Stamp Tax on Property Divisions in Total Ownership: VPT Below €1,000,000 Threshold | CAAD 502/2016-T

ARBITRAL DECISION

I – REPORT

Request

A..., (hereinafter Claimant) taxpayer no. ..., resident at Rua ..., ..., ... ..., submitted, on 16-08-2016, under the terms of Article 2(1)(a) and Article 10 of Decree-Law No. 10/2011, of 20 January, which approves the Legal Regime for Tax Arbitration (RJAT), a request for arbitral pronouncement, in which the Respondent is AT - TAX AUTHORITY AND CUSTOMS AUTHORITY, with a view to:

¾ The declaration of illegality and consequent annulment of the acts of assessment of Stamp Tax on the divisions with residential use of the urban property located at Rua ... nos. ... to ..., ..., registered in the property register of the union of parishes of ..., ..., ..., ..., ... and ..., municipality of ..., under article ... .

¾ The condemnation of the Respondent to refund the amounts corresponding to the stamp tax improperly paid relating to the contested assessments, plus the corresponding statutory interest.

The Claimant alleges, in essence and with relevance to the decision of the case, the following:

- Being the Stamp Tax of item 28 of the General Table of Stamp Tax an annual tax that must be assessed annually, the Claimant was only notified to pay installments of this tax, without the collection notices for the installments identifying the corresponding assessment acts through their respective number.

- The lack of the required legal basis constitutes a defect that affects the act with illegality under Article 90(c) of the Tax Procedure Code.

- The assessments in question concern an urban property of which the Claimant is the owner, and which, at the date of the facts in question, was in a regime of full ownership constituted by parts capable of independent use and thus described in the property register.

- The present challenge encompasses the three installments in which the payment of the tax is divided.

- The joinder of claims is admissible since, given the identity of the tax, the tax year and the grounds invoked, it is unequivocal that the merit of the claims depends essentially on the same factual circumstances and on the interpretation and application of the same principles or rules of law.

- The contested assessments are affected by error as to the legal prerequisites, which lies in the fact that the taxable property value registered in the property register, under the Urban Property Tax Code (CIMI) is not equal to or greater than €1,000,000.00.

- As results from item 28 of the General Stamp Tax Table (TGIS), it applies to the ownership, usufruct, or right of superficies of properties whose taxable property value (VPT) contained in the property register, under the CIMI, is equal to or greater than €1,000,000.00.

- In the case in question, the incidence of stamp tax with reference to the urban property is in dispute, owned by the Claimant, located at Rua ... nos. ... to ..., ..., registered in the property register of the Union of Parishes of ..., ..., ..., ..., ... and ..., municipality of ..., under article ... .

- At the date of the assessments, the property was described as a property in full ownership constituted by divisions capable of independent use.

- Under Article 12(3) of the CIMI, each story or part of a property capable of independent use is considered separately in the property registry, which also discriminates the respective VPT.

- From the analysis of the regulatory framework in question here, no legal provision emerges that corresponds the VPT of a property composed of several stories or divisions capable of independent use to the sum of the respective parts.

- Moreover, each of the parts capable of independent use is the subject of a separate Urban Property Tax assessment, which is consistent with the regime provided for properties in full ownership, but with stories or parts capable of independent use.

- Under Article 5(1)(u) of the Stamp Tax Code (CIS), the assessment of tax is carried out "in the situations provided for in item 28 of the General Table, at the time and in accordance with the rules provided in the CIMI, with the necessary adaptations".

- Under Article 113(1) of the CIMI, the tax is assessed annually (...) on the basis of the taxable property values of the properties and in relation to the taxpayers contained in the property registers on 31 December of the year to which it relates.

- Now, the Urban Property Tax is assessed in relation to each part capable of independent use and taking into account the respective taxable property value.

- The fiction of the existence of a taxable property value corresponding to the sum of the taxable property values of the various parts capable of independent use finds no support either in the letter or in the spirit of the law.

- And even less support in the law does the Respondent find in the application it makes of the provisions in question in distinguishing between stories with residential use and stories with commercial use; between what is the VPT of the property and the VPT that the Respondent denominates as "taxable property value – total subject to tax".

