Stamp Tax on Building Land (Verba 28.1 TGIS) – CAAD Arbitration Decision 486/2015-T

ARBITRAL DECISION

Applicant – A…

Respondent - Tax and Customs Authority

The Arbitrator, Dr. Sílvia Oliveira, designated by the Deontological Council of the Centre for Administrative Arbitration (CAAD) to constitute the Arbitral Tribunal, established on 19 October 2015, with respect to the above-identified case, decided as follows:

1. REPORT

1.1

A…, holder of tax identification number nº …, resident at Rua …, Lote …, in Montijo (hereinafter referred to as the "Applicant"), submitted a request for arbitral pronouncement and constitution of a single arbitral tribunal on 27 July 2015, pursuant to article 4 and paragraph 2 of article 10 of Decree-Law nº 10/2011 of 20 January [Legal Framework of Arbitration in Tax Matters (RJAT)], in which the Tax and Customs Authority is the Respondent (hereinafter referred to as the "Respondent").

1.2

The Applicant seeks to have the Arbitral Tribunal declare the "(…) illegality of the (…) tax assessments, as well as of the (…) decisions rejecting the administrative appeals (…)".

1.3

The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD on 28 July 2015 and notified to the Respondent on the same date.

1.4

The Applicant failed to appoint an arbitrator and therefore, pursuant to article 6, paragraph 2, letter a) of the RJAT, the undersigned was designated as arbitrator by the President of the Deontological Council of CAAD on 25 September 2015, with the appointment being accepted within the legal period and terms.

1.5

On the same date the parties were duly notified of such designation and did not manifest any will to refuse the arbitrator's appointment, in accordance with article 11, paragraph 1, letters a) and b) of the RJAT, combined with articles 6 and 7 of the Deontological Code.

1.6

Thus, in accordance with letter c), paragraph 1, article 11 of the RJAT, the Arbitral Tribunal was established on 19 October 2015, and an arbitral order was issued on the same date to notify the Respondent to, in accordance with article 17, paragraph 1 of the RJAT, submit its response within a maximum period of 30 days and, if it so wished, request the production of additional evidence.

1.7

On 19 November 2015, the Respondent submitted its Response, defending itself by contest and concluding that "the request for declaration of illegality and consequent annulment of the disputed tax assessments should be judged without merit, absolving the AT of the request".

1.8

On the same date, the Respondent also submitted a request seeking to dispense with the holding of the first arbitral meeting (in accordance with the terms and for the purposes provided in article 18 of the RJAT), "(…) thus enabling the Arbitral Tribunal to decide on the request forthwith".

1.9

Accordingly, by order of this Arbitral Tribunal dated 20 November 2015, taking into consideration the request for dispensation with the holding of the arbitral meeting referred to in article 18 of the RJAT, submitted by the Respondent (see above point), and with the aim of guaranteeing the principle of contradictory proceedings and equality of the parties (in accordance with article 16, letters a) and b) of the RJAT), the Applicant was notified to pronounce, within a period of 5 days, on the Respondent's aforementioned request, and both Parties were notified to pronounce, within the same period, on the possibility of dispensing with the submission of written arguments.

1.10

The Applicant submitted a request on 24 November 2015 agreeing with the dispensation with the holding of the meeting provided for in article 18 of the RJAT, as well as with the dispensation with the submission of written arguments.

1.11

The Respondent did not pronounce itself on the content of the arbitral order identified in point 1.9 above.

1.12

Thus, by arbitral order dated 1 December 2015, in accordance with the procedural principles established in article 16 RJAT, of contradictory proceedings [letter a)], of equality of the parties [letter b)], of the autonomy of the Arbitral Tribunal in conducting the proceedings and in determining the rules to be observed [letter c)], of cooperation and good faith proceedings [letter f)] and of free conduct of proceedings established in articles 19 and 29, paragraph 2 of the RJAT, as well as taking into account the principle of avoiding unnecessary acts, provided for in article 130 of the Code of Civil Procedure (CPC), applicable by virtue of article 29, paragraph 1, letter e) of the RJAT, this Arbitral Tribunal decided as follows:

1.12.1

To dispense with the holding of the meeting referred to in article 18 of the RJAT;

1.12.2

To dispense with the submission of written arguments;

1.12.3

To set 18 December 2015 as the date for delivery of the arbitral decision.

1.13

The Applicant was further notified that "until the date of delivery of the arbitral decision it should proceed with payment of the subsequent arbitral fee, in accordance with paragraph 3 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings and communicate such payment to CAAD".

2. CAUSE OF ACTION

The Applicant supports its request, in summary, as follows:

From the Request for Arbitral Pronouncement

2.1

It begins by clarifying that "this request for arbitral pronouncement aims at the annulment of the decisions rejecting administrative appeals (…) identified in which the declaration of illegality of Stamp Tax assessments of 7.11.2012 and 21.03.2013 was requested, respectively in the amounts of € 9,193.25 and € 19,075.99, relating to ownership in the proportion of ½ each of urban real property, consisting of a parcel of land for construction, located in the extinct parish of …-…-… (current Union of parishes of … and …-…-…), municipality of Montijo, registered in the property register under nº … (corresponding to the extinct article …) of that parish (…)".

From the Cumulation of Claims

2.2

On the other hand, it also refers that "the (…) request for constitution of arbitral tribunal is made with cumulation of requests for declaration of illegality of the acts of Stamp Tax assessment, as well as of the decisions rejecting administrative appeals (…) identified" given that "(…) the requirements upon which the cumulation of the identified requests (…) depends are verified".

2.3

In fact, "the Applicant is co-owner of the land with reference to which the Stamp Tax assessments in question were issued, seeking to have the matter of the incidence thereon of Stamp Tax provided for under item 28.1 of the General Table of Stamp Tax (TGIS) (…)" depending "(…) the merits of the requests (…) essentially on the appraisal of the same circumstances of fact and on the interpretation and application of the same principles and rules of law", being "(…) therefore unequivocal the factual identity and likewise the defect attributed to the Stamp Tax assessments sub judice", for which reason it requests "(…) that this cumulation of requests be admitted".

From the Facts

2.4

With regard to the facts at the origin of the request, the Applicant states that "(…) it is co-owner, in the proportion of ½, of urban real property located in the extinct parish of …-…-… (current Union of parishes of … and …-…-…), municipality of Montijo, registered in the property register under nº … (corresponding to the extinct article …), which consists of a parcel of land intended for construction (…)".

2.5

"As a result of the acquisition, by gift, of the aforementioned property by the Applicant in 2009, the respective assessment was carried out, following which it was assigned the taxable property value of € 3,677,300.00, subsequently updated to € 3,815,198.75, and currently fixed at € 1,948,190.00, following assessment carried out in 2015".[2]

2.6

The Applicant continues by stating that "it was notified of the Stamp Tax assessments (…) identified (…), with the amount of each of them being € 9,193.25 and € 19,075.99 (…) materialized respectively in the collection documents nº 2012 … and nº 2013 … (…)" and that "in the case of the assessment relating to the year 2012, in the amount of € 19,075.99", its payment was made in installments "(…) in 3 installments of € 6,358.66 (…)".[3]

2.7

"In light of notification of the assessment issued following Law nº 55-A/2012 of 29 October (…) and not conforming thereto, the Applicant filed the respective administrative complaint, which was assigned nº …2013…", the Applicant having been notified of its rejection through "memorandum nº …, of 22.05.2013, from the Tax Office of …", on the ground that the tax authority understood that "(…) considering that item 28.1, in referring to properties with residential purpose includes all properties to which residential purpose was assigned in the context of the respective assessment, and that the taxable event occurred on 2012/10/31, the property in question is subject to stamp tax (…)".

2.8

Not conforming to the rejection decision, the Applicant filed an administrative appeal, having been "notified of the decision rejecting" the said appeal through "memorandum nº …, of 25.05.2015, from the Tax Office of …".

