Stamp Tax on Vertical Property: CAAD Ruling on Verba 28 TGIS for Multi-Unit Buildings

ARBITRAL DECISION

I. Report

1. A… (hereinafter designated as "Claimant"), taxpayer with Tax Identification Number ("NIF") …, widow, resident at Rua … Maia, filed, on 22 July 2014, pursuant to the combined provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, i.e., the Legal Framework for Tax Arbitration ("RJAT"), a request for constitution of an arbitral tribunal in order to declare illegal the assessments relating to Stamp Duty ("IS"), relating to the 2013 tax year, namely the 1st and 2nd instalments (detailed below), and also the 3rd instalment, which, at the date of the request for constitution of the present arbitral tribunal, had not yet been received, in the total amount of €11,118.40, with the Tax and Customs Authority ("Respondent" or "ATA") being named as the defendant.

A) Constitution of the Arbitral Tribunal

1. Pursuant to the provisions of paragraph 1 of article 6 and paragraph (b) of paragraph 1 of article 11 of the RJAT, the Deontological Council of this Administrative Tax Arbitration Center ("CAAD") appointed the undersigned as sole arbitrator, who communicated acceptance of the appointment within the applicable period, and notified the parties of this appointment on 10 September 2014.

2. Thus, in accordance with what is provided in paragraph (c) of paragraph 1 of article 11 of the RJAT, and by means of communication from the President of the Deontological Council of CAAD, the Sole Arbitral Tribunal was constituted on 25 September 2014.

B) Procedural History

1. In the request for arbitral decision, the Claimant petitioned for a declaration of illegality of the IS assessments previously mentioned, in the total amount of €11,118.40.

2. The aforementioned assessments relate to a property located in the Parish Union of Lordelo do Ouro and Massarelos (registered in the land registry of the aforementioned parish), municipality of Porto, under article …, constituted in full ownership regime and comprising 17 parts capable of independent use, 16 of which are intended for residential purposes and the other for parking and commerce (as results from the information attached by the Claimant).

3. The ATA submitted a reply, petitioning for dismissal of the request for arbitral decision, on the grounds that there is no legal violation, requesting that the tax acts in question, as they do not violate any legal or constitutional provision, be maintained in the legal order.

4. By order of 12 February 2015, the Sole Arbitral Tribunal, pursuant to paragraph (c) of article 16 of the RJAT, and following the request by the ATA, decided, without opposition from the parties, that it was not necessary to hold the meeting referred to in article 18 of the RJAT, given the simplicity of the questions at issue and considering that it had at its disposal all the necessary elements to make a clear and impartial decision.

5. It likewise decided, in accordance with paragraph 2 of article 18 of the RJAT, that it was not necessary for oral arguments to be presented, as the positions of the parties were fully defined in their respective written submissions, and set 20 March 2015 as the deadline for the arbitral decision.

6. The Tribunal was regularly constituted and is competent to consider the questions indicated (article 2, paragraph 1, paragraph (a) of the RJAT), the parties have legal personality and capacity and have full standing (articles 4 and 10, paragraph 2 of the RJAT and article 1 of Ordinance No. 112-A/2011, of 22 March). There are no irregularities and no exceptions have been raised, and therefore nothing prevents judgment on the merits.

7. The present proceedings are thus in a position for a final decision to be rendered.

II. Issue to be Decided

1. The central issue to be considered and decided regarding the merits of the case, as appears from the parties' procedural documents, is as follows: with reference to properties not constituted in horizontal property regime, consisting of various storeys and divisions capable of independent use (and with residential purpose), what is the Tax Patrimonial Value ("VPT") relevant for determining the IS payable pursuant to Item No. 28 of the General Stamp Duty Table ("TGIS").

2. That is, the present tribunal seeks to determine whether, as the Claimant alleges, the amount to be considered is the VPT individually attributed to each of the parts capable of autonomous use, or, conversely, the total value resulting from the sum of the VPTs of those autonomous fractions, as suggested by the Respondent.

