Stamp Tax on High-Value Construction Land Under Verba 28 TGIS – CAAD Arbitration 500/2014-T

ARBITRAL DECISION

CLAIMANT: A - ..., S.A. in representation of B - ... and others

RESPONDENT: Tax and Customs Authority

Arbitral Award[1]

The arbitrators Dr. José Poças Falcão (arbitrator-president), Prof. Dr. Maria do Rosário Anjos and Dr. Alberto Amorim Pereira, appointed by the Deontological Council of the Center for Administrative Arbitration to form the Arbitral Tribunal, constituted on 25 September 2014, agree as follows:

I - REPORT

A) The Parties and Constitution of the Arbitral Tribunal

1. B - .... ("B"), with TIN …, C. ("C"), with TIN …, D ("D"), with TIN …, and E – ... ("E"), with TIN …, all with registered office at Avenida … Lisbon, represented in the proceedings by the management company A - ..., S.A., with TIN … and likewise with registered office at Avenida … Lisbon, hereinafter designated "Claimant", filed the present arbitral petition pursuant to Article 2, n. 1, subsection a), and 10, n. 1 and 2, both of Decree-Law no. 10/2011, of 20 January on the Legal Regime of Arbitration in Tax Matters (RJAT) and Articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March and requested the constitution of a collective arbitral tribunal for decision of the present arbitral petition.

2. The Claimant files its petition with a view to declaring the illegality of 45 assessment acts for Stamp Duty, relating to the year 2013, issued by the Tax and Customs Authority pursuant to item 28.1 of the General Table of the Stamp Duty Code ("TGIS"), which it attached in annex to the arbitral petition. The challenged assessments concern the following:

a) Real property registered under matrix article …, of the parish …, municipality of … and district of Porto (cf. Documents 1 to 3);

b) Real property registered under matrix article …, of the parish …, municipality of … and district of Porto (cf. Documents 4 to 6);

c) Real property registered under matrix article …, of the union of parishes of … and …, municipality of … and district of Lisbon (cf. Documents 7 to 9);

d) Real property registered under matrix article …, of the union of parishes of … and …, municipality of … and district of Setúbal (cf. Documents 10 to 12);

e) Real property registered under matrix article …, of the union of parishes of … and …, municipality of … and district of Setúbal (cf. Documents 13 to 15);

f) Real property registered under matrix article …, of the union of parishes of … and …, municipality of … and district of Setúbal (cf. Documents 16 to 18);

g) Real property registered under matrix article …, of the union of parishes of … and …, municipality of … and district of Setúbal (cf. Documents 19 to 21);

h) Real property registered under matrix article …, of the union of parishes of … and …, municipality of … and district of Setúbal (cf. Documents 22 to 24);

i) Real property registered under matrix article …, of the parish of …, municipality of … and district of Porto (cf. Documents 25 to 27);

j) Real property registered under matrix article …, of the parish of …, municipality of … and district of Lisbon (cf. Documents 28 to 30);

k) Real property registered under matrix article …, of the parish of ..., municipality of ... and district of Lisbon (cf. Documents 31 to 33);

l) Real property registered under matrix article …, of the parish of ..., municipality of ... and district of Lisbon (cf. Documents 34 to 36);

m) Real property registered under matrix article …, of the parish of ..., municipality of ... and district of Lisbon (cf. Documents 37 to 39);

n) Real property registered under matrix article …, of the parish of …, municipality and district of Porto (cf. Documents 40 to 42);

o) Urban real property registered under matrix article …, of the parish of …, municipality of … and district of Funchal (Cf. Documents 43 to 45).

1. The challenged assessments, which are considered fully reproduced herein, are contained in documents nos. 1 to 45, attached in annex to the arbitral petition, filed on 23/07/2014. The Claimant concludes its arbitral petition by requesting the annulment of the disputed stamp tax assessments.

2. The petition for constitution of the Arbitral Tribunal was filed on 23/07/2014, and was accepted by the Illustrious President of CAAD and automatically notified to the Tax and Customs Authority. The Claimant opted not to designate an arbitrator, whereby, pursuant to the provision of n. 1, Article 6 of the RJAT, the undersigned were appointed by the Deontological Council of the Center for Administrative Arbitration as arbitrators of the collective Arbitral Tribunal.

3. The appointment was accepted and the parties, notified of the acceptance, did not refuse the designation, in the terms provided in subsections a) and b), of n. 1, Article 11, of the RJAT, combined with the provisions of Articles 6 and 7 of the Code of Deontology. Thus, in accordance with the provision in subsection c), of n. 1, Article 11, of Decree-Law no. 10/2011, of 20 January, with the wording introduced by Article 228, of Law no. 66-B/2012, of 31 December, the collective Arbitral Tribunal was constituted on 25 September 2014.

4. On 2/10/2014, the Respondent "AT" was notified, pursuant to the provision of Article 17 of the RJAT, to file a response within the legal period, pursuant to the provisions of n. 1 and 2, Article 17, of the RJAT. On 3/11/2014 AT attached its Response to the proceedings.