2.9

"For its part, in light of notification of the assessment relating to the year 2012 (…) identified, and not conforming thereto, the Applicant filed the respective administrative complaint (…)", having been notified "by memorandum nº …, of 28.08.2013, from the Tax Office of … (…) of the decision rejecting the administrative complaint filed (…)" on the basis of the understanding that "(…) the relevant prerequisites for the purposes of Stamp Tax assessment (…) will be the description of the property, its respective purpose and the taxable property value of the property as at 31/12/2012, whereby, the property being described as land for construction, with purpose for residential and with a taxable property value of € 3,815,498.75, no illegality can be attributed to the assessment subject to these proceedings (…)".

2.10

The Applicant "not conforming to that decision (…) filed (…) an administrative appeal", having been notified "by memorandum nº …, of 24.04.2015, from the Tax Office of … (…) of the decision rejecting the administrative appeal filed (…)".

2.11

The Applicant continues by stating that "in both decisions that were rendered on the administrative appeals at issue (…)" it is stated that "(…) there is nothing to point out to the Stamp Tax assessment in question, given that it was carried out in accordance with the elements in force in the register, having been issued in the name of: (i) owner(s) (contained in the register); (ii) of an urban property with residential purpose (such purpose being contained in the register), (iii) of taxable property value, determined in accordance with CIMI, equal to or greater than € 1,000,000.00 (VPT also contained in the register) (…)", concluding the Respondent that "(…) it appears to us that the land parcels fall within the scope of item 28 of the TGIS (in the wording given by Law 55-A/2012 of 29 October), whereby the Stamp Tax assessment carried out on the now appellant is correct, not suffering therefrom any illegality (…)".

2.12

In this context, "being convinced of the illegality of the Stamp Tax assessments (…) identified and consequently of the decisions rendered on the administrative appeals (…) identified, the Applicant files this request for constitution of an arbitral tribunal", immediately referring that the provision "(…) in the scope of the taxable item, thus subjected Stamp Tax, with regard to taxpayers resident in, property (…) of urban properties with residential purpose, whose taxable property value, determined in accordance with the Real Estate Tax Code, is equal to or greater than € 1,000,000.00" and that "with regard to the subjective scope of the tax as well as the taxable event, article 2, paragraph 4 of the Stamp Tax Code determines, in the wording given by Law nº 55-A/2012 of 29 October, that in the situations provided for in item nº 28 of the General Table, the passive subjects of the tax are those referred to in article 8 of CIMI, that is, passive subjects of Stamp Tax are the owners of properties on 31 December of the year to which the tax pertains (…)".

2.13

The Applicant continues by stating that "for the year 2012, Law nº 55-A/2012 of 29 October, provided, as a transitional provision, that: i) the taxable event would occur on 31 October 2012; ii) the passive subject would be the owner of the urban property on 31 October 2012 and that iii) the tax authority would assess the tax by the end of November 2012, the same being payable by 20 December of that year (…)".

2.14

However, the Applicant understands that, although notified of the Stamp Tax assessments already identified "(…) the Applicant cannot conform to the Stamp Tax assessments in question" because:

a) "The urban property in question is classified as land for construction, whereby it does not fall within the category of urban property with residential purpose provided for in item 28.1 of the TGIS (…), with its ownership not being subject to Stamp Tax (…)";

b) "Stamp Tax on property as defined in item 28.1 of the TGIS and consequently the assessments sub judice is manifestly in violation of the principles of equality and capacity to contribute (…), for which reason it appears to be unconstitutional (…)";

c) "Equally, Stamp Tax on property as defined in item 28.1 of the TGIS violates the principle of progressivity (…), and is therefore also unconstitutional on this ground (…)";

d) "The Stamp Tax assessment of 21.03.2013, in the amount of € 19,075.99, incurs a defect of duplication of tax collection, in that the tax authority proceeds to assess a tax already assessed through the Stamp Tax assessment of 07.11.2012, in the amount of € 9,193.25 (…)";

e) "The Stamp Tax assessment of 07.11.2012, in the amount of € 9,193.25, incurs a defect of insufficient reasoning equivalent to lack of reasoning, given that it does not contain an indication of the year to which the assessed tax pertains, only appearing in the space referring to the year to which the tax relates the mention Law nº 55-A/2012 (…)".

2.15

Having presented the arguments that underlie his disagreement with the notified assessments, the Applicant addresses one by one all those enumerated in the previous point.

From the Concept of Urban Property with "Residential Purpose"

2.16

In this regard, the Applicant understands that "(…) the concept of property with residential purpose (…) does not encompass land for construction, such as that present here, contrary to what is stated in the decisions of the administrative appeals at issue", because "(…) it does not find express definition in the Stamp Tax Code, in Law nº 55-A/2012 of 29 October, nor even in the Real Estate Tax Code, the legal regulation to which the Stamp Tax Code refers for the regulation of other aspects relating to the incidence, assessment and collection of this tax on property".

2.17

In fact, according to the Applicant "(…) from the express absence of such concept in the law it is not possible to extract the conclusion that the tax authority wishes to draw from it, namely that land for construction is included in the objective scope rule contained in item 28 of the TGIS, in the original wording of Law nº 55-A/2012 of 29 October", for which reason "it is therefore necessary (…) to determine the interpretation of the concept of urban property with residential purpose (…)".

2.18

Now, "in the interpretation of tax law, the interpreter should make use of the general criteria established in article 9 of the Civil Code (CC)", for which reason "in the interpretation of the concept of urban property with residential purpose the interpreter cannot disregard the definitions contained in the Real Estate Tax Code, this because, on one hand, this legal regulation is chosen as subsidiary applicable legislation (…) and on the other hand, because until the entry into force of Law nº 55-A/2012 the property of urban and rural real properties was taxed only under Real Estate Tax".

2.19

Thus, the Applicant continues by stating that "the species of residential, commercial, industrial or service properties (…) comprises buildings licensed for such or, in the absence of license, which have as their normal purpose each of these ends (…) and land for construction (…) land situated within or outside an urban agglomeration, for which a license or authorization has been granted, prior notification admitted or favorable prior information issued for a subdivision or construction operation, and also those which have been so declared in the acquisition title (…)", from which results, according to the Applicant, that "(…) the qualification of an urban property as residential, commercial, industrial for services or land for construction depends, as a general rule, on a requirement of a formal nature, namely licensing".[4] [5]

2.20

In these terms, the Applicant understands that "(…) there results (…) an unequivocal distinction between (…) residential urban properties (commercial, industrial or service) and (…) land for construction", being "(…) qualified as land for construction (…) those in which the owner has acquired the right to build thereon or to carry out subdivision operations, as well as those which have been expressly acquired for that purpose", meaning that "(…) the qualification of land as land for construction can occur for several reasons, namely because in relation to the same": (emphasis ours)

i) "A license for subdivision or construction was granted;

ii) There was prior notification of construction works;

iii) There was favorable prior information of a subdivision or construction operation; or,

iv) The designation of land for construction was adopted in the respective acquisition title of the property".

2.21

Thus, the Applicant concludes that "(…) the concept closest to the literal meaning of the expression urban property with residential purpose is the concept of residential property (…)", considering that "(…) the non-coincidence of the expression (…) residential purpose with the expression (…) residential property clearly points to the fact that it was not the tax legislator's intention to use the same concept", for which reason the Applicant understands that "(…) it follows that the tax legislator, in opting for the expression residential purpose, intended to include within the scope of Stamp Tax incidence only urban properties allocated to residential use, that is, with real and present residential functionality".[6]

2.22

Now, according to the Applicant, "a parcel of land for construction cannot have residential use as its normal destination because it does not meet the (…) conditions of habitability", for which reason "in light of the above, it is unequivocal the conclusion that item 28.1 of the TGIS, in the wording applicable as of the date (…) is not intended to tax land for construction".

2.23

In truth, the Applicant reiterates that "(…) in using the expression with residential purpose the tax legislator intended only and solely to encompass urban properties with real and present residential functionality, and not to extend, for the purposes of Stamp Tax incidence, the species of urban properties provided for in article 6, paragraph 1, of the Real Estate Tax Code", not preventing "(…) the circumstance that subsequently the legislator may provide for the subjection to Stamp Tax of land for construction whose building, authorized or contemplated, is for residential purposes".[7] [8]

2.24

In summary, the Applicant understands that "(…) the annulment of the Stamp Tax assessments better identified (…) as well as of the decisions rendered on the administrative appeals (…) identified is required".