III. Decision on the Facts and its Reasoning

1. Having examined the documentary evidence produced, the tribunal finds proven, with relevance to the decision of the case, the following facts:

I. The Claimant is the owner of an urban property, registered in the land registry of the Parish Union of Lordelo do Ouro and Massarelos, municipality of Porto, under article …, constituted in full ownership regime and comprising 17 parts capable of independent use, 16 of which are intended for residential purposes and the other for parking and commerce.

II. The individual VPT of each of the autonomous fractions is as follows:

[Table content not provided in original]

III. The Claimant, for the 2013 tax year (and as a result of what is stated in Item No. 28 of the TGIS), received the assessment notices from the ATA, mentioned above, relating to the first and second instalments of IS, in the total amount of €7,412.32.

IV. Similarly, a third assessment is expected, still relating to the same tax year, in the amount of €3,706.08.

1. The Tribunal's conviction regarding the facts found as proven resulted from the documents attached to the file and contained in the petition and the unchallenged allegations of the parties, as specified in the points of the facts stated above.

2. There is no factual matter relevant to the decision of the case found as not proven.

IV. On the Law

A) Legal Framework

1. Given that the legal issue to be decided in the present proceedings requires interpretation of the relevant legal texts, it is important, first, to set out the rules that comprise the relevant legal framework, as of the date of occurrence of the facts.

2. The subjection to IS of properties with residential purpose resulted from the addition of Item No. 28 to the TGIS, effected by article 4 of Law 55-A/2012, of 29 October, which typified the following tax facts:

"28 – Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value contained in the land registry, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000.00 – on the tax patrimonial value for purposes of Municipal Property Tax:

28.1 – For property with residential purpose – 1%

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

1. The aforementioned law also added to the IS Code, paragraph 7 of article 23, relating to the assessment of IS: "where the tax is due for the situations provided for in Item No. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central departments of the Tax and Customs Authority, with the necessary adaptations, the rules contained in the CIMI applying," and article 67, paragraph 2, which provides that "to matters not regulated in the present code relating to Item 28 of the General Table the CIMI applies subsidiarily."

2. In this context, and taking into account the indication above, let us now turn to the Municipal Property Tax Code ("IMI").

3. First, note article 2, paragraph 4 of the IMI Code, which states that "for purposes of this tax, each autonomous fraction, in the horizontal property regime, is deemed to constitute a property."

4. In turn, paragraph 3 of article 12 of the IMI Code establishes that "each storey or part of property capable of independent use is considered separately in the land registration, which also specifies the respective tax patrimonial value."

5. Thus, it is within this legal framework that it is important to decide whether, in cases where the horizontal property of an urban property with various autonomous fractions is not constituted, the VPT, for purposes of Item No. 28 of the TGIS, is calculated individually, i.e., per fraction capable of being used autonomously, or, alternatively, determined by the sum of the VPTs of those fractions.

B) Arguments of the Parties

1. In this regard, the Claimant in its petition alleged, in summary, the following:

2. "The subjection to stamp duty of properties with residential purpose resulted from the addition of Item 28 of the TGIS, effected by article 4 of Law No. 55-A/2012, of 29/10 (...)."

3. Thus, in the understanding of the Claimant, urban properties subject to taxation are those which exclusively have residential purpose and whose VPT contained in the land registry where they are registered, pursuant to the IMI Code, is equal to or greater than €1,000,000.00.

4. As for the concept of "property with residential purpose," the Claimant considers that, notwithstanding the fact that Law No. 55-A/2012, of 29 October, does nothing to clarify this, article 67, paragraph 2 of the IS Code clarifies that "to matters not regulated in the present code relating to Item 28 of the General Table the CIMI applies subsidiarily."

5. Therefore, it is within the scope of the IMI Code that the Claimant understands that, "from the perspective of the legislator, what matters is not the formal legal precision of the concrete situation of the property but rather its normal use, the purpose to which it is intended" (our emphasis).

6. However, for the Claimant, from the reading of the rules transcribed by it, it is not possible to know "what the legislator intended to say when speaking of 'property with residential purpose' and, in particular, whether the Tax Authority should take into account the VPT of the whole property or only the VPT of the fraction or division capable of independent use."

