AIMI Taxation of Construction Land Used in Commercial Activities - CAAD Case 502/2018-T

ARBITRAL DECISION

I – REPORT

A..., SA, collective entity no. ... (hereinafter referred to as the Claimant), with registered office in ..., submitted, pursuant to article 2º no. 1, paragraph a) and articles 10º et seq. of the Legal Regime for Tax Arbitration, provided for in Decree-Law no. 10/2011, of 20 January, as amended by article 228º of Law no. 66-B/2012, of 31 December (hereinafter abbreviated as "LRTA") and articles 1º and 2º of Order no. 112-A/2011, of 22 March, a request for an arbitral pronouncement on the legality of the assessment of the Additional Municipal Property Tax (AIMI) with no. 2017..., relating to the year 2017, in the amount of €16,935.61, seeking the declaration of illegality of the said assessment and its consequent annulment as well as the reimbursement of the amount unduly paid, together with compensatory interest; it further seeks, by way of subsidiary claim, that articles 135º-A and 135º-B of the Municipal Property Tax Code (CIMI) be dis-applied as unconstitutional and, consequently, that the illegality of the tax act assessing AIMI be declared, which should be annulled with all legal consequences.

The Tax and Customs Authority (hereinafter referred to as "TCA" or "Respondent") is the respondent.

The request for the constitution of an arbitral tribunal was accepted by His Excellency the President of the Administrative Arbitration Center (CAAD) and automatically notified to the Respondent in accordance with regulatory requirements.

Pursuant to the provisions of paragraph a) of no. 2 of article 6º and paragraph b) of no. 1 of article 11º of Decree-Law no. 10/2011, of 20 January, as amended by article 228º of Law no. 66-B/2012, of 31 December, the CAAD Ethics Board designated the undersigned, Cristina Aragão Seia, as arbitrator of the sole arbitral tribunal, who communicated her acceptance of the appointment within the legal deadline.

On 30.11.2018, the parties were duly notified, and did not manifest, within the legal terms and deadline, any intention to challenge the appointment of the arbitrator (article 11º, no. 1, paragraphs a) and b) of the LRTA, in conjunction with articles 6º and 7º of the Ethics Code).

In compliance with the requirement set out in paragraph c) of no. 1 of article 11º of the LRTA, the Arbitral Tribunal was constituted on 20.12.2018.

In these terms, it is regularly constituted to examine and decide on the subject matter of the case.

To substantiate the request for an arbitral pronouncement, the Claimant alleges, in summary, the following:

a) The illegality of the application of the additional IMI:

• The Claimant is a real estate company whose corporate purpose comprises real estate development;

• The real properties of which it is the owner are intended for the pursuit of its economic activity;

• The real properties held by it constitute the economic substrate of its activity and embody true elements of its production process;

• The taxation in AIMI of the real estate assets held by it places a tax burden on the economic activity it develops and is contrary to the ratio legis of the regime;

• It cannot be presumed that the portfolio of real properties held by companies whose activity is limited to the carrying out of operations related to the onerous exploitation of real estate (purchase, sale, lease, etc.), is demonstrative of wealth or an indicator of their contributory capacity to be considered for purposes of taxation in AIMI;

b) The non-discriminatory taxation of all construction land:

• Construction land affected to economic activities - to the construction of buildings intended for commercial, industrial, service or other purposes - are covered by the exclusion rule in no. 2 of article 135º-B;

• The disregard for the criterion of dedication of the property is illegal in that the additional assessment of AIMI in question falls on properties which, by their nature, are not covered by the scope of the objective incidence of AIMI;

c) The unconstitutionality of the taxation regime in AIMI:

• AIMI is contrary to the constitutional principle of equality, enshrined in article 13º of the Constitution of the Portuguese Republic (CRP) and, in parallel, contrary to the principle of tax equality and contributory capacity enshrined in article 104º, no. 3 of the same instrument.

