Summary
Full Decision
ARBITRAL DECISION
The Arbitrator, Dr. Sílvia Oliveira, appointed by the Ethics Council of the Administrative Arbitration Center (CAAD) to constitute the Arbitral Tribunal, established on 4 November 2015, with respect to the process above identified, decided as follows:
1. REPORT
1.1
A..., Lda., Legal Entity No. ..., registered under the same number at the Commercial Registry Office of Loures and with registered office at Rua..., ..., in..., Loures (hereinafter referred to as the "Applicant"), submitted a request for arbitral ruling and constitution of a singular Arbitral Tribunal on 29 July 2015, pursuant to the provisions of article 4 and no. 2 of article 10 of Decree-law no. 10/2011, of 20 January [Legal Regime for Arbitration in Tax Matters (RJAT)], in which the Tax and Customs Authority is the Respondent (hereinafter referred to as the "Respondent").
1.2
The Applicant requests that the Arbitral Tribunal declare the "(…) illegality of the Stamp Tax Assessment for the year 2014, item 28.1 of the TGIS, dated 20/03/2014, relating to the urban property registered in the matrix under art. ... of the parish of..., municipality of Oeiras, in the amount of € 12,253.08 (…)".
1.3
The request for constitution of the Arbitral Tribunal was accepted on 29 July 2015 by the Honorable President of CAAD and notified to the Respondent on the same date.
1.4
On 3 August 2015, the Applicant submitted a request to request the substitution of document no. 6 (attached with the constitution of arbitral tribunal) by the "(…) correct document now attached".
1.5
The Applicant did not proceed with the appointment of an arbitrator, so, pursuant to the provisions of article 6, no. 2, paragraph a) of the RJAT, the undersigned was appointed as arbitrator by the President of the Ethics Council of CAAD on 13 October 2015, the appointment having been accepted within the legally provided period and terms.
1.6
On the same date the parties were duly notified of this appointment and did not express the intention to refuse it, pursuant to the provisions of article 11, no. 1, paragraphs a) and b) of the RJAT, in conjunction with articles 6 and 7 of the Ethics Code.
1.7
Thus, in accordance with the provisions of paragraph c), no. 1, of article 11 of the RJAT, the Arbitral Tribunal was constituted on 4 November 2015, an arbitral order having been issued on 5 November 2015, to notify the Respondent to, pursuant to the provisions of article 17, no. 1 of the RJAT, submit a response within a maximum period of 30 days and, if it wished, request the production of additional evidence.
1.8
Additionally, it was also stated in that arbitral order that the Respondent should send to the Arbitral Tribunal, within the response period, a copy of the administrative file.
1.9
On 9 December 2015, the Respondent submitted its Response, having defended itself by means of contestation and concluded that "the request for declaration of unconstitutionality and consequent annulment of the contested assessment should be judged unfounded, abssolving the AT [Tax Authority] of the request".
1.10
In the same Response, the Respondent informed the Arbitral Tribunal that the administrative file "(…) is composed solely of the contested assessments (…)", "(…) which have already been attached to the case file by the Applicant (...)". [2]
1.11
By arbitral order of 9 December 2015, both Parties were notified to pronounce themselves within a period of 5 days on the possibility of waiving the holding of the meeting referred to in article 18 of the RJAT, as well as on the possibility of waiving the submission of written arguments.
1.12
The Respondent, on 10 December 2015, submitted a request to the effect that "(…) it has no objection (…) to the draft of waiver of the meeting referred to in article 18 of the RJAT, likewise dispensing with the holding of written arguments (…)".
1.13
The Applicant did not pronounce itself regarding the content of the arbitral order identified in point 1.11 above (on this matter see point 1.16 below).
1.14
In these terms, by order of this Arbitral Tribunal, dated 22 December 2015, and in accordance with the procedural principles enshrined in article 16 RJAT, of contradictory proceedings [paragraph a)] of equality of the parties [paragraph b)], of the autonomy of the Arbitral Tribunal in the conduct of the proceedings and in the determination of the rules to be observed [paragraph c)], of cooperation and good faith in proceedings [paragraph f)] and of the free conduct of proceedings enshrined in articles 19 and 29, no. 2 of the RJAT, as well as taking into account the principle of the limitation of useless acts, provided for in article 130 of the Code of Civil Procedure (CPC), applicable by virtue of the provisions of article 29, no. 1, paragraph e) of the RJAT, this Arbitral Tribunal decided as follows:
1.14.1
To waive the holding of the meeting referred to in article 18 of the RJAT;
1.14.2
To waive the submission of written arguments;
1.14.3
To set 15 January 2016 for the purpose of issuing the arbitral decision.