5. By arbitral order issued on 3/11/2014 the parties were notified of the waiver of the meeting provided for in Article 18 of the RJAT, as it is a matter exclusively of law, with no controversy regarding the facts, no exceptions whose examination by the tribunal was requested, and, finally, the waiver was requested by the ATA upon filing the response.

6. A period for filing arguments by the parties was set, which they filed on 14/11/2015. The proceedings proceeded to final decision. By order of 03/02/2015, the date initially set was amended, due to an oversight, fixing the date to render the arbitral decision by 24/03/2015.

B) ON THE PETITION FILED BY THE CLAIMANT

1. The Claimant files the present arbitral petition seeking to declare the illegality and consequent annulment of the Stamp Duty assessment acts, relating to the year 2013, in the total amount of €339,210.28 with reference to the urban real properties described above, which are classified as construction land, based on the provision of Article 10, n. 1 and 2 of the RJAT. The real properties and their respective tax assessments are duly identified in documents nos. 1 and 45, which are hereby reproduced.

2. It bases its petition on the illegality of the stamp tax assessment on the grounds that, in summary, the real properties in question, as construction land, should not be considered as "real properties with residential purpose," within the terms and for the purposes of the provision in item 28.1 of the General Table to the Stamp Duty Code, in the version introduced by Law no. 55-A/2012, of 29 October.

3. Thus, the challenged assessments, issued pursuant to the provision in item 28.1 of the TGIS, are illegal, for violation of the provision in Articles 2, n. 4, 23, n. 7 and 44, n. 5 of the Stamp Duty Code and the provision in Articles 6, 41 and 45 of the IMI Code. It further argues that the entry into force of Law 83-C/2013 of 31 December (State Budget Law for 2014) amended the wording of item 28.1 of the TGIS, implicitly acknowledged that until 1/01/2014, there was no rule of incidence that permitted the collection of stamp duty in the case of construction land. This is evident from the new wording of that legal provision, namely: "28.1 – For residential real property or for construction land whose construction, authorized or planned, is for housing, within the terms of the IMI Code."

It further invokes numerous arbitral jurisprudence and from the Supreme Administrative Court, in support of the position it sustains in the present proceedings.

B) – THE RESPONDENT'S RESPONSE

1. The Respondent argues in its response, in summary, that the Claimant is not correct. The Tax and Customs Authority (ATA), defends in its response the legality of the assessments on the grounds that they comply with the letter of the law and that the petition for declaration of illegality and consequent annulment of the assessments should be judged unfounded, with its acquittal from the petition.

It contends that the purpose of the urban real property is based on the part relating to the appraisal of real properties, provided for in Articles 41 and 45 of the IMI Code. It further invokes other arguments regarding the concept of residential real property, as better appears from the response filed, which is hereby fully reproduced.

It concludes for the unfoundedness of the arbitral petition, seeking the legality of the challenged tax acts and the acquittal of the Respondent from the petition.

D) ON THE PROCEDURAL REQUIREMENTS

1. The Arbitral Tribunal is regularly constituted and is materially competent, pursuant to Article 2, n. 1, subsection a) of Decree-Law no. 10/2011, of 20 January.

2. The Parties enjoy legal capacity and standing, are legitimate and are duly represented (Articles 4 and 10, n. 2, of DL no. 10/2011 and Article 1 of Ordinance no. 112/2011, of 22 March).

3. The legitimacy of the now Claimant as managing entity of the real property funds owning the real properties referenced in the proceedings results from the powers it assumes as managing entity and representative of the mentioned funds and is duly substantiated in the proceedings.

4. As to the cumulation of petitions seeking the joint assessment of the illegality of 45 Stamp Duty assessments, relating to the year 2013, despite constituting autonomous acts, with the presuppositions required by the provision in n. 1, Article 3, of the RJAT and Article 104 of the CPPT being verified, the cumulation must be admitted. Thus, the cumulation of petitions for declaration of illegality of all tax acts of stamp duty assessment is accepted in the same arbitral petition given the identity of the tax, despite concerning different real properties, since the entity Claimant is the same and the assessment of the tax acts in question depends on the assessment of the same factual circumstances and the application of the same rules of law.

5. The proceedings do not suffer from nullities that render it invalid and no exceptions were raised that prevent judgment on the merits of the case, whereby the Tribunal is in a position to render the arbitral decision.

II. QUESTION TO BE DECIDED

1. Given the positions of the Parties assumed in the arguments presented, it falls to the Tribunal to decide the question of whether or not the incidence of stamp duty is in accordance with the law in force in the year in which the taxable events occurred that gave rise to the assessments, as provided for in item 28.1 contained in the General Table of the Stamp Duty Code (TGIS) to the specific case of the urban real properties identified in the proceedings, characterized as construction land, duly described in the proceedings.