- In truth, as can be ascertained from the analysis of the property record, the Respondent excluded from the total VPT of the property, €2,342,320.00, the VPT of the parts with commercial use, thereby achieving the VPT allegedly subject to tax.

- Furthermore, given that the property is in full ownership, and is composed of parts with residential use and parts with non-residential use, it is unclear how the Respondent can intend to qualify the property as being for residential purposes.

- The qualification "property with residential use" does not exist in the CIMI.

- When the norm of incidence refers to residential use, Stamp Tax presupposes a functional approach, as also requires, moreover, the principle of substance over form that underlies the legal system.

- The attribution, to the property in question, of residential use, when the same is composed of parts with residential use and parts with non-residential use, clearly goes beyond the law, finding support neither in its letter nor in its spirit.

- The Claimant's position is in line with the consolidated jurisprudence of CAAD and the Supreme Administrative Court, namely the decisions of the Supreme Administrative Court of 20.05.2016, case no. 1352/15, of 24.05.2016, case no. 1344/15, of 04.05.2016, case no. 172/16, and of 09.09.2015, case 47/15.

- On the side of arbitral decisions under the auspices of CAAD, the following are cited: decisions in cases 132/2013-T, 26/2014-T, 88/2014-T, 206/2014-T, 290/2014-T, 309/2014-T, 428/2014-T, 451/2014-T, 457/2014-T, 458/2014-T, 567/2014-T, 724/2014-T, 152/2015-T, 174/2015-T, 236/205-T, 311/2015-T and 50/2013-T.

Response of the Respondent

In its Response, the Respondent alleges, in brief, the following:

- Article 44(5) of the Stamp Tax Code (CIS), amended by Law No. 55-A/2012, of 29/10, provides that, where assessment is to take place, the tax referred to in item 28 of the TGIS is paid in the periods, terms and conditions defined in Article 120 of the CIMI, this means that (when the amount is greater than €500.00) it is paid in three installments, in the months of April, July and November, in accordance with Article 120(1)(c) of the aforementioned article.

- Now, what is at issue here are assessments resulting from the direct application of the legal rule, which translates into objective elements, without any subjective or discretionary assessment.

- The concept of property is defined in Article 2(1) of the CIMI, being provided in its (4) that, in the regime of condominium ownership, each autonomous unit is deemed to constitute a property.

- It follows from the analysis of the normative provision that a "property in full ownership with stories or divisions capable of independent use" is unequivocally different from a property in condominium ownership regime, constituted by autonomous units, that is, several properties.

- Article 12 of the CIMI establishes the concept of property register, and its (3) concerns exclusively the manner of registering property register data.

- As to the assessment of Urban Property Tax, in the case of properties in full ownership, the value that serves as the basis for its calculation will unquestionably be that entered in the property record as "total taxable property value".

- In compliance with Article 119(1) of the CIMI, the collection document is sent to the taxpayer with discrimination of the parts capable of independent use, the respective taxable property value and the tax apportioned to each municipality of the location of the properties.

- In accordance, given that the assessment is correct and the appraised tax is owed, no interest (late payment or statutory) is owed, first and foremost because there is no error attributable to the services, which merely acted, as they should, in strict compliance with the legal rule.

- The Claimant argues that, by the fact that there is a property in full ownership with stories or divisions capable of independent use, such incidence should be determined by the VPT attributed to each story or division.

- The allegations made in the initial petition, as well as the reference to arbitral decisions supporting his claim, show this disagreement.

- However, the thesis defended by the Claimant lacks legal support.

- Although the assessment of Stamp Tax, in the situations provided for in item 28.1 of the TGIS, is carried out in accordance with the rules of the CIMI, the truth is that the legislator reserves the aspects that require the necessary adaptations, namely those in which, as is the case of properties in full ownership, even though with stories or divisions capable of independent use (although the Urban Property Tax is assessed in relation to each part capable of independent use) for the purposes of Stamp Tax the property as a whole is relevant, because divisions capable of independent use are not deemed to be a property, but only autonomous units in the condominium ownership regime, as provided in Article 2(4) of the CIMI.