1.15
The Applicant was also warned that "until the date of issuance of the arbitral decision it should proceed with payment of the subsequent arbitral fee, pursuant to the provisions of no. 3 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings and communicate this payment to CAAD" (which it did on 14 January 2016).
1.16
However, the Applicant, on 14 January 2016, submitted a request to the effect that the arbitral order of 22/12/2015 be revoked (based on the claim that on that date the 5-day period granted to pronounce itself on the possibility of waiving the meeting and arguments was still running) and that the supervening factual circumstances alleged in paragraphs 7 and 8 of the submitted request be admitted (request for attachment of documents relating to payment of the 2nd and 3rd installments of Stamp Tax, whose assessment is contested in the present proceedings).
1.17
Additionally, "in the event that the above alleged factual circumstances (…) are not contested by the Respondent" the Applicant "does not object to the waiver of the holding of the meeting referred to in article 18 of the RJAT, as well as dispenses with the submission of arguments".
1.18
By arbitral order dated 14 January 2016, it was decided:
1.18.1
"To accept the submission of the above identified request, giving notice thereof to the Respondent";
1.18.2
"To notify the Respondent to pronounce itself within a period of 5 days on the content of the request (…) as to the factual circumstances presented in paragraph no. 7 and no. 8 thereof";
1.18.3
"To render the arbitral order of 22/12/2015 (…) without effect";
1.18.4
To render "without effect the date of 15/01/2016 for issuance of the arbitral decision, the same to be rescheduled for a date to be fixed in a new arbitral order, after the period mentioned above (…)" in point 1.18.2 above.
1.19
The Respondent submitted a request on 20 January 2016 to the effect that it had nothing "(…) to object to the factual circumstances presented in points 7 and 8 of the request submitted by the Applicant on 14-01-2016", adding that "(…) regardless of whether the factual circumstances referred to in paragraphs 7 and 8 of the request submitted (…) are or are not supervening to the institution of the (…) arbitral action, it is not apparent what the utility (…) of the respective attachment of documents is, since (…) they translate into mere collection notes", "(…) which (…) are not in themselves contestable (…)".
1.20
Indeed, in the view of the Respondent, the Applicant "(…) merely attached the documents that demonstrate payment (by coercive collection) of the 2nd and 3rd installments of the contested assessment – which in no way influences the analysis of the merits of the issue", so it also reiterated "the content of the request submitted by the Respondent, in which the waiver of the meeting referred to in article 18 of the RJAT is dispensed with, as well as the submission of arguments".
1.21
Additionally, the Respondent also submitted counter-arguments regarding the counting of the period applicable to the notifications of the Parties, namely of the Applicant, which, taking into account "the content of the arbitral order of 14 January 2016 (…) and the revocation of the arbitral order of 22 December 2016" [rendering without effect the date of 15 January 2016 (for the issuance of the arbitral decision) in order to give the possibility of exercise of contradictory proceedings by the Respondent in the face of the request submitted by the Applicant].
1.22
By arbitral order dated 26 January 2015, it was decided, in accordance with the procedural principles enshrined in article 16 RJAT, of the autonomy of the Arbitral Tribunal in the conduct of the proceedings and in the determination of the rules to be observed [paragraph c)], of cooperation and good faith in proceedings [paragraph f)] and of the free conduct of proceedings enshrined in articles 19 and 29, no. 2 of the RJAT:
1.22.1
Not to analyze "the question of notification (or of the alleged non-notification to the Applicant's representative) of the arbitral orders of December 2015 since it would prove to be a useless act (and without consequences), limited by law in accordance with article 130 of the Code of Civil Procedure (CPC) [applicable by virtue of the provisions of article 29, no. 1, paragraph e) of the RJAT]". [3]
1.22.2
With regard to the alleged "factual circumstances supervening to the request for arbitral ruling", not to admit the attachment of documents relating to payment of the 2nd and 3rd installments of the Stamp Tax for the year 2014, since, taking into account that the Applicant, in the request for arbitral ruling, already requested "(…) that the illegality of the Stamp Tax Assessment for the year 2014, item 28.1 of the TGIS, dated 20/03/2014, relating to the urban property registered in the matrix under art. ... of the parish of Carnaxide (…), in the amount of € 12,253.08 (…)" be declared, the request now submitted for the attachment of the two above identified documents (made on the basis of the alleged supervening nature thereof) contributes nothing whatsoever to the legal assessment of the validity of that request for arbitral ruling (as to the legality of the assessment), there being furthermore, contrary to what the Applicant states, any expansion of the request for arbitral ruling (underlined by us). [4]
1.22.3
To waive the holding of the meeting referred to in article 18 of the RJAT.
