Stamp Tax on Urban Properties in Total Ownership: Summing VPT of Independent Units Under Verba 28.1 TGIS (CAAD 494/2015-T)

ARBITRAL DECISION

I. REPORT

1. On 28 July 2015, the commercial company A…, Lda., NIPC …, with registered office at …, Lot…, …, …, … , (hereinafter, Claimant), filed a petition for the constitution of an arbitral tribunal, under the combined provisions of articles 2, no. 1, paragraph a), and 10, nos. 1, paragraph a), and 2, of Decree-Law no. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters (hereinafter, abbreviated RJAT), as amended by article 228 of Law no. 66-B/2012, of 31 December, seeking a declaration of illegality and annulment of the Stamp Tax assessments [Item 28.1 of the General Table of Stamp Tax (hereinafter, TGIS)] relating to the year 2014 and to the urban property registered under article … in the urban property register of the Union of Parishes of …, … and …, municipality of ..., district of Lisbon, property of the Claimant, subject of the collection notices bearing nos. 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015… and 2015…, relating to the first instalment, in the total amount of € 3,937.84, and with nos. 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015… and 2015…, relating to the second instalment, in the total amount of € 3,937.73, with the total value of the tax levy being € 11,813.30.

The Claimant submitted 3 (three) documents and called one witness, not having requested the production of any other evidence.

The Respondent is the AT – Tax and Customs Authority (hereinafter, Respondent or AT).

1.1. In essence and in brief summary, the Claimant alleged the following (which we mention mostly by transcription):

• It is the owner and legitimate proprietor of an urban property, in individual ownership, divided into three blocks, comprised of 18 fractions intended for housing (6 in each of the blocks), 15 retail shops and 2 divisions intended for services, all with independent use;

• All the divisions of that property were subject to individual assessment, in accordance with and for the purposes of the provisions of the IMI Code, and each of the divisions intended for housing was assigned tax property values below € 70,000.00;

• On 20 March 2015, the AT assessed Stamp Tax relating to the year 2014 and concerning each of the said divisions allocated to housing, in the total amount of € 11,813.30;

• The Claimant proceeded to timely payment of the 1st tax instalment, in the total amount of € 3,937.84, and of the 2nd tax instalment, in the total amount of € 3,937.73;

• The AT considered that the Claimant is a taxpayer of Stamp Tax, item 28.1 of the TGIS, by being the owner of that urban property with a tax property value of € 1,181,330.00, a value which it arrived at through the sum of the values of the various divisions allocated to housing;

• For the purposes of tax liability or otherwise to Stamp Tax, the AT cannot proceed to sum the values of the divisions of which a given taxpayer is the owner in a property, as the Stamp Tax should apply to properties whose property value exceeds the amount of 1 million euros, which is not the case for any of the divisions with independent use held by the Claimant;

• Although the property is not established in the regime of horizontal ownership, it should be for purposes of tax liability or otherwise to Stamp Tax, treated as such, since all the divisions constitute true autonomous fractions, by being divisions with independent use;

• It does not result from the combined analysis of arts. 2 to 6 of the IMI Code that any distinction is made between properties established in horizontal or full ownership, and no reason is discerned for not including in the definition of property contained in no. 1 of art. 2 of the IMI Code the divisions with independent use of properties established in full ownership;

• The interpretation made by the AT is not in accordance with law and the Constitution, by violation of the principle of equality (art. 13 of the CRP), as well as the provisions of art. 104, no. 3, of the CRP;

• The disputed assessment acts are illegal, by violating the tax liability rule provided for in item 28 of the TGIS.

The Claimant concludes its initial pleading by petitioning the following:

"1 – The declaration of illegality and consequent annulment of the tax assessment acts for Stamp Tax on real property, in the amount of 11,813.30€, as well as the annulment of the respective payment slips relating to the first and second instalments already issued, and third instalments, if issued.

2 – The condemnation of the respondent to return all amounts paid, plus interest accrued, from the date of payment of the assessments until the actual reimbursement of the said amounts."

1. The petition for constitution of an arbitral tribunal was accepted and automatically notified to the AT on 14 August 2015.

2. The Claimant did not proceed to appoint an arbitrator, therefore, under the provisions of no. 1 of article 6 and paragraph a) of no. 1 of article 11 of the RJAT, the President of the CAAD Deontological Council appointed the signatory as arbitrator of the singular Arbitral Tribunal, who communicated acceptance of the office within the applicable period.

