential purposes given the PDM of the Lisbon City Council and as results, according to the Claimant, from no. 1 of art. 54 of the Municipal Master Plan Revision Regulation of Lisbon.
Furthermore, the favorable opinion itself of the said City Council demonstrates that the allocation is for "elderly home", that is, for services and not residential purposes, and therefore is excluded from Item 28.1.
On the other hand, the Claimant alleges that item 28 of the TGIS is not taxing any operation nor any economic benefit of the Claimant, so the principle of equality is at issue, as a corollary of the principle of contributory capacity, being also a distortion of the very purpose of the Stamp Duty Tax.
Furthermore, it also suffers from an error in interpretation, according to the Claimant, insofar as Item 28.1 of the TGIS does not tax the productive sector.
The Claimant further raises an error in the premises of law by application of a materially unconstitutional norm, on the ground of violation of the principle of equality by discrimination against companies engaged in purchase for construction and resale compared to other companies.
Since such interpretation would lead to unjustified discrimination against companies when compared with others that hold in their assets land for construction of buildings intended for commerce, services or industry, in violation of the principle of equality enshrined in art. 13 of the CRP (Portuguese Constitution).
Since the activity of the Claimant, as it alleges, depends on the acquisition of land for construction of future residential buildings and does not reveal increased contributory capacity.
Similarly, the Claimant alleges an error in the premises of law by application of a materially unconstitutional norm, on the ground of violation of the principle of equality insofar as it subjects to taxation the ownership of land for construction relative to which the authorized or envisaged building does not include housing of value equal to or exceeding that amount.
Considering that the Claimant has no approved project, nor is it planned, the construction of buildings allocated to housing of value exceeding € 1,000,000.00, it becomes, according to the Claimant, that there is negative discrimination.
Finally, the Claimant raises the unconstitutionality of Item 28.1 of the TGIS for violation of the principle of equality, raising Constitutional Court Decision no. 250/2017 of 24 May, which considers that said item violates contributory capacity.
The Claimant petitions for restitution of the amounts paid as well as compensatory interest, calculated from the date of the alleged undue payment until the date of processing of the credit note.
For its part, the Respondent replied, maintaining the lack of merit of the arbitral pronouncement request and alleging, in summary, that:
The Respondent defends itself, on one hand, by preliminary objection, raising the material incompetence of the Arbitral Tribunal to assess the request for declaration of material unconstitutionality of Item no. 28 of the TGIS, since this is not established among the matters on which the arbitral tribunal may pronounce itself pursuant to no. 1 of art. 2 of the RJAT, whereby, the preliminary objection being verified, would require the dismissal of the Respondent from the case.
Defending itself, on the other hand, by opposition, raising that urban properties that are land for construction and to which residential allocation has been attributed within the scope of their respective appraisals, with such allocation appearing in their respective property registers, are subject to Stamp Duty Tax.
There being no definition in the Stamp Duty Tax law of what is meant by 'urban property', 'land for construction', and 'residential allocation', it is necessary to resort subsidiarily to the CIMI to obtain a definition that allows assessment of potential subjection to Stamp Duty Tax, in accordance with the provisions of article 67, no. 2 of the Stamp Duty Code in the wording given to it by Law no. 55-A/2012, of 29/10.
Article 2, no. 1 of the CIMI provides that "property is any portion of territory, comprising waters, plantations, buildings and constructions of any nature incorporated or resting thereon, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances mentioned above, endowed with economic autonomy in relation to the land where they are located, although situated in a portion of territory that constitutes an integral part of a different asset or does not have patrimonial nature".
And, in turn, article 6, no. 1 of the CIMI provides regarding the species of existing urban properties, integrating 'land for construction' in this concept, "...land situated inside or outside an urban agglomeration, for which a license or authorization has been granted, admitted prior notification or issued favorable preliminary information on a subdividing or construction operation, and also those which have been thus declared in the acquisition title, except for land where the competent entities prohibit any of those operations...".
The notion of 'urban property' finds its basis in the part relating to the appraisal of real estate, since the purpose of real estate appraisal is to incorporate value into it, constituting a determining factor of distinction – coefficient – for appraisal purposes.
The legislator opted for determining, according to the Respondent, the application of the appraisal methodology of properties in general to the appraisal of 'land for construction', as results from the expression 'value of authorized buildings' referred to in article 45, no. 2 of the CIMI, and applying to it accordingly the allocation coefficient provided for in article 41 of the CIMI.
In the appraisal of land for construction, according to the Respondent, the legislator intended that the appraisal methodology of urban properties in general be applied, thus all the coefficients, above identified, must be taken into account, namely the allocation coefficient provided for in art. 41 of the CIMI, with such legal requirement resulting from no. 2 of art. 45 of the CIMI, by referring to the value of authorized or envisaged buildings on the same land for construction."
Wherefore, for the purpose of determining the tax property value of land for construction, it is clear, according to the Respondent, the application of the allocation coefficient in appraisal.
Following from such assertion that the consideration for purposes of application of item 28 of the TGIS cannot be ignored, worth in this sense, according to the Respondent, the following order of considerations:
a) in the application of law to concrete cases it is important to determine the exact meaning and scope of the norm, so that the rule contained therein is revealed, an indispensable condition for it to be applied, in accordance with the provisions of art. 9 of the Civil Code, by virtue of art. 11 of the General Tax Law (LGT);
b) article 67, no. 2, of the Stamp Duty Code, orders that the provisions of the CIMI be applied subsidiarily;
c) the allocation of the property (aptitude or purpose) is a coefficient that contributes to the appraisal of the property, in the determination of tax property value, applicable to land for construction;
d) item 28 itself of the TGIS refers to the expression 'properties with residential allocation', appealing to a classification that is superimposed on the species provided for in no. 1 of art. 6 of the CIMI.
