Summary
This CAAD arbitration case (Process 487/2014-T) concerns the application of Stamp Tax under Entry 28.1 of the General Stamp Tax Table (TGIS) to various properties owned by Bank A, including multiple parcels classified as land for construction (terreno para construção). The claimant challenged eight Stamp Tax assessments, arguing two primary grounds of illegality. First, the bank contended that Entry 28.1 violates the constitutional principle of tax equality by excluding situations where ownership of multiple properties individually below €1,000,000 but collectively exceeding that threshold results in differential taxation of taxpayers with equal tax capacity. Second, regarding seven of the eight properties, the claimant argued the assessments involved errors in legal premises because the properties lacked residential allocation as required by Entry 28.1. Specifically, the bank maintained that land for construction cannot have residential allocation since no actual residential construction exists on such properties. The claimant further argued that legislative intent behind Entry 28.1 was to tax high-value homes or habitation properties, not undeveloped land, industrial properties, or leisure areas. The Tax Authority defended the assessments by referencing the Municipal Property Tax Code (CIMI) definitions, arguing that in the absence of specific Stamp Tax definitions, CIMI provisions should govern the interpretation of urban property, land for construction, and residential allocation concepts. The Authority pointed to CIMI Article 2 defining property and Article 6 defining land for construction as urban property within areas with approved construction licenses or authorizations. The case highlights critical interpretive questions regarding the scope of Stamp Tax on high-value properties and whether undeveloped land designated for future construction falls within the taxable category of residential properties under Portuguese tax law.
Full Decision
ARBITRAL DECISION
CAAD: Tax Arbitration
Case No. 487/2014 – T
I – REPORT
Request
Bank "A", SA, Public Company, with taxpayer number …, with registered office at Street …, No. …, …, submitted, pursuant to the provisions of No. 1 of Article 2 of Decree-Law No. 10/2011, of 20 January, which established the Tax Arbitration Regime (RJAT) and of Order No. 112-A/2011, of 22 March, a request for arbitral pronouncement with a view to:
The declaration of the illegality of the acts of assessment of Stamp Duty (IS), under Entry 28.1 of the respective General Table (TGIS) relating to eight properties described of which it is the owner;
The condemnation of AT – Portuguese Tax and Customs Authority to the reimbursement of the amounts of tax unduly paid and to the payment of the corresponding compensatory interest.
The Claimant alleges, in essence, the following:
The Claimant was notified of the following IS assessments, under Entry 28.1 of TGIS:
Assessment No. 2014…, relating to the property described as land for construction, registered in the urban property register of Aveiro under registry entry …, of which it is the sole owner (hereinafter referred to as "property 1");
Assessment No. 2014… relating to the property described as land for construction, registered in the urban property register of Aveiro under registry entry …, of which it is the sole owner (hereinafter referred to as "property 2");
Assessment No. 2014…, relating to the property described as land for construction, registered in the urban property register of Aveiro under registry entry …, of which it is the sole owner (hereinafter referred to as "property 3");
Assessment No. 2014…, relating to the property described as land for construction, registered in the urban property register of Aveiro under registry entry …, of which it is the sole owner (hereinafter referred to as "property 4");
Assessment No. 2014…, relating to the property described as land for construction, registered in the urban property register of Aveiro under registry entry …, of which it is the sole owner (hereinafter referred to as "property 5");
Assessment No. 2014…, relating to the property described as residential property, registered under registry entry … of the Parish of Quarteira, of which it is the sole owner (hereinafter referred to as "property 6");
Assessment No. 2014…, relating to urban property intended for leisure, described as "Green Areas", registered under registry entry … of the Parish … – Setúbal, in which the Claimant is owner of 1/104 share (hereinafter referred to as "property 7");
Assessment No. 2014 …, relating to urban property used for warehouses and industrial activity, described under registry entry … of the Parish … – Charneca da Caparica, of which the Claimant is the sole owner (hereinafter referred to as "property 8");