Having been duly notified, the Tax and Customs Authority filed a response in which it defended the non-merits of the request, raising exceptions and objections, invoking in summary:

a) By way of exception - the lapse of the request for an arbitral pronouncement:

• The true and only request for an arbitral pronouncement formulated by the Claimant was for the annulment of the tax act assessing the additional IMI, with the corresponding restitution of tax unduly paid and the payment of compensatory interest;

• Since the Claimant's attack is directed exclusively at the tax assessment act, it is clearly beyond the 90-day period legally defined for its challenge, in arbitration proceedings, counted from the day following the end of the period for voluntary payment of the tax liability, pursuant to article 10º of the LRTA, in conjunction with article 102º nos. 1 and 2 of the Tax Procedure and Process Code ("TPPC").

• The lapse of the right to action constitutes a dilatory exception that determines the dismissal of the Respondent from the proceedings under paragraph h) of no. 1 of article 89º of the Code of Administrative Procedure in the Courts (CAPC) and paragraph e) of no. 1 of 287º of the Code of Civil Procedure (CCP), applicable ex vi article 2º of the LRTA;

b) By way of objection:

• The subjection of construction land and properties classified as residential to the rule of incidence of AIMI is effected independently of their potential dedication, as well as of the nature and specificities of their owner;

• Although it has excluded from incidence urban properties classified as "industrial, commercial or service" and "other", the legislator explicitly chose to maintain other properties which also form part of the assets of companies, such as those classified as residential or construction land, by not including them in the negative delimitation enshrined in the law;

• It was not on the basis of the activity to which the real properties are dedicated that the exclusion of incidence was defined, since in the approved version of the regime the non-incidence was determined solely on the basis of the types of properties indicated in article 6º of the CIMI, without any reference to dedication or not to the functioning of collective entities;

• It does not appear that the incidence of AIMI on real properties owned by companies that carry out their activity in the real estate sector, namely construction land acquired with the intention of promoting buildings thereon intended for sale, is discriminatory or that these companies should deserve more advantageous treatment than that granted to the generality of owners of urban properties;

• The ownership of a real estate portfolio of high value by a natural or legal person (whether a real estate company, real estate fund or other) evidences, as in relation to any owner of property intended for housing, a special economic capacity to be able to contribute additionally to the Financial Stabilization Fund of Social Security, to which the revenue from AIMI is allocated;

• It is not apparent that the taxation of construction land, with dedication to "commerce and services", as provided for in articles 135º-A and 135º-B of the CIMI, conflicts with the principle of equality, justice and contributory capacity;

• Nor that the taxation of construction land held by collective entities that form part of their real estate portfolio and are dedicated to the development of their economic activity - as provided for in articles 135º-A and 135º-B of the CIMI, also conflicts with the principle of equality, justice and contributory capacity;

• The thesis that the additional IMI violates the principle of tax capacity has no foundation whatsoever, as the ownership of real properties is a manifestation of wealth and contributory capacity.

As it was understood that there was no controversy regarding the essential and relevant facts for the decision and that had sufficient documentary support, the meeting referred to in article 18º of the LRTA was dispensed with, with only the Respondent submitting arguments where it reiterated its legal position.

The date of 29.03.2019 was set for the pronouncement of the final decision.

II – SANITARY DECISION

The parties have legal personality and capacity, are legitimated as to the request for an arbitral pronouncement and are duly represented, pursuant to the provisions of articles 4º and 10º of the LRTA and article 1º of Order no. 112-A/2011, of 22 March.

The Respondent raised the exception of lapse of the right to action due to the lateness of the request for an arbitral pronouncement, a dilatory exception that determines the dismissal from the proceedings, which the Respondent requested pursuant to paragraph h) of no. 1 of article 89º CAPC and paragraph e) of no. 1 of 287º of the CCP, applicable ex vi article 2º of the LRTA.