3. On 28 September 2015, the parties were duly notified of this appointment, having shown no willingness to refuse the appointment of the arbitrator, in accordance with the combined provisions of article 11, no. 1, paragraphs b) and c), of the RJAT and articles 6 and 7 of the Deontological Code of CAAD.

4. Thus, in conformity with the provision of paragraph c) of no. 1 of article 11 of the RJAT, the singular Arbitral Tribunal was constituted on 13 October 2015.

5. On 12 November 2015, the Respondent, duly notified to that effect, submitted its Reply in which, apart from raising objections, specifically challenged the arguments put forward by the Claimant and concluded by submitting the present action to be without merit, with its consequent dismissal of the claim.

The Respondent submitted no documents, nor requested the production of any other evidence.

On the same occasion, the Respondent submitted to the record the respective administrative file (hereinafter, abbreviated PA).

6.1. In essence and also briefly, it is important to extract the most relevant arguments on which the Respondent based its Reply (which we mention mostly by transcription):

The Respondent begins by invoking the exception of lack of jurisdiction of the Arbitral Tribunal as to the subject matter, deploying the following argument:

• The Arbitral Tribunal lacks jurisdiction ratione materiae, in view of the provision of art. 2 of the RJAT, to consider the legality of an assessment act installment, which is not in itself any tax act, there being no doubt whatsoever, including by the value of the case and all documents attached to it, that the Claimant challenges exclusively the collection notices that constitute the 1st and 2nd instalments of the tax relating to the property;

• Whereby there is manifest lack of jurisdiction ratione materiae of the Arbitral Tribunal, the exception invoked should be judged as well-founded.

Subsequently, the Respondent enters into its defence by way of substantive rebuttal, arguing as follows, which we highlight here:

• What is at issue here are assessments that result from the direct application of the legal norm, which is expressed in objective elements, without any subjective or discretionary consideration;

• The concept of property is defined in article 2, no. 1, of the IMI Code, and it is provided in its no. 4 that, in the regime of horizontal ownership, each autonomous fraction is deemed to constitute a property, whereby it results from the analysis of the normative provision that a "property in full ownership with storeys or divisions capable of independent use" is, unequivocally, different from an immovable in the regime of horizontal ownership, constituted by autonomous fractions, that is, several properties;

• As for the assessment of IMI, where it concerns properties in full ownership, the tax property value serving as the basis for its calculation will unquestionably be the tax property value which the Claimant defines as "overall value of the property";

• The assessment being correct and the tax being due, no compensatory interest is due, primarily because there is no error attributable to the Services, which merely acted, as they should, in strict compliance with the legal norm;

• The thesis defended by the Claimant lacks legal foundation, because although the assessment of Stamp Tax, in the situations provided for in item no. 28.1 of the TGIS, proceeds in accordance with the rules of the IMI Code, the truth is that the legislator provides for the aspects that require the necessary adaptations, namely, those where, as is the case with properties in full ownership, although with storeys or divisions capable of independent use (although IMI is assessed in relation to each part capable of independent use) for purposes of Stamp Tax what is relevant is the property as a whole since the divisions capable of independent use are not deemed to be property, but only the autonomous fractions in the regime of horizontal ownership, as provided for in no. 4 of art. 2 of the IMI Code;

• The defect of violation of law by error as to the legal presuppositions should be judged as without merit, maintaining in the legal order the assessments now challenged for constituting a correct application of law to the facts;

• It is not discernible how the taxation at issue could have violated the principle of equality, as the provision of item 28.1 of the TGIS does not constitute a violation of this principle, there being no discrimination in the taxation of properties established in horizontal ownership and properties in full ownership with storeys or divisions capable of independent use, or between properties with residential allocation and properties with other allocations,

• Horizontal ownership and vertical ownership are differentiated legal institutions, and the legislator may subject to a different legal tax framework, hence discriminatory, properties in the regime of horizontal and vertical ownership, in particular, by benefiting the legally more evolved institution of horizontal ownership, without such discrimination should be considered necessarily arbitrary;

• It cannot be concluded that there is alleged discrimination in violation of the principle of equality when, in fact, we are dealing with distinct realities, valued by the legislator in a different way;

• In these terms, the collection notices for Stamp Tax, item 28 of the TGIS, 1st and 2nd instalments, now challenged, remain entirely valid and lawful.