All assessments are vitiated by illegality by applying a tax incidence norm – the incidence norm of Entry 28.1 of TGIS – which violates the constitutional principle of tax equality. The norm in question violates the principle of tax equality by excluding from its scope situations of ownership of several properties whose individual value does not reach the value of €1,000,000, but which together exceed that value. In this manner, persons with the same taxable capacity will be taxed differently;
In relation to the assessments regarding "property 1", "property 2", "property 3", "property 4", "property 5", "property 7" and "property 8", the Claimant considers that the same are also illegal due to errors in the legal premises, since the situations described do not meet the provision of Entry 28.1 of TGIS, not being in any case properties with residential allocation, as required by that norm;
As to the land for construction, they do not meet the provision of the norm of Entry 28.1 of TGIS because there is no construction on the properties that could be intended for residential purposes;
As to the urban property with industrial allocation ("property 8"), in this case there is also no residential allocation;
And also in the case of "property 7", described as "Green Areas", residential allocation is excluded;
Immediately, the concept of "residential allocation" refers to the actual use of the property, which leads to excluding from the concept any property used for purposes other than habitation;
Furthermore, reconstructing the legislator's intent, it appears that the norm in question intended to tax "high-value properties intended for habitation" or "homes with value equal to or greater than one million euros," and in the concept of "home" or "habitation" there can never be included land for construction, a property intended for leisure or a property intended for industrial purposes.
Application submitted by the Claimant on 31-07-2014
By application submitted on 31-07-2014, the Claimant, after declaring that it had received collection notices for the second installment of IS on the property in question and having made the respective payment, came before the Tribunal requesting that it condemn the Respondent to the reimbursement of the amounts unduly paid and to the payment of the corresponding compensatory interest.
In the same subsequent application, the Claimant indicated that it had been notified of the annulment of Assessment No. 2014…, relating to urban property used for warehouses and industrial activity, described under registry entry … of the Parish … – Charneca da Caparica and, consequently, declared that it was withdrawing its claim regarding that assessment.
Response
In its response to the request for arbitral pronouncement, the Respondent AT – Portuguese Tax and Customs Authority argues for the dismissal of the claim, alleging, in summary, the following:
On the illegality due to errors in the premises of application of Entry 28.1 of TGIS
In the absence of any definition of the concepts of urban property, land for construction and residential allocation in the scope of IS, reference must be made to CIMI in search of a definition that permits assessment of possible subjection to IS, in accordance with the provision in Art. 67, No. 2 of the Stamp Duty Code in the wording given by Law No. 55-A/2012, of 29/10;
No. 1 of Art. 2 of CIMI provides that "property is any portion of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated or erected thereon, with a character of permanence, provided that it forms part of the assets of an individual or collective person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the aforementioned circumstances, endowed with economic autonomy in relation to the land where they are implanted, although located in a portion of territory that constitutes an integral part of different assets or does not have patrimonial nature".
For its part, Art. 6, No. 1 of CIMI provides regarding the types of existing urban properties, integrating in this concept land for construction, that is, "land situated within or outside an urban area, 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 in the title of acquisition, with the exception of land where the competent entities prohibit any of these operations…"
The notion of allocation of urban property is found in the section relating to the assessment of real estate, which is well understood since the assessment of real estate (purpose) incorporates value to the real estate, constituting a determining factor of distinction (coefficient) for purposes of assessment.
As results from the expression "…value of authorized buildings", contained in Art. 45, No. 2 of CIMI, the legislator chose to determine the application of the methodology of assessment of properties in general, to the assessment of land for construction, and consequently there is applicable to them the allocation coefficient provided for in Art. 41 of CIMI.