In the urban property record of the property, the type of property is "land for construction".
We are, according to the Respondent, facing 'land for construction', more specifically, before a plot of land for urban construction, with areas of building implantation and construction perfectly defined and identified in the urban property records.
Fiscally, the property is a land for construction, in that capacity it was acquired and thus is property classified, and therefore, is, without doubt, a plot of land for construction, more precisely an urban property with residential vocation.
The tax law considers as an integrative element for purposes of appraisal of land for construction the value of the implantation area, which varies between 15% and 45% of the value of authorized or envisaged buildings based on the urbanization and construction project.
It cannot be ignored that the building permit for the performance of urbanization operations must contain, among other elements, the number of plots and the indication of the area of location, purpose, implantation area, construction area, number of floors and number of units of each of the plots, with specification of units intended for controlled-cost housing, when envisaged, pursuant to paragraph e) of article 77 of the RJUE.
And that article 77 of the RJUE contains mandatory specifications, notably for permits for subdividing operations or urbanization works, and for construction works.
Long before the actual building of the property, it is possible to determine and assess the allocation of the land for construction.
Indeed, this was no other intention of the legislator, according to the Respondent, if we consider that in the application of law to concrete cases it is important to determine the exact meaning and scope of the norm, so that the rule contained therein is revealed, an indispensable condition for it to be applied, but rather to consider in respect of the principle of 'social equity in austerity' that in the concept 'urban properties' there are integrated 'land for construction' with residential allocation.
In an interpretation very much limited to the letter of the law, one could, according to the Respondent, derive from the text the meaning that the Claimant wishes to give to it, but this is not the best interpretation of the law, and in the hermeneutical task, the literal element, constituting the point of departure and limit for extracting the meaning of the norm, is not the decisive element, nor even the most important, the role that is reserved for the 'unity of the system', pursuant to no. 2 of article 9 of the Civil Code.
In the interpretation of law, according to the Respondent, in addition to the aforementioned grammatical element, the logical element must also be considered, which requires, namely, that consideration be given to the end pursued by the legislator in elaborating the norm (teleological element), namely in order to ascertain its nature and its temporal scope of relevance, and to consider the place that the interpreted norm occupies therein (systematic element), with only the combination of all these interpretative elements resulting in the true meaning of that norm.
As for the activity pursued by the Claimant, the Respondent considers that the Arbitral Tribunal should not assess or discuss the merits of the legislative measure and its scope, but should limit itself to assessing it in the aspect of its conformity with the constitutional text.
The legislator defined, according to the Respondent, an economically valid premise, constitutionally valid, as a manifestation of contributory capacity (whose recipients effectively have special contributory capacity in light of the criterion adopted) required for the payment of this tax.
It is, unequivocally, a norm of general and abstract character, applicable in an undifferentiated manner to all cases in which its respective substantive and legal prerequisites are met.
Having regard to the exceptional historical circumstances that presided over the elaboration of the norm in question, and which were described above, we have that it does not offend any constitutional principle when in abstract and general form it makes the tax fall objectively on any and all "Ownership, usufruct or right of superficies of urban properties whose tax property value contained in the register, pursuant to the Real Estate Tax Code (CIMI), is equal to or greater than (euro) 1,000,000 - on the tax property value used for IMI purposes: Per residential property or per land for construction whose authorized or envisaged building, is for residential purposes, pursuant to the provisions of the IMI Code:" regardless of the nature of the owner, usufructuary or superficiary.
As for the matter of constitutionality, the principle of equality is one of the structuring principles of the Portuguese constitutional system, finding general endorsement in art. 13 of the CRP. In turn, the binding of administrative authorities to the principle of equality finds endorsement in art. 266, no. 2, of the fundamental statute.
With regard to this principle - which, in addition to founding and having as a corollary the principle of contributory capacity, is also projected onto the principle of justice.
In this sense, the principle of equality is concretized and thus possesses various dimensions, such as (i) the prohibition of arbitrariness, (ii) the prohibition of discrimination, and (iii) the obligation of differentiation.
In the case sub judice, the Claimant raises the violation of the principle of equality before the tax law in the dimension of the prohibition of differentiation in equal situations.
Terms in which in the present dispute, according to the Respondent, the Arbitral Tribunal should not assess or discuss the merits of the legislative measure and its scope, but should limit itself to assessing it in the aspect of its conformity (manifest, it must be said) with the constitutional text.
Item 28 is a norm in conformity with the Constitution of the Portuguese Republic.
Item 28.1 of the TGIS falls on the ownership, usufruct or right of superficies of urban properties with residential allocation, whose tax property value contained in the register, pursuant to the CIMI, is equal to or greater than € 1,000,000.00, that is, falls on the value of the property.
The legislator defined an economically valid premise, constitutionally valid, as a manifestation of contributory capacity (whose recipients effectively have special contributory capacity in light of the criterion adopted) required for the payment of this tax.
It is, unequivocally, according to the Respondent, a norm of general and abstract character, applicable in an undifferentiated manner to all cases in which its respective substantive and legal prerequisites are met.
Nor does the fact that the Claimant, according to the Respondent, in a vain attempt to support its peculiar thesis, present borderline cases, e.g., regarding the TPV of properties, impose that it should even be possible to attribute to the norm sub judice any unconstitutionality.