7. In this context, in the opinion of the Claimant, "it is therefore necessary to inquire what the ratio legis underlying the rule of Item 28 of the TGIS, introduced by Law No. 55-A/2012, of 29 October, is."

8. Having, in this manner, conducted an analysis of the discussion held in the Parliament, regarding legislative proposal No. 96/XII (2nd), the proposal that gave rise to the aforementioned law, and likewise, the explanatory statement of the same (legislative proposal).

9. In this sense, the Claimant concluded that "there is no doubt that the legislator, in introducing this legislative innovation, considered as the determining element of taxpayers' capacity the urban properties with residential purpose and of high value (...) intending to introduce a principle of taxation on wealth demonstrated in ownership (...)."

10. Therefore, "clearly the legislator understood that this value, when attributed to a residence (...) reflects a taxpaying capacity above average and, as such, capable of determining a special contribution to ensure fair distribution of the tax burden."

11. In parallel, the Claimant likewise draws attention to the fact that this matter must be analyzed in light of the principles of justice, equality and proportionality, in order to understand what treatment is given by the IMI Code in similar situations, "namely the incidence of the tax concerning properties constituted in horizontal property."

12. Concluding that the Claimant, "considering that registration in the property register of properties in vertical property, consisting of different parts, storeys or divisions with independent use, pursuant to the CIMI, follows the same registration rules as properties constituted in horizontal property, and that the respective IMI, as well as the new IS, are assessed individually in relation to each of the parts, there is no doubt that the legal criterion for defining the incidence of the new tax has to be the same."

13. Especially since, in its understanding, this was also the criterion adopted by the ATA, given that "the assessment issued by the latter is very clear in its essential elements, from which it results that the incidence value is the corresponding to the VPT of each independent division and the assessment is individualized on the part of the property corresponding to that same division. Moreover, the Tax Authority also excluded from the total VPT of the property the divisions not intended for residential use, showing once again that the property is taxed not as a whole, but by parts."

14. Thus, the Claimant petitioned for a declaration of illegality "of the stamp duty assessment acts – 1st and 2nd instalment – of the present challenge and its respective annulment, with all legal consequences, namely, reimbursement to the claimant of the amount paid unduly (...)."

15. In parallel, the Claimant also requested that it be "declared illegal the stamp duty assessment acts – 3rd instalment – relating to the same period, with all legal consequences, namely, reimbursement to the claimant of the amount that may be paid unduly (...)."

16. And, finally, the Claimant further requested that there be likewise paid "compensatory interest, pursuant to the provisions of article 43, paragraph 1 of the General Tax Law and article 61 of the Code of Tax Procedure and Process, calculated from the dates of payments until the reimbursement of the amount paid unduly."

17. For its part, the Respondent, after being duly notified to that effect, submitted its reply in which, in summary, alleged the following:

18. The Claimant bases its request for arbitral decision on the fact that the criterion for taxation of autonomous parts of properties in vertical property must follow the same model as the taxation of properties in horizontal property.

19. In fact, for the Respondent, "what the Claimant is seeking is that the Tax Authority consider that, for purposes of assessment of the present tax, there is analogy between the vertical property regime and the horizontal property regime, since there should be no discrimination in the legal-fiscal treatment of these two property regimes as it would be illegal" (our emphasis).

20. However, in the opinion of the Respondent, there is no need to apply such analogy, since "the tax law does not contain any gap! The CIMI, to which the said item refers, determines that in the horizontal property regime the fractions constitute properties. The property not being subject to this regime, legally the fractions are parts capable of independent use, without there being common parts."

21. Thus, the Respondent understands that, for purposes of Item 28 of the TGIS, it cannot be accepted "that the parts capable of independent use have the same tax regime as the autonomous fractions of the horizontal property regime."

22. In parallel, in the opinion of the Respondent, the unity of a given urban property, constituted in vertical property, is not called into question when the same is composed of storeys or divisions with the possibility of having an independent economic use.

23. In fact, citing the Respondent, "such property does not cease to be one merely by that fact, its parts not being legally equated to autonomous fractions in horizontal property regime."

24. It appears to the present tribunal that it is clear to the Respondent that the institutes of horizontal property and vertical property are autonomous and distinct realities.