Thus, for purposes of determining the tax patrimonial value of land for construction, it is clear that the allocation coefficient applies in the scope of assessment, so its consideration for purposes of application of Entry 28.1 of TGIS cannot be ignored;
Entry 28.1 of TGIS uses the expression "properties with residential allocation", an expression different and broader than that used in CIMI, so its sense must be found in the need to integrate other realities beyond those identified in Art. 6, No. 1 paragraph a) of CIMI;
The fact that the assessment of land for construction takes into account residential allocation, when applicable, the fact that the license permit for the carrying out of urban operations should contain, among other elements, the number of lots and the indication of the location area, purpose, area of implantation, construction area, number of floors, number of units in each of the lots, with specification of units intended for housing at controlled costs, and all of this further associated with the fact that Municipal Master Plans establish the strategy for municipal development, municipal policy for spatial planning and urbanism and other urban policies, makes it possible, well before the actual construction of the property, to ascertain and determine the allocation of the land for construction;
For all of this, the IS assessments on real estate with "land for construction" allocation are fully supported;
On the question of unconstitutionality of Entry 28.1 of TGIS
On the alleged unconstitutionality of Entry 28.1 of TGIS, it should be dismissed, for the following reasons:
Art. 13 of the Constitution of the Republic "requires that equal treatment be given to what is necessarily equal and different treatment to what is essentially different, not precluding differentiation of treatment, but only arbitrary, unreasonable discriminations, that is, distinctions of treatment that do not have sufficient material justification and foundation".
The different valuation and taxation of a property in full ownership as opposed to a property held in horizontal (condominium) ownership results from the different legal effects inherent in these two figures;
The different aptitude of properties (habitation/services/commerce) supports different treatment, having constituted a choice of the legislator, for political and economic reasons, to exclude from the scope of IS properties intended for purposes other than residential;
Thus, the AT understands that the provision of Entry 28.1 of TGIS does not constitute any violation of the principle of equality in Article 13 of the Constitution.
Meeting provided for in Article 18 of RJAT and Submissions
Having obtained the agreement of the parties, the Tribunal decided to dispense with the holding of the meeting provided for in Article 18 of RJAT as well as the phase of final submissions.
Application submitted by the Claimant on 19-11-2014
By subsequent application of 19-11-2014, the Claimant, after stating that it had received collection notices for the third installment of IS on the properties in question and having made the respective payment, came before the Tribunal requesting that it condemn the Respondent to the reimbursement of the amounts unduly paid and to the payment of the corresponding compensatory interest. This Application was added to the file and notified to the Respondent, which did not comment thereon.
II – ISSUES TO BE DECIDED
The following are the issues to be decided by the Tribunal:
The constitutionality of the tax incidence norm contained in Entry 28.1 of TGIS, in light of the constitutional principle of tax equality;
Subsidiarily:
The legality of the assessment based on the premise that the provision of Entry 28.1 of TGIS, in the wording in force until 31 December 2013, encompassed in its scope of application urban properties classified as land for construction;
The legality of the assessment based on the premise that the provision of Entry 28.1 of TGIS, in the wording in force until 31 December 2013, encompassed in its scope of application urban properties classified as "green areas" (question raised by the Claimant in paragraph 23 of the initial petition).
III – CASE MANAGEMENT
The Tribunal is competent and properly constituted, in accordance with the provisions of Articles 2, No. 1, paragraph a), 5 and 6, all of RJAT.
The parties have standing and capacity to sue, are properly represented and have proper representation.
The accumulation of claims is admissible, as all the prerequisites established in Article 3, No. 1 of RJAT are met.
No irregularities were identified in the proceedings, so nothing prevents the examination of the merits of the claim.
IV – REASONING
FACTUAL MATTERS
The following are the facts found to be relevant for the decision:
The Claimant was, at the date of the occurrence of the tax facts that gave rise to the assessments, owner/co-owner of the following properties:
Urban property ("property 1") described as land for construction, registered in the urban property register of Aveiro under registry entry …;
Urban property ("property 2") described as land for construction, registered in the urban property register of Aveiro under registry entry …;
Urban property ("property 3") described as land for construction, registered in the urban property register of Aveiro under registry entry …;
Urban property ("property 4") described as land for construction, registered in the urban property register of Aveiro under registry entry …;
Urban property ("property 5") described as land for construction, registered in the urban property register of Aveiro under registry entry …;
Urban property ("property 6") described as residential property, registered under registry entry … of the Parish of Quarteira;
Urban property ("property 7") intended for leisure, described as "green areas", registered under registry entry … of the Parish … – Setúbal, in which the Claimant is owner of 1/104 share;
Urban property ("property 8") used for warehouses and industrial activity, described under registry entry … of the Parish … – Charneca da Caparica.