In fact, the Respondent understands that, although the Claimant has submitted a gracious complaint regarding the AIMI assessment at issue, which received a rejection order, "the object of the request, expressly delimited by the Claimant, is the alleged illegality of the assessment act and not the rejection of the gracious complaint submitted. (...) Now, since the attack is directed exclusively at tax assessment acts, it is clearly beyond the 90-day period legally defined for its challenge, in arbitration proceedings, counted from the day following the end of the period for voluntary payment of the tax liability, pursuant to article 10º of the LRTA, in conjunction with article 102º nos. 1 and 2 of the Tax Procedure and Process Code", concluding that the request for an arbitral pronouncement was late.

The Respondent further alleges, in this regard, that "at no point in the petition does the Claimant make any assessment of the rejection act of the gracious complaint and its grounds". This is not accurate. In fact, although not referred to in the final request, the Claimant begins its statement of claim, requesting, on the first page of the request, the constitution of an Arbitral Tribunal "to pronounce on the illegality of the order rejecting the gracious complaint issued by the Tax and Customs Authority ("TCA"), within the scope of process ...2018..., which is attached under the designation of Document 1 and which is reproduced for all legal purposes, and, consequently, to pronounce on the illegality of the tax act assessing the Additional Municipal Property Tax ("AIMI"), with no. 2017... (...)".

This Tribunal understands, therefore, that the TCA's argument is unfounded. The request for declaration of illegality of the assessment act has underlying it the request for declaration of illegality of all subsequent acts whose validity is affected by that declaration, which obviously includes the act rejecting the gracious complaint.

This situation is clear from administrative litigation, as can be seen from the joint analysis of articles 50º, no. 1 and 59º, no. 4 of the CAPC. Similarly, the tax arbitration litigation regime corroborates the same understanding, since article 2º of the LRTA takes primary acts, in the case sub judice the AIMI assessment, as the reference for the jurisdiction of arbitral tribunals, with secondary acts – in this case, the order rejecting the gracious complaint – being relevant as references to the timeliness of the challenge action, as results from article 10º, no. 1, paragraph a) of that instrument, where it is required that requests for constitution of an arbitral tribunal be submitted within 90 days, counted from the facts provided for in nos. 1 and 2 of article 102º of the TPPC.

The arbitral request was, therefore, correctly formulated, as it relates to paragraph a) of no. 1 of article 2º of the LRTA - assessment act -, and was submitted within the period set by paragraph a) of no. 1 of article 10º of the same instrument (90 days counted from the order rejecting the gracious complaint).

The exception of lapse of the right to action, invoked by the TCA, is therefore unfounded.

Apart from this exception raised by the Respondent and found unfounded by this Tribunal, no other exceptions have been raised that need to be addressed.

The arbitral tribunal is materially competent.

No nullities are found, so it is necessary to proceed to examine the merits of the request.

III - MERITS

FACTUAL MATTER

Facts Proven

In view of the positions taken by the parties and the documentary evidence attached to the proceedings - bearing in mind that the Tribunal does not have the duty to pronounce on all matters alleged, but rather has the duty to select that which is relevant for the decision, taking into account the cause of action underlying the request formulated (cfr. articles 596º, no. 1 and 607º, nos. 2 to 4, of the CCP, as amended by Law 41/2013, of 26.06) and to record whether it considers it proven or not proven (cfr. article 123º, no. 2, of the TPPC) - the following facts are considered, with relevance to the assessment and decision of the issues raised:

• The Claimant is a real estate company whose corporate purpose comprises real estate development;

• The Claimant is the owner of the urban properties included in the assessment at issue (doc. 1 to 3 attached with the arbitral request);

• The construction land registered in the urban property record under article ... of the Union of parishes of ..., ..., ... and ..., municipality of Leiria, contains a mention of Industry in the type of location coefficient;

• The Claimant was notified by the TCA of the AIMI assessment, concerning the properties identified above, for the year 2017, with no. 2017... doc. 3 attached with the arbitral request);

• The Claimant submitted a gracious complaint regarding that assessment which was filed under no. ...2018... (doc. 1 attached with the arbitral request);

• In the said gracious complaint, a rejection order was issued which was notified to the Claimant, by letter dated 02.07.2018 (doc. 1 attached with the arbitral request);

• The tax assessed was paid by the Claimant on 29.09.2017.