From the Violation of the Principles of Equality and Capacity to Contribute

2.25

The Applicant continues his exposition, stating that "(…) even if the aforementioned defect is admitted not to be valid (…) the tax acts in question should always be annulled by the application of materially unconstitutional law, given that item 28.1 of the TGIS incurs in manifest violation of the principles of equality and capacity to contribute (…)".[9]

2.26

"Thus, the principle of capacity to contribute should conform the tax legislator in the objective definition of the tax by reference to three manifestations of wealth susceptible of indicating the taxpayer's economic capacity, namely: i) accrued wealth (income), ii) possessed wealth (patrimony) and iii) expended wealth (consumption)".

2.27

In this context, according to the Applicant, having the tax legislator chosen "(…) to establish as criteria for determining the objective scope of that tax, on one hand, the qualification of the property – urban property with residential purpose – and on the other hand, the taxable property value – equal to or greater than €1,000,000.00", "(…) the Applicant does not discern the reasons that justify that only the property, usufruct and surface right of urban properties with residential purpose and of taxable property value equal to or greater than € 1,000,000.00 pass to be subject to Stamp Tax (…)".

2.28

Now, for the Applicant "(…) such understanding is manifestly in disconformity with the principle of capacity to contribute, as a corollary and expression of the principle of equality (…)", for which reason "(…) it (…) can be concluded that Stamp Tax thus (…) delimited violates the principle of capacity to contribute as a corollary and expression of the principle of tax equality".

2.29

"(…) In an attempt to inquire into the legislator's choice of the said criteria for objective delimitation of Stamp Tax incidence, the preparatory works of the said Law nº 55-A/2012 of 29 October were analyzed" and according to the Applicant, "in the statement of reasons contained in draft Law nº 96/XII(12) it is stated (…) that (…) these measures are fundamental to reinforce the principle of social equity in austerity, guaranteeing an effective distribution of the necessary sacrifices to comply with the adjustment program", with the government "(…) strongly committed to ensuring that the distribution of these sacrifices will be made by all and not only by those who live on the income from their work".[10]

2.30

Now, for the Applicant, "from the analysis of the reasons contained in draft Law nº 96/XII, as well as from the intervention of His Excellency the Secretary of State for Tax Affairs in the debate on general consideration, it follows that (…) the introduction of a new tax on property (…) of urban properties of taxable property value equal to or greater than € 1,000,000.00 had as its objective to reinforce the principle of social equity in austerity, or in other words, had as its objective to burden the taxpayers (presumedly) with greater capacity to contribute".

2.31

Thus, the Applicant understands that "(…) it cannot fail to conclude that Stamp Tax levied on property (…) of urban properties with residential purpose, provided for in item 28.1 of the TGIS (…) is materially unconstitutional, due to violation of the principle of capacity to contribute, corollary and expression of the principle of equality (…), which consequently leads to the material unconstitutionality of the Stamp Tax assessments at issue".[11]

2.32

On the other hand, and without prejudice to the above, the Applicant understands that "even if the unconstitutionality due to violation of the principle of capacity to contribute, as a corollary and expression of the principle of equality (…) is not considered valid (…) it would still be said that taxation in terms envisioned with the assessments sub judice incurs in violation of the principle of equality", "(…) which vitiates with illegality, determinative of its annulment, the assessments at issue, as well as the annulment of the decisions of the administrative appeals in question".[12]

From the Violation of the Principle of Progressivity

2.33

For the Applicant, "beyond the violation above invoked, Stamp Tax on property (…) still incurs in violation of the principle of progressivity (…)", given that "(…) in Stamp Tax on property no degree of progressivity is discernible, inasmuch as it merely taxes at a single rate urban properties of value equal to or greater than € 1,000,000.00, with no place for any distinction in the tax rate or even in the taxable base".

2.34

Thus, for the Applicant, "Stamp Tax on property (…) of urban properties with residential purpose, provided for in item 28.1 of the TGIS (…) is also materially unconstitutional due to violation of the principle of progressivity (…)", "(…) which leads (…) to the illegality of the Stamp Tax assessments at issue, as well as of the decisions rendered on the administrative appeals in question.

From Duplication of Tax Collection

2.35

In this regard, the Applicant understands that "(…) the Stamp Tax assessment of 21.03.2013, in the amount of € 19,075.99 would always be illegal due to duplication of tax collection", inasmuch as "(…) the said assessment repeats the taxation relating to the year 2012, (…) already carried out by the Stamp Tax assessment of 07.11.2012, in the amount of € 9,193.25".

2.36

In fact, according to the Applicant, Law nº 55-A/2012 of 29 October, "in its transitional provisions, provided that, as regards the tax relating to the year 2012, the taxable event would occur on 31 October 2012 (…)" and "as a result, the Applicant was notified of the Stamp Tax assessment of 07.11.2012, in which the amount of tax payable was calculated as € 9,193.25 (…)".

2.37

The Applicant continues by stating that "from the analysis of the said assessment, it is found that, in the field referring to the Tax Year, there appears the mention Law 55A/2012 (…)", for which reason, "given the reference to that Law nº 55-A/2012, (…) it can only be concluded that the assessment in question relates to the year 2012, and consequently that as regards this year the amount of € 9,193.25 is the only amount payable, as Stamp Tax".

2.38

Thus, the Applicant states that "it was with perplexity that (…) it was notified of the said Stamp Tax assessment", having found that "it was again required to pay the tax relating to the year 2012 (…)", inasmuch as "(…) the tax authority chose to again carry out Stamp Tax assessment on the property of the same urban property and by reference to the same year (…) making (…) no account whatsoever of the fact that such reality had already been taxed", thus originating, according to the Applicant, "(…) a duplication of tax collection", this being "(…) also a cause of illegality of the assessment".[13][14]

2.39

In summary, the Applicant understands that "it cannot therefore be considered that, with that transitional provision, instead of replacing the date of the taxable event generating the tax obligation, the legislator intended to establish two taxable events for which Stamp Tax would be due by reference to the year 2012", inasmuch as "such understanding would be, in these terms, in violation of the principle of legal certainty, as a corollary of the Rule of Law (…) which aims to guarantee (…) legal stability, certainty of orientation and realization of law (…)".[15]

2.40

In light of the above, the Applicant understands that "the annulment of the decision of administrative appeal nº …2013… and consequently of the tax act embodied in the assessment of 21.03.2013 (…) is required".

From Lack of Reasoning

2.41

In this regard, the Applicant considers that "the Stamp Tax assessment of 7.11.2012 would always appear illegal due to obscure reasoning, equivalent to lack of reasoning of the assessment act", inasmuch as "in the space referring to the year to which the tax pertains, there appears only the mention Law nº 55-A/2012, for which reason it does not result therefrom clear the year to which the assessed tax pertains, such obscurity being equivalent to lack of reasoning".

2.42

In fact, the Applicant states that, "in accordance with article 36 of the CPPT, notifications of acts in tax matters that affect the rights and legitimate interests of taxpayers, including assessment acts, must contain their respective reasoning", and that "the description of the content of the duty to reason is set forth in article 77, paragraph 2 of the General Tax Law (LGT), in accordance with which the reasoning will contain, albeit succinctly, the legal provisions applied, as well as the qualification and quantification of the facts and the operations for determining the taxable base and the tax".

2.43

Now, given that paragraph 2 of article 125 of the Code of Administrative Procedure (CPA), in the wording applicable as of the date, by virtue of article 2, letter d), of the Code of Procedure and Tax Process (CPPT) stipulates that "it is equivalent to lack of reasoning the adoption of reasons which, due to obscurity, contradiction or insufficiency, do not concretely clarify the motivation of the act", "there remain therefore no doubts that clarity is a requirement of reasoning and that its absence is equivalent to lack of reasoning", imposing itself for the Applicant "the annulment of the Stamp Tax assessment of 7.11.2012, due to insufficient reasoning and (…) of the decision rendered on administrative appeal nº …2013…".[16]

2.45

In these terms, the Applicant concludes his request, requesting that "the Stamp Tax assessments sub judice be annulled, as well as the decisions rendered on the administrative appeals at issue".