1.22.4
To waive the submission of written arguments;
1.22.5
To reschedule the date for issuance of the arbitral decision for 29 January 2016.
2. BASIS OF THE CLAIM
The Applicant supports its request, in summary, in the following manner:
Timeliness and Subject Matter of the Request
2.1
It begins by clarifying that "the Collection Note no. 2015 ..., relating to the 1st installment of IS (…) in question, in the amount of € 4,084.36, had as the deadline for payment the month of April 2015" and that "pursuant to the provisions of paragraph a) of no. 1 of article 10 of the RJAT and paragraph a) of no. 1 of article 102 of the Code of Tax Procedure and Process (…), the request for constitution of an arbitral tribunal may be submitted within a period of 90 days counting from the end of the period for voluntary payment of the tax installments legally notified to the taxpayer, meaning that the present request may be submitted until 29/07/2015", "therefore, the Applicant is in time to submit the present request for constitution of an arbitral tribunal, and corresponding request for arbitral ruling".
2.2
Additionally, the Applicant clarifies that "(…) the present request for arbitral ruling has as its subject matter the entirety of Stamp Tax – assessed pursuant to item 28.1, with reference to the year 2014, in the indicated amount of € 12,253.08 (…)".
Grounds of the Request – Formal Defects
Lack of Authorship of the Act
2.3
In this context, the Applicant begins by stating that "a cursory analysis of the Collection Notes notified (…) shows that those (…) do not contain all the elements that should have been mandatorily notified to the taxpayer (…), namely the indication of the author of the act (…)", there being "(…) no question here of the nullity of the notification (…)" but "(…) the lack of author of the Assessment (…) which is, in the first place, a defect of the notified tax act, that is, of the Assessment".
2.4
Indeed, according to the Applicant "it was not made known (…) the tax act of Assessment, but only the Collection Notes, and from these Notes there is no indication of the authority that carried out the Assessment, nor its respective signature (…)", "and it cannot be said that the circumstance that the logo of the Tax and Customs Authority (…) appears in the Collection Note counts as an indication of the authorship of the act" since "(…) in the same document there is also mention of the Finance Service of Loures – ..., and it cannot be presumed therefrom that these entities were the authors of the act", concluding the Applicant that "we are (…) faced with a tax act that imposes a tax on the Applicant but that has no defined author".
2.5
Thus, for the Applicant, "an act without an author cannot serve as a tax act, since it lacks one of its essential elements (…)" being thus "the Assessment (…) null pursuant to art. 133, no. 1 of the CPA, and ground for contestation pursuant to the provisions of art. 99, paragraph d) of the CPPT, nullity whose declaration is hereby requested". [5] [6]
Lack of Prior Hearing
2.6
For the Applicant, as "it is a matter of the assessment of Stamp Tax provided for in item 28.1 of the TGIS, regarding the year 2014", "it is a relatively new tax, assessed to the taxpayer without being given the opportunity to pronounce itself before the assessment (…)", therefore the Applicant understands that "the omission of the prior hearing constituted (…) the pretermission of an essential formality, manifesting itself as a vitiating defect of the Assessment, which constitutes grounds for its annulment (…)".