25. The Respondent concludes its reply by affirming that "the tax fact of stamp duty of Item 28.1, as it consists of the ownership of urban properties whose tax patrimonial value contained in the land registry, pursuant to the CIMI, is equal to or greater than €1,000,000, the patrimonial value relevant for purposes of the incidence of the tax is, thus, the total patrimonial value of the urban property and not the patrimonial value of each one of the parts that make it up, even when capable of independent use."

26. Therefore, the Respondent understands that the assessments promoted by it result from a correct interpretation and application of the law to the facts, requesting, thus, that the claim put forth by the Claimant be judged unfounded.

C) Tribunal's Appraisal

1. In the understanding of the present tribunal, and taking into account the legal framework previously presented, the essential normative proposition to be considered for the decision of the case is that which results from Item No. 28 of the TGIS.

2. It should likewise be noted that, in the eyes of the arbitral tribunal, the issue to be decided concerns exclusively a matter of law, namely understanding, for purposes of application of the aforementioned item, how the relevant VPT is determined.

3. First, let it be clear that it is evident, from the letter of the law, that the VPT to be considered, for purposes of application of Item No. 28 of the TGIS, can only be that which is determined within the scope of the IMI Code.

4. This is, moreover, what the aforementioned item tells us, in the exact words: "(…) whose tax patrimonial value contained in the land registry, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000.00" (our emphasis).

5. Thus, attention should be paid, once again, to what follows from article 2, paragraph 4 of the IMI Code, which states that "for purposes of this tax, each autonomous fraction, in the horizontal property regime, is deemed to constitute a property."

6. Reinforced, nevertheless, by article 12, paragraph 3 of the same Code, which establishes that "each storey or part of property capable of independent use is considered separately in the land registration, which also specifies the respective tax patrimonial value."

7. It is concluded, thus, that, for purposes of calculating the IMI payable, the VPT is considered individually for each storey or part capable of independent use.

8. And if this is the method of determination followed for the IMI, it will necessarily have to be the model equally applied within the scope of Item No. 28 of the TGIS, as explained above.

9. Notwithstanding, and if the doubts raised still persist, the present tribunal relies on some arbitral decisions previously rendered, which addressed the issue in question.

10. Thus, first, let us consider decision No. 50/2013-T, of 29 October, which provides the following.

11. "Law No. 55-A/2012 says nothing as to the qualification of the concepts in question, namely, as to the concept of 'property with residential purpose.' However, article 67, paragraph 2 of the Stamp Duty Code, added by the aforementioned Law, provides that 'to matters not regulated in the present code relating to Item 28 of the General Table the CIMI applies subsidiarily.'

The rule of incidence thus refers to urban properties, the concept of which is that which results from the provisions of article 2 of the CIMI, and the determination of VPT follows the terms provided for in article 38 and following of the same code.

Upon consultation of the CIMI, it is verified that its article 6 only indicates the different types of urban properties, among which it mentions residential ones (...)

From this we can conclude that, from the perspective of the legislator, what matters is not the formal legal precision of the concrete situation of the property but rather its normal use, the purpose to which the property is intended. We also conclude that for the legislator the situation of the property in vertical or horizontal property was not relevant, as no reference or distinction is made between the one and the other. What is relevant is the material truth underlying its existence as an urban property and its use.

(...)

Using the criterion that the law itself introduced in article 67, paragraph 2 of the IS Code, 'to matters not regulated in the present code relating to Item 28 of the General Table the CIMI applies subsidiarily" (our emphasis).

1. That is, taking into account that registration in the property register of properties in vertical property, for purposes of the IMI Code, follows the same registration rules as properties constituted in horizontal property, and that the respective IMI, as well as the new IS, are assessed individually in relation to each of the parts, it does not seem to the present tribunal that there is any doubt that the legal criterion for defining the incidence of the new tax has to be the same.

2. In this context, if the law requires, with respect to the IMI, the issuance of individualized assessment notices for the autonomous parts of properties in vertical property, in the same manner as it establishes for properties in horizontal property, it will require, in the same terms, with respect to the rule of incidence of Item No. 28 of the TGIS.