- That, expressly, results from the letter of the law is that the legislator intended to tax with item 28.1 under discussion properties as a single legal-tax reality, as stated below.

- The subjection to stamp tax of item 28.1 of the TGIS results from the combination of two facts: residential use and the taxable property value of the urban property registered in the property register being equal to or greater than €1,000,000.00.

- In truth, it appears from the property record (attached to the initial petition) that the property in question is in a regime of full ownership, composed of several parts capable of independent use.

- Being this the property register information, in accordance with Article 23(7) of the CIS, the assessments of stamp tax relating to the year 2015 were made by the Tax Administration, taking into account the nature of the urban property, as of the date of the taxable event, applying, with the necessary adaptations, the rules contained in the CIMI.

- In accordance with the rules of the CIMI, specifically Article 113(1), assessment is carried out annually, on the basis of the taxable property values of the properties and in relation to the taxpayers contained in the property registers on 31 December of the year to which it relates.

- Given that the property is in a regime of full ownership (not having autonomous units, to which tax law assigns the qualification of property, because from the notion of property in Article 2(4) of the CIMI it follows that only autonomous units of property in condominium ownership regime are deemed to be properties), it is the global VPT of the property that must, therefore, be relevant.

- Given the foregoing, the alleged violation of item 28.1 of the TGIS should be judged unfounded, and the contested assessments maintained in the legal order as they constitute a correct application of the law to the facts.

- It should be noted that the property register entry of each part capable of independent use is not autonomous, per register, but is contained in a description in the register of the property as a whole – see the property record of the property which represents the owner's document containing the property register elements of the same.

- What is intended to be concluded is that these norms of assessment procedures, the norms on property register entries, and further the norms on the assessment of parts capable of independent use, do not permit asserting that there should be an equation of the property in full ownership regime to the condominium ownership regime, this because, and as already stated, it would be illegal and unconstitutional.

- These civil-law regimes are different, and tax law respects them!

- Thus, it follows from the fact that Stamp Tax item 28.1 applies to the ownership of urban properties whose VPT contained in the property register, under the CIMI, is equal to or greater than €1,000,000.00, that the taxable property value relevant for purposes of the incidence of the tax is clearly the total taxable property value of the urban property and not the taxable property value of each of the parts that compose it, even when capable of independent use.

- Item 28.1 thus applies to the ownership, usufruct or right of superficies of urban properties with residential use, whose taxable property value contained in the property register, under the CIMI, is equal to or greater than €1,000,000.00.

- This is a general and abstract rule, applicable uniformly to all cases in which the respective factual and legal prerequisites are met.

- Also, the different valuation and taxation of a property in full ownership as opposed to a property constituted in condominium ownership stems from the different legal effects inherent to these two figures.

- Indeed, constitution in condominium ownership determines the division/partition of full ownership and the independence or autonomy of each of the units that constitute it, for all legal purposes, under Article 2(4) of the CIMI and Articles 1414 et seq. of the Civil Code, whereas a property in full ownership constitutes, for all purposes, a single legal-tax reality.

- Thus, one cannot conclude for alleged discrimination, or violation of the principle of equality when, in truth, we are dealing with distinct realities, valued by the legislator differently.

- It is also important to note that taxation under Stamp Tax obeys the criterion of suitability, to the extent that it aims to tax the wealth embodied in the ownership of properties of high value, arising in a context of economic crisis that cannot at all be ignored.

- In truth, the measure implemented seeks to achieve maximum effectiveness with regard to the objective to be attained, with minimal harm to other interests considered relevant.

- Thus, the option for this mechanism of revenue collection is legitimate, which would only be censurable if it resulted manifestly indefensible.

- We do not believe that this is the case insofar as this measure is applicable uniformly to all holders of properties with residential use of value greater than €1,000,000.00.