3. RESPONSE OF THE RESPONDENT

3.1

The Respondent responded in support of the lack of merit of the request for arbitral pronouncement, having invoked the following arguments:

3.2

"It is the understanding of AT that the property on which the disputed assessment falls has the legal nature of property with residential purpose, for which reason the assessment act subject to this request for arbitral pronouncement should be maintained, as it embodies a correct interpretation of Item 28 of the General Table, as amended by Law 55-A/2012 of 29/12".

3.3

"With this legislative amendment, Stamp Tax would henceforth also be levied on the property, usufruct or surface right of urban properties whose TPV contained in the register, in accordance with the Real Estate Tax Code, is equal to or greater than EUR 1,000,000.00".

3.4

"In the absence of any definition of the concepts of urban property, land for construction and residential purpose, in the context of Stamp Tax, it is necessary to resort to the Real Estate Tax Code, in search of a definition that allows ascertainment of possible subjection to Stamp Tax, in accordance with the provision in article 67, paragraph 2 of the Stamp Tax Code in the wording given by Law nº 55-A/2012 of 29/10".

3.5

Thus, the Respondent continues, "in accordance with said legal provision, to matters not regulated in the Code, relating to item nº 28 of the TGIS, the provisions of the Real Estate Tax Code are subsidiarily applicable", in accordance with which:

3.5.1

"Paragraph 1 of article 2 provides that property is any portion of territory, encompassing waters, plants, buildings and constructions of any nature incorporated or situated therein, with a permanent character, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value (…)" and,

3.5.2

"Article 6, paragraph 1 (…) incorporating in this concept" (of urban property) "land for construction, that is land situated within or outside an urban agglomeration, for which a license or authorization has been granted, prior notification admitted or favorable prior information issued for a subdivision or construction operation (…)".

3.6

On the other hand, according to the Respondent, "the notion of purpose of urban property finds its basis in the part relating to the assessment of real estate, which is well understood given that the assessment of the real estate (purpose) incorporates value to the real estate, constituting a determining fact of distinction (coefficient) for purposes of assessment".[17]

3.7

"Contrary to what is advocated by the Applicant, the AT understands that the concept of properties with residential purpose, for the purposes of the provision in item 28 of the TGIS, comprises both built properties and land for construction, beginning with the literal element of the rule".

3.8

"Note that the legislator does not refer to properties destined for residential use, having opted for the notion residential purpose - a different and broader expression, whose meaning must be found in the need to integrate other realities beyond those identified in article 6, paragraph 1, letter a) of CIMI".

3.9

On the other hand, even though "with regard to the legal regime of urbanization and building, (…) the same has as its presupposition buildings already constructed", "it cannot be ignored that the building license permit for the carrying out of urbanization operations should contain, among other elements, the number of lots, (…), the purpose (…)", the Respondent understanding that "Municipal Master Plans also establish the municipal development strategy, the municipal policy of land management and urbanism and other urban policies (…)" for which reason "well before the actual building of the property, it is possible to ascertain and determine the purpose of the land for construction".

3.10

With regard to the "alleged violation of constitutional principles, AT cannot fail to point out that the CRP requires that what is necessarily equal be treated equally and as different what is essentially different, not preventing differentiation of treatment (…)", for which reason "AT understands that the provision of item 28 of the TGIS does not constitute a violation of any constitutional command" given that "it is levied on property, usufruct or surface right of urban properties with residential purpose, whose TPV contained in the register, in accordance with the Real Estate Tax Code, is equal to or greater than EUR 1,000,000.00, that is, it is levied on the value of the real estate", being "(…) a general and abstract rule, applicable indiscriminately to all cases in which the factual and legal presuppositions are satisfied".

3.11

In fact, "the different suitability of real properties (residential/services/commercial) sustains the different treatment, having been a choice of the legislator, for political and economic reasons, to exclude from the incidence of Stamp Tax real properties intended for purposes other than residential".

3.12

In truth, "(…) taxation under Stamp Tax obeys criteria of suitability, being applied indiscriminately to all holders of properties with residential purpose of value greater than EUR 1,000,000.00, being levied on the wealth embodied and manifested in the value of the properties".

3.13

"Thus, the choice of this mechanism for obtaining revenue is justified, which would only be open to censure, in light of the principle of proportionality, if it resulted in being manifestly indefensible", "which is not the case inasmuch as such measure will apply indiscriminately to all holders of properties with residential purpose of value greater than EUR 1,000,000.00".

3.14

In these terms, "(…) the assessments at issue embody a correct interpretation and application of law to the facts, not suffering from a defect of violation of law (…) being it appropriate, consequently, to judge the claim as without merit and to absolve the (…) Respondent of the request".

4. PROCEDURAL MATTERS

4.1

The request for arbitral pronouncement is timely given that it was submitted within the period provided for in letter a) of paragraph 1 of article 10 of the RJAT.[18]

4.2

The parties have legal personality and capacity to be parties, are legitimate as to the request for arbitral pronouncement and are duly represented, in accordance with articles 4 and 10 of the RJAT and article 1 of Ordinance nº 112-A/2011 of 22 March.

4.3

The cumulation of requests made here by the Applicant is legal and valid, in accordance with article 3, paragraph 1 of the RJAT, given that the merits of the requests depends essentially on the appraisal of the same circumstances of fact and on the interpretation and application of the same principles or rules of law.

4.4

The Tribunal is competent as to the appraisal of the request for arbitral pronouncement made by the Applicant.

4.5

No exceptions were raised requiring adjudication.

4.6

No procedural defects are found for which reason it is now necessary to rule on the merits of the request.

5. MATTER OF FACT

5.1

From the Facts Proven

5.2

The following facts are considered as proven:

5.2.1

The Applicant is co-owner of an urban property (land for construction), registered in the urban property register under nº U-… (corresponding to the extinct article U-…) of the Union of parishes of … and …-…-… (extinct parish of …-…-…), in Montijo, whose TPV initially assigned (in 2009) amounted to EUR 3,677,300.00, subsequently updated to EUR 3,815,198.75, and currently fixed at EUR 1,948,190.00, following assessment carried out in 2015 (as per document nº 1, attached to the request).

5.2.2

The Applicant was notified of collection document nº 2012 …, relating to the Stamp Tax assessment nº 2011 …, relating to the year 2012[19], dated 7 November 2012, in the amount of EUR 9,193.25 (Single Payment), with payment due date of 20 December 2012, and notified of collection document nº 2013 …, relating to the Stamp Tax assessment relating to the year 2012, dated 21 March 2013, in the total amount of EUR 19,075.99 and relating to the 1st Installment of EUR 6,358.67, with payment due date in April/2013, both relating to the property identified in the previous point (as per document nº 2, attached to the request and administrative file joined to the records by the Respondent).

5.2.3

The Applicant was further notified of collection document nº 2013 …, relating to the Stamp Tax assessment relating to the year 2012, dated 21 March 2013 (identified in the previous point), in the amount of EUR 6,358.66 (2nd Installment), with payment due date in July/2013, and of collection document nº 2013 …, relating to the Stamp Tax assessment dated 21 March 2013 (identified in the previous point), in the amount of EUR 6,358.66 (3rd Installment), with payment due date in November/2013, both relating to the property identified in point 5.2.1 above (as per document nº 3, attached to the request).

5.2.4

In summary, the Applicant was notified of the following amounts of Stamp Tax to pay:

5.2.5

The Applicant filed an administrative complaint (nº …2013…) relating to the Stamp Tax assessment above identified (Stamp Tax collection note nº 2012 …) (document nº 4 attached to the request and administrative file joined to the records by the Respondent).