Facts Not Proven

It was not proven that the other construction land was intended for commercial, industrial or service purposes.

Motivation regarding factual matter:

The factual matter deemed proven is based on the critical examination of the documentary evidence presented and not contested, which is hereby reproduced.

2. LEGAL MATTER

As results from the arbitral request, the Claimant expresses its objection to the assessment act challenged, since the real properties it holds constitute the economic substrate of its activity and embody true elements of its production process; that the taxation in AIMI of the real estate assets it holds, by placing a tax burden on its economic activity, is contrary to the ratio legis of the regime; that it cannot be presumed that the portfolio of real properties held by companies, such as the Claimant, whose activity is limited to the carrying out of operations related to the onerous exploitation of real estate (purchase, sale, lease, etc.), is demonstrative of wealth or an indicator of their contributory capacity to be considered for purposes of taxation in AIMI; and that, since it is a tax on real estate wealth, properties dedicated to an economic activity and which are held for its pursuit are not subject to it, as is the case here.

It further alleges that construction land affected to economic activities are covered by the exclusion rule in no. 2 of article 135º-B and that the disregard for the criterion of dedication of the property is illegal.

Finally, it invokes the unconstitutionality of the taxation regime in AIMI, considering it contrary to the constitutional principle of equality, enshrined in article 13º of the Constitution of the Portuguese Republic (CRP) and to the principle of tax equality and contributory capacity enshrined in article 104º, no. 3 of the same instrument.

Let us examine this:

Taxation in AIMI of properties dedicated to commercial activities

Law 42/2016, of 28 December, added to the CIMI, among others, article 135º-A which establishes: "passive subjects of the additional municipal property tax are natural or legal persons who are owners, usufructuaries or superficiaries of urban properties situated in Portuguese territory".

In turn, the following article, 135º-B, provides:

"1. The additional municipal property tax falls on the sum of the tax property values of urban properties situated in Portuguese territory of which the passive subject is the owner.

2 - The following are excluded from the additional municipal property tax: urban properties classified as "commercial, industrial or for services" and "other" in accordance with paragraphs b) and d) of no. 1 of article 6º of this Code".

As the Claimant alleges, this regime excludes from the incidence of AIMI "urban properties classified as "commercial, industrial or for services" and "other" in accordance with paragraphs b) and d) of no. 1 of article 6º (...)" of the CIMI, so only urban properties dedicated to residential purposes and construction land are covered, as defined in that article 6º.

However, from the stated negative delimitation of incidence, the Claimant draws the conclusion that it was intended to create a tax on real estate wealth, in which urban properties dedicated to economic activities would not be subject to taxation in AIMI. It argues that AIMI, as a tax complementary to IMI, is intended to tax the accumulation of residential real estate assets of very high value.

Well. As Baptista Machado states - Introduction to Law and Legitimizing Discourse: "in the absence of other elements that lead to the choice of the less immediate meaning of the text, the interpreter should in principle opt for that meaning which best and most directly corresponds to the natural meaning of the verbal expressions used, and in particular to their technical-legal meaning, in the assumption (not always correct) that the legislator knew how to correctly express his thought" (p. 182).

Now, the literality of articles 135º-A, no. 1 and 135º-B, nos. 1 and 2 of the CIMI is clear and does not appear to be subject to interpretive doubts. As stated in Arbitral Decision no. 664/2017-T, of 26.06.2018, "the exclusion from the tax encompasses, therefore, properties classified as commercial, industrial or for services, understood as such the buildings or constructions licensed for these purposes or which have as their normal destination each of these purposes. It also encompasses, in addition, the residual category referred to in paragraph d) of no. 1 of that article 6º, including therein lands situated inside or outside an urban agglomeration that are neither construction land nor rural properties, and also buildings and constructions that do not fit into any of the previous classifications".

The scope of objective incidence, by effect of the reference to that article 6º, was thus defined not only by reference to a certain type of urban property, but also by reference to the administrative procedure through which the classification was effected or, in the absence of a license, to the normal destination of these properties for commercial, industrial and service purposes or other.