- What is now being defended in arbitral proceedings was the subject of binding information by the AT, with an order of concordance by the Legal Deputy of the Director-General of the Tax Authority and Customs Authority, of 11.02.2013, whose content is partially transcribed:

"3. For purposes of taxation under stamp tax, item 28 of the respective general table, the distinction between properties constituted in full ownership and properties constituted in condominium ownership regime is determinative. In the case of a property constituted in condominium ownership, under the terms provided in Articles 1417 et seq. of the Civil Code, each autonomous unit so constituted is deemed to constitute a property, as results from the provision in Article 2(4) of the CIMI, applicable by force of the provision in Article 1(1) and (6) of the Stamp Tax Code, as amended by Law No. 55-A/2012 of 29 October and item 28 of the General Table of Stamp Tax, in its current wording.

4. For due and legal purposes, namely for purposes of taxation under stamp tax, item 28 of the TGIS, properties constituted in full ownership are considered in their entirety as a single property.(...)

6. For purposes of Urban Property Tax and consequently for purposes of subjection to stamp tax, item 28 of the General Table, attached to the CIS, by reference to that Code, the property in full ownership with parts or divisions capable of independent use (so-called full ownership) and the property in condominium ownership regime, are, with respect to the concept of "tax property", distinct since in the latter case the autonomous unit, for purposes of Urban Property Tax, integrates the concept of property. This is an exception to the general rule, given that each autonomous unit of a building subject to the condominium ownership regime belongs to an independent holder, who is owner of his autonomous unit and co-owner of the common parts of the property.

7. As for the first case (full ownership) even though the property has parts or divisions capable of independent use the tax legal concept is that this property constitutes a single unit, since its ownership, without prejudice to co-ownership, belongs only to a single owner".

- In this way it is concluded that the now Claimant, for purposes of Urban Property Tax and also of stamp tax, by force of the wording of the aforementioned item, is not owner of autonomous units, but rather of a single property, considering the AT that this is the understanding that best accords with the principle of legality inherent in Article 8 of the General Tax Law, to which all of its activity is devoted.

- Whereby we have, necessarily, to conclude that the notifications made for payment of the tax in question did not violate any legal principle, and should thus be maintained.

- This understanding is in accordance with a recent arbitral decision, of 5 May, rendered in case no. 668/2015 – T.

- The Claimant alleges, in his learned initial petition, absence of legal basis under Article 99(c) of the Tax Procedure Code, due to lack of the assessment number, in the various documents for payment of the tax in question.

- From the consultation of the aforementioned collection notices, it is verified that they refer to the assessment of Stamp Tax on real property, item 28 of the TGIS, where the property is properly identified by description – municipality/parish/article – the taxable property value, the rate applied, and in these same collection notices we also find the legal provisions under which the assessment was made.

- Thus, under the terms established in Article 77 of the General Tax Law, the procedural decision must be grounded through a brief statement of the factual and legal reasons that motivated it, and the grounding may consist of a mere declaration of agreement with the grounds of earlier opinions, information or proposals, including those forming part of the report of the tax audit.

- In accordance with (2) of such article the grounding of tax acts may be carried out in summary form, and must always contain the applicable legal provisions, the qualification and quantification of the taxable facts and the operations for determining the taxable basis and the tax.

- That is, the grounding must be expressed, through a brief statement of the factual and legal grounds of the decision, being able to consist of a mere declaration of agreement with the grounds of earlier opinions, information or proposals, which will constitute in this case an integral part of the respective act, being equivalent to the lack of grounding the adoption of grounds which, by obscurity, contradiction or insufficiency, do not concretely clarify the motivation for the act.

- In conformity with what has already been decided in this learned court, cf. decision rendered in case 42/2013-T, it will always be said that "in the so-called mass acts, as is the case of the contested assessment, the same formal rigor should not be required as should be required of other administrative acts intended for specific individualized situations (in this sense see, for example, the decision of the Supreme Administrative Court of 22-11-2000, case no. 25389)."

- Also bearing in mind with respect to the grounding of administrative acts that the act is grounded when, by the motivation adduced, it is apt to reveal to a normal addressee the factual and legal reasons that determine the decision, enabling him to react effectively by legal means against the same, if he so wishes.