That is, the fact that the legislator establishes a value (€ 1,000,000.00) as the delimitative criterion of the tax incidence, below which the provision of the tax norm is not met, constitutes a legitimate choice of the legislator regarding the determination of the material scope of the "high-value residential properties" that it intends to tax more heavily, particularly since any other value of analogous magnitude would likewise assume an artificial character that is inherent to any quantitative fixing of a level or limit.
Indeed, the different valuation and taxation of a property with residential allocation compared to a property intended for commerce, industry or services, or even a rural property, results from the different aptitude of the properties in question (residential/services/commerce/industry/agricultural activity), which supports the different treatment given by the legislator that, for economic and social reasons, decided, within its margin of maneuver, to exclude from the tax incidence properties intended for purposes other than residential.
In like measure, and reserving that it is not incumbent upon the AT, in the exercise of its competence, competencies assigned in the exercise of its administrative activity, to make considerations regarding the alleged (but non-existent) unconstitutionality of the norm contained in Item 28.1 TGIS, given its full binding to the law, it does not see that from it results the violation of the principles of proportionality, legality, reliance of citizens, and contributory capacity.
With item 28.1 TGIS, the legislator assumed it as a measure of equality, which was intended to "reinforce the principle of social equity in austerity, guaranteeing an effective distribution of sacrifices necessary to comply with the adjustment program", being that equality in the distribution of sacrifices sought with item 28.1 of the TGIS by the "fiscal effort required" of owners of "high-value residential urban properties" compared with "those who live on income from their work".
Thus, for the legislator, according to the Respondent, item 28.1 of the TGIS aimed to rebalance the distribution of sacrifices, so that these would not fall only on "those who live on income from their work" (which, evidently, it had in mind the measures implemented in the context of Personal Income Tax as to the alteration of the rate structure and income brackets of PIT, the 3.5% surcharge, and the additional solidarity rate).
From the aforesaid, it is then clear, for the Respondent, that the tax legislator considered that the ownership, usufruct or right of superficies of a residential property or land for construction whose authorized or envisaged building, was housing, of TPV equal to or exceeding € 1,000,000.00 represented a manifestation of wealth and was susceptible, by itself, of revealing significant contributory capacity, thus making item 28.1 of the TGIS fall on the possession of certain types of properties, by contrast with income from work and pensions, already affected by other fiscal measures (and not only).
It is certain that contributory capacity, in addition to income and use of goods, is also expressed, pursuant to the law, through ownership of property (cf. no. 1, of art. 4 of the LGT).
And represents, in the case of item 28 of the TGIS, the economic premise that legitimizes the taxation of the ownership of urban properties and land with residential allocation whose tax property value is equal to or greater than one million euros.
Taxation in the context of stamp duty tax is subject to the criterion of adequacy, to the extent that it aims at the taxation of wealth embodied in the ownership of properties with residential allocation of high value and arises in a context of economic crisis that cannot be ignored.
It is, according to the Respondent, legitimized the option for this mechanism of obtaining revenue, since such measure is applicable in an undifferentiated manner to all and any owners of properties with residential allocation of value exceeding €1,000,000.00 falling on the wealth embodied and manifested in the value of the properties.
And neither the fact that the Claimant, according to the Respondent, presents here borderline/frontier cases, imputing, in this connection, any unconstitutionality of Item 28 by violation of the principle of equality, works in favor of the thesis she propounds.
For indeed, regarding a difference in situations between the ownership of "concentrated" real property assets (a single property with value of €1,000,000) or of "dispersed" real property assets (several properties whose total value amounts to €1,000,000) it must be immediately noted that the measure enshrined in item 28.1 of the TGIS is, in its own essence, entirely unrelated to any weighting or overall evaluation of the real property assets of the taxpayer.
Indeed, the substantive and legal reality selected by the legislator to constitute the basis of the tax incidence is the property itself considered, in view of its allocation and its tax property value, not the overall property assets of the taxpayers.
And any understanding to the contrary appeals to considerations that do not shape the legal framework and structure of the taxation in question and that, as such, do not shape its internal coherence.
The reference to the property individually considered results axiomatically from the definition and content legally proper to this regulation subject of item 28.1 of the TGIS, from which it is immediately observed that this is analytical taxation on certain and determined urban properties whose taxable matter is given by the tax property value of each property.
This results immediately from:
i. the reference of this item 28.1 TGIS to "per property with residential allocation'';
ii. it is also evidenced by the provision of no. 7 of art. 23 of the Stamp Duty Code, which establishes that the "tax due for the situations provided for in item no. 28 of the General Table'' "is assessed annually, for each urban property, by the central services of the Tax and Customs Authority'';
iii. it is finally confirmed, by the reference, determined by no. 2 of art. 67 of the Stamp Duty Code, to the provisions of the CIMI, it being known that the "Real Estate Tax (IMI) falls on the tax property value of rural and urban properties located in Portuguese territory'' (cf. art. 1 and art. 2 of the CIMI) and that "the tax is due by the owner of the property'' (art. 8, no. 1 of the CIMI, without prejudice to the provisions of no. 2 regarding the usufructuary and superficiary).
And what results from the law itself, results a priori, from the legislative choice itself, when the intention was, according to the Respondent, exclusively to define that the ownership of properties with residential allocation of value above the indicated amount, demonstrates that the respective owner has special contributory capacity, i.e., can acquire a single property in these conditions.
The Claimant further invokes the right to compensatory interest, by virtue of having opted to make the payments of the collection documents with respect to the assessment in question, despite considering them undue, whereby, in case of merit of the present request for arbitral pronouncement, it understands that such interest is owed to it from the date of payment until restitution, calculated at the rate legally stipulated in article 43 of the LGT.