It is true that the legislative concern to "avoid the impact of this tax on economic activity" was announced in the Proposal for the State Budget Law for 2017 and was implemented through the exclusion from the scope of incidence of "urban properties classified in the category "industrial", as well as urban properties licensed for tourism activity, the latter provided that their destination is properly declared and proven" and the deduction from the taxable amount of the sum of "€600,000.00, when the passive subject is a collective entity with agricultural, industrial or commercial activity, for properties directly dedicated to its functioning".

Being certain that the exclusion of incidence of AIMI was not made with a view to the possible activity to which properties are dedicated, but only had as its basis the types of properties indicated in article 6º of the CIMI, without any reference to dedication or to the functioning of companies.

Moreover, as stated in Arbitral Decision no. 675/2017-T, of 04.05.2018, "if the final draft of the Budget had maintained the legislative intention of moving away the incidence from properties directly dedicated to the functioning of collective entities, the reference to this dedication that appeared in the proposal and that clearly expressed this legislative option would certainly have been maintained.

Having been deleted this reference to the dedication of properties, there is no legal support for concluding that residential properties and construction land dedicated to the functioning of collective entities are not relevant for the incidence of AIMI".

The Claimant is therefore wrong when it alleges that it would have been the legislator's intention to exclude from the scope of incidence of the tax properties dedicated to economic activities, on the pretext that the objective pursued would be not to increase the tax burden on passive subjects who own properties as a result of their corporate purpose.

Taking into account what is stated in the Report on the Budget for 2017, we can conclude that it was not intended with AIMI to burden the taxation of luxury properties, as was primarily aimed at with item 28.1 of the TGIS, as the real estate assets of significant value can be constituted by a plurality of properties of reduced value. It would instead have been intended to create another means of subsidizing the Social Security system, which is one of the constitutional duties of the State.

The fact that the Claimant holds the properties in the context of its economic activity does not therefore exclude the incidence of AIMI.

Dedication of properties

The Claimant argues that some of the properties subject to the arbitral request are construction land dedicated to economic activities - to the construction of buildings intended for commercial, industrial, service or other purposes - and therefore would be excluded from the scope of subjection to AIMI, instituted by article 135º-B of the IMI Code.

Contrary to what the Claimant argues, this does not result from the respective property records as the Tribunal can ascertain, nor has the Claimant proven that the construction land referred to in the assessment is dedicated to economic activities. In fact, with the exception of the urban property article ...º, of the Union of parishes of ..., ..., ... and ..., municipality of Leiria, which corresponds to construction land in which Industry was used as the location coefficient factor, in all others Housing appears.

Notwithstanding, in the draft version of article 135º-B that appeared in the Budget Proposal, no. 2 had the following wording:

"2 - The following are excluded from the additional municipal property tax: urban properties classified in the category "industrial", as well as urban properties licensed for tourism activity, the latter provided that their destination is properly declared and proven."

Article 6º of the CIMI establishes the following:

1 - Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Construction land;

d) Other.

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

3 - Construction land is understood as land situated inside or outside an urban agglomeration, for which a license or authorization has been granted, a prior communication admitted or favorable prior information issued for a subdivision or construction operation, and also those which have been declared as such in the acquisition deed, except for land in which competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land planning plans, are dedicated to spaces, infrastructure or public facilities.

4 - The provision of paragraph d) of no. 1 includes land situated within an urban agglomeration that are neither construction land nor fall within the scope of no. 2 of article 3º, as well as buildings and constructions licensed or, in the absence of a license, which have as their normal destination purposes other than those referred to in no. 2, and also those in the exception of no. 3.

What determines the subjection of properties to AIMI is, therefore, their classification, determined in accordance with this article.

The objective or real incidence of the additional municipal property tax falls, in accordance with the provision of no. 1 of article 135º-B "on the sum of the tax property values of urban properties situated in Portuguese territory of which the passive subject is the owner".

With the provision in no. 2 of the same provision of an exclusion of incidence from "urban properties classified as "commercial, industrial or for services" and "other", in accordance with paragraphs b) and d) of no. 1 of the said article 6º.