- Following closely the established jurisprudence, which states: "Varying the density of grounding depending on the legal type of act and its circumstances, less dense grounding of certain types of acts is acceptable, such grounding being considered sufficient provided it corresponds to a minimum limit that does not alter it, that is, the "quantum" indispensable to compliance with the minimum requirements of formal grounding is guaranteed: the revelation of the existence of reflection and the indication of the principal reasons that moved the agent", in Decision of the Supreme Administrative Court in appeal no. 31616 of 13-04-2000.

- Attention should also be paid to the doctrine which states that a given act, in this case, the administrative-tax act, is properly grounded whenever it is possible, through it, to discover the cognitive path used by its author to arrive at the final decision, in A. Varela and others, Manual of Civil Procedure, Coimbra Editora, 2nd edition, 1985, p. 687 et seq, Alberto dos Reis, Annotated Code of Civil Procedure, Coimbra Editora, 1984, V, p. 139 et seq.

- Analyzing the cognoscibility of the volitional itinerary or cognitive path of the administration with respect to the final act, in this case the assessment of the tax, following established jurisprudence it will always be said that grounding "(...) Does not mean an exhaustive description of all the reasons that determine its practice, but implies properly clarifying its addressee of the motives that are at the genesis and the reasons that support its content. (...) This duty of grounding thus aims to enable the addressee of the act to know the cognitive and evaluative itinerary of this, allowing him to know what the motives were that led the Administration to its practice. (...) An act is properly grounded whenever the administered person, placed in his position as normal addressee – the bonus pater familiae of which Article 487(2) of the Civil Code speaks – is clarified about the reasons that motivated it." in Decision of the Supreme Administrative Court in case no. 016217 of 28-10-1998.

- Reiterating what has already been said, to achieve that objective a succinct grounding is sufficient, but that is clear, concrete, congruent and that appears contextual, the grounding of the administrative-tax act being sufficient if, in the context in which it was practiced, and given the factual and legal reasons expressly stated in it, they are capable or apt and sufficient to enable a normal addressee to grasp the cognitive and evaluative itinerary of the decision.

- Now, it is demonstrated that the Claimant understood perfectly the meaning and scope of the assessments, as results from his own legal-argumentative exercise that he now makes in this request for arbitral pronouncement.

- Whereby one cannot fail to conclude, as the good jurisprudence concludes, that: "There is no formal defect of lack of grounding if the claimant himself expressly reveals having understood perfectly the logical and legal process that led to the decision of taxation, recognizing having perceived the prerequisites concretely taken into account by the author of the act and the reasons why the taxed values were reached, denouncing the cognitive and evaluative itinerary traversed...", in Decision of the Supreme Administrative Court in case no. 0105/12 of 30-01-2013.

- It is manifest and unquestionable that the Claimant understood perfectly the logical and legal process that led to the decision of taxation in question, and what the criteria and legal methods were that led to the values contained in the assessments now at issue, this request for arbitral pronouncement, and the grounding presented by the Claimant, being proof of this very fact.

3. Subsequent Proceedings

3.1. Dispensing with the Meeting Provided for in Article 18 of the RJAT

In an order rendered on 15.12.2016, the Court proposed dispensing with the meeting provided for in Article 18 of the RJAT, as it seemed unnecessary.

With the Parties having expressed their agreement, the Court ordered the dispensing with the meeting by order rendered on 2.5.2017.

3.2. Subsequent Request of the Claimant

On 24.01.2017, the Claimant submitted a request in which he requested the attachment of proof of payment of the second and third installments of the tax relating to the contested assessments – payment subsequent to the submission of the request for arbitral pronouncement – and simultaneously requested the expansion of the claim in order to encompass in it the refund of these same amounts.

The Tax Authority was afforded a period to pronounce itself on this request, which it chose not to do.

3.3. Pleadings

By order of 10.05.2017, the Parties were afforded a period to submit final pleadings.

In their respective final pleadings, both Parties reiterated, in essence, the theses and arguments already previously stated.