The property classified as "green areas", held in co-ownership by 104 co-owners, comprises a swimming pool, tennis court, support house and garden;
In March 2014, the Claimant was notified of the IS assessments on the properties referenced, under Entry 28.1 of TGIS, with the following amounts of tax assessed, in respect of the 1st installment:
"Property 1": €32,595.78, Assessment No. 2014…;
"Property 2": €4,011.94, Assessment No. 2014…;
"Property 3": €4,923.98, Assessment No. 2014…;
"Property 4": €3,644.68, Assessment No. 2014…;
"Property 5": €4,078.94, Assessment No. 2014…;
"Property 6": €53,025.00, Assessment No. 2014…;
"Property 7": €97.36, Assessment No. 2014…;
"Property 8": €3,984.48, Assessment No. 2014….
Subsequently, during the course of this arbitral proceeding, collection notices were sent to the Claimant for the 2nd and 3rd installments of the tax relating to the properties described;
The Claimant proceeded to pay the amounts of the three installments of the assessed tax;
The Claimant was further notified of the annulment of Assessment No. 2014…, relating to urban property used for warehouses and industrial activity, described under registry entry … of the Parish … – Charneca da Caparica ("property 8").
The facts found are based on the documents brought by the Claimant to the proceedings, whose authenticity and correspondence to reality were not challenged.
There are no facts found to be not proven that are relevant for the decision.
LEGAL REASONING
Delimitation of the Object of the Proceeding
During the course of the current proceeding, facts have occurred that determine the necessity of redefining the object of the same, in relation to what was initially petitioned.
The first of the supervening facts was the annulment, by the Tax Administration, of one of the eight assessments initially challenged – specifically Assessment No. 2014 …, relating to urban property used for warehouses and industrial activity, described under registry entry … of the Parish … – Charneca da Caparica ("property 8"). Having been annulled, this assessment ceased to exist as an act subject to challenge, so the Tribunal should not rule on its legality.
The second and third supervening facts were the notification of the Claimant to proceed to payment, respectively, of the 2nd and 3rd installments of the tax whose assessment is challenged.
Such facts are relevant to the decision of the case, only insofar as they relate to the quantum of the obligation to refund the tax unduly paid, if to be so qualified, and the corresponding compensatory interest.
Being relevant to the decision of the case, such facts are supervening in relation to the moment of presentation of the request for arbitral pronouncement, so, pursuant to Article 524 of the Code of Civil Procedure, acceptance of their addition to the proceeding must be granted.
Moreover, such elements should, in any event, have been brought to the proceeding by the Respondent itself, in accordance with No. 3 of Article 63 of the Code of Administrative Court Procedure (applicable in this arbitral proceeding by force of paragraph c) of No. 1 of Article 29 of RJAT), which provides that "the Administration must bring to the proceeding the information of the existence of any acts connected with the act challenged that may be carried out during the course of the proceeding". To this extent, the Respondent did nothing more than anticipate the Tax Administration.
Thus, in this arbitral proceeding it is incumbent to assess:
The legality of the assessments identified with the numbers 2014 …, 2014 …, 2014…, 2014…, 2014…, 2014…, 2014…;
In the event that some or all of the aforementioned assessments are found to be illegal, the right of the Claimant to refund the tax unduly paid and respective compensatory interest, in relation to the three installments paid.
Question of Unconstitutionality of Entry 28.1 of TGIS
The Claimant bases its argument of unconstitutionality of Entry 28.1 of TGIS on the fact that it applies only to properties with residential allocation and on the fact that it applies only to properties whose value equals or exceeds €1 million, but not to a set of properties whose combined value equals or exceeds that amount.