Properties dedicated to "housing" and "construction land" as defined in the same article 6º of the CIMI are therefore subject to AIMI.

However, it was not on the basis of the activity to which properties are dedicated that the exclusion of incidence came to be defined, as in the approved version the non-incidence was defined solely on the basis of the types of properties indicated in article 6º of the CIMI, without any reference to dedication to the functioning of collective entities, as was already stated in Arbitral Decision of 22.01.2019, rendered in case 401/2018-T.

The dedication of a property, which presupposes a use, and the purpose to which it is intended, the "normal destination", underlying the classifications of properties, referred to in no. 2 of article 6º of the CIMI, are distinct concepts.

Therefore, it can be concluded that the dedication of properties to the economic activities of collective entities does not exclude taxation in AIMI (outside cases where it is properties that were previously exempt or not subject to taxation in IMI, which are not counted for purposes of AIMI, in accordance with no. 3 of article 135º-B of the CIMI).

The holding of high-value real estate assets, regardless of whether they are dedicated to economic activity or not, is tendentially revealing of high contributory capacity, superior to that which is to be presumed to exist when lower-value assets are held or when they do not exist, so, in principle, limiting taxation to the former situations has justification.

However, the Report on the Budget for 2017 and its parliamentary discussion do not explicitly set out the reasons that would underlie the distinction, for purposes of taxation in AIMI, between the property values of properties classified as residential or construction land (regardless of their actual dedication to those purposes) and those of urban properties that have other classifications, in light of article 6º of the CIMI.

With regard to properties that have the classification of "other" in light of article 6º, nos. 2, paragraph d), and 4, of the CIMI, a reason for the distinction can be seen in the fact that these are essentially properties that are not intended for income-generating activities, namely land situated in urban agglomerations that do not meet the requirements necessary for their classification as construction land nor are being used for agricultural or forestry purposes, and buildings intended for public spaces, infrastructure or facilities.

This Tribunal understands that the literality of the AIMI rules leads to the incidence of the tax, and for what matters here, on "construction land", regardless of the dedication which may come to be attached to it, since they are not part of the negative delimitation of incidence.

This understanding, which is noted here, does not constitute an isolated, much less novel, position within the framework of CAAD and has been followed by numerous arbitral decisions, among which stand out those rendered in the following cases: 654/2017-T of 03.09.2018, 664/2017-T of 26.06.2018, 667/2017-T of 05.09.2018, 685/2017-T of 06.09.2018, 690/2017-T of 06.09.2018, 692/2017-T of 11.05.2018, 696/2017-T of 23.07.2018, 6/2018-T of 26.07.2018, 306/2018-T of 28.12.2018 and 401/2018-T of 22.01.2019.

On the unconstitutionality of AIMI

The Claimant further seeks that the rules in question be dis-applied invoking the unconstitutionality of the taxation regime of AIMI, for violation of the principles of equality and the principle of tax equality and contributory capacity, provided for, respectively, in articles 13º and 104, no. 3 of the CRP.

It should be said first and foremost that, as it falls to the Courts to assess (un)constitutionality, the Tax Administration, which is under the hierarchical dependence of the executive, cannot substitute itself for the courts and scrutinize the constitutionality of the laws which it is required to apply.

The Claimant invokes that it would be a violation of the principle of equality, in the aspect of contributory capacity, of article 135º-A of the CIMI by making a non-discriminatory taxation of all properties, arguing that those dedicated to economic activities are necessarily excluded from such taxation.

This is rejected by the Respondent, arguing that the judgment of unconstitutionality of AIMI based on violation of the principle of equality is based on premises that are grounded in a comparison between incomparable situations.

As stated in Arbitral Decision no. 664/2017-T, "the Constitutional Court has emphasized that one of the essentially constitutional objectives of the tax system, alongside the satisfaction of the financial needs of the State and other public entities, is that of the fair distribution of income and wealth, as can be inferred from article 103º, no. 1, of the Constitution".