1. Notified to that effect, the Claimant made submissions regarding the matter of exception alleged by the Respondent in its Reply, contending for the dismissal of the exception that was raised.

On the same occasion, the Claimant waived the examination of the witness that it had called.

1. On 23 November 2015, an order was issued dispensing with the holding of the meeting referred to in article 18 of the RJAT.

2. On 25 November 2015, the Claimant came to request an extension of the claim, in that, following the submission of the petition for arbitral decision, it had proceeded to payment of the third instalment, in the total amount of € 3,937.73, of Stamp Tax relating to the assessments identified above and subject of the collection notices bearing nos. 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015… and 2015….

3. Notified to that effect, both Parties submitted written submissions, in which they reiterated the positions previously assumed in their respective pleadings.

II. CASE MANAGEMENT

The Arbitral Tribunal was regularly constituted.

The case is not affected by any nullities.

The parties have legal standing and capacity, are duly represented, and are proper parties.

The joinder of claims is admitted – there are at issue various Stamp Tax assessment acts, with the annulment of each of them being sought – in light of the fact that the success of the claims formulated by the Claimant depends essentially on the consideration of the same circumstances of fact – rooted in the Claimant's ownership of an urban property in vertical ownership with storeys or divisions capable of independent use – and the interpretation and application of the same principles or rules of law – in the present case, of item 28.1 of the TGIS (cf. article 3, no. 1, of the RJAT).

The extension of the claim is admitted, as the presuppositions for such provided for in art. 265, no. 2, of the CPC are met, applicable ex vi art. 29, no. 1, paragraph e), of the RJAT, in that the requested extension constitutes evident development of the original claim, in which, moreover, reference was already made to "third instalments" of Stamp Tax.

II.1. LACK OF JURISDICTION OF THE ARBITRAL TRIBUNAL AS TO THE SUBJECT MATTER

The Respondent raised this exception, invoking the following core argument:

"The Arbitral Tribunal lacks jurisdiction ratione materiae, in view of the provision of art. 2 of the RJAT, to consider the legality of an installment of the assessment act, which is not in itself any tax act, there being no doubt whatsoever, including by the value of the case and all documents attached to it, that the Claimant challenges exclusively the collection notices that constitute the 1st and 2nd instalments of the tax [of Stamp Tax, relating to the year 2014,] relating to the property."

The Claimant made submissions on this exception, contending for its dismissal, in the following terms that it is important to highlight here:

"The claimant throughout its procedural pleading clearly contends for the illegality of the tax assessment acts for Stamp Tax relating to the year 2014, of the 18 divisions for housing of the property in question.

See to that effect, in particular, the content of art. 8 of the p.i., in which the claimant refers to and lists the 18 assessment notices and their amounts; and fundamentally the content of the claim formulated by the claimant.

The claimant asks the Tribunal for the declaration of illegality and consequent annulment of the tax assessment acts for Stamp Tax on real property, in the total amount of 11,813.30€.

And also consequently the annulment of the respective payment slips relating to the first and second instalments already issued, and third instalments, if issued.

Further requesting the return of all amounts paid plus legal interest."

Bearing in mind that the scope of the tribunal's subject matter jurisdiction is of public order and its consideration precedes that of any other matter (art. 13 of the CPTA applicable ex vi art. 29, no. 1, paragraph c), of the RJAT) and that the violation of the rules of subject matter jurisdiction results in the absolute lack of jurisdiction of the tribunal, which is of ex officio knowledge (art. 16, nos. 1 and 2, of the CPPT applicable ex vi art. 29, no. 1, paragraph a), of the RJAT), it is important to consider, primarily, the dilatory exception raised by the Respondent regarding the lack of jurisdiction of the arbitral tribunal.

The jurisdiction of tax arbitral tribunals constituted under the aegis of CAAD is, from the outset, limited to the matters indicated in article 2, no. 1, of the RJAT, which provides as follows:

"1 - The jurisdiction of arbitral tribunals comprises the consideration of the following claims:

a) The declaration of illegality of acts of tax assessments, self-assessments, withholdings at source and payments on account;

b) The declaration of illegality of acts of determination of taxable income where it does not give rise to the assessment of any tax, of acts of determination of taxable matter and of acts of determination of tax property values."