III – FACTUAL MATTERS

A) Proven Facts

1. As factual matters relevant to the decision to be rendered, the Tribunal considers the following facts to be proven:

a) The Claimant is a commercial company dedicated to the management of real estate funds owning the real properties referenced in the stamp duty tax assessments challenged in the proceedings;

b) The Funds here represented by the managing company Claimant, within the scope of their activity, are owners of various real properties, including residential real properties, commercial real properties and construction land;

c) In the year 2013 the funds were notified of the acts assessing Stamp Duty of 2013 sub judice, relating to real properties registered in the matrix as "construction land" and issued pursuant to item 28.1 of the General Table of the Stamp Duty Code, amended by Article 4 of Law no. 55-A/2012, of 29 October, namely:

a. Fund designated as "B" was notified of the tax acts of Stamp Duty assessment no. 2014 …, no. 2014 … and no. 2014 …, in the total amount of € 10,621.83, relating to the year 2013 (1st, 2nd and 3rd installments) and concerning the real property registered in the matrix under matrix article …, of the parish of …, municipality of … and district of Porto; was likewise notified of the tax acts of Stamp Duty assessment no. 2014 …, no. 2014 … and no. 2014 …, in the amount of € 11,811.89, relating to the year 2013 (1st, 2nd and 3rd installments), concerning the urban real property registered in the matrix under matrix article …, of the parish of …, municipality of ... and district of Porto – Cf., respectively, documents nos. 1 to 3 and 4 to 6 attached in annex to the PI.

b. Fund designated as "C" was notified of the tax acts of Stamp Duty assessment as follows discriminated:

i. assessments no. 2014 …, no. 2014 … and no. 2014 …, concerning the urban real property registered in the matrix under matrix article …, of the union of parishes of … and …, municipality of … and district of Lisbon;

ii. assessments no. 2014 …, no. 2014 … and no. 2014 … concerning the urban real property registered in the matrix under matrix article …;

iii. assessments no. 2014 …, no. 2014 … and no. 2014 …, concerning the urban real property registered in the matrix under matrix article …;

iv. assessments no. 2014 …, no. 2014 … and no. 2014 …, concerning the urban real property registered in the matrix under matrix article …;

v. assessments no. 2014 …, no. 2014 … and no. 2014 …, concerning the urban real property registered in the matrix under matrix article …;

vi. no. 2014 … and no. 2014 … and no. 2014 …, concerning the urban real property registered in the matrix under matrix article …, all (ii to vi) of the union of parishes of ... and …, municipality of ... and district of Setúbal;

vii. assessments no. 2014 …, no. 2014 … and no. 2014 …, concerning the urban real property registered in the matrix under matrix article …, of the parish of …, municipality of … and district of Porto;

viii. assessments no. 2014 …, no. 2014 … and no. 2014 …, concerning the urban real property registered in the matrix under matrix article …;

ix. no. 2014 … and assessments no. 2014 … and no. 2014 …, concerning the urban real property registered in the matrix under matrix article …;

x. assessments no. 2014 …, no. 2014 … and no. 2014 …, concerning the urban real property registered in the matrix under matrix article …;

xi. assessments no. 2014 …, no. 2014 … and no. 2014 …, concerning the urban real property registered in the matrix under matrix article …, all (vii to xi) of the parish of ..., municipality of ... and district of Lisbon - Cf. respectively, documents nos. 7 to 39 attached in annex to the PI.

c. Fund designated as "D" was notified of the tax acts of Stamp Duty assessment no. 2014 …, no. 2014 … and no. 2014 …, relating to the year 2013 (1st and 2nd installments) and concerning the real property registered in the matrix under matrix article …, of the parish of …, municipality and district of Porto – Cf. documents nos. 40 to 42, attached in annex to the PI.

d. Fund designated as "E" was notified of the tax acts of Stamp Duty assessment no. 2014 …, no. 2014 … and no. 2014 …, concerning the urban real property registered in the matrix under matrix article …, of the parish of …, municipality of … and district of Funchal – Cf. documents nos. 43 to 45 attached in annex to the PI.

d) The Stamp Duty assessments in question all relate to the year 2013, and result (allegedly) from the application of Article 1, n. 1 of the Stamp Duty Code, combined with item 2.28 of the respective General Table and with Article 6 of Law no. 55-A/2012, of 29 October.

e) It results from the respective property records attached to the proceedings as documents nos. 46 to 60, that the real properties subject to the challenged Stamp Duty assessments are registered in the matrix as "construction land."

f) The Funds here represented by the managing company Claimant proceeded to payment of the tax acts relating to the 1st installments of the tax, in the total amount of € 113,069.82 – cf. Documents 61 to 75;

g) All challenged stamp duty tax assessments had as payment deadline 30/04/2014 and total globally the amount of €339,210.28, as results from documents nos. 1 to 45 attached to the proceedings by the Claimant;

h) The urban real properties described in the present proceedings had no constructed buildings in 2013.

i) On 23-07-2014, the Claimant filed the petition for constitution of the arbitral tribunal (CAAD computer system), for challenging the tax assessment.

B) Unproven Facts

1. There are no facts relevant to the decision that have not been proven.

C) Substantiation of Proven Factual Matters

1. The proven facts, as described above, are based on the documentary evidence that the Parties attached to the present proceedings and are based on the documents indicated for each of the points, whose authenticity and correspondence to reality were not questioned.

IV – LEGAL MATTERS

1. Once the factual matters have been established, it is important to know about the sole question of law in dispute in the present proceedings, corresponding, in summary, to the question of illegality raised by the Claimant in the present arbitral petition.

It is necessary to decide.