We take as established in this regard that the freedom enjoyed by the legislator requires that the principle of contributory capacity have some flexibility and can yield, to a certain extent, before other purposes of the State.

Hence, when a situation that is apparently or tendentially equal is treated in an apparently different way, one can only speak of tax inequality if there are no reasonable grounds that led the legislator to make the choices it made. That is, what is constitutionally prohibited to the legislator is pure arbitrariness, which will not occur when it has in view the pursuit of objectives to which it attributes greater value - as is the paradigmatic case of tax benefits, in which the legislator prefers to forgo tax revenue to achieve other objectives.

It is, moreover, within that spirit that the legislator, as far as the present case is concerned, intends only to tax properties classified as residential, refraining from applying AIMI to others. That is, it took a measure of distinction of what is unequal, making a choice whose justification appears clear: not to increase the tax burden on productive sectors, in view of the much-vaunted needs for investment and economic growth.

We will say, on the other hand, that properties intended for housing constitute goods of enjoyment, of which it can be said that their accumulation or high value will reveal a higher index of wealth and, as such, of higher contributory capacity.

Therefore, even if the contributory capacity revealed may be equal, no violation of the principle of equality is apparent, taking into account the reasonableness of the distinction and the purposes sought.

The Claimant argues, however, the circumstance that the properties in question form an integral part of its commercial activity by virtue of that being its corporate purpose, for which it lacks foundation and, on the contrary, would violate the principle of equality, to apply AIMI to such properties, when compared with other non-real estate entities that own properties.

As, in the same way, that Arbitral Decision states, "the ownership of a real estate portfolio, for purposes of sale and transformation, with a view to obtaining economic results, does not cease to constitute a patrimonial asset that is revealing of an increased contributory capacity, which goes beyond the tax that applies to the taxable profit by reason of the economic activity developed. What is at issue, therefore, is not the taxation of the actual income obtained by these entities through the activity developed, but the complementary contributory capacity that derives from the ownership of assets and which by itself can facilitate the obtaining of credit or strengthen their negotiating position in the conclusion of various contracts".

It is further added that the contributory capacity of business collective entities, relevant for assessing the application of the principle of tax equality, is not evidenced only by income, namely by the results of the activity for which the properties are intended. In fact, "assets provide their owner with a special contributory capacity, advantages which by their nature escape the tax on personal income: thus, the ownership of assets facilitates the obtaining of credit, strengthens the negotiating position of its owner in the conclusion of various contracts, makes it easier to multiply wealth allowing them to take risks where in principle they would not. In this perspective, property tax is seen as something more than an extension of personal income tax - it is not a matter of overloading here income that is already subject to it, but of reaching manifestations of contributory capacity that in fact escape it" (Sérgio Vasques, Contributory Capacity, Income and Assets, in Taxation, no. 23, p. 36).

Following the same line, we conclude that there appears to be, therefore, any unconstitutionality.

Request for restitution of the amount paid and compensatory interest

The Claimant requests the restitution of the amounts collected by the Tax and Customs Authority, as well as the payment of compensatory interest.

As the request for an arbitral pronouncement is not to be found meritorious, it cannot be concluded that there was unduly paid and, consequently, the annulment of the assessment and the restitution of the amount paid nor the payment of compensatory interest are not justified, in accordance with article 43º, no. 1, of the General Tax Law.

IV. DECISION

In these terms, this Arbitral Tribunal decides:

1. To find the request for an arbitral pronouncement totally unfounded;

2. To dismiss the TCA from all requests;

3. To condemn the Claimant to payment of costs.

V. VALUE OF THE PROCEEDINGS

In accordance with the provision of article 306º, no. 2 of the CCP, 97º-A, no. 1, paragraph a) of the TPPC and 3º, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the proceedings is assigned the value of €16,935.61.

VI. COSTS

Pursuant to article 22º, no. 4 of the LRTA, the amount of costs is set at €1,224.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Claimant.

Let it be notified.

Lisbon, 29 March 2019

The Arbitrator,

Cristina Aragão Seia