Now, from the presentation made by the State Secretary of Fiscal Affairs, on the occasion of the presentation and discussion in the Parliament of the bill that would give rise to Law No. 55-A/2012 (which introduced Entry 28.1 of TGIS), in which that government official stated that: "The Government proposes the creation of a special tax on high-value residential urban properties. It is the first time in Portugal that a special tax is created on high-value properties intended for habitation. This tax (…) will apply to homes worth equal to or greater than €1 million," it can be inferred – and this has already been understood by the Supreme Administrative Court in a judgment issued on 09-07-2014, in Case No. 0676/14 – that Entry 28.1 of TGIS aims to tax high-value residential homes.
The legislator did not intend, therefore, to tax any high-value real estate property, but only high-value residential homes, considering that the ownership of a high-value residential home manifests a particularly high taxable capacity.
And indeed, the ownership of a high-value residential home, being a situation that is characterized as consumption of income, constitutes, unquestionably, a manifestation of particularly high taxable capacity, which does not necessarily occur with the ownership of properties with different economic functions, not characterized as situations of consumption of income but rather configured, for example, as investment.
The economic function of the properties taxed under Entry 28.1 – habitation – is what distinguishes them from other real estate, and the legislator sees in properties with this economic function a manifestation of taxable capacity that does not occur in relation to other properties.
Thus, being a matter of taxing different situations differently, the argument of illegality of the challenged assessments due to unconstitutionality of the applicable incidence norm does not therefore hold.
Question of Applicability of Entry 28.1 of TGIS to Land for Construction
On this question, and in the exact terms in which it is presented here, the Supreme Administrative Court has already ruled repeatedly, predominantly in a sense consonant with what the Claimant argues for (see the judgments of that Court issued on 24/9/2014, Case Nos. 01533/13, 0739/14 and 0825/14; on 10/9/2014, Case Nos. 0503/14, 0707/14 and 0740/14; on 9/7/2014, Case No. 0676/14; on 2/7/2014, Case No. 0467/14; on 28/5/2014, Case Nos. 0425/14, 0396/14, 0395/14; on 14/5/2014, Case Nos. 055/14, 01871/13 and 0317/14; on 23/4/2014, Case Nos. 270/14 and 272/14; and on 9/4/2014, Case Nos. 1870/13 and 48/14).
The same question was also ruled upon by tax arbitral tribunals, namely in Case Nos. 151/2014-T, 42/2013-T, 48/2014-T, 49/2013-T, 53/2014-T, 75/2013-T, 144/2013-T, 158/2013-T, 180/2013-T, 189/2013-T, among others) with the arbitral jurisprudence also being predominantly to the effect that the provision of Entry 28.1 of TGIS, in the wording in force until 31 December 2013, did not encompass land for construction.
Among the numerous judgments from the Supreme Administrative Court on this question, the following is cited from the judgment issued in the case already referenced above, in which it is stated:
"The concept of "property (urban) with residential allocation" was not defined by the legislator. Neither in Law No. 55-A/2012, which introduced it, nor in the Urban Property Code, to which No. 2 of Article 67 of the Stamp Duty Code (also introduced by that Law), makes reference for subsidiary purposes. And it is a concept which, probably due to its imprecision – a fact all the more serious given that it is in function of it that the scope of objective incidence of the new taxation is defined – had a short life, since it was abandoned when Law No. 83-C/2013, of 31 December, the State Budget Law for 2014, came into force, which gave new wording to that Entry No. 28 of the General Table, and which now defines its scope of objective incidence through the use of concepts that are legally defined in Article 6 of the Urban Property Code.
This amendment – to which the legislator did not attribute an interpretive character, nor does it appear to us that it did –, merely makes unambiguous for the future that land for construction whose building, authorized or foreseen, is for habitation is encompassed in the scope of Entry 28.1 of the General Table of Stamp Duty (provided that the respective tax patrimonial value is equal to or greater than €1 million), clarifying nothing, however, in relation to past situations (assessments from 2012 and 2013), such as the one at issue in the present proceedings.
Now, as to these, it does not appear possible to adopt the interpretation of the respondent, since it does not unambiguously result either from the letter or from the spirit of the law that the intention thereof was, from the outset, to encompass in its scope of objective incidence land for construction for which authorization or provision has been made for the construction of residential buildings, as now unambiguously results from Entry 28.1 of the General Table of Stamp Duty.