1. The question that is the subject of the present action is whether land intended for urban construction for "housing, services and/or commerce" falls within the scope of incidence of n. 28.1 of the General Table of the Stamp Duty Code (TGIS), in its original wording, that is, in the version introduced by the State Budget Law for 2012 (Law no. 55-A/2012, of 29 October.)

2. On this question, there is already very abundant jurisprudence from CAAD (much of which is invoked in the present arbitral petition), and its understanding is unanimous. To which is added, as the Claimant also emphasizes, the recent and known jurisprudence of the STA has also pronounced itself in the same direction.

Despite this, it is important to analyze the legal framework of reference to substantiate the correct analysis of this question, despite its similarity to many other cases already decided.

1. The taxation under stamp duty of urban real properties with residential purpose was introduced by Law no. 55-A/2012, of 29 October (Budget Law) which made various amendments to the Stamp Duty Code and added item 28 to the TGIS, which has the following wording:

"28 - Ownership, usufruct or right of superficies of urban real properties whose tax patrimony value shown in the matrix, within the terms of the Municipal Property Tax Code (CIMI), equals or exceeds € 1,000,000 – on the tax patrimony value used for purposes of IMI:

28.1 – For real property with residential purpose – 1 %;

28.2 – For real property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance – 7.5 %. "

1. In the transitional provisions contained in Article 6 of that Law no. 55-A/2012, the following rules relating to the assessment of the tax provided for in that item were established:

"1 – In 2012, the following rules must be observed by reference to the assessment of the stamp duty provided for in item no. 28 of the respective General Table:

a) The taxable event occurs on 31 October 2012;

b) The taxpayer of the tax is the one mentioned in n. 4 of Article 2 of the Stamp Duty Code on the date referred to in the previous subsection;

c) The tax patrimony value to be used in the assessment of the tax corresponds to what results from the rules provided for in the Municipal Property Tax Code by reference to the year 2011;

d) The assessment of the tax by the Tax and Customs Authority must be carried out by the end of November 2012;

e) The tax must be paid, in a single installment, by the taxpayers by 20 December 2012;

f) The applicable rates are as follows:

i) Real properties with residential purpose assessed within the terms of the IMI Code: 0.5 %;

ii) Real properties with residential purpose not yet assessed within the terms of the IMI Code: 0.8 %;

iii) Urban real properties when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance: 7.5 %.

2 – In 2013, the assessment of the stamp duty provided for in item no. 28 of the respective General Table must be based on the same tax patrimony value used for purposes of assessment of municipal property tax to be carried out in that year.

3 – Non-delivery, in whole or in part, within the indicated period, of the amounts assessed as stamp duty constitutes a tax infraction, punished in accordance with the law."

1. In the referred item 28.1 and in sub-items i) and ii) of subsection f) of n. 1 of Article 6 of Law no. 55-A/2012, the legislator used the concept of "real property with residential purpose," which finds no reference in any other legislative diploma, whereby it is necessary to specify the same, by resorting to the canons of interpretation of the legal norm.

Thus, it is important in the first place to bear in mind that the Municipal Property Tax Code (CIMI) is mentioned in various norms of the Stamp Duty Code introduced by that Law and is indicated as a diploma of subsidiary application regarding the tax provided for in the referred item no. 28, as occurs in Articles 2, n. 4, 3, n. 3, subsection u), 5, subsection u), 23, n. 7, and 46 and 67 of the CIS. However, in none of these normatives is a concept used with that designation.

1. Law no. 83-C/2013, of 31 December, amended that item no. 28.1, giving it the following wording:

"28.1 - For residential real property or for construction land whose construction, authorized or planned, is for housing, within the terms of the IMI Code – 1 % "

Such formulation applies, naturally, only as from 1 January 2014, but it must be said in advance that it has not helped at all to clarify the qualification of the concept in question. However, there is no doubt that it contributed to clarifying, albeit implicitly, that the previous version did not contemplate the taxation of this type of real property, that is, of construction land, reason why the legislator amended its content.

1. It is, however, important to verify the possible contribution to be extracted from the concepts of real property used in the CIMI, in its Articles 2 to 6.

Thus, according to Article 2 of the CIMI, real property is understood as:

"1 – For the purposes of this Code, real property is any fraction of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated into or based upon it, 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, as well as waters, plantations, buildings or constructions, in the preceding circumstances, endowed with economic autonomy in relation to the land where they are located, although situated in a fraction of territory that constitutes an integral part of a different patrimony or does not have patrimonial nature.

2 – Buildings or constructions, although mobile in nature, are deemed to have a character of permanence when assigned to non-transitory purposes.

3 – The character of permanence is presumed when the buildings or constructions are based in the same location for a period exceeding one year.

4 – For the purposes of this tax, each autonomous fraction in a horizontal property regime is deemed to constitute a real property."

1. Article 3 further provides that rural real property is understood as:

"1 – Rural real property is land located outside an urban agglomeration that is not to be classified as construction land, within the terms of n. 3 of Article 6, provided that:

a) They are assigned or, in the absence of concrete assignment, have as normal destination a use generating agricultural income, such as are considered for purposes of income tax for natural persons (IRS);

b) Not having the assignment indicated in the previous subsection, they are not built or have only buildings or constructions of an accessory nature, without economic autonomy and of reduced value.