Article 43, under the heading 'undue payment of tax obligation', has as its premise the intention to compensate the taxpayer for the deprivation of the amount that was paid unduly.
The right to compensatory interest provided for in no. 1 of article 43 of the LGT, derived from judicial annulment of a tax assessment, depends on it having been demonstrated in the proceeding that that assessment is affected by error attributable to the services from which has resulted payment of a tax obligation in an amount exceeding that legally due.
Given that the assessment effected was made on the basis of the applicable law, to which the Administration is bound, with the tax Administration aiming, pursuant to article 55 of the LGT and following the principle contained in article 266, no. 1 and 2 of the CRP, "... the pursuit of public interest, in respect for the rights and legally protected interests of citizens" and its "... organs and administrative agents ... being subordinate to the Constitution and the law ..." and must "... act, in the exercise of its functions, with respect for the principles of equality, proportionality, justice, impartiality and good faith".
Being thus the tax Administration bound by the principle of legality, it cannot fail to give full compliance to the normative provisions that the ordinary legislator created and which are in force in the legal system and also by force of the provisions of article 55 of the LGT.
The right to compensatory interest provided for in no. 1 of article 43 of the LGT, derived from judicial annulment of a tax assessment, depends on it having been demonstrated in the proceeding that such fact is affected by error in the substantive or legal premises attributable to the tax Administration.
The error supporting the right to compensatory interest is not any defect or illegality but that which is concretized in defective appreciation of relevant factuality or in erred application of the legal norms.
Since, at the time of the facts, the tax Administration made the application of the law in the terms to which as an executive organ it is constitutionally bound, one cannot speak of error of the services pursuant to the provisions of article 43 of the LGT.
The Respondent concludes that the assessment challenged remains entirely valid and legal, concluding on the legality of the same.
1.13. Notified for this purpose, the Claimant replied to the preliminary objection, generally seeking its lack of merit.
Preliminary Ruling:
Having been raised the incompetence of the Singular Arbitral Tribunal, by constituting a matter of preliminary objection and, therefore, a preliminary question, we pronounce ourselves immediately.
The Respondent, in its reply, also presented a preliminary defense invoking the incompetence of the singular arbitral tribunal to assess matters, insofar as the constitutionality of the norm is concerned, raised by the Claimant.
In fact, the Claimant raises an error in the legal premises by application, among other things, of a norm that it considers materially unconstitutional but petitioning, in any of the grounds, the declaration of illegality of the tax assessment.
It does not appear from the petition that the Claimant intends the declaration of unconstitutionality of the norm but, and following the understanding supported, namely in the decision rendered in the scope of case no. 385/2015-T (of CAAD) "(...) that this tribunal, within the powers that are legally recognized to it, judges the norm in question unconstitutional, thus refusing its application to the concrete case. Since the norm cannot be applied, in concreto, the tax act that results from its execution will, consequently, be illegal and, as such, voidable.
What is at issue in the present proceedings is, therefore, the legality of the tax assessment, with the result that to decide, this tribunal will have to, necessarily and by constitutional imperative (art. 204 of the CRP), evaluate the constitutional conformity of the norms that legally support it".
For this reason, the preliminary objection of incompetence of the STA is considered to lack merit "(...) it being further determined that, pursuant to art. 204 of the CRP, for the full and complete fulfillment of the jurisdictional function entrusted to this arbitral tribunal pursuant to the RJAT, it shall be competent to assess the constitutional conformity of the legal norms that support the contested tax assessment, and should refuse their application in concreto if it is concluded that they are unconstitutional".
Thus, supporting the same position, the Tribunal is competent and is regularly constituted, pursuant to articles 2, no. 1, paragraph a), 5 and 6, all of the RJAT.
The parties have legal standing and capacity, are legitimate and are represented, pursuant to articles 4 and 10 of the RJAT and 1 of Ordinance no. 112-A/2011, of 22 March.
There are no nullities nor other preliminary questions affecting the entire proceeding, whereby it is necessary now to address the merits of the petition.
Matter of Fact:
Proven Facts:
It is incumbent upon the tribunal to select the facts that matter for the decision of the case and to discriminate the proven matter from the unproven matter (in accordance with article 123, no. 2, of the CPPT and article 607, no. 3 of the CPC, applicable ex vi article 29, no. 1, paragraphs a) and e), of the RJAT).
Thus, the facts pertinent to the judgment of the case are chosen and delimited in terms of their legal relevance, which is established in attention to the various plausible solutions of the question(s) of law (in accordance with the former article 511, no. 1, of the CPC, corresponding to the current article 596, applicable ex vi article 29, no. 1, paragraph e), of the RJAT).
Thus, having regard to the positions assumed by the parties, the documentary evidence and the elements contained in the Administrative File joined to the proceedings, the following facts were considered proven, with relevance for the decision:
The Claimant is engaged in civil construction and public works, acquisition of properties for resale, construction of real estate for sale, leasing of properties and property administration, being the legitimate owner of an urban property registered in the urban property matrix under art. ..., of the parish of ..., municipality of Lisbon, with tax property value of € 1,217,100.00, as per the property record joined as Doc. No. 5 with the arbitral petition.
The property in question is described as land for construction with an area of 3,538,000 m2 and gross construction area of 5,094.7200 m2 as per the property record joined with the arbitral petition as Doc. No. 5.
The property is described in the matrix as "land for construction", in the appraisal of the property the type of location coefficient was considered: "residential", as per the property record joined with the arbitral petition as Doc. No. 5.