5.2.6

The Applicant was notified through Memorandum nº …, dated 22 April 2013, of the proposed rejection of administrative complaint nº …2013…, relating to the Stamp Tax assessment relating to the year of 2011 (collection note nº 2012 …) and to exercise the right to be heard, orally or in writing, within a period of 15 days (as per administrative file joined to the records by the Respondent).

5.2.7

The Applicant did not exercise the right to be heard relating to the proposed rejection of the administrative complaint referred to in the previous point (document nº 4 attached to the request).

5.2.8

The Applicant was notified through Memorandum nº …, dated 22 May 2013, of the decision rejecting administrative complaint nº …2013…, relating to the Stamp Tax assessment evidenced in collection note nº 2012 … (document nº 4 attached to the request).

5.2.9

The Applicant filed an administrative appeal of the decision rejecting the administrative complaint (identified in the previous point) on 07 June 2013, through administrative appeal nº …2013… (document nº 5 attached to the request).

5.2.10

The Applicant was notified, through Memorandum nº …, dated 25 May 2015, of the decision rejecting administrative appeal nº …2013…, relating to the administrative complaint nº …2013… (document nº 5 attached to the request).

5.2.11

The Applicant filed an administrative complaint (nº …2013…) relating to the Stamp Tax assessment relating to the year 2012 (collection note of Stamp Tax nº 2013 …) (document nº 6 attached to the request and administrative file joined to the records by the Respondent).

5.2.12

The Applicant was notified through Memorandum dated 3 July 2013, of the proposed rejection of administrative complaint nº …2013…, relating to the Stamp Tax assessment relating to the year of 2012 (collection note nº 2013 …) and to exercise the right to be heard, orally or in writing, within a period of 15 days (as per administrative file joined to the records by the Respondent).

5.2.13

The Applicant did not exercise the right to be heard relating to the proposed rejection of the administrative complaint referred to in the previous point (document nº 6 attached to the request).

5.2.14

The Applicant was notified through Memorandum nº …, dated 28 August 2013, of the decision rejecting administrative complaint nº …2013…, relating to collection note 2013 … (document nº 6 attached to the request).

5.2.15

The Applicant filed an administrative appeal of the decision rejecting the administrative complaint (identified in the previous point) on 09 June 2014, through administrative appeal nº …2013… (document nº 7 attached to the request).

5.2.16

The Applicant was notified, through Memorandum nº …, dated 24 April 2015, of the decision rejecting administrative appeal nº …2013…, relating to the administrative complaint nº …2013… (document nº 7 attached to the request and postal registration contained in the administrative file joined to the records by the Respondent).

5.3

No other facts were proven that could affect the decision on the merits of the request.

5.4

From the Facts Not Proven

5.5

No evidence was obtained that the amounts of Stamp Tax assessed by the Respondent were paid by the Applicant.

5.6

No facts were found to be unproven having relevance to the arbitral decision.

6. GROUNDS OF DECISION

6.1

In these proceedings, the essential question to be decided is whether the scope of item 28.1 of the TGIS, in the wording given to it by Law nº 55-A/2012 of 29 October, specifically, whether:

6.1.1

Land for construction should be included in that rule and, in particular;

6.1.2

Land for construction with TPV equal to or greater than EUR 1,000,000 are, or are not, subsumed in the species urban properties "with residential purpose",

in order to determine whether the Stamp Tax assessments subject to the Request for Arbitral Pronouncement suffer or not from a defect of violation of that item nº 28.1 (due to error as to the presuppositions of law), which would justify the declaration of their illegality and respective annulment.

6.2

The answer to the questions stated in the previous point requires the analysis of the legal norms applicable to the case in question, in order to determine the correct interpretation given the Law and the Constitution, as it is a matter of ascertaining a presupposition of tax incidence, carefully protected by the principle of tax legality, resulting from article 103, paragraph 2 of the CRP.

From the Scope of Item 28.1 of the TGIS (in the wording given to it by Law nº 55-A/2012 of 29 October)

6.3

Law nº 55-A/2012 made various amendments to the Stamp Tax Code and added to the TGIS item 28, with the following wording:

"28. Property, usufruct or surface right of urban properties whose TPV contained in the register, in accordance with the Real Estate Tax Code, is equal to or greater than EUR 1,000,000.00 – on the TPV for the purpose of Real Estate Tax:

28.1 – By property with residential purpose – 1%.

28.2 – (…)".

6.4

Notwithstanding the text of Law nº 55-A/2012 (in force since 30 October 2012) did not define the concepts contained in the said item nº 28, namely the concept of "property with residential purpose", if we observe the provision in article 67, paragraph 2, of the Stamp Tax Code (also added by the said Law), it is verified that "to matters not regulated in this Code, relating to item 28 of the General Table, the Real Estate Tax Code applies subsidiarily"(emphasis ours).

6.5

Now, from the reading of the Real Estate Tax Code, we easily perceive that the concept of "property with residential purpose" refers naturally to the concept of "urban property", defined in accordance with articles 2 and 4 of that Code.

6.6

In fact, in accordance with article 2, paragraph 1 of the Real Estate Tax Code, "(…) property is any portion of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated or situated therein, with a permanent character, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are located, although situated in a portion of territory that constitutes an integral part of a different patrimony or does not have a patrimonial nature" (emphasis ours).

6.7

Additionally, in accordance with paragraphs 2 and 3 of the same article, "buildings or constructions, even if movable by nature, are regarded as having a permanent character when allocated to non-transitory purposes", being "presumed to have a permanent character when the buildings or constructions are situated in the same location for a period exceeding one year".

6.8

On the other hand, in accordance with article 4 of the Real Estate Tax Code, "urban properties are all those that should not be classified as rural (…)".

6.9

In this regard, among the various species of "urban properties" referred to in article 6 of the Real Estate Tax Code, "land for construction" are expressly mentioned [paragraph 1, letter c)], with paragraph 3 of the same article further providing that "land for construction is considered to be land situated within or outside an urban agglomeration, for which a license or authorization has been granted, prior notification admitted or favorable prior information issued for a subdivision or construction operation, and also those which have been so declared in the acquisition title, excepting land in which the competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land management plans, are allocated to spaces, infrastructure or public facilities" (emphasis ours).

6.10

As can be seen from the norms of the Real Estate Tax Code transcribed above, it is not possible to extract what the legislator intended to say when referring in the text of the law to "properties with residential purpose", given that this concept is not used in the classification of properties, nor is this concept found, with this terminology, in any other statute.

6.11

On the other hand, given that Law nº 55-A/2012 of 29/10 has no preamble whatsoever, it follows therefrom that it is not possible to extract from it the legislator's intention.

6.12

Thus, in the absence of exact terminological correspondence of the concept of "property with residential purpose" with any other concept used in other statutes, various interpretative hypotheses can be ventured, with the text of the law being the starting point for the interpretation of that expression, as it is on the basis thereof that the legislative thought must be reconstructed, as follows from paragraph 1 of article 9 of the Civil Code, applicable by virtue of article 11, paragraph 1, of the LGT.

From the Interpretation of the Concept of "Urban Property with Residential Purpose"

6.13

In fact, in accordance with article 9 of the Civil Code, "interpretation should not be confined to the letter of the law, but should reconstruct, from the texts, the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was made and the specific conditions of the time in which it is applied", and "the interpreter cannot consider the legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed" (emphasis ours).

6.14

In these terms, it may be stated that tax laws are interpreted as any others, with its true meaning being determined in accordance with the techniques and interpretative elements generally accepted by legal doctrine (see article 9 of the Civil Code and article 11 of the LGT) [20].

6.15

Thus, the concept closest to the literal meaning of the expression "property with residential purpose" is manifestly that of "residential properties", referred to in article 6, paragraph 1 of the Real Estate Tax Code (and defined in paragraph 2 of the same article), encompassing buildings or constructions licensed for residential purposes or, in the absence of a license, which have as their normal destination residential purposes (emphasis ours).

6.16

"That is, for the purposes of the Real Estate Tax Code, both properties licensed for residential use are residential, even if they are not currently in that use, and, in the case of lack of a license, which have as their normal destination that purpose".[21]

6.17

Therefore, adopting the interpretation that "property with residential purpose" means "residential property", the assessments whose declaration of illegality is sought will in fact be illegal, given that there is no building or construction on the identified land.