3. Therefore, the IS, within the scope of Item No. 28 of the TGIS, could only be incurred on a given fraction if it, possibly, had a VPT exceeding €1,000,000.00.

4. And, more should be said, that this was indeed the understanding adopted by the ATA.

5. In fact, the latter (ATA) also issued individualized assessment notices, relating to each one of the fractions capable of autonomous use, demonstrating that, in its opinion, the aforementioned fractions, despite not being legally constituted in horizontal property, would, for all purposes, be independent from one another.

6. However, the ATA overlooked that it could not, by virtue of the framing previously stated, proceed to the sum of the individual VPTs of the fractions previously mentioned, seeking a value that would already fall within the basis of incidence of Item No. 28 of the TGIS.

7. This when the legislator itself established a different rule within the scope of the IMI Code, which, as previously referred to, is the code applicable to matters not regulated in the IS Code, as regards Item No. 28 of the TGIS.

8. In summary, the criterion established by the ATA of considering the value of the sum of the individual VPTs attributed to the parts, storeys or divisions with independent use, taking advantage of the fact that the property is not constituted in horizontal property regime, does not find, in the eyes of the present tribunal, legal support, being, namely, contrary to the criterion applicable in the context of IMI and, by referral (in the terms mentioned above), in the context of IS.

9. In this context, the present tribunal considers that the criterion defended by the ATA violates the principles of legality and fiscal equality, and also that of the prevalence of material truth over legal-formal reality.

10. In parallel, note that article 12, paragraph 3 of the IMI Code makes no distinction as to the regime of properties that are in horizontal or vertical property.

11. As such, and since if the property were in horizontal property regime, none of its residential fractions would be subject to incidence of the new tax, the ATA cannot treat situations that are materially equal in a different manner.

12. In this regard, see what was said regarding this matter in the Arbitral Decision rendered in the course of Case No. 132/2013-T, of 16 December, an understanding which the present tribunal adopts.

"In fact, it makes no sense to distinguish in the law what the law itself does not distinguish (ubi lex non distinguit nec nos distinguere debemus).

Moreover, distinguishing, in this context, between properties constituted in horizontal property and in full property would be an 'innovation' without associated legal support, especially because, as has been stated here, nothing suggests, neither in Item No. 28 nor in the provisions of the CIMI, a justification for that particular differentiation.

Note, by way of example, what article 12, paragraph 3, of the CIMI provides: each storey or part of property capable of independent use is considered separately in the land registration, which also specifies the respective tax patrimonial value.

The uniform criterion that is required is, thus, the one that determines that the incidence of the rule in question only takes place when some of the parts, storeys or divisions with independent use of property in horizontal or full property with residential purpose possesses a VPT exceeding €1,000,000.00.

Setting as the reference value for the incidence of the new tax the total VPT of the property in question, as the now respondent intended, finds no basis in the applicable legislation, which is the CIMI, given the referral made by the cited article 67, paragraph 2 of the IS Code.

(...)

Moreover, admitting differentiation of treatment could produce results incomprehensible from a legal perspective and contrary to the objectives that the legislator said it had for adding Item No. 28. By way of example, suppose the following hypothesis, which seems plausible in light of the interpretation made by the now respondent: a citizen who is the owner of a property constituted in full property intended for residential purposes, with the total value of the autonomous units equal to or exceeding €1,000,000.00 and the VPT of each one below €1,000,000.00, is subject to annual taxation of 1% of that value (as occurred in the situation in question); whereas another citizen who owns a property with the exact same characteristics as the previous one but which has been constituted in horizontal property, with the total value of the autonomous fractions likewise equal to or exceeding €1,000,000.00 and the VPT of each one below €1,000,000.00, will not be subject to taxation pursuant to the mentioned Item No. 28.

On the other hand, one might ask: if such fractions have the same owner, why does it not make sense to aggregate, for taxation purposes, their respective VPTs? The answer can be illustrated through another hypothesis: a citizen who is the owner of a property in horizontal property, in which each one of its 20 fractions possesses a VPT below €1,000,000.00, would be subject to taxation if – if such aggregation were admitted – the total VPT exceeded that value; whereas another citizen with identical 20 fractions distributed among 5, 10 or 20 properties would not be subject to any taxation pursuant to the mentioned Item No. 28.