On 05/04/2016, the AT proceeded to the assessment of Stamp Duty Tax item 28.1 of the TGIS, in the total amount of € 12,171.00, reported to the year 2015 – as per Docs. Nos. 1 to 3 joined with the arbitral pronouncement request.
The Claimant presented an administrative appeal which was dismissed and notified to the Claimant on 17/04/2017 – as per Docs. Nos. 8 and 4 joined with the arbitral pronouncement request.
The Claimant proceeded to pay the tax as per Docs. Nos. 9, 10 and 11 joined with the arbitral pronouncement request.
On 15/11/2011, favorable preliminary information regarding the feasibility of construction of a unit of assisted living facilities on the property was issued by the Lisbon City Council, as per Doc. No. 6 joined with the arbitral pronouncement request.
According to the PDM, the area where the property is located is qualified as "special use space for consolidated equipment" – as per Doc. No. 7 joined with the arbitral pronouncement request.
No other facts were proven with relevance for the decision of the case, considering the possible legal solutions.
Unproven Facts:
With relevance for the assessment of the merits of the case, there are no unproven facts.
Substantiation of the Matter of Proven and Unproven Facts:
The conviction regarding the matter of fact resulted from the submissions of the parties and their respective documentary support joined to the proceeding.
Matter of Law – Questions to be Decided:
Object and Scope of the Present Proceeding:
The questions to be decided in the present proceedings are to know:
A) For the purpose of application of item 28.1 of the TGIS, in the wording introduced by Law no. 83-C/2013, of 13 December, is the property in question covered by the rule of incidence?
B) Is item 28.1 of the TGIS, in the wording introduced by Law no. 83-C/2013, of 13 December, unconstitutional for violation of the constitutional principles of tax equality and contributory capacity, and should, in that case, its application be refused?
It is necessary to decide,
Is the Property in Question Covered by the Rule of Incidence?
The subjection to Stamp Duty Tax of properties with residential allocation resulted from the addition of Item no. 28 to the TGIS, effected by article 4 of Law 55-A/2012, of 29 October, which typified the following tax facts:
"28 – Ownership, usufruct or right of superficies of urban properties whose tax property value contained in the register, pursuant to the Real Estate Tax Code (CIMI), is equal to or greater than € 1,000,000.00 – on the tax property value used for IMI purposes:
28.1 – Per residential property – 1%
28.2 – Per property, when the taxpayers are not natural persons resident in a country, territory or region subject to a clearly more favorable tax regime, appearing on the list approved by ordinance of the Minister of Finance – 7.5%".
Law no. 83-C/2013, of 31 December amended the wording of the norm, which became the following:
"28.1 Per residential property or per land for construction whose authorized or envisaged building, is for residential purposes, pursuant to the provisions of the IMI Code".
It is within this legal framework that it is important to assess the legal classification of the property on which the tax in question fell.
On this matter, there are already CAAD decisions, among others, in cases 53/2013-T, 49/2013-T, 42/2013-T, 180/2013-T, 75/2013-T, 215/2013-T, 240/2013-T, 284/2013-T, 288/2013-T, 310/2013-T, 12/2014-T, 151/2014-T, 202/2014-T, 210/2014-T, 276/2014-T, 514/2014-T, 516/2014-T, 523/2014-T, 599/2014-T and 663/2014-T, 467/2015-T, 615/2015-T, 630/2015-T, 447/2016-T, 467/2016-T.
Also the Administrative Supreme Court (STA) has already ruled on this matter, and at this time, it seems useful to reference the STA judgment of 09/04/2014 (case no. 1870/13), among other STA judgments such as, among others, judgments rendered on 26/10/2016, in case 0886/16, on 9/9/2015, in case no. 047/15; on 8/7/2015, in case no. 0573/15; on 17/6/2015, in case no. 1479/14; on 27/5/2015, in case no. 0387/15; on 29/4/2015, in case no. 021/15; on 15/4/2015, in cases nos. 01481/14 and 0764/14; on 5/2/2015, in case no. 1387/14; on 5/11/2014, in case no. 530/14; on 29/10/2014, in case no. 864/14; on 24/9/2014, in cases nos. 01533/13, 0739/14 and 0825/14; on 10/9/2014, in cases nos. 0503/14, 0707/14 and 0740/14; on 9/7/2014, in case no. 0676/14; on 2/7/2014, in case no. 0467/14; on 28/5/2014, in cases nos. 0425/14, 0396/14, 0395/14; on 14/5/2014, in cases nos. 055/14, 01871/13 and 0317/14; on 23/4/2014, in cases nos. 270/14 and 272/14; and on 9/4/2014, in cases nos. 1870/13 and 48/14, which, in detail, makes a historical analysis of the evolution and framework of item 28, now under analysis:
"The concept of 'urban property with residential allocation' was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the Real Estate Tax Code, to which no. 2 of article 67 of the Stamp Duty Code (also introduced by that Law) refers subsidiarily. And it is a concept that, probably due to its imprecision – a fact all the more serious as it is on the basis of which the material scope of the new taxation is determined – had a short life, since it was abandoned upon the entry into force of the Law of the State Budget for 2014 (Law no. 83-C/2013, of 31 December), which gave new wording to item no. 28 of the General Table, and which now determines its material scope through the use of concepts legally defined in article 6 of the Real Estate Tax Code. This amendment – to which the legislator did not assign an interpretative character, nor does it seem to us that it did – merely makes it unequivocal for the future that land for construction whose authorized or envisaged building is for residential purposes is covered within the scope of item 28.1 of the General Table of the Stamp Duty Tax (provided that its tax property value is of value equal to or exceeding 1 million euros)".