2 – Rural real property also includes land located within an urban agglomeration, provided that, by force of legally approved provision, it cannot have a use generating any income or may only have a use generating agricultural income and is in fact having this assignment.

3 – The following are also rural real property:

a) Buildings and constructions directly assigned to the production of agricultural income, when located in the land referred to in the preceding numbers;

b) Waters and plantations in the situations to which n. 1 of Article 2 refers.

4 – For the purposes of this Code, urban agglomerations are considered, in addition to those located within legally fixed perimeters, clusters with a minimum of 10 dwellings served by public roadways, with their perimeter delimited by points distanced 50 m from the axis of the roadways, in the transverse direction, and 20 m from the last building, in the direction of the roadways."

1. Article 4 qualifies as urban real property "all those that should not be classified as rural, without prejudice to the provision of the following article."

And Article 6 indicates the types of urban real property, as follows:

"1 – Urban real properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Construction land; (underlined by us)

d) Other.

2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, that have as normal destination each of these purposes.

3 – Construction land is understood as land located within or outside an urban agglomeration, for which a license or authorization has been granted, prior notice admitted or favorable prior information issued for subdivision or construction operations, and also those that have been declared as such 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 territorial planning plans, are assigned to public spaces, infrastructure or facilities. (Wording of Law no. 64-A/08, of 31-12)

4 – The provision of subsection d) of n. 1 includes land located within an urban agglomeration that is not construction land nor is covered by the provision of n. 2 of Article 3 and also buildings and constructions licensed or, in the absence of a license, that have as normal destination other purposes than those referred to in n. 2 and also those of the exception of n. 3."

1. Faced with the legal framework set out above, and considering the rules on the interpretation of legal norms, in particular those resulting from Article 11 of the General Tax Law[2] (LGT) it is necessary to conclude that the general principles of interpretation of laws, to which n. 1 of Article 11 of the LGT refers, are established in Article 9 of the Civil Code, which establishes the following:

"1. The interpretation must not be confined to the letter of the law, but must reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied.

1. However, the interpreter cannot consider the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

2. In determining the sense and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and was able to express its intent in adequate terms."

3. Thus, it is important to determine the sense and scope of the concept of "real property with residential purpose," a fundamental task for the interpretation and correct application of the normative content in items 28 and 28.1 of the TGIS. As can be seen from the above, the CIMI does not use in the classification of real properties it adopts the concept of "real property with residential purpose." Nor is this concept, with this terminology, found in any other diploma.

Following the reasoning already pursued in prior arbitral decisions, in particular those rendered in cases nos. 53/2013-T, 144/2013- T, 202/2014-T, 306/2014 –T and 328/2014 – T (among others) "in the absence of exact terminological correspondence of the concept of 'real property with residential purpose' with any other used in other diplomas, several interpretative hypotheses may be advanced."

1. The starting point of the interpretation of that expression "real properties with residential purpose" is, naturally, the text of the law, and it is on the basis of it that the "legislative intent" must be reconstructed, as required by n. 1 of Article 9 of the Civil Code, applicable by force of the provision of Article 11, n. 1, of the LGT.

Now, the concept closest to the literal tenor of this expression used is manifestly that of "residential real properties," defined in n. 2 of Article 6 of the CIMI as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of a license, that have residential purposes as their normal destination.

1. If the expression "real property with residential purpose" is understood to coincide with that of "residential real properties," it is manifest that the assessments will suffer from error regarding the presuppositions of fact and law, since all the real properties regarding which Stamp Duty was assessed pursuant to the referred item no. 28.1 are construction land, with no building or construction with residential purpose, required by that n. 2 of Article 6, to fulfill that concept of "residential real properties."

2. For this reason, it would suffice to adopt the interpretation that "real property with residential purpose" means "residential real property," and the assessments whose declaration of illegality is requested would be illegal, since there is no building or construction. However, the non-coincidence of the terms of the expression used in item 28.1 of the TGIS with that which results from n. 2 of Article 6 of the CIMI points to the fact that it was not intended to use the same concept. Therefore, the AT's position on this matter in what is alleged in its response is incorrect.

3. However, a more in-depth interpretation of the sense to be given to the concept in question leads to the conclusion that "purpose," in this context, means "the action of designating something for a determined use." And, if we bear in mind the objectives defined in a declaration of principles made in the Parliament on the legislator's intent to introduce a taxation on "luxury homes," there is no doubt that the underlying purpose or ratio legis is to tax the "use" of the real property considered in the fullness of the degree of comfort it provides. In this regard, Baptista Machado[3] states as follows: "when, as is usually the case, the norms (legislative formulas) bear more than one meaning, then the positive function of the text is translated into giving stronger support or suggesting more strongly one of the possible meanings. For, among the possible meanings, some will correspond to the more natural and direct significance of the expressions used, whereas others can only fit into the verbal framework of the norm in a forced, contrived manner. Now, in the absence of other elements that lead to the choice of the less immediate sense of the text, the interpreter must in principle opt for that sense which best and most immediately corresponds to the natural significance of the verbal expressions used, and in particular their technical-legal meaning, on the supposition (not always correct) that the legislator was able to express its intent correctly."