If this line of reasoning makes sense – thus justifying the non-aggregation of the VPTs of fractions of properties in horizontal property – there is no plausible reason why the same should not be applied to the autonomous units of properties in full property.

Observing, now, the case in question, it is verified that the VPTs of the storeys (autonomous units) of the property with residential purpose vary between (...), so that each one of them is below €1,000,000.00.

From this it is concluded, as a result of what was stated, that on the same cannot be incurred the IS referred to in Item No. 28 of the TGIS, being therefore illegal the assessment acts challenged by the claimant" (our emphasis).

1. A final point worthy of note (although the previous framing is sufficient to recognize the illegality of the assessment acts carried out by the ATA) is based on the understanding advocated, both by the legislator and by the government itself, when adding Item No. 28 to the TGIS.

2. In this regard, let us focus now on the arbitral decision rendered in the course of case No. 48/2013-T, of 9 October, which extensively analyzes the objectives underlying the addition of the aforementioned item.

3. "Law No. 55-A/2012, of 29/10, has no preamble, therefore from the same it is not possible to extract the legislator's intention.

Such law of the Parliament originated from legislative proposal No. 96/XII (2nd), which, in the explanatory statement speaks of the introduction of fiscal measures inserted in a broader set of measures to combat the budget deficit.

In the explanatory statement of the aforementioned legislative proposal, it is stated that, 'these measures are fundamental to reinforce the principle of social equity in austerity, guaranteeing an effective distribution of the sacrifices necessary to comply with the adjustment program. The Government is strongly committed to ensuring that the distribution of these sacrifices will be made by all and not only by those who live from the income of their work. In accordance with this objective, this act expands the taxation of capital and property, encompassing equitably a broad set of sectors of Portuguese society.'

In that explanatory statement it is further stated that, in addition to the aggravation of taxation on capital income and equity gains, a rate is created in the context of stamp duty applicable to urban properties of residential purpose whose tax patrimonial value is equal to or exceeding one million euros.

That is, in such explanatory statement, it is also not clarified what is meant by urban properties with residential purpose.

In his intervention in Parliament, in the presentation and discussion of the aforementioned legislative proposal, the Secretary of State for Tax Affairs stated the following:

'The Government has chosen as the priority principle of its fiscal policy social equity. This is all the more important in times of rigor as a way to ensure fair distribution of the tax burden.

In the demanding period that the country is going through, during which it is obliged to comply with the program of economic and financial assistance, it becomes all the more pressing to assert the principle of equity. It cannot always be the same - workers employed and retirees, bearing the tax burden.

For the tax system to be fairer, it is crucial to promote the expansion of the tax base by requiring increased effort from taxpayers with higher income and thereby protecting Portuguese families with lower income in this way.

For the tax system to promote more equality, it is fundamental that the effort of budget consolidation be distributed among all types of income, encompassing with special emphasis capital income and high-value properties. This matter, as recalled, was extensively addressed in the ruling of the Constitutional Court.

Finally, for the tax system to be more equitable, it is crucial that everyone be called to contribute in accordance with their taxpaying capacity, granting the tax administration enhanced powers to control and monitor situations of tax fraud and tax evasion.

In this sense, the Government presents, today, a set of measures that effectively reinforce a fair and equitable distribution of the effort of adjustment among a broad and comprehensive set of sectors of Portuguese society.

This proposal has three essential pillars: the creation of special taxation on urban properties valued above 1 million euros; the aggravation of taxation on capital income and on equity gains; and the reinforcement of the rules to combat fraud and tax evasion.

First, the Government proposes the creation of a special rate on high-value residential urban properties. It is the first time in Portugal that special taxation has been created on high-value properties intended for residential use. This rate will be 0.5% to 0.8% in 2012, and 1% in 2013, and will apply to homes valued at equal to or exceeding 1 million euros. With the creation of this additional rate, the tax effort required of these owners will be significantly increased in 2012 and 2013".'