Grounds of the Request – Defects of Law
Duplication of Assessment
2.7
In this matter, the Applicant alleges that "(…) in the concrete case, the tax fact upon which Stamp Tax fell was the ownership, by the Applicant, as owner, on 31 December 2014, of the property registered in the urban property matrix of the parish of..., municipality of..., under art. ..., with a TPC [Tax Patrimonial Value] of € 1,225,308.25" and "as is easy to see, the tax fact upon which both Property Transfer Tax and Stamp Tax fell was exactly the same", being "also the period in question (…) the same for both taxes, namely 2014 - the ownership of the property on 31 December of that year".
2.8
Indeed, concludes the Applicant that "being faced with urban residential properties or construction land whose building, authorized or planned, is for residential purposes, with a TPC equal to or greater than € 1,000,000, there is no doubt that both taxes, Property Transfer Tax and Stamp Tax (item 28.1), tax the very same factual situation, the very same reality, the very same economic capacity" therefore "(…) the Stamp Tax assessment (…) in question should be annulled, with all legal consequences flowing therefrom". [7]
Unconstitutionality - Violation of Constitutional Principles of Legality, Justice, Equality and Impartiality
2.9
In this chapter, the Applicant alleges that "the property (…) on which the Assessment fell is construction land for urban purposes (…)", which "(…) corresponds to Lot 43 of the Development Permit no. .../2009, issued by the Municipal Chamber of Oeiras, and is intended for the construction of 3,775 m2 of housing, 70 m2 of commercial/services and as such was registered in the respective urban matrix and subsequently assessed (…)".
2.10
On the other hand, the Applicant clarifies that "it carries out the activity of building construction and purchase and sale of real property (…)" and that "the land in question was intended, as of 31/12/2014 (…) for construction, being fiscally a property of the type or sort construction land (…)", being of the understanding that "Law no. 83-C/2013, of 31 December (…)" which "came to alter the wording of item 28.1 of the TGIS (…) having (…) come to include for purposes of taxation, from 01/01/2014, construction land whose building, authorized or planned, is for residential purposes, pursuant to the provisions of the Property Transfer Tax Code", "(…) is unconstitutional (…)".
2.11
Indeed, according to the Applicant, "in taxing, for purposes of Stamp Tax, construction land, the law is not truly taxing the holding of luxury goods (…) but is taxing an economic activity or (…) the goods allocated to the development of an economic activity (…) taxation that is deemed unconstitutional".
2.12
Thus, in the understanding of the Applicant, "this norm of tax incidence (…) appears to be unconstitutional due to violation of the constitutional principles of legality, justice, equality and impartiality (…) reason why it should be disapplied" since "as has already been seen, as a result of the pointed out new wording of item 28.1 of the TGIS, the economic activity of companies engaged in the construction of residential buildings or those dealing in the development and/or purchase and sale of land of that type would be (…) clearly penalized, when compared to other companies that hold in their portfolio construction land for buildings intended for commerce, services or industry, as well as when compared to other companies that, for the development of their economic activity, are owners of buildings intended for commerce, services or industry, whose tax patrimonial value is greater than 1 million euros".
2.13
Thus, for the Applicant, "(…) the taxation of the situation of ownership of construction land intended for housing, whose TPC is equal to or greater than one million euros, and the non-taxation of the ownership of other construction land intended for a purpose different from housing, with an identical or even higher TPC (…), flagrantly violates the constitutional principle of tax equality – and the principle of contributory capacity that flows from this", "since it creates a discrimination, without any foundation whatsoever, between the owners of the two properties in question (…)". [8] [9] [10]
2.14
Thus, "there is no doubt that the Stamp Tax now assessed to the Applicant manifestly violates the constitutional principle of equality (…) because (i) it is based on a norm that treats in a very different manner taxpayers that find themselves in identical situations, the measure of difference not being assessed by their actual contributory capacity and (ii) it is based on an arbitrary legal solution devoid of any rational foundation".
Violation of Law: The Land is (Also) for Commerce/Services
2.15
The Applicant further argues that "even if it were understood that there is no reason to disapply, based on unconstitutionality, the above identified norm (…) the assessment here contested appears (…) illegal since the Applicant's plot of land is not subsumable under the provision of the norm in question" since being intended "(…) for the construction of housing, jointly with commerce/services (…) it does not directly fall within the provision of Item 28.1", therefore "(…) in light of the principle of tax specificity, the tax computed (…) would always be illegal".