II – DISMISSAL OF DEFECTS

The singular Arbitral Tribunal was regularly constituted on 10-11-2016, having been the arbitrator appointed by the Deontological Council of CAAD, with the respective legal and regulatory formalities fulfilled (Articles 11(1)(a) and (b) of the RJAT and Articles 6 and 7 of the Deontological Code of CAAD).

The Parties have legal standing and capacity, are legitimate and are regularly represented, under the terms of Articles 4 and 10 of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March.

Given that there is an objection to a plurality of assessment acts, the joinder of claims is admissible under the terms of Article 3(1) of the RJAT.

No procedural irregularities were identified.

III – ISSUES TO BE DECIDED

The issues to be decided are:

- The existence of a situation of expansion of the claim and its admissibility;

- The existence of a defect of lack of grounding;

- The incidence of the tax of item 28.1 of the General Table of Stamp Tax on divisions of urban property in full ownership, with residential use and capable of independent use and as such considered in the property register for tax purposes.

IV – FACTS FOUND PROVED

The following are the facts found proved considered relevant to the decision:

- The Claimant was, as of the date of the taxable event, owner of the urban property located at Rua ... nos. ... to ..., ..., registered in the property register for tax purposes of the union of parishes of ..., ..., ..., ..., ... and ..., municipality of ..., under article ...;

- The property described is described in the property register for tax purposes as a property in full ownership with stories or divisions capable of independent use;

- The property is composed of eighteen divisions capable of independent use, of which eight have commercial use, and the remaining have residential use;

- The taxable property value of the property is €2,342,320.00;

- The value considered by the Tax Authority and Customs Authority as being subject to tax is €1,254,600.00;

- The Tax Authority and Customs Authority assessed stamp tax on the taxable property values of the stories or parts capable of independent use with residential use, at the rate of 1%, under the terms of item 28.1 of the General Table of Stamp Tax (TGIS) for the year 2015;

- None of the divisions of the property has a taxable property value equal to or greater than one million euros;

- The Claimant proceeded with payment of all the assessed stamp tax.

- The Claimant proceeded with payment of the second and third installments of the assessed stamp tax, in execution proceedings, on 20-02-2017.

V - GROUNDS

I. Expansion of the Claim/Incident of Assessment to Render Liquid the Generic Claim

The Claimant requested, through a request addressed to the Court on 24.2.2017, the expansion of the claim, in order to include in it the refund of the amounts paid voluntarily in execution proceedings, relating to the second and third installments of the tax corresponding to the contested assessments.

This payment was made on 20-02-2017, therefore after the submission of the request for arbitral pronouncement.

With due respect for the position assumed by the Claimant, we believe we are not dealing with a situation of expansion of the claim but of a simple incident of assessment to render liquid the generic claim, under the terms of Articles 358 and 359 of the Code of Civil Procedure, applicable to the tax arbitral process by force of the reference made by Article 29(1)(e) of the RJAT.

Indeed, the claim formulated by the Claimant, as far as the refund of the paid tax is concerned, is a generic claim, not quantified, that encompasses all the tax that will have been paid relating to the contested assessments, and whose amount was not possible for the Claimant to quantify at the moment of submission of the request for arbitral pronouncement, because, at that moment, the totality of the assessed tax had not yet been paid, and because that payment was dependent on facts whose occurrence and time of verification were not foreseeable, such as, for example, the institution of execution proceedings before the assessments were annulled.

Thus, at the moment when, by the subsequent payment of the totality of the tax, the Claimant has exact knowledge of the total amount whose refund he intends to demand, he must come to the proceedings to indicate that amount, through an assessment procedure.

It is clear that the claim formulated, as far as the refund of the paid tax is concerned, is a generic claim, since its amount is not nor can be determined beforehand, and it is also clear that the amounts paid relating to the second and third installments of the assessed tax fall within the generic claim: "the refund of the improperly paid tax".

Thus, the incident is admissible.

The matter of fact relating to it must be considered in the themes of proof stated or to be stated with the remainder of the matter of fact of the main case – as, indeed, has already been done – and the assessment must be discussed and decided together with the main case, as provided in Article 360(2) of the Code of Civil Procedure.