Prior to the legislative amendment that newly began to include the aforementioned land for construction, it was necessary to ascertain, making use of the various interpretative elements, whether, in the absence of that literal reference, such land could, nevertheless, be included within the material scope of item 28. It is for this reason that it is understood that the said judgment proceeded, saying that, the legislator not having clarified "(...) in relation to the previous situations [i.e., assessments prior to 2014], such as the one at hand in these proceedings, it does not seem possible to adopt [for these] the interpretation of the applicant, since it does not result unequivocally, neither from the letter nor from the spirit of the law, that the intention of this was, ab initio, to cover in its material scope of incidence the land for construction for which authorization or construction of residential buildings was envisaged, as results today unequivocally from item 28.1 of the General Table of the Stamp Duty Tax".
And it continues "from the letter of the law nothing unequivocal follows, indeed, since it itself, by using a concept that it did not define and that was also not defined in the statute to which it referred subsidiarily lent itself, unnecessarily, to equivocations, in a matter – of tax incidence – in which certainty and legal security should also be paramount concerns of the legislator".
It also follows from the learned decision that "from its "spirit", ascertainable in the statement of reasons of the legislative proposal that is at the origin of Law no. 55-A/2012 (Legislative Proposal no. 96/XII – 2nd, Journal of the Republic Assembly, series A, no. 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing more follows than the concern to attract new fiscal revenues, on sources of wealth "more spared" in the past from the tax voracity than labor income, in particular capital income, financial capital gains and property, reasons that bring no relevant contribution to the clarification of the concept of "urban properties with residential allocation", as they take it as settled, without any concern to clarify it. Such clarification must, however, have arisen – as reported in the Arbitral Decision rendered on 12 December 2013, in case no. 144/2013-T, available in CAAD database –, upon the presentation and discussion in the National Assembly of that legislative proposal, in the words of the State Secretary for Tax Affairs, who is said to have expressly stated, as gathered from the Journal of the Republic Assembly (DAR I Series no. 9/XII – 2, of 11 October, p. 32) that: "The Government proposes the creation of a special tax on high-value urban residential properties. It is the first time in Portugal that a special taxation on high-value properties intended for residential purposes is created. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will fall on houses with value equal to or greater than 1 million euros", from which it is gathered that the reality to be taxed had in view are, after all, and notwithstanding the terminological imprecision of the law, "urban residential properties", in common language "houses", and not other realities".
"The fact that one might consider that in the determination of the tax property value of urban properties classified as land for construction one should take into account the allocation that the building authorized or envisaged for it will have to determine its respective implantation area value (cf. nos. 1 and 2 of article 45 of the CIMI), does not determine that land for construction can be classified as 'properties with residential allocation', since 'residential allocation' always appears in the Real Estate Tax Code referred to "buildings" or "constructions", existing, authorized or envisaged, since only these can be inhabited, which does not occur in the case of land for construction, which do not have, in themselves, conditions for such, being not susceptible to being used for residential purposes unless and when the construction authorized and envisaged for them is built thereon (but in that case they will no longer be "land for construction" but another species of urban properties – "residential", "commercial, industrial or for services" or "other" – article 6 of the CIMI)".
And he adds "It would be strange, indeed, that the determination of the material scope of the tax incidence rule of item no. 28 of the General Table of the Stamp Duty Tax were found, in the end, in the rules for determining the tax property value of the Real Estate Tax Code, and that the terminological imprecision of the legislator in the drafting of that rule was, after all, clarified and finally explained via an indirect and equivocal reference, to the allocation coefficient established by the legislator in relation to built properties (article 41 of the Real Estate Tax Code)".
"Given that land for construction – whatever the type and purpose of the building that will be, or may be, erected thereon – does not satisfy, by itself, any condition for as such to be licensed or to be defined as having residential purposes its normal destination, and the rule of tax incidence referring to urban properties with "residential allocation", without any specific concept being established for this purpose, cannot from it be extracted that therein lies a future potentiality, inherent to a distinct property that might possibly be built on the land".
Concluding the Venerable STA that "(…) resulting from article 6 of the Real Estate Tax Code a clear distinction between 'residential' urban properties and 'land for construction', the latter cannot be considered as 'properties with residential allocation' for the purposes of the provision of item no. 28.1 of the General Table of the Stamp Duty Tax, in its original wording, given to it by Law no. 55-A/2012, of 29 October".
Similarly, in the STA judgment, of 14-05-2014, case no. 046/14, it is stated that "the legislator not having defined the concept of 'urban properties with residential allocation', and resulting from article 6 of the Real Estate Tax Code – subsidiarily applicable to the Stamp Duty Tax provided for in the new item no. 28 of the General Table – a clear distinction between 'residential urban properties' and 'land for construction', the latter cannot be considered, for the purposes of incidence of the Stamp Duty Tax (Item 28.1 of the TGIS, in the wording of Law no. 55-A/2012, of 29 October), as urban properties with residential allocation."
Moreover, as to the matters covered by the reservation of law, take note of article 103, no. 2 of the CRP and article 8 of the LGT. According to these norms, the principle of fiscal legality encompasses incidence, rate, tax benefits and guarantees of taxpayers. This is also referred to in the work "The Principle of Fiscal Legality" by Ana Paula Dourado, Almedina, 2007, page 106.
Being item 28.1 TGIS a rule of incidence, covered by the principle of fiscal legality, its analogical application is prohibited to situations not expressly provided therein.
Likewise, neither an extensive interpretation of the said item should be admitted that would permit inclusion in the expression contained in the law of land for construction. On interpretation, article 11, nos. 1 to 3 of the LGT and art. 9 of the Civil Code govern.