With respect to the assessment of Stamp Tax, resulting from the application of the tax liability rule contained in item 28.1 of the TGIS, no. 7 of article 23 of the Stamp Tax Code (CIS), as amended by article 3 of Law no. 55-A/2012, of 29 October, provides that: "Where the tax is owed by the situations provided for in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central departments of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the IMI Code". Now, the expression "the tax is assessed annually" indicates that a single annual assessment is made, although it may be divided, for purposes of payment – and only for this purpose –, in instalments, as results from the provisions of arts. 44, no. 5 of the CIS and 120 of the IMI Code.

Thus, there are not as many assessments as there are instalments in which the tax levy must be paid, for the division of an assessment into instalments is merely a revenue collection technique. As is stated in the arbitral decision delivered in case no. 205/2013-T (available at www.caad.org.pt/tributario/decisoes), "from the fact that the value of the [Stamp Tax] assessment can be paid in several instalments, it does not follow that there are three assessments (…) it being, differently, an assessment that can be paid in several instalments".

Indeed, as has been repeatedly stated in various decisions of arbitral tribunals constituted under the aegis of CAAD (in this sense, among others, the decisions delivered in cases nos. 205/2013-T, 408/2014-T, 726/2014-T, 736/2014-T, 90/2015-T and 137/2015-T, available at www.caad.org.pt/tributario/decisoes), "the assessment of tax is only one and only it will constitute an injurious act, capable of being the object of a single challenge, whereby, when the law provides for its payment in several instalments, staggered over time, the annulment of the tax act will have consequences for all of them, making the obligation to pay cease or imposing the obligation to return the amounts of tax already paid by the taxpayer, as well as compensation of the situation through the payment of compensatory interest, all at the charge of the Tax Authority.

What the law does not provide for, neither in the arbitral sphere, nor in the sphere of judicial challenge proceedings, is the claim for annulment of payment of isolated tax instalments, since such effect will only result from the annulment of the tax assessment act which, as we have seen, consists of the quantification of the total amount to be paid and which is only and exclusively a single tax act." (arbitral decision delivered in case no. 90/2015-T).

That said. Examining the petition for arbitral decision, with a view to clarifying what is the object of this case, it appears abundantly clear that the Claimant aims, with its institution, at the declaration of illegality and consequent annulment of the tax assessment acts for Stamp Tax relating to the year 2014 and concerning the aforesaid property, indicating, accordingly, as the value of the economic benefit of the claim the total value of those Stamp Tax assessments (€ 11,813.30).

Thus, although the Claimant associates the tax assessment acts with the three Stamp Tax instalments, proceeding to submit the respective collection notices, the fact is that it does not limit the object of the petition for arbitral decision to any of the tax instalments in particular, but rather to the assessments of the tax considered in their overall account. Indeed, the Claimant concludes its initial pleading by petitioning "the declaration of illegality and consequent annulment of the tax assessment acts for Stamp Tax on real property, in the amount of 11,813.30€, as well as the annulment of the respective payment slips relating to the first and second instalments already issued and third instalments, if issued".

Thus, contrary to what the AT states, the object of the petition for arbitral decision are the tax assessment acts and not each of the Stamp Tax instalments individually considered.

In these terms, without need for further consideration, the exception of absolute lack of jurisdiction of the Arbitral Tribunal, as to the subject matter, to consider the claim formulated in this case is judged to be without merit.

There are no other exceptions or preliminary matters that prevent the knowledge of the merits and which it is proper to know.

III. GROUNDS

III.1. ON THE FACTS

§1. PROVEN FACTS

With respect to the matter of fact, it is important, first and foremost, to emphasize that the Tribunal does not have to pronounce on everything that was alleged by the parties, but rather has the duty to select the facts that matter for the decision and to distinguish the proven facts from the unproven (cf. article 123, no. 2, of the CPPT and article 607, nos. 3 and 4, of the CPC, applicable ex vi article 29, no. 1, paragraphs a) and e), of the RJAT). In this manner, the facts pertinent to the judgment of the case are chosen and delimited according to their legal relevance, which is established in view of the various plausible solutions of the legal issue(s).