6.18

In truth, the non-coincidence of the terms of the expression used in item nº 28.1 of the TGIS with that extracted from paragraph 2 of article 6 of the Real Estate Tax Code points to the fact that the legislator did not intend to use the same concept.

6.19

On the other hand, it is necessary also to take into account that the scope rules of taxes must be interpreted in their exact terms, without recourse to analogy, with certainty and security in their application being made prevalent.[22]

6.20

Finally, it will also be important to inquire what the ratio legis underlying the rule of item 28.1 of the TGIS is and, in compliance with article 9 of the Civil Code[23], what the circumstances are in which the rule was made and what are the specific conditions of the time in which it is applied.

6.21

In fact, in this regard, the legislator intended to introduce a principle of taxation on the wealth externalized in the property, usufruct or surface right of luxury urban properties with residential purpose, having considered, as the determining element of capacity to contribute, urban properties with residential purpose of high value (luxury), that is, of value equal to or greater than EUR 1,000,000.00, on which would (and did) pass a special rate of Stamp Tax (emphasis ours).

6.22

In truth, in the preamble of the draft Law that introduced the amendments to item 28 of the TGIS the following reasons were presented:

6.22.1

"The pursuit of the public interest, in light of the country's economic-financial situation, requires a reinforcement of budgetary consolidation that will require, in addition to permanent activism in reducing public expenditure, the introduction of fiscal measures inserted in a broader set of measures to combat the budgetary deficit".

6.22.2

"These measures are fundamental to reinforce the principle of social equity in austerity, guaranteeing an effective distribution of the necessary sacrifices to comply with the adjustment program (…) with the Government strongly committed to ensuring that the distribution of these sacrifices will be made by all and not only by those who live on the income from their work".

6.22.3

"In accordance with that objective, this act broadens the taxation of capital income and property, equitably encompassing a broad set of sectors of Portuguese society".

6.22.4

"A special rate under Stamp Tax is created levied on urban properties of residential purpose whose TPV is equal to or greater than one million Euros" (emphasis ours).

6.23

Thus, it results from this legislative motivation that the taxation in question aims at "an effective distribution of the sacrifices", placing such taxation on property (as opposed to labor income, already affected by other measures).

6.24

Because this statement of reasons underlying the adoption of the measures is overly broad, it has contributed little to the interpretation of the concept of "urban property with residential purpose".

6.25

And we believe the same conclusion can also be drawn from the analysis of the discussion of draft Law nº 96/XII in the National Assembly[24], which was at the origin of the proposed amendments, with no distinct interpretative ratio being discernible from the one presented here.[25]

6.26

In fact, the justification for the measure designated "special rate on residential urban properties of higher value" is therefore based on the invocation of the principles of social equity and fiscal justice (calling upon holders of property of high value intended for residential use to contribute in a more aggravated manner), by placing the new special rate on "houses of value equal to or greater than 1 million Euros" (emphasis ours).

6.27

Now, if such logic seems to make sense when applied to a "residence" (whether a house, an autonomous unit, a part of property with independent use or an autonomous unit) whenever it represents, on the part of its holder, a capacity to contribute above average (and, in that measure, susceptible of determining a special contribution to guarantee the fair distribution of the tax burden), it would make no sense whatsoever if applied to "land for construction".

6.28

In these terms, the Respondent cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the tax system and the principles of tax legality (article 103, paragraph 2 of the CRP), of justice, equality and tax proportionality (therein included).

6.29

On the other hand, having in consideration the above already analyzed, it should further be noted that the concept of "property (urban) with residential purpose" was not defined by the legislator, neither in the text of Law nº 55-A/2012 (which introduced it), nor in the Real Estate Tax Code, to which paragraph 2 of article 67 of the Stamp Tax Code (likewise introduced by that Law) refers on a subsidiary basis.

6.30

In truth, it is a concept that, probably due to its imprecision (a fact all the more serious given that in function thereof the scope of the objective incidence of the new taxation is delimited) had a very short life, given that it was abandoned upon the entry into force of the State Budget Law for 2014[26] (on 1 January 2014), which gave new wording to that item nº 28.1 of the TGIS and which now delimit its objective scope of incidence through the use of concepts that are legally defined in article 6 of the Real Estate Tax Code. [27]

6.31

This amendment, "to which the legislator did not give an interpretative character, merely makes unequivocal, for the future, that land for construction whose building, authorized or contemplated, is for residential purposes are encompassed within the scope of item 28.1 of the TGIS (provided that the respective TPV is of value equal to or greater than 1 million Euros), but clarifies nothing, however, regarding past situations", as is the case with the assessments that are at issue in these proceedings (emphasis ours) [28].

6.32

Now, as regards the assessments subject to the request for arbitral pronouncement, it does not result, neither from the letter nor from the spirit of the law, that the intention thereof was, ab initio, to encompass in its objective scope of incidence land for construction for which building authorization or contemplation has been given for residential buildings, as follows today from the text of item 28.1 of the TGIS (after the wording introduced by the State Budget Law for 2014[29]) (emphasis ours).

6.33

In this regard, from the letter of the law nothing unequivocal results given that it itself, in using a concept that it did not define (and which was also not found defined in the statute to which it referred on a subsidiary basis) unnecessarily lent itself to ambiguities in tax incidence matters (matters in which certainty and legal security should also be of primary concern to the legislator).

6.34

And from its "spirit", ascertainable in the statement of reasons[30] of the draft Law that is at the origin of Law nº 55-A/2012, nothing more follows than the concern to obtain new tax revenues from sources of wealth "spared" in the past by the tax legislator compared to labor income, in particular capital income, mobile capital gains and property, reasons these that bring no relevant contribution to the clarification of the concept of "properties (urban) with residential purpose", given that they give it as settled, without any concern to clarify it.

6.35

Thus, it can be ascertained that the reality that was intended to be taxed was in fact, in common language (and despite the terminological imprecision of the law with the expression "urban properties with residential purpose"), that of "houses", and not any other realities (as already referred to in point 6.26 above).

6.36

It should be added that "residential purpose" always appears in the Real Estate Tax Code as relative to "buildings" or "constructions", given that only these can be inhabited, which is not the case with land for construction which do not have, in themselves, conditions for such, being not susceptible of being used for residential purposes except if and when the construction authorized and contemplated for them is erected thereon.

6.37

Thus, given that land for construction (whatever the type and purpose of the building that will, or could be erected thereon) does not, by itself, satisfy any condition to, as such, be licensed or to be defined as having residential use as its normal destination, and the scope rule of Stamp Tax referring to urban properties with "residential purpose" (without any specific concept being established for that purpose), cannot therefrom be extracted that therein is contained a future potentiality, inherent to a distinct property that might perhaps be built on that land.

6.38

In these terms, it can be concluded that, as a clear distinction results from article 6 of the Real Estate Tax Code between urban properties "residential" and "land for construction", these cannot be considered as "urban properties with residential purpose", for the purposes of the provision in item nº 28.1 of the TGIS, in its original wording (which was given by Law nº 55-A/2012 of 29 October) (emphasis ours) [31].

6.39

In summary, and in response to the questions raised above in points 6.1.1 and 6.1.2, it can be concluded that on "land for construction" cannot be levied Stamp Tax to which item nº 28.1 of the TGIS refers (in the wording provided by Law nº 55-A/2012) given that land for construction (with TPV equal to or greater than EUR 1,000,000) do not fall within the species urban properties "with residential purpose", and therefore the assessment acts subject to the request for arbitral pronouncement presented by the Applicant are illegal.

6.40

Consequently, further analysis of the remaining arguments presented by the Applicant (alleged duplication of tax collection and lack of reasoning) is made unnecessary given that the above established, illegality of the assessment acts subject to the request has already been considered, making the analysis of that argument futile as to its consequences.