From the letter of the law nothing unambiguous results, moreover, since the law itself, by using a concept that it did not define and that also was not defined in the statute to which it made reference for subsidiary purposes, unnecessarily lent itself to ambiguities, in a matter – tax incidence – in which certainty and legal security should also be paramount concerns of the legislator.
And from its "spirit", ascertainable in the explanatory memorandum of the bill that is the origin of Law No. 55-A/2012 (…) nothing more results than the concern to raise new tax revenue, on sources of wealth "spared" in the past from the reach of the Tax Authority more than labor income, particularly income from capital, securities gains and property, reasons which make no relevant contribution to the clarification of the concept of "properties (urban) with residential allocation," since they treat it as settled, without any concern to clarify it. Such clarification will, however, have emerged (…), when the bill was presented and discussed in Parliament, in the words of the State Secretary of Fiscal Affairs, who apparently stated explicitly that: «The Government proposes the creation of a special tax on high-value residential urban properties. It is the first time in Portugal that a special tax is created on high-value properties intended for habitation. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to homes worth equal to or greater than €1 million" (…) from which it is gathered that the reality to be taxed in view, is, after all, and notwithstanding the terminological imprecision of the law, "properties (urban) for habitation," in current language "homes," and not other realities.
The fact that it may be considered that in determining the tax patrimonial value of urban properties classified as land for construction account should be taken of the allocation that the building authorized or foreseen for it will have for determination of the respective value of the area of implantation (see Nos. 1 and 2 of Article 45 of the Urban Property Code), does not determine that land for construction can be classified as "properties with residential allocation," since "residential allocation" always appears in the Urban Property Code referred to "buildings" or "constructions," existing, authorized or foreseen, since only these can be inhabited, which is not the case with land for construction, which do not, in themselves, have conditions for this, not being capable of being used for habitation unless and until a building authorized and foreseen for them is erected thereon (but in that case they will no longer be "land for construction" but another species of urban property – "residential," "commercial, industrial or for services" or "other" – Article 6 of the Urban Property Code).
It would indeed be strange if the determination of the scope of the norm of objective tax incidence of Entry No. 28 of the General Table of Stamp Duty were, after all, found in the norms for determining the tax patrimonial value of the Urban Property Code, and that the terminological imprecision of the legislator in the wording of that rule was, in fact, elucidated and finally clarified through an indirect and ambiguous reference to the allocation coefficient established by the legislator in relation to built properties (Article 41 of the Urban Property Code).
Thus, given that land for construction – regardless of the type and purpose of the building that will or could be erected on it – does not satisfy, by itself, any condition to be licensed as such or for it to be defined as habitation being its normal destination, and given that the norm of incidence of Stamp Duty refers to urban properties with "residential allocation," without any specific concept being established for the purpose, it cannot be inferred therefrom that the same contains a future potentiality, inherent to a distinct property that may possibly be built on the land.
It is concluded therefore, in conformity with what was decided in the judgment under appeal, that, resulting from Article 6 of the Urban Property Code a clear distinction between urban properties "residential" and "land for construction," the latter cannot be considered as "properties with residential allocation" for purposes of Entry No. 28.1 of the General Table of Stamp Duty, in its original wording, as given to it by Law No. 55-A/2012, of 29 October.".
Relying on this jurisprudence, which is fully accepted here, it is concluded in favor of the claim regarding the illegality of Assessments Nos. 2014…, 2014 …, 2014…, 2014.. and 2014…, relating to properties classified as land for construction.
Question of Applicability of Entry 28.1 of TGIS to Property Classified as "Green Areas"
As to the property described as "Green Areas", registered under registry entry … of the Parish … – Setúbal, in which the Claimant is owner of a 1/104 share, the same comprises a swimming pool, tennis court, support house and garden.
While it is true that the property in question may be a common area of a set of residential buildings, the fact is that it is possible to separate it from that set of residential buildings, which, moreover, is proven by its description in the property register and its perfectly autonomous property registration.