In this framework, the following facts with relevance to the decision are considered proven:

a) In the year 2014, the Claimant was the owner of the urban property, in full ownership with storeys or divisions capable of independent use, located at …, Blocks…, …, Union of Parishes of …, …, municipality of ..., district of Lisbon, registered in the respective urban property register under article… . [cf. Doc. no. 1 attached to P.I. (factuality accepted by agreement)]

b) The said urban property is comprised of 5 (five) storeys and 35 (thirty-five) storeys or divisions capable of independent use, of which 18 (eighteen) are allocated to housing, and was assigned, in 2014, a total tax property value of € 1,540,550.00 [cf. Doc. no. 1 attached to P.I. (factuality accepted by agreement)].

c) Each of the storeys or divisions capable of independent use that make up that same urban property has its own tax property value, determined in accordance with the IMI Code, and the storeys or divisions with independent use allocated to housing were assigned, in 2014, the following unit tax property values, all below € 1,000,000.00 [cf. Doc. no. 1 attached to P.I. (factuality accepted by agreement)]:

d) On 20 March 2015, the AT made the following Stamp Tax assessments, in the total amount of € 11,813.30, all relating to the year 2014 and concerning the storeys or divisions with independent use allocated to housing, comprised in the urban property identified above in proven fact a) [cf. fls. 9 of PA (factuality accepted by agreement)]:

e) As a result of the Stamp Tax assessments referred to in proven fact d), the Claimant was notified of the single collection documents that follow, in the total amount of € 11,813.30, [cf. Docs. nos. 2 and 3 attached to P.I., document attached to the request of 25/11/2015 and fls. 10 of PA (factuality accepted by agreement)]:

f) The Stamp Tax assessments detailed in proven fact d) resulted from the application of item 28.1 of the TGIS to each and every storey or division with independent use allocated to housing referred to therein, comprised in the urban property identified in proven fact a) [cf. Docs. nos. 2 and 3 attached to P.I. and document attached to the request of 25/11/2015 (factuality accepted by agreement)].

g) On 27 April 2015, the Claimant proceeded to timely and full payment of the amounts corresponding to the 1st instalment of the said Stamp Tax assessments, in the total amount of € 3,937.84. [cf. Doc. no. 2 attached to P.I. (factuality accepted by agreement)].

h) On 15 July 2015, the Claimant proceeded to timely and full payment of the amounts corresponding to the 2nd instalment of the said Stamp Tax assessments, in the total amount of € 3,937.73. [cf. Doc. no. 2 attached to P.I. (factuality accepted by agreement)].

i) On 24 November 2015, the Claimant proceeded to timely and full payment of the amounts corresponding to the 3rd instalment of the said Stamp Tax assessments, in the total amount of € 3,937.73. [cf. document attached to the request of 25/11/2015 (factuality accepted by agreement)].

j) On 28 July 2015, the Claimant submitted the petition for constitution of an arbitral tribunal that gave rise to the present case – cf. information management system of CAAD.

§2. UNPROVEN FACTS

With relevance to the consideration and decision of the case, there are no facts that were not proven.

§3. REASONING AS TO THE MATTER OF FACT

With regard to the proven matter of fact, the Tribunal's conviction was based on the facts pleaded by the parties, whose correspondence to reality was not challenged, on the documents attached to the record and on the administrative file.

III.2. ON THE LAW

§1. THE ISSUE SUB JUDICE

The essential issue to be resolved on the merits of the dispute regarding the claim for declaration of illegality of the disputed Stamp Tax assessments concerns determining whether, for purposes of the tax liability rule in item 28.1 of the TGIS, in cases of a property in full ownership with storeys or divisions capable of independent use, regard should be had to the total value of the property resulting from the sum of the tax property values of the various storeys or divisions with residential allocation, as underlay the assessments at issue, or whether regard should be given instead to the tax property value of each storey or division with residential allocation, as the Claimant contends, with the consequent violation of law, by error in the legal presuppositions, of the disputed tax assessments.

In addition to the matter concerning this defect of violation of law, the Claimant also raises the issue of the unconstitutionality of item 28.1 of the TGIS, by violation of the principle of equality.

However, this issue will only be considered if and to the extent that the interpretation and implementation of the normative solution resulting from the said item involves the subsumption to its legal provision of the situation sub judice; if that does not occur, the consideration of the unconstitutionality of the rule in question does not assume procedural relevance for the resolution of the dispute.

Considering and deciding.

Article 4 of Law no. 55-A/2012, of 29 October, added to the General Table of Stamp Tax, appended to the Stamp Tax Code, approved by Law no. 150/99, of 11 September, item 28, which provides as follows (wording resulting from the amendment introduced by the State Budget Law for 2014 (cf. article 194 of Law no. 83-C/2013, of 31.12) and applicable to the present case):

"28 — Ownership, usufruct or right of superficies of urban properties whose tax property value appearing in the register, in accordance with the Municipal Property Tax Code (IMI Code), is equal to or exceeding € 1,000,000 — on the tax property value used for purposes of IMI:

28.1 — For residential property or land for construction where the buildings, whether authorized or planned, are for residential purposes, in accordance with the provisions of the IMI Code— 1%;

28.2 — For property, when the taxpayers that are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, listed in the order approved by the Minister of Finance — 7.5%."