4. The relevance of the text of the law is especially emphasized in the interpretation of tax incidence norms, and in this regard the Stamp Duty appears as a tax of difficult texture and confused identity, with the interpreter frequently encountering successive difficulties, whereby the guiding thread must be, in the first instance, the principle of unity of the legal system, attempting to impose some coherence of application.

5. In this line of thinking, we cannot dispense with recourse to the Statement of Reasons of Legislative Proposal no. 96/XII/2nd, on which Law no. 55-A/2012 was based. In this statement of reasons the Government's concern is evident to reinforce the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary to meet the adjustment program and its commitment to ensuring that the distribution of these sacrifices will be made by all and not just by those who live from the income of their work.

6. In this context, with no other interpretative coordinates, the tenor of the legal text must be the primary element of interpretation, in accordance with the presumption, imposed by that same n. 3 of Article 9, that the legislator was able to express its intent in adequate terms. Now, bearing in mind the meaning of the words "purpose" and "assign," which are "to designate" or "to apply," the formula used in that item 28.1 of the TGIS manifestly encompasses real properties that are already being used as housing, and cannot encompass real properties which, although not yet applied to housing purposes, might eventually be destined for such, as occurs with construction land for residential construction.

7. It further follows that, it is also necessary to clarify when a real property can be considered as assigned to residential purpose, namely whether it is when it is fixed that destination in a subdivision permit or by a licensing act or similar, or when the effective attribution of that destination is concretized. The comparison of item 28.1 of the TGIS with n. 2 of Article 6 of the CIMI, which defines the concept of residential real properties, points to the need for an "effective assignment."[4]

Thus, a building or construction licensed for housing or, even without a license, but that has housing as its normal destination, is, in accordance with the provision in n. 2 of Article 6 of the CIMI, a residential real property, because it is the legislator itself that considers as such "buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal destination each of these purposes."

For this reason, on the presupposition that the legislator of Law no. 55-A/2012 was able to express its intent in adequate terms, if it intended to also refer to real properties merely licensed for housing or that have housing as their normal destination, it certainly would not have used the expression "real property with residential purpose."

1. In these terms, it must be presumed that the legislator's use of a different expression intended to reach a different reality, whereby "real property with residential purpose" cannot be a real property merely licensed for housing or intended for that purpose, and must be a real property that already has effective assignment to that purpose.

Note that in the case of the present proceedings the real property in question is characterized as construction land, and from the Certificate attached to the proceedings by the Claimant as document no. 2, it is possible to extract that in the building area in which this lot/parcel of land is located, the building capacity has already been exhausted. Therefore, although it is construction land with aptitude for housing construction, this is merely potential, whose concretization will depend on obtaining the necessary building license which does not appear, in light of the information contained in the present proceedings, to even be viable.

For this very reason the only possible sense for the expression "assignment" is that it is an "effective assignment." See that Article 3 of the CIMI, regarding rural real property, refers to those that "are assigned or, in the absence of concrete assignment, have as their normal destination a use generating agricultural income," which shows that the assignment is concrete, effective. As is further evident from the latter part of this text, a real property may have a determined use as its destination and either be or not be assigned to it, which evidences that the presupposition of an effective assignment is required.

1. It furthermore follows that the legislative intention not to extend the scope of incidence to construction land was expressly referred to by the Government when presenting to the Parliament of the Assembly of the Republic Legislative Proposal 96-XII by saying, through the voice of the Secretary of State for Tax Affairs, namely: "In the first place, the Government proposes the creation of a special rate to tax residential urban real properties of higher value. It is the first time that in Portugal a special taxation on high-value properties intended for housing has been created. This rate will be 0.5% to 0.8%, in 2012, and 1%, in 2013, and will apply to homes valued at equal or more than 1 million euros. With the creation of this additional rate, the fiscal effort required of these owners will be significantly increased in 2012 and in 2013." (underlining added).

2. The express reference to "homes" as the target of the incidence of the new tax leaves no room for doubt as to the legislative intent. On the other hand, no reference to "construction land" is found in the discussion of that Legislative Proposal.

3. With regard to the argument adduced by the Respondent, extracted from the provision of Article 45 of the CIMI, it must be said that it has no relation to the concept here at issue nor to the classification of real property, limiting itself to consecrating the rule applicable for purposes of determining the tax patrimony value of the real property, enshrining the relevant factors for that purpose. In fact, what is weighed there, in referring to the "building to be constructed" is the consideration of the destination of the land, which, as has been seen, is something that, in the context of the CIMI, does not imply assignment and occurs before it.

Therefore, the invocation by the AT in its response does not hold as to the relevant purpose for the question to be decided in the present proceedings. The same is to be said of the Court of Appeal of the South judgment invoked therein, which refers, indeed, to the question of the regime for assessing the tax patrimony value of construction land, in no way relevant to the decision under consideration in the present proceedings.

1. Finally, it is important to note that Law no. 83-C/2013, of 31 December, also contradicts the position here defended by the ATA, since it did not clarify the logical element underlying the original wording of item 28.1, but instead indirectly confirmed the interpretation that it did not encompass construction land.