After this reference, we limit ourselves to the land for construction, contained in the amendment given by Law no. 83-C/2013, of 31 December to item 28.1 of the TGIS.
In the arbitral decision rendered in case no. 467/2015-T, of 4/2/2016 and cited in the arbitral decision rendered in case 294/2016/T and 454/2016-T, it should not be concluded, immediately and without further ado, that the property in question may, at the date of the facts, be subject to Stamp Duty Tax, pursuant to item 28.1 of the TGIS (in its current wording), because: "(…) the essential question which, [in the context of the new wording of item 28.1 of the TGIS, given by art. 194 of Law no. 83-C/2013, of 31/12,] arises, is whether, … "without [...] that forecast or expectation of 'building for residential purposes' [...] materialized", can the application of the Stamp Duty Tax analyzed here be accepted [...]. To answer the said question, it appears as particularly useful the consideration of the following: "With regard to land for construction, whether or not located inside an urban agglomeration, as defined in art. 3/4 of this statute [CIMI], they must, as such, be considered those plots of land for which has been granted: - license for subdividing operation; - construction license; - authorization for subdividing operation; - authorization for construction; - favorable prior notification admitted for subdividing or construction operation; issued favorable preliminary information on subdividing or construction operation, as well as; - those which have thus been declared in the acquisition title, it being necessary to note that, also for this purpose, only the acquisition title with the form required by civil law should be relevant, that is, the deed or the duly authenticated private document referred to in art. 875 CC." [see. António Santos Rocha / Eduardo José Martins Brás – Taxation of Property. IMI-IMT and Stamp Duty Tax (Annotated and Commented). Coimbra, Almedina, 2015, p. 44]".
We conclude, in the present case, that the property of the Claimant is land for construction as results from the urban property record joined to the proceedings, but nothing else is derived from this documentary support, whereby Stamp Duty Tax provided for in item 28.1 of the TGIS cannot fall on that property, since it is not the mere registration in the property matrix as "land for construction" that carries the inevitable application of item 28.1 of the TGIS, since it does not constitute, by itself, conclusive demonstration that a property has a building for residential purposes foreseen.
See in this regard, following the decision 467/2016-T, JOSÉ MANUEL FERNANDES PIRES, (Lessons on Taxes on Property and Stamp Duty. Coimbra, Almedina, 3rd ed., 2015, pages 110 to 112): "The right to build is not inherent in the right of ownership, but only arises ex novo in the property of the owner when an administrative act of the competent public entity recognizes and authorizes the owner to build or subdivide. [...] only when that right is constituted in the legal sphere of the owner is it that the Real Estate Tax Code establishes that we are before land for construction".
Thus, and continuing in the direction of that decision, "(…) it seems clear that for the verification of the regulatory provision it is not enough the mere registration in the property matrix of a property as land for construction allocated to residential purposes, because the delimitation of the material scope now in question does not waive the demonstration of an actual building potentiality, necessarily revealed by the existence of documentary support that authorizes it. The same is to say that the incidence of the tax, for purposes of the provision of item 28.1 of the TGIS, materializes itself only, and even then not in definitive or complete terms, with the verification of an "actual allocation", to use the happy expression of JOSÉ MANUEL FERNANDES PIRES (cit. work, p. 507)".
Now, without the express demonstration of that actual building potentiality, item 28.1 of the TGIS does not appear applicable, and, however, still for purposes of application of item 28.1 of the TGIS, it would not be enough to demonstrate that actual building potentiality.
It would be necessary to further demonstrate that the building, authorized or envisaged, is, cumulatively, for residential purposes.
What does not happen in the case, quite the contrary, since the Claimant demonstrates that the land for construction is not intended for residential purposes, but rather for services, with favorable preliminary information regarding the feasibility of construction of a unit of assisted living facilities on the property by the Lisbon City Council, and according to the PDM, the area where the property is located is qualified as "special use space for consolidated equipment".
The same is to say that it cannot be for a purpose other than residential purposes, since building for commerce or industry will not give rise to the application of the rule to which we have been making reference.
As happens in the situation in question in these proceedings.
It is certain that, even though registered in the matrix, the property is given as being "land for construction" allocated to residential purposes, however there is no indication of what would be intended for residential purposes, in the proper sense, other than those that might have alternative allocation, excluding commerce or industry.
Now, in the present proceedings, materially, exactly the opposite is verified, i.e., the land for construction is intended for services as stated.
It is safe to conclude that the legislator did not intend to tax in the context of Stamp Duty, by application of item 28.1 of the TGIS, land for construction whose authorized or envisaged building had as its destination offices or services. It intended only to tax those intended for residential purposes, the solution being thus in conformity, namely, with the constitutional principle of tax equality, as results from the decision rendered in the scope of case no. 467/2017-T.
It is true that in the appraisal of the land, the AT used the location coefficient type "residential", however, this is not the criterion adopted by the legislator either in the CIMI or in the Stamp Duty Code.
The legislator did not attribute to the use of that coefficient any relevance in the qualification of the property, only in its respective appraisal. Whereby also the AT cannot do so.
Thus, it would always be necessary, for fulfillment of the rule of incidence, that the property be residential or, if not, be land for construction and that construction has been authorized or is envisaged and is this intended for residential purposes.
Now, in the case, as the Claimant demonstrates, the envisaged construction is not for residential purposes but rather for services.
According to item 28.1 of the TGIS, are subject to tax, in addition to residential properties (those of paragraph a) of number 1 of no. 2 of article 5 of the CIMI), land for construction (i.e., the species of property provided for in paragraph d) of no. 1 of the same article of the CIMI), provided that authorization has been granted or construction intended for residential purposes is envisaged, and, in this case, wholly or partially, and, in the latter case, what is the value considered for purposes of subjection to taxation.