As is emphasized in the decision delivered in case no. 518/2014-T (available at www.caad.org.pt/tributario/decisoes), "the references in item 28 of the TGIS to 'urban properties whose tax property value appearing in the register, in accordance with the Municipal Property Tax Code (IMI Code), is equal to or exceeding € 1,000,000' and to 'tax property value used for purposes of IMI' imply that this rule has a fundamentally cross-referential character, whereby the relevant regulatory content depends on the normativity to which it refers contained in the IMI Code.

In fact, both as to the objective scope of tax liability, with the cross-reference to the 'tax property value appearing in the register, in accordance with the Municipal Property Tax Code', and as to the determination of the taxable amount, with the cross-reference to the 'tax property value used for purposes of IMI', the regulatory content of this item 28 of the TGIS results from a delegation – in accordance with a general cross-reference – to the set of regulations found in the IMI Code."

We have, then, that the IMI Code defines the concept of property, determines the various types of properties and identifies the species of urban properties.

Under article 2 of the IMI Code, "property is any parcel of land, including water, plantings, buildings and constructions of any nature incorporated therein or resting thereon, with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value".

No. 4 of the cited article 2 expressly provides that each autonomous fraction, in the regime of horizontal ownership, is deemed to constitute a property.

Properties are divided into rural (article 3), urban (article 4) or mixed (article 5), and urban properties are further subdivided into four species: residential; commercial, industrial or for services; land for construction and others (article 6).

In turn, no. 2 of article 6 of the IMI Code clarifies that "residential, commercial, industrial or for services are the buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal purpose each of these ends".

From the combined analysis of the aforesaid provisions, it is apparent that the IMI Code makes no distinction between properties established in the regime of horizontal ownership or full ownership. Indeed, although no. 4 of article 2 expressly refers to autonomous fractions of properties established in the regime of horizontal ownership as each constituting a property, the fact is that it does not exclude from such classification the divisions with independent use of properties established in the regime of full or vertical ownership.

And where the law has not made a distinction, the interpreter cannot do so.

Having thus analyzed the definition of property inherent in no. 1 of article 2 of the IMI Code, we discern no reason for not including therein the divisions with independent use of properties established in the regime of full ownership, as these constitute a parcel of land that forms an integral part of the patrimony of a natural or legal person and has economic value.

It should be noted that each of these divisions or fractions is assigned a tax property value.

It being established that divisions with independent use of properties established in the regime of full ownership should be classified as properties, in accordance with and for purposes of the IMI Code, it appears evident that each of these divisions, when that is the purpose to which they are dedicated, constitute residential properties, which moreover is a matter on which various arbitral jurisprudence has already focused and to which reference will be made below.

In the case at issue, each of the divisions of the urban property in question is capable of independent use, and 18 (eighteen) of these divisions are allocated to housing (cf. proven fact b)).

Indeed, had the divisions in the present case not been individually classified as "properties", it would make no sense or logic to prepare, in this case, an assessment of Stamp Tax for each of these units.

It is true that the subsidiary application of the IMI Code could suggest the idea that only autonomous fractions, in the regime of horizontal ownership, are deemed to be properties under the provision of article 2, no. 4, of the IMI Code.

However, if one considers the wording of the cited article 2, no. 4, it is immediately apparent that the requirement for the establishment of the regime of horizontal ownership is necessary only for purposes of IMI taxation.

It should further be noted that, under the provision of article 12, no. 3, of the IMI Code, "each storey or part of the property capable of independent use is considered separately in the property register entry, which also lists the respective tax property value".

Moreover, with respect to the spirit of the law, it is important to note that, as has been stated in the most recent arbitral jurisprudence and which is followed here quite closely, the introduction of item 28 into the TGIS had as its objective the taxation of urban properties of high value with residential allocation, taxing the wealth, evidenced in ownership, usufruct or right of superficies, of luxury urban properties, or their autonomous fractions or divisions, with residential allocation (cf. the decisions delivered in cases nos. 50/2013-T, 132/2013-T, 132/2013-T, 181/2013-T, 182/2013-T, 183/2013-T, 185/2013-T, 100/20114-T, 238/2014-T, 290/2014-T, 428/2014-T, 518/2014-T, 707/2014-T and 756/2014-T, all available at www.caad.org.pt/tributario/decisoes).