In fact, if the original wording of item 28.1 under analysis, in speaking of "real property with residential purpose" intended to encompass the buildings and constructions that constituted "residential real properties" and construction land for which housing construction was authorized or planned, then the natural thing should be to attribute to the new wording an interpretative nature, similar to what it does in other provisions it contains, such as for example Article 177, n. 7, regarding subsections a) and b) of n. 3 of Article 17-A of the IRS Code.

1. For all that is left stated it is the understanding of this Tribunal that item 28.1 does not apply to construction land, even though this reveals potential for housing construction. It is important to note that on this same question several arbitral decisions have already been rendered, among which the following stand out, those rendered in arbitral cases nos. 42/2013 T, 48/2013-T, 53/2013- T, 144/2013-T, 180/2013 – T and 189/2013-T, 306/2014 – T and 328/2014 - T, among others.

The Supreme Administrative Court has also pronounced on this question, in particular in Judgments rendered on 9 and 23 April 2014 (in which Isabel Marques da Silva was the reporting judge) and 9 May 2014 (in which Dulce Neto was the reporting judge). And, to this end, the judgment of the STA of 9 April 2014 (in which express reference is made to arbitral decision no. 144/2013-T) concludes that "as the legislator did not define the concept of 'urban real property with residential purpose,' and resulting from Article 6 of the IMI Code - subsidiarily applicable to the Stamp Duty provided for in the new item no. 28 of the General Table - a clear distinction between 'residential urban real properties' and 'construction land,' these cannot be considered, for purposes of the incidence of the Stamp Duty (Item 28.1 of the TGIS, in the wording of Law no. 55-A/2012, of 29 October), as urban real properties with residential purpose."

1. In accordance with what is set out above, if the letter of the law – of Item 28.1 of the TGIS – (grammatical element) does not present itself sufficiently clear to, without difficulty, specify the concept of "real property with residential purpose," already the logical element ("the systematic element and the unity of the legal system, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied"), to which n. 1 of Article 9 of the Civil Code points, permits to conclude, as has been concluded in various arbitral decisions and also by the Supreme Administrative Court in the above-cited Judgments that, resulting from Article 6 of the IMI Code a clear distinction between urban real properties "residential" and "construction land," these cannot be considered as "real properties with residential purpose" for purposes of the provision in item no. 28.1 of the General Table of the Stamp Duty Code, in its original wording as given by Law no. 55-A/2012, of 29 October," which justifies, in the case sub judice, the annulment of the challenged assessments, for error in the presuppositions on which the respective issuance was based.

Regarding the Alleged Violation of Constitutional Principles:

1. Regarding the allegation of unconstitutionality, for violation of the principle of equality and taxpaying capacity, to which the Claimant alludes, this Tribunal understands that the assessment and decision of the question to be decided relates exclusively to the correct interpretation of the norm contained in item 28.1 of the TGIS, whereby we are before a clear violation of the norm itself, as is abundantly demonstrated above.

In light of what has been said, the examination of the remaining grounds of illegality is moot, in particular those invoked regarding unconstitutionality. In the judgment, the judge must pronounce on all questions that he must assess, refraining from pronouncing on questions which he must not know (final segment of n. 1 of Article 125 of the CPPT), and that the questions on which the powers of cognition of the tribunal fall, are, in accordance with n. 2 of Article 608, of the CPC, applicable subsidiarily to the arbitral tax proceedings, by referral of Article 29, n. 1, subsection e), of the RJAT, "the questions that the parties have submitted to its assessment, excepting those whose decision is prejudiced by the solution given to others (…)."

Now, in light of the solution given to the questions related to the concept of "real property with residential purpose," from which results, without need for further consideration, the illegality of the challenged assessments, the examination of the remaining questions posed by the parties is moot, in particular that of the invoked unconstitutionality of the incidence norm contained in Item 28.1 of the TGIS, since it is not capable of the interpretation that was made by the AT in the case.

1. As a consequence of all that has been set out, it results that the challenged assessments are illegal, are affected by a defect of violation of law through error regarding the presuppositions of fact and law, embodied in the violation of the provision in item no. 28.1 of the TGIS, whereby they must be subject to annulment.

Regarding the Request for Compensatory Interest:

1. All the requirements are thus met for, with the annulment of the challenged assessments, all amounts unduly paid by the Claimant and related thereto are reimbursed, whether those referenced and proven in the proceedings (cf. Docs. 61 to 75) or those which have in the meantime occurred in compliance with the assessments challenged and annulled by this present Arbitral Award, since such reimbursement is essential to the restoration of the "situation that would exist if the tax act subject to the arbitral decision had not been taken," as is required by subsection b) of n. 1 of Article 24 of the RJAT.

2. With regard to the request for payment of compensatory interest, it is evident that the arbitral tax proceedings was conceived as an alternative means to the proceedings for judicial challenge (cf. the legislative authorization granted to the Government by Article 124, n. 2 (first part) of Law no. 3-B/2010, of 28 April (State Budget Law for 2010). Thus, although Article 2, n. 1, subsection a), of the RJAT, uses the expression "declaration of illegality" as delimiting the competence of arbitral tribunals functioning in CAAD, it should be understood that this competence comprises all the powers that in judicial challenge proceedings are attributed to tax courts, such as that of assessing error attributable to the services. All the more so, since among the grounds for judicial challenge, are counted precisely the "erroneous qualification and quantification of income, profits, patrimony values and other taxable facts" (cf. Article 99, subsection a), of the CPPT), regardless of who is responsible.