And regardless of its geographic location and/or its possible integration in a set of residential buildings, it is found that the property has capacity to have autonomy, physical and economic, in relation to the same.
The owners of the property (in this case, in a co-ownership regime) may exploit the same, directly or indirectly, provided that the respective legal provisions eventually applicable are met.
Additionally, and in the absence of knowledge of any encumbrance on the property, and even if it is a property integrated in a set of residential buildings, its owners may proceed to the disposal of their respective share in the urban property in question, autonomously and independently of any disposal of their individual property in a residential building, of which it will not, necessarily, be an integral part.
Now, the Tax Authority itself appears to accept such autonomy, in that it clearly describes the property as "green areas". Thus, by a fortiori argument, the justification adduced above regarding the inability of land for construction to be inhabited, is fully valid also in this situation, in which there exists an urban property that does not contain any building or structure that permits its normal use as a residence. The property will not be, nor in the future – maintaining the current circumstances –, capable of being licensed for habitation, by the simple fact that there is no physical reality that permits it.
In these terms, it must be concluded in favor of the claim for annulment of Assessment No. 2014…, relating to the property intended for leisure, described as "Green Areas", registered under registry entry … of the Parish … – Setúbal.
On the Right to Compensatory Interest
Confirmed the illegality of Assessments Nos. 2014…, 2014…, 2014…, 2014 …, 2014 … and 2014.., relating to properties classified as land for construction and to the property classified as green areas, for the reasons stated, and having the Claimant paid in full the tax relating to these assessments (1st installment), as well as the remaining installments, in accordance with the terms added to the file, the Claimant has the right, in conformity with Articles 24, No. 1, paragraph b) of RJAT and 100 of the General Tax Law, to reimbursement of the tax unduly paid, in the amount of €49,352.98 (1st installment) and other installments paid during the course of this proceeding.
As to compensatory interest, Article 43 of the General Tax Law stipulates that "compensatory interest is due when it is determined, in administrative claim or court challenge, that there was an error attributable to the services from which results payment of the tax debt in an amount superior to that legally due".
As to the existence, in the case, of an error attributable to the services, such error is considered verified, according to the uniform jurisprudence of the Supreme Administrative Court (see, to this effect, the judgments of the Supreme Administrative Court of 22-05-2002, Case No. 457/02; of 31.10.2001, Case No. 26167; of 2.12.2009, Case No. 0892/09) whenever they proceed with administrative claim or challenge of the assessment (in the same sense, the decision in arbitral proceeding 218/2013-T, already cited).
Therefore, the Respondent has the right to compensatory interest, in accordance with Art. 43, No. 1 of the General Tax Law and Art. 61, Nos. 2 and 5 of the Code of Administrative Court Procedure, on the amounts paid, counted from the date of the payments of unduly paid tax until its full reimbursement.
VI. DECISION
For the reasons stated, this Tribunal decides:
To annul the acts of assessment of Stamp Duty challenged by the Claimant with the numbers 2014…, 2014…, 2014…, 2014…, 2014… and 2014…, relating to properties classified as land for construction and green areas and other subsequent assessment acts, issued during the course of this proceeding;
To dismiss the claim for annulment of Assessment No. 2014…, relating to the property classified as residential urban property, registered under registry entry … of the Parish of Quarteira, for the reason that there is no evidence of the defect of violation of constitutional law;
To condemn the Tax Authority, in accordance with paragraph b) of No. 1 of Article 24 of RJAT, to restore the situation that would have existed if the annulled assessment acts had not been carried out, adopting the acts and operations necessary for the purpose, namely through:
The reimbursement of the tax unduly paid based on Assessment No. 2014…, in the amount of €32,595.78 and the payment of the corresponding compensatory interest;
The reimbursement of the tax unduly paid based on Assessment No. 2014…, in the amount of €4,011.94 and the payment of the corresponding compensatory interest;
The reimbursement of the tax unduly paid based on Assessment No. 2014…, in the amount of €4,923.98 and the payment of the corresponding compensatory interest;
The reimbursement of the tax unduly paid based on Assessment No. 2014…, in the amount of €3,644.68 and the payment of the corresponding compensatory interest;
The reimbursement of the tax unduly paid based on Assessment No. 2014…, in the amount of €4,078.94 and the payment of the corresponding compensatory interest;
The reimbursement of the tax unduly paid based on Assessment No. 2014…, in the amount of €97.36 and the payment of the corresponding compensatory interest.