1. Next, it is necessary to bring together the conclusions that allow, without any margin for doubt, a decision on the issue in discussion (that is, whether, for purposes of application of Item No. 28 of the TGIS, in cases where a property with various autonomous fractions, capable of independent use, is not constituted in horizontal property regime, the relevant VPT is determined by the sum of the individual VPTs, or, alternatively, is individually considered).

2. In this sense, first note that this matter is, from the outset by force of article 67, paragraph 2 of the IS Code, subject to the rules of the IMI Code, "to matters not regulated in the present code relating to Item 28 of the General Table the CIMI applies subsidiarily."

3. As such, and as has been mentioned so many times, in the understanding of the present tribunal, the mechanism for determining the relevant VPT for purposes of the aforementioned item is that which is established in the IMI Code.

4. Now, article 12, paragraph 3 of the IMI Code establishes that "each storey or part of property capable of independent use is considered separately in the land registration, which also specifies the respective tax patrimonial value."

5. The legislator thus devaluing, in the terms previously mentioned, any prior constitution of horizontal or vertical property.

6. In fact, for the latter (legislator), what is relevant is the material truth underlying its existence as an urban property and its use.

7. It should be noted that the ATA itself seems to agree with the criterion set out, which is why the assessments that it itself issues are very clear in their essential elements, from which it results that the incidence value is the corresponding to the VPT of each one of the storeys and the assessments are individualized.

8. Therefore, if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical property, in the same manner as it establishes for properties in horizontal property, it clearly established the criterion, which has to be unique and unequivocal, for the definition of the rule of incidence of the new tax.

9. Thus, there would only be grounds for incidence of IS (within the scope of Item No. 28 of the TGIS) if some of the parts, storeys or divisions with independent use presented a VPT exceeding €1,000,000.00.

10. The ATA cannot consider as the reference value for the incidence of the new tax the total value of the property (i.e., the sum of all fractions with residential purpose), when the legislator itself established a different rule in the context of IMI (and, as previously mentioned, this is the code applicable to matters not regulated regarding Item No. 28 of the TGIS).

11. In conclusion, the current legal regime does not impose the obligation to constitute horizontal property, so that the action of the ATA translates into arbitrary and illegal discrimination.

12. In fact, the ATA cannot distinguish where the legislator itself understood not to do so, under the penalty of violating the coherence of the fiscal system, as well as the principle of fiscal legality provided for in article 103 of the Constitution of the Portuguese Republic, and still the principles of justice, equality and fiscal proportionality.

13. In the case at hand, the property in question is constituted in vertical property and contains 17 fractions with independent use (of which 16 have residential purpose), as was proven above.

14. Given that none of these fractions, individually considered, has a patrimonial value equal to or exceeding €1,000,000.00, as results from the documents attached to the file, it is concluded that the legal basis of incidence is not met.

IV. Decision

1. For these reasons, this Arbitral Tribunal decides:

A) To judge the request for arbitral decision to be well-founded and, in consequence, to declare illegal and annul the IS assessments above mentioned, with reference to 2013, from which resulted tax payable in the amount of €11,118.40, relating to the taxation of urban properties with VPT equal to or exceeding €1,000,000, pursuant to Item No. 28 of the TGIS, the Claimant being reimbursed of the amount already paid, increased by compensatory interest, pursuant to the provisions of articles 43, paragraph 1 of the General Tax Law and 61 of the Code of Tax Procedure and Process;

B) To condemn the Respondent in the costs of the proceedings.

V. Value of the Proceedings

1. The value of the proceedings is fixed at €11,118.40, pursuant to article 97-A, paragraph 1, paragraph (a), of the Code of Tax Procedure and Process, applicable by force of paragraphs (a) and (b) of paragraph 1 of article 29 of the RJAT and of paragraph 2 of article 3 of the Regulation on Costs in Tax Arbitration Proceedings ("RCPAT").

VI. Costs

1. In accordance with the provisions of article 22, paragraph 4 of the RJAT, the value of the arbitration fee is fixed at €918, pursuant to Table I of the aforementioned Regulation, to be charged to the Respondent, given the full acceptance of the request.

Let notice be given.

Lisbon, CAAD, 17 March 2015

The Arbitrator

(Sérgio Santos Pereira)