3. On the other hand, the already cited subsection b) of n. 1 of Article 24 of the RJAT provides that the arbitral decision on the merits of the pretension to which no appeal or challenge is available binds the tax administration as of the end of the period provided for appeal or challenge, and this must, in the precise terms of the success of the arbitral decision in favor of the taxpayer and until the end of the period provided for the voluntary execution of sentences of tax court judgments, "restore the situation that would exist if the tax act subject to the arbitral decision had not been taken, adopting the acts and operations necessary for that effect."

4. Equally, Article 100 of the LGT, applicable to the arbitral tax proceedings by force of the provision in subsection a) of n. 1 of Article 29 of the RJAT, establishes that "The tax administration is obliged, in case of total or partial success of administrative complaints or appeals, or of judicial proceedings in favor of the taxpayer, to the immediate and full restoration of the situation that would exist if the illegality had not been committed, including the payment of compensatory interest, in accordance with the terms and conditions provided for in the law."

5. Now, it further results from the provision of n. 1 of Article 43 of the LGT, that "Compensatory interest is due when it is determined, in administrative complaint or judicial challenge, that there was error attributable to the services from which results payment of the tax debt in an amount greater than that legally due."

6. As for the error attributable to the services, it may consist of error regarding the presuppositions of fact, which occurs whenever there is "a divergence between reality and the factual matter used as a presupposition in the practice of the act" or error regarding the presuppositions of law, when "in the practice of the act there was erroneous interpretation or application of legal norms, such as norms of objective and subjective incidence (…)" and "is demonstrated when administrative complaint or judicial challenge of that same assessment proceeds and the error is not attributable to the taxpayer."

7. In the case at hand, it is manifest that, with the declaration of illegality of the acts of Stamp Duty assessment, as it has been demonstrated the erroneous application of the objective incidence norm contained in item 28.1 of the TGIS, which justifies its annulment, the right of the Claimant to compensatory interest must be recognized on the amounts unduly paid, from the date of payment of each of the installments of the tax, as provided for in n. 5 of Article 61 of the CPPT, since such illegality is exclusively attributable to the Tax Administration, which practiced those tax acts without the necessary legal support.

V - DECISION

In view of the above, this Arbitral Tribunal decides:

a) To judge the present arbitral petition meritorious and, in consequence, declare the illegality of all challenged assessments;

b) To declare annulled the tax acts that constitute its object, relating to the Stamp Duty assessments above identified, for defect of violation of law, for error in the presuppositions of fact and law underlying them;

c) To condemn the Tax and Customs Authority to reimburse the Funds here represented by the Claimant of the amount of Stamp Duty paid, or to pay, by the Funds here represented relating to the assessments now challenged;

d) To condemn the Tax and Customs Authority to pay the Funds here represented by the Claimant compensatory interest on the amounts effectively paid, with compensatory interest at the legal supplementary rate of civil debts, within the terms of Articles 35-10 and 43-1 and 5 of the LGT, 61 of the CPPT, 559 of the Civil Code and of Ordinance no. 291/2003, of 8 April (or diplomas that succeed it), counted from the dates of the payments until the date of processing of the credit note in which they are included, within the terms of Article 61-5 of the CPPT.

Process Value: In accordance with the provision of Article 306, n. 1 and 2 of the CPC, Article 97-A, n. 1, subsection a) of the CPPT and Article 3, n. 2 of the Regulation of Costs in Arbitral Tax Proceedings, the value of the process is fixed at €339,210.28.

Costs: In accordance with the provision in n. 4 of Article 22 of the RJAT and in accordance with Table I attached to the Regulation of Costs in Arbitral Tax Proceedings, the amount of costs is fixed at €5,681.93, to be borne by the Respondent Tax and Customs Authority.

Register and notify.

Lisbon, 23 February 2015

The Arbitrator-President,

(José Poças Falcão)

The Arbitrator,

(Maria do Rosário Anjos)

The Arbitrator,

(Alberto Amorim Pereira)

[1] The present decision is drafted according to old orthography.

[2] Article 11 of the LGT provides, relating to interpretation of tax norms, that:

"1. In determining the sense of tax norms and in the qualification of facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

1. Whenever tax norms employ terms characteristic of other branches of law, they must be interpreted in the same sense that they have therein, unless otherwise results directly from the law.

2. Persisting doubt regarding the sense of the incidence norms to be applied, the economic substance of the taxable facts must be considered.

3. Gaps resulting from tax norms covered by the reserve of law of the Assembly of the Republic are not susceptible to supplementation by analogy."

[3] In this sense, cf. BAPTISTA MACHADO, J. Introduction to Law and to the Legitimizing Discourse, latest ed. Almedina, page 182 et seq.

[4] In this sense, cf. arbitral decisions rendered in cases nos. 53/2013 – T, 144/2013-T, 178/2013 – T, 285/2014 – T, among others.