Considering the location coefficient: "residential", as the Respondent argues, it would always fall to the latter to demonstrate this materiality for substantiation of the act of assessment, for purposes of Stamp Duty Tax now in question, of its actual existence, and, in this case, if wholly or partially intended for residential purposes, and, being partially, what is the value considered for purposes of subjection to taxation.
Since, if this were not so, as it was not, within the scope of incidence and in the tax base of future non-residential components, it would lead to these elements being subject to incidence, and therefore, penalized, while, as results from decision 454/2016-T, "(…) components of identical nature, if considered for exclusively non-residential buildings, would escape the tax incidence and, consequently, would be favored compared to the former (which is to say that the former would be penalized, by way of taxation, compared to the latter)".
And concludes, "(…) in that case, the taxation of mixed buildings with a residential component, for which no justifying cause is envisaged, whereby such interpretation does not appear as reasonable, but rather clearly arbitrary (see in this regard the arbitral decision of 6/2/17, in Case no. 294/2016-T). Such an interpretation would thus violate the principle of equality and, to that extent, would be unconstitutional, as the Claimant intends".
Following decision no. 447/2016-T of CAAD, such proof would always be incumbent upon the Respondent, which is not verified in the case in question, not having been demonstrated that the land for construction in question had, in fact, authorization, project or foreseen construction intended for residential purposes, so as to be subject to Stamp Duty Tax pursuant to Item no. 28.1 of the TGIS.
On the contrary, the Claimant demonstrated that the land is not intended for residential purposes.
This because, as results, it is insisted, from decision 454/2016-T "(...) the burden of proof of those legitimating premises of taxation fell to the Respondent (…)" which does not demonstrate it and constitutes a fact whose proof must fall to the Respondent, as it constitutes an essential fact to the integration of the norm, as an element of actual tax incidence and be, therefore, constitutive of the right to assess it, and must appear in the assessment act itself, which is not the case.
It would always have to be concluded that the property, land for construction relative to which it was not proved to have authorization or foreseen construction intended for residential purposes, fulfills the rule of incidence of the tax that served as the basis for the assessment.
Thus, demonstrating the actual building potentiality, but this, even though authorized or envisaged, is not for residential purposes, will not give rise to the application of the rules by absence of verification of the necessary prerequisites for the incidence of Stamp Duty Tax of Item 28.1 of the TGIS.
For this reason, the assessment in question is affected by the vice of violation of law, in what the STA understands, to be an erroneous interpretation of item 28.1 of the TGIS, by error in the legal premises, which affects the assessment of Stamp Duty Tax, imputable to the Tax and Customs Authority, and the tax assessment and dismissal of the administrative appeal are voidable.
4.2. Questions of Prejudicial Knowledge
With the request for arbitral pronouncement proceeding for vice of violation of law, which provides effective protection of the interests of the Claimants, the knowledge of the other questions raised becomes prejudicial, as it is useless [article 130 of the Code of Civil Procedure (CPC)].
On Compensatory Interest:
The Claimant requests condemnation of the AT to return the tax unduly paid, increased by compensatory interest and default interest.
With the request for annulment of the tax act, the AT must be ordered to reimburse the Claimant for the tax unduly paid.
Article 43, no. 1 of the LGT establishes that "compensatory interest is due when it is determined, in administrative appeal or judicial challenge, that there was error attributable to the services from which results payment of the tax obligation in an amount exceeding that legally due".
In the case at hand, the error that affects the assessment of Stamp Duty Tax is attributable to the Tax and Customs Authority that carried out the assessment act on its own initiative, whereby the Claimant is entitled to compensatory interest on each of the amounts until reimbursement, at the supplementary legal rate, pursuant to articles 43, nos. 1 and 4, and 35, no. 10, of the LGT, article 559 of the Civil Code and Ordinance no. 291/2003, of 8 April.
Being affected by illegality, due to error attributable to the AT, the assessment of Stamp Duty Tax, compensatory interest is due from the date of payment by the AT, pursuant to articles 43 of the LGT and 61, no. 2 of the CPPT.
On Responsibility for Payment of Arbitration Costs:
Pursuant to article 527, no. 1 of the Code of Civil Procedure, ex vi 29, no. 1, e) of the RJAT, it is established that the party that caused them shall be condemned in costs or, if there is no success in the action, whoever drew profit from the proceeding.
In light of the above, the Respondent should be ordered to pay costs.
Decision:
In these terms and with the substantiation above, it is decided:
a. To judge the preliminary objection of incompetence of the arbitral tribunal to be without merit.
b. To judge the Claimant's requests as well-founded, for vice of violation of law, and, in consequence, to annul the assessment act in question and dismissal of the administrative appeal, with the Respondent, by effect of the annulment, to return to the Claimant all amounts paid, increased with the respective compensatory interest.
c. To order the Respondent to pay the costs of the present proceeding.
Value of the Proceeding:
In accordance with the provisions of articles 306, no. 2 of the CPC and 97-A, no. 1 of the CPPT and 3, no. 2 of the Regulation on Costs in Tax Arbitration Proceedings, the value of the proceeding is fixed at € 12,171.00.
Rate of Arbitration:
The arbitration fee is set at € 918.00 pursuant to Table I attached to the Regulation on Costs in Tax Arbitration Proceedings.
Notify the parties.
Lisbon, 6 April 2018
The Arbitrator
(Marisa Almeida Araújo)
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