Value of the Case: The value of the case is set at €175,724.02.
Costs: In accordance with Article 22, No. 4, of RJAT, the amount of costs is set at €3,672.00, in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the parties in the proportion of 5/6 by the Respondent and 1/6 by the Claimant.
Let this arbitral decision be registered and notification of it be made to the parties.
Lisbon, Administrative Arbitration Center, 13 December 2014.
The Arbitrator President
Manuel Luís Macaísta Malheiros
The arbitrator member
Ana Pedrosa Augusto
The arbitrator member
Nina Aguiar
DISSENTING OPINION
I voted against the majority on the question of the legality of the assessment relating to the property qualified by the tax administration as "green areas," because I consider, contrary to the majority opinion of the tribunal, that a common area of a set of residential properties should be treated on a par with a common area of a single residential property.
Indeed, if a taxpayer is the owner of a single-family home with a common area comprising a swimming pool, tennis court and support house (as is the case), that common area will be treated as residential urban property (Art. 4 of the Urban Property Code, read together with Art. 3 of that same code).
If, in that single residential property, the home represents 70% of the value of the property, and the common area represents 30% of the value of the property, Stamp Duty (if applicable) will apply in the same manner to the 70% represented by the building and to the 30% represented by the common area. Moreover, the value of the common area will be computed for purposes of determining the incidence of Stamp Duty.
The same should occur if the common area serves a set of properties, since the substance of the facts is exactly the same.
I consider that the autonomous property registration of the common area does not contribute in any way to alter its qualification as residential urban property, and does not imply recognition of a different classification by the tax administration, since that autonomous registration is only and exclusively due to the circumstance that it is the subject of co-ownership, which makes necessary the property autonomization. That is, property autonomization is a necessary consequence of a merely formal aspect, which has nothing to do with the economic function of the property.
I also do not agree with the argument that the property is not residential because "regardless of its geographic location and/or its possible integration in a set of residential buildings," it has "capacity to have autonomy, physical and economic, in relation to the same," and this because "the owners of the property may exploit the same, directly or indirectly". Also in the case of a common area of a single-family home, the common area can have "autonomy, physical and economic" in relation to the built portion and also in that case the owner could give the property a separate allocation, "provided that the respective legal provisions eventually applicable are met". But then the property will necessarily be reclassified in accordance with the commercial or other function it then assumes. In this case, the property – registered autonomously because it is in co-ownership and only for that reason – is not classified as property with commercial or industrial allocation, so it has no other economic function than that of a residential common area.
If the owners of the property in question proceed to the separate disposal of their share in the property, the purchaser will acquire nothing more than an ideal portion in a property that has the function of a common area of a residential property, and which will not cease to have that function by virtue of the disposal.
Finally, we also cannot agree with the argument that the property, being qualified as "green areas," does not have capacity to be inhabited ("just like land for construction"), by the simple fact that, being a common area of a set of residential properties, the property is already inhabited. Indeed, a common area of a single-family home, comprising a garden, swimming pool and tennis court, is inhabited, in the same manner that a balcony, a terrace, an attic or a garage of a residential property is inhabited.
In summary, I consider that the reasoning on which this part of the decision is based gives preference to a formal aspect – the property autonomization required, itself also by another formal aspect, which is the existence of a co-ownership situation – over the substance of the property situation, which is that of a common area of a set of residential properties.
Lisbon, 13 January 2015
Nina Aguiar
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Text prepared on computer, in accordance with No. 5 of Article 131 of the Code of Civil Procedure, applicable by reference of paragraph e) of No. 1 of Article 29 of Decree-Law No. 10/2011, of 20/01.
The wording of this decision follows old Portuguese spelling conventions.