II. The Existence of a Defect of Lack of Grounding

The Claimant is correct in asserting that the lack or insufficiency of grounding of the tax act constitutes a defect that affects the act with invalidity under Article 77(c) of the General Tax Law and Article 36 of the Tax Procedure Code.

However, the grounding of the tax act consists of the clarification "of the factual and legal reasons" that motivated the decision (Article 77(1) of the General Tax Law).

The indication of the number with which the Tax Administration registers and identifies the decision cannot be considered as forming part of the grounding of the act, whereby its absence cannot be equivalent to lack of grounding.

Thus, the claim for annulment of the contested assessment acts on the basis of the defect of violation of law due to lack of grounding is unfounded.

III. The Incidence of the Tax of Item 28.1 of the General Table of Stamp Tax on Divisions of Urban Property in Full Ownership, with Residential Use and Capable of Independent Use and as Such Considered in the Property Register for Tax Purposes

The fundamental issue that must be examined and decided is whether the tax of item 28.1 of the General Table of Stamp Tax applies to divisions of urban property in full ownership, with residential use capable of independent use and as such considered in the property register for tax purposes.

On this same issue the Supreme Administrative Court has already pronounced itself several times, with the doctrine established being that, in the case of a property constituted in condominium ownership, the objective incidence of Stamp Tax should be determined, not by the taxable property value resulting from the sum of the taxable property value of all the divisions or stories capable of independent use (individualized in the property register article), but by the taxable property value attributed to each of those stories or divisions intended for residential purposes.

The basis for this doctrine can be found in one of the first decisions that the Supreme Court made on this matter, on 09-09-2015, in case no. 47/15. In this decision, which we take as the basis of our decision in the present case, that Court holds:

"The concept of 'property (urban) with residential use' was not defined by the legislator. Neither in Law No. 55-A/2012, which introduced it, nor in the Urban Property Tax Code, to which Article 67(2) of the Stamp Tax Code (also introduced by that Law) refers subsidiarily. And it is a concept which, probably due to its imprecision – a fact all the more serious since it is in function of it that the scope of objective incidence of the new taxation is delineated – had a short life, since it was abandoned when Law No. 83-C/2013, of 31 December, the State Budget Law for 2014, came into effect, which gave new wording to item no. 28 of the General Table, and which now delineates its scope of objective incidence through the use of concepts that are legally defined in Article 6 of the Urban Property Tax Code.

Nothing unequivocal follows from the letter of the law, moreover, for it itself, by using a concept that it did not define and that was also not defined in the instrument to which it referred subsidiarily, unnecessarily lent itself to equivocations, in a matter – of tax incidence – in which certainty and legal security should also be paramount concerns of the legislator."

The Court continues:

"(...) The present subject matter is, first and foremost by virtue of Article 67(2) of the Stamp Tax Code, subject to the norms of the Urban Property Tax Code – 'matters not regulated in this code relating to item 28 of the General Table are subject subsidiarily to the CIMI'.

As such, and as has been mentioned so many times, in the understanding of this court, the mechanism for determining the VPT relevant for purposes of the aforementioned item is that which is established in the Urban Property Tax Code.

Now, Article 12(3) of the Urban Property Tax Code establishes that 'each story or part of a property capable of independent use is considered separately in the property registry, which also discriminates the respective taxable property value'.

With the legislator downplaying, in the terms previously mentioned, any prior constitution of condominium or vertical ownership.

Indeed, for this (legislator), what is relevant is the material truth underlying its existence as an urban property and its use.

It should be noted that the Tax Authority itself seems to agree with the criterion set forth, which is why the assessments it itself issues are very clear in their essential elements, from which it follows that the value of incidence is that corresponding to the VPT of each of the stories and the assessments individualized.

Thus, if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in condominium ownership, it has clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of the new tax.

Thus, there would only be incidence of Stamp Tax (within the scope of item no. 28 of the TGIS) if one of the parts, stories or divisions with independent use presented a VPT exceeding €1,000,000.00.