Indeed, as results from the analysis of the discussion of the Bill no. 96/XII in the Assembly of the Republic (DAR, I Series, no. 9/XII/2, of 11.10.2012), the grounds for the measure designated as special tax on residential urban properties of higher value is based on the invocation of the principles of social equity and tax justice, calling upon the holders of properties of high value intended for housing to contribute in a more intensive manner, by imposing the new special tax on houses with value equal to or exceeding one million euros.

Now, if the objective of the law was to adapt taxation under Stamp Tax to the taxpaying capacity of taxpayers, it does not appear that any relevance would be attributed to the distinction between properties established in the regime of horizontal or vertical ownership.

Manifestly, it is not thereby that the greater or lesser taxpaying capacity is revealed, all the more so because, as is known, horizontal ownership is a relatively recent legal institution, and it is certain that a large part of old properties are not even established in this regime, although in practice they function as such.

Now, the principle of prevalence of substance over form requires that the AT should value material reality. And in the case at issue, material reality consists in the absence of any substantial difference between the divisions owned by the Claimant and the fractions of a property established in horizontal ownership.

Or, to put it another way: being the establishment of horizontal ownership merely a legal operation and not a factual one, no reasons can be discerned for differences in taxation in this regard, in that what will always be relevant is the individual value of each fraction, whether or not the property is established in the regime of horizontal ownership.

In light of all that has been set forth, there can be no doubt that the tax property value relevant for purposes of the tax liability rule of Stamp Tax in cases of properties established in the regime of full ownership, comprised of various divisions with independent use, some of which have residential allocation, is the tax property value of each division of the property and not, as argued by the Respondent, the overall tax property value of the property, corresponding to the sum of all tax property values of the divisions that compose it.

Thus, in conclusion, with regard to properties in full ownership with storeys or divisions capable of independent use, regard must be had exclusively to the tax property value proper to each storey or division with residential allocation, as it appears in the register, for purposes of the application of item 28.1 of the TGIS.

It appears to us that this normative meaning attributed to item 28.1 of the TGIS is that which best accords with the principles of equality and taxpaying capacity (cf. arts. 13 and 104, no. 3, of the CRP), for, from the perspective of taxpaying capacity, there is no relevant difference between the ownership of a property with independent units with certain tax property values proper to each and a property in horizontal ownership with autonomous fractions with the same tax property values proper to each.

Furthermore, this interpretation proves "particularly compelling in a case such as the present in which the property in question has parts capable of independent use with residential allocation and parts capable of independent use with allocation to services and commerce (…).

In such circumstances, neither the register nor that which is used for purposes of IMI contains a 'tax property value' that corresponds to the sum of the tax property values of the divisions of independent use with residential allocation (…). In fact, what the IMI Code establishes, according to the cited art. 7, no. 2, paragraph b), and appears in the register (…) is that the 'value of the property' is 'the sum of the values of its parts', therefore, of all of its parts, whatever their allocation.

Consequently, the 'tax property value of the property – total subject to tax' (…) on which the disputed assessments are based does not have correspondence with the legal category enshrined in item 28 of the TGIS of 'tax property value appearing in the register, in accordance with the Municipal Property Tax Code'.

Let it be insisted, in fact, that the IMI Code only refers to, as results from art. 7, no. 2, paragraph b) cited above, the 'value of the property' as the sum of all of its parts subject to independent valuation, thus not justifying configuring partial values of the property by having regard only to certain economically independent parts of the property (those which have residential allocation), while disregarding the parts with other allocations (for commerce, industry or for services). In such context, there is not constituted the value of the property as provided for in art. 7, no. 2, paragraph b) of the IMI Code, but rather the value of the set of certain parts of the property, a value which is not subject to any provision under the Municipal Property Tax Code (nor is it a tax property value used for purposes of IMI).

It is therefore advanced that it is considered that in the disputed assessments there is the adoption, for purposes of determining the tax liability of item 28.1 of the TGIS, of a tax property value that finds no basis in law." (arbitral decision delivered in case no. 518/2014-T, available at www.caad.org.pt/tributario/decisoes).