From the Payment of Compensatory Interest

6.41

With regard to the payment of compensatory interest, in accordance with paragraph 5 of article 24 of the RJAT "the payment of interest, regardless of its nature, is due in accordance with the terms provided for in the LGT and in the CPPT", from which it follows that an arbitral decision is not limited to the appraisal of the legality of the tax act.

6.42

Equally, in accordance with article 24, paragraph 1, letter b) of the RJAT, it should be understood that the request for compensatory interest is a claim relating to tax acts (e.g. assessment), which aims to clarify/make concrete the content of the duty to "restore the situation that would exist if the tax act subject to the arbitral decision had not been carried out, adopting the acts and operations necessary for that purpose".

6.43

As Jorge Lopes de Sousa states "it is within the competencies of arbitral tribunals operating at CAAD the fixation of the effects of the arbitral decision which can be defined in a process of judicial review, namely, the annulment of the acts whose declaration of illegality is sought, the condemnation of the Tax and Customs Authority to payment of compensatory interest (…)".[32] [33]

6.44

Thus, in tax arbitration proceedings, there can be place for the payment of compensatory interest, in accordance with articles 43, paragraphs 1 and 2, and 100 of the LGT, when it is determined that there was an error attributable to the services resulting in payment of the tax debt in an amount greater than the amount legally due (emphasis ours).

6.45

As referred to, even though there is no reference made in the request for arbitral pronouncement by the Applicant in the sense of requesting its payment, such is not necessary given that its payment does not depend on the deduction of a request for compensatory interest in the petition, being in accordance with the effects that follow from the annulment of the tax act(s).[34] [35]

6.46

Even if it has not been made clear from the procedural documents and documents attached whether the Applicant paid any of the amounts relating to the Stamp Tax assessments subject to the request for arbitral pronouncement, the right to compensatory interest will always depend on the verification of an error attributable to the services of the Respondent, from which has resulted a payment of tax debt in an amount greater than the amount legally due.

6.47

In these terms, as a consequence of the illegality of the assessment acts already identified above, and in accordance with letter b), paragraph 1, article 24 of the RJAT (in conformity with what is established therein), "the arbitral decision on the merits of the claim that is not subject to appeal or review binds the tax authority from the end of the period provided for appeal or review, with this being required to restore the situation that would exist if the tax act subject to the arbitral decision had not been carried out, adopting the acts and operations necessary for that purpose" (emphasis ours), wherefore there must be reimbursement of the amounts that may have already been paid by the Applicant, as title of the tax borne, as a means of achieving the reconstitution of the situation that would exist if the illegality had not been committed.

6.48

Additionally, given the establishment in article 61 of the Code of Procedure and Tax Process (CPPT), with the requirements of the right to compensatory interest being met (that is, the existence of an error attributable to the services being verified from which has resulted payment of the tax debt in an amount greater than the amount legally due, as provided for in paragraph 1 of article 43 of the LGT), the Applicant has the right to compensatory interest at the legal rate, calculated on the amounts which it may have paid within the scope of the Stamp Tax assessments subject to the request for arbitral pronouncement, which will be counted in accordance with paragraph 3 of article 61 of the CPPT, that is, from the date of possible payment of the undue tax until the date of issuance of the respective credit note.

7. DECISION

7.1

In accordance with article 22, paragraph 4 of the RJAT, "the arbitral decision issued by the arbitral tribunal contains the fixation of the amount and the distribution among the parties of the costs directly resulting from the arbitral proceedings".

7.2

Thus, in accordance with article 527, paragraph 1 of the CPC (by virtue of 29, paragraph 1, letter e) of the RJAT), it should be established that the Party that caused them or, if there is no winning party to the action, whoever obtained benefit from the proceedings shall be condemned to costs.

7.3

In this regard, paragraph 2 of the said article clarifies the expression "caused them", in accordance with the principle of success, understanding that the party bears the costs of the proceedings in proportion to the degree to which it lost.

7.4

In these terms, in the case under analysis, having regard to what is set forth in the preceding chapter, the principle of proportionality requires that all responsibility for arbitral costs be attributed to the Respondent.

7.5

In these terms, having regard to the analysis carried out, this Arbitral Tribunal decided:

7.5.1

To judge the request for arbitral pronouncement presented by the Applicant as well-founded and to condemn the Respondent as to the request for declaration of illegality of the Stamp Tax assessments subject thereto (and identified in these proceedings), annulling not only the decisions rejecting the Administrative Appeals duly filed, but also the respective tax acts, with the consequences flowing therefrom;

7.5.2

To condemn the Respondent to the reimbursement of the amounts that may have been unduly paid by the Applicant, within the scope of the Stamp Tax assessments now annulled, plus, in this case, compensatory interest at the legal rate, calculated in accordance with the legal terms;

7.5.3

To condemn the Respondent to payment of the costs of these proceedings.

Value of the Proceedings: Having regard to the provision in articles 306, paragraph 2 of the CPC, article 97-A, paragraph 1 of the CPPT and article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is set at EUR 28,269.24.

Costs of the Proceedings: In accordance with the provision in Table I of the Regulation of Costs in Tax Arbitration Proceedings, the value of the costs of the Arbitral Proceedings is set at EUR 1,530.00, to be borne by the Respondent, in accordance with article 22, paragraph 4 of the RJAT.

Notify.

Lisbon, 18 December 2015

The Arbitrator

Sílvia Oliveira

[1] The drafting of this decision is governed by the orthography prior to the 1990 Orthographic Agreement, except with regard to transcriptions made.

[2] In this regard, the Applicant clarifies that "the taxable property value of € 3,677,300.00 suffered an error as it had considered (…) the property's allocation to residential use, when for it construction of a building for industrial purposes was provided, of which the tax authority was made aware, reason for which the Applicant filed a property register complaint, following which a new assessment of the property was carried out (…)", which fixed the TPV at € 1,948,190.00.

[3] The Applicant was notified of collection documents nº 2013 … and nº 2013 … for payment of the second and third installments.

[4] In this sense, the Applicant cites J. SILVÉRIO MATEUS and L. CORVELO DE FREITAS who state that "(…) tax law does not provide the concept of each of the types of urban properties mentioned (…) [article 6 of the Real Estate Tax Code]. As has been observed, paragraph 2 merely refers, in the first instance, to the use assigned by licensing and, in the absence of a license, to the criterion of normal purpose" (in "Taxes on Real Estate Property", Rei dos Livros Publishing, 2005, page 116).

[5] In this matter, the Applicant also cites tax arbitral jurisprudence, which "(…) defines residential properties as those that (…) are classified in accordance with their municipal license or, not existing this, as a result of normal use (…) or (…) normal destination of the property (…), as opposed to land for construction which (…) are defined in accordance with their legal potentiality (…)" [cf. decision issued in proceedings nº 49/2013-T] and "in the same sense, inter alia, the decision of 15.09.2014 issued in proceedings nº 198-T/2014; the decision of 16.10.2014 issued in proceedings nº 202/2014-T and the decision of 05.09.2014 issued in proceedings nº 12/2014-T".

[6] In this sense, the Applicant cites the arbitral decision issued in proceedings nº 53/2013-T, dated 02.10.2013, in accordance with which "on the face of the meanings of the words allocation and allocate, which are to assign or apply, the formula used in that item nº 28.1 of the TGIS manifestly encompasses properties already applied to residential purposes (…)".

[7] In this regard, the Applicant cites the understanding of the Supreme Administrative Court, in accordance with which "(…) in this amendment without an interpretative character, it is established that, for the future, land for construction of taxable property value equal to or greater than 1 million euros, whose building, authorized or contemplated, is for residential use, are encompassed within the scope of item 28.1 of the General Table of Stamp Tax (…)" (cf. Judgment of 2.07.2014 issued in proceedings nº 0467/14).