The Tax Authority cannot consider as the reference value for the incidence of the new tax the total value of the property, when the legislator itself established a different rule in the context of Urban Property Tax (and, as previously mentioned, this is the code applicable to matters not regulated as far as item no. 28 of the TGIS is concerned).

In conclusion, the current legal regime does not impose the obligation to constitute condominium ownership, whereby the action of the Tax Authority translates into arbitrary and illegal discrimination.

Indeed, the Tax Authority cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the tax system, as well as the principle of tax legality provided for in Article 103 of the Constitution of the Portuguese Republic, and further the principles of justice, equality and tax proportionality.

In the case at hand, the property/properties in question were, as of the date relevant to the facts, constituted in full ownership and had [...] units with independent use, as results from the documents [...].

Given that none of these units has taxable property value equal to or exceeding €1,000,000.00, as results from the documents attached to the case file, it is concluded that the legal prerequisite for incidence is not met."

We consider that the jurisprudence of the Supreme Administrative Court explained in the cited decision is based on correct grounds, whereby we understand that we should apply it to the case sub judice, without any reservation.

Within the scope of Urban Property Tax (IMI), the legislator clearly established, in Article 12(2) of the CIMI, that parts of property with independent use are assessed separately, this value being taken as the basis for the tax assessment.

Within the scope of Stamp Tax, Article 13(1) of the respective code provides that "the value of real property is the taxable property value contained in the property register under the terms of the CIMI".

Therefore, it appears clear that the legislator intended that the taxable property value of the parts with independent use be considered for purposes of delimiting the objective incidence of the tax.

The Tax Administration seems to conform its action to this understanding, by issuing Stamp Tax assessment acts individualized in relation to each part with independent use.

Moreover, in accordance with Article 9(1) of the Civil Code, interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was drawn up and the specific conditions of the time in which it is applied. Now, the subjective element of interpretation, to be drawn from the historical elements that are well known in this matter, and which are partially reproduced in the decision of the Supreme Court cited, clearly indicates the legislator's intention to submit to taxation residential units ("dwelling houses") of high value. Residential units are the parts capable of independent use and not the property as a whole.

Without this interpretation, the rule of item 28.1 of the General Table of Stamp Tax would be completely arbitrary, unfair and devoid of rationality.

In consonance with all the interpretive elements mentioned, and following the jurisprudence of the Supreme Administrative Court, it must be considered that, being faced with a property in full ownership formed by parts capable of independent use, there is only incidence of stamp tax (within the scope of item no. 28 of the TGIS) if one of the parts, stories or divisions with independent use presents a taxable property value equal to or greater than one million euros.

For all the foregoing, it must be concluded that the contested stamp tax assessments are illegal, by violation of tax law, as they apply to independent parts of properties in full ownership but taking as their basis the taxable property value of the sum of such parts and when none of these parts has a taxable property value equal to or greater than €1,000,000.00.

VII - DECISION

For the grounds stated, it is decided:

I) The present request for arbitral pronouncement is judged entirely well-founded, declaring the invalidity, by violation of law, and annulling the acts of assessment of Stamp Tax of item 28.1 of the TGIS, relating to the year 2015 and concerning the residential divisions of the urban property located at Rua ... nos. ... to ..., in ..., registered in the property register for tax purposes of the union of parishes of ..., ..., ..., ..., ... and ..., municipality of ..., under article ..., relating to the year 2015.

II) The Respondent, Tax Authority and Customs Authority, is condemned to refund the stamp tax improperly paid relating to the annulled assessments, plus the corresponding statutory interest, under the terms of Article 43 of the General Tax Law.

Economic Utility Value of the Case: The economic utility value of the case is fixed at €12,546.00.

Costs: Under the terms of Article 22(4) of the RJAT, the amount of costs is fixed at €918.00, under the terms of Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Let this arbitral decision be registered and the Parties be notified.

Lisbon, Centre for Administrative Arbitration, 28 June 2017

The Arbitrator

(Nina Teresa Sousa Santos Aguiar)