In this framework, bearing in mind the proven factual circumstances, it is imperative to recognize that none of the storeys of independent use with residential allocation of the property in question, not established in the regime of horizontal ownership, has a tax property value equal to or exceeding € 1,000,000.00.

Consequently, since the tax property value of each of the said storeys of independent use with residential allocation is below that value to which item 28.1 of the TGIS refers, it follows that such storeys do not fall within the tax liability rule contained in that item 28.1, whereby the disputed assessments are affected by the defect of violation of law, by error in the legal presuppositions regarding the provision in item 28.1 of the TGIS, which entails the declaration of their illegality and consequent annulment.

That being said. Given the success of the requested declaration of illegality of the disputed assessments, by reason of error in the legal presuppositions, the consideration of the issue raised by the Claimant regarding the unconstitutionality of item 28.1 of the TGIS becomes unnecessary and superfluous.

§2. ON COMPENSATORY INTEREST

The Claimant also petitions the condemnation of the AT to reimbursement of the tax paid unduly, in the amount of € 11,813.30, plus the respective compensatory interest.

Article 24, no. 1, paragraph b), of the RJAT provides that the arbitral decision on the merits of the claim shall be binding on the tax authority from the end of the period provided for appeal or challenge, and the latter must, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the period provided for spontaneous execution of the judgments of judicial tax tribunals, restore the situation that would have existed by adopting the necessary acts and operations to that effect, which must be understood, in conformity with the provision in art. 100 of the General Tax Law (LGT), applicable ex vi paragraph a) of no. 1 of art. 29 of the RJAT, as including the payment of compensatory interest, in accordance, moreover, with the provision in no. 5 of the same art. 24 of the RJAT.

Article 43, no. 1, of the LGT provides that "compensatory interest is due when it is determined, in a gracious complaint or judicial challenge, that there was an error attributable to the services which resulted in payment of the tax debt in an amount exceeding that legally due", and no. 4 of art. 61 of the CPPT provides that "if the decision recognizing the right to compensatory interest is judicial, the period for payment is counted from the start of the period of its spontaneous execution".

In the present case, it is apparent that the illegality of the disputed assessments, by error in the legal presuppositions, is attributable to the AT by, in those tax assessments, having proceeded to the incorrect interpretation and application of the provision contained in item 28.1 of the TGIS, whereby the Claimant has the right, in accordance with the provision in arts. 24, no. 1, paragraph b), of the RJAT and 100 of the LGT, to the reimbursement of the amount of tax unduly paid – € 11,813.30 – and to compensatory interest, in accordance with the provision in arts. 43, no. 1, of the LGT and 61 of the CPPT, calculated from the dates of payment of the respective instalments – 27.04.2015, 15.07.2015 and 24.11.2015 (cf. proven facts g), h) and i)) –, at the rate resulting from no. 4 of art. 43 of the LGT, until the date of processing of the respective credit note, in which they are included.

IV. DECISION

In the terms set forth, this Arbitral Tribunal decides:

a) To judge the exception of absolute lack of jurisdiction of the Arbitral Tribunal, as to the subject matter, to be without merit;

b) To judge the petition for arbitral decision to be well-founded in its entirety and, consequently, to declare illegal and annul the Stamp Tax assessments challenged in the present case, in the total amount of € 11,813.30, relating to the year 2014 and to the urban property registered under article … in the urban property register of the Union of Parishes of …, …, municipality of ..., district of Lisbon;

c) To judge the petition for the condemnation of the Tax and Customs Authority to reimburse the Claimant the total amount of the tax unduly paid – € 11,813.30 –, plus compensatory interest in accordance with the law, from the dates on which the payments of the corresponding instalments were made – 27.04.2015, 15.07.2015 and 24.11.2015 – until the date of processing of the respective credit note, in which they are included, to be well-founded;

d) To condemn the Tax and Customs Authority to pay the costs of the case.

VALUE OF THE CASE

In accordance with the provision in arts. 306, no. 2, of the CPC, 97-A, no. 1, paragraph a), of the CPPT and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is set at € 11,813.30.

COSTS

Under article 22, no. 4, of the RJAT, the amount of costs is set at € 918.00 (nine hundred eighteen euros), in accordance with Table I appended to the Regulation of Costs in Tax Arbitration Proceedings, to be charged to the Tax and Customs Authority.

Lisbon, 3 February 2016.

The Arbitrator,

(Ricardo Rodrigues Pereira)