[8] The Applicant reiterates in this regard that the Supreme Administrative Court "has pronounced (…) to the effect that land for construction is not considered urban properties with residential purpose for the purposes of the provision in item 28.1 of the TGIS, in the wording given by Law nº 55-A/2012 of 29 October", namely through the Judgment of 09.04.2014 issued in proceedings nº 048/14, in accordance with which "not having the legislator defined the concept of properties (urban) with residential purpose, and as article 6 of the Real Estate Tax Code subsidiarily applicable to Stamp Tax provided for in new item nº 28 of the General Table shows an unequivocal distinction between urban residential properties and land for construction, these cannot be considered, for the purposes of Stamp Tax incidence (Item 28.1 of the TGIS, in the wording of Law nº 55-A/2012 of 29 October), as urban properties with residential purpose".

[9] In this regard, the Applicant cites Judgment nº 84/2003 of 12.01.2003 of the Constitutional Court, in accordance with which it is stated that "the principle of capacity to contribute expresses and makes concrete the principle of tax or fiscal equality in its aspect of uniformity – the duty of all to pay taxes in accordance with the same criterion (…)", consisting "(…) this criterion (…) that the incidence and distribution of taxes (…) should be made in accordance with the economic capacity or capacity to spend (…) of each and not in accordance with what each might eventually receive (…)".

[10] In this regard, the Applicant also cites the Secretary of State for Tax Affairs in the opening of the general consideration debate of the measures provided for in the identified Law (in the National Assembly Records, I Series, Number 9, of 11 October 2012, pages 32 et seq).

[11] As the Applicant states, the arbitral decision of 24.02.2014 issued in proceedings nº 218/2013-T already pronounced thereon, in which it is argued that "(…) taxation by item 28.1 of the TGIS leads to manifest inequity in that it leaves out of such taxation (…) real property of the same taxpayer which, although (…) allocated to residential purposes, has, each one, TPV less than 1,000,000 but which together make up a TPV greater (…) than € 1,000,000".

[12] In this sense, the Applicant cites Judgment nº 353/2012 of the Constitutional Court of 05.07.2012, "which, addressing a different question (…) concludes in general terms that the pursuit of the objective of reducing the public deficit (…) cannot justify the violation of the structural principles of the Rule of Law".

[13] In this sense, the Applicant cites the Judgments of the Supreme Administrative Court of 26.02.2003 and 8.07.2009 issued in proceedings nº 6195/12 and nº 530/09 respectively.

[14] In this regard, the Applicant cites Jorge Lopes de Sousa who, in a note to article 205 of the CPPT, identifies cumulative requirements of duplication of tax collection, requirements which the Applicant considers to be met in the assessment at issue dated 21.03.2013.

[15] In this regard, it should further be noted that, faced with a factual situation identical to the present one, the Arbitral Tribunal already concluded to duplication of tax collection (arbitral decision nº 14/2014-T).

[16] In this sense, the Applicant cites the Judgments of the Supreme Administrative Court of 6.10.2010 and 15.4.2009 issued in proceedings nº 667/10 and nº 65/09 respectively.

[17] In this matter, the Respondent states that "as follows from the expression value of authorized buildings contained in article 45, paragraph 2 of CIMI, the legislator chose to determine the application of the assessment methodology of properties in general to the assessment of land for construction, being them therefore applicable the purpose coefficient provided for in article 41 of CIMI" (in this sense, the Respondent cites the Judgment of TCAS nº 04950/11 of 14/02/2012.

[18] In this regard, having in mind that the request for arbitral pronouncement includes a request to review the acts rejecting Administrative Appeals filed against decisions rejecting the administrative complaints presented against the Stamp Tax assessments at issue, as a means of being able to declare, in final instance, the illegality of the Stamp Tax assessments subject to the request (which were notified to the Applicant on 24 April 2015 and 25 May 2015), the decision on administrative appeal that includes the appraisal of the legality of a tax assessment act is encompassed in the provision of letter e) of paragraph 1 of article 102, for which reason the period of 90 days (three months, from 1 January 2015) counted from the respective notification is always applicable.

Thus, having regard to the provision in paragraph 1 of article 102 of the CPPT (in the wording given by Law nº 66-B/2012 of 31 December, in force since 1 January 2013), the period for bringing judicial review is three months counted from the facts enumerated in that article, namely "of the notification of the remaining acts that can be subject to independent review in accordance with this Code", as well as the provision in article 10, paragraph 1, letter a) of the RJAT which establishes that the request for constitution of an arbitral tribunal must be submitted "within a period of 90 days, counted from the facts provided for in paragraphs 1 and 2 of article 102 of the CPPT, as to acts subject to independent review and likewise from the notification of the decision (….) of the administrative appeal", for which reason, having regard to the date of filing of the request for arbitral pronouncement (27 July 2015), the request is timely.

[19] The tax year appears identified in the collection note as "Law 55A/2012".

[20] In this sense, see Judgment TCAS Proceedings 07648/14 of 10 July.

[21] See Arbitral Decision nº 48/2013-T of 9 October.

[22] See Judgment TCAS Proceedings 5320/12 of 2 October, Judgment TCAS Proceedings 7073/13 of 12 December and Judgment TCAS 2912/09 of 27 March 2014.

[23] In accordance with this article, interpretation of the legal norm should not be confined to the letter of the law, but should reconstruct the legislative thought from the texts and other elements of interpretation, taking into account the unity of the legal system.

[24] Available for consultation in the National Assembly Records, I series, nº 9/XII/2 of 11 October 2012.

[25] As already referred to in various Arbitral Decisions issued by CAAD (namely in Proceedings nº 48/2013-T of 9 October).

[26] Introduced by Law nº 83-C/2013 of 31 December.

[27] See in this sense Judgment STA 048/14 of 9 April and Judgment STA 0272/14 of 23 April.

[28] See in this sense Judgment STA 048/14 of 9 April and Judgment STA 0272/14 of 23 April.

[29] In this regard, it should be noted that, having regard to the provision in article 103, paragraph 3 of the CRP (prohibition of authentic retroactivity of tax law), it is not possible to admit the application of the new wording of item 28.1 of the TGIS (in force since 1 January 2014) to a Stamp Tax assessment relating to the year 2013, as we would be faced with the application of a new law to a prior taxable event (given that this event occurred on 31 December 2013 being therefore prior to the entry into force of the new wording of the law).

In this matter also, and in support of the interpretation of the constitutional provision, it becomes important to mention the provision in article 12, paragraph 1 of the LGT, in accordance with which "tax norms apply to facts subsequent to their entry into force, with no retroactive taxes being able to be created".

In judicial matters, the Constitutional Court (TC), in its jurisprudence on tax matters, namely in Judgment nº 128/2009 of 12 March considered that it follows from article 103, paragraph 3, CRP that "any tax norm (…) will be constitutionally censured when it assumes a retroactive nature, being the expression retroactivity used here in its proper or authentic sense", that is, "it prohibits the application of a new tax law, unfavorable, to a taxable fact occurring within the validity of the revoked tax law (the old law) and more favorable".

[30] In the presentation and discussion in the National Assembly of draft Law nº 96/XII – 2ª (which gave rise to Law nº 55-A/2012 of 29 October) the Secretary of State for Tax Affairs is said to have expressly stated that "the Government proposes the creation of a special rate on residential urban properties of higher value (…) being the first time that in Portugal a special taxation on properties of high value intended for residential use is created. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013 and will be levied on houses of value equal to or greater than 1 million Euros" [See National Assembly Records (DAR I Series nº 9/XII of 11 October, page 32)].

[31] See Judgment STA 048/14 of 9 April, Judgment STA 0272/14 of 23 April, Judgment STA 0505/14 of 29 October and Judgment STA 0740/14 of 10 September.

[32] See Leite de Campos, Diogo, Silva Rodrigues, Benjamim, Sousa, Jorge Lopes in "General Tax Law - Annotated and Commented", 4th Ed., 2012, page 116).

[33] On the subject of compensatory interest can be seen of the same author (Sousa, Jorge Lopes), Interest in Tax Relations, in "Fundamental Problems of Tax Law", Lisbon, 1999, page 155 et seq).

[34] In this regard, see Judgment of STA Proceedings nº 1052/04 of 30 November 2004.

[35] In this matter, see Leite de Campos, Diogo, Silva Rodrigues, Benjamim, Sousa, Jorge Lopes in "General Tax Law - Annotated and Commented"