2.16
In summary, for the Applicant "it cannot be understood otherwise than that the tax act contested violates the norm provided for in Item 28.1 of the TGIS – to the extent that the same does not provide for the taxation of construction land whose building, authorized or planned, is jointly for housing and commerce/services, but only those whose building, authorized or planned, is for housing and, as such, should be annulled".
Reimbursement of Tax Paid, with Compensatory Interest
2.17
In this context, the Applicant clarifies that the payments made "(…) were intended solely to avoid the continuation of the tax execution proceedings on other Applicant's assets (…)", therefore it understands that "(…) it has the right that the amounts paid be reimbursed to it (…) increased by compensatory interest (…)".
2.18
In summary, the Applicant concludes that "the tax act that is now contested is burdened with formal and substantive defects, generating the illegalities and unconstitutionalities noted, therefore it should be eradicated".
2.19
Thus, "it requests that the present request for arbitral ruling be (…) judged founded, as proven, declaring null or annulling the Assessment due to violation of the legal provisions and constitutional principles cited (…)" and that "(…) as a consequence of the granting of the present request for arbitral ruling, the reimbursement of the amount (…) that the Applicant has already paid be carried out, increased by compensatory interest counted from the dates of payment until the actual reimbursement".
3. RESPONSE OF THE RESPONDENT
3.1
The Respondent responded by sustaining the unfoundedness of the request for arbitral ruling, having invoked the following arguments:
Non-Existence of Authorship of the Act
3.2
With regard to this matter, according to the Respondent, the allegations of the Applicant that "(…) the assessment does not contain the indication of its author and the respective signature (…) being null (…)", "(…) lack any foundation whatsoever (…)", since "(…) as can be verified in the documents (…) all these elements appear in the collection notes in question, i.e., (…) identification of the processing agency or service (…), period to which it refers, number assigned to the document, identification of the debtor entity, including the tax identification number, nature of the revenue, amount of the revenue, payment deadline".
3.3
Additionally, the Respondent states that "the document further includes: the assessment of the tax (identification of the property and its tax patrimonial value (TPC), applicable rate and computed value, means of defense and periods to react".
3.4
On the other hand, the Respondent understands that "(…) this defect argued by the Applicant is a defect that, if considered well-founded, affects not the contested assessment, but rather the act of notification of the assessment, having (…) as a consequence the nullity of the act of notification (…) and the ineffectiveness of the underlying tax act". [11]
3.5
Now, taking into account that "(…) the competence of this Arbitral Tribunal is (…) limited to the appreciation of the (…) claims" listed in article 2 of the RJAT, "(…) it follows that the present Arbitral Tribunal does not have competence to appreciate questions relating to the ineffectiveness of the contested assessment". [12] [13]
(Alleged) Lack of Substantiation
3.6
In this matter, the Respondent understands that "(…) it is demonstrated that the Applicant understood perfectly the meaning and scope of the assessments, as results from the legal-argumentative exercise it now makes in the present request for arbitral ruling", "therefore it cannot be otherwise concluded (…) that the formal defect of lack of substantiation does not occur if the contestant itself expressly reveals having understood perfectly the logical and legal process that led to the decision of taxation, recognizing having understood the presuppositions concretely taken into account by the author of the act and the reasons why the taxed values were reached, disclosing the cognitive and evaluative course traveled". [14]
3.7
Now, "from the analysis of the contested assessment it seems to result clearly that the AT [Tax Authority] considered that the urban property in question was subsumable under the concept of construction land with residential allocation and for that reason taxed the Applicant, as owner of that property, in Stamp Tax pursuant to item 28.1 of the TGIS", therefore the Respondent understands that "this substantiation appears to be elucidative (…) to decide in the manner it decided, especially if we take into account that it is a mass act".
Lack of Prior Hearing
3.8
In this context, the Respondent argues that, taking into account that the right of hearing "(…) is only dispensed (…) (i) in the case of the assessment being carried out based on the taxpayer's declaration or the decision of the claim, complaint or petition is favorable to him; and (ii) in the case of the assessment being carried out officiously based on objective values provided for in law, provided that the taxpayer has been notified to submit a missing declaration, without having done so", in the case under analysis, given that "the contested assessment, in that it is limited to applying a fixed rate to the TPC that was fixed as a result of the declaration submitted by the Applicant and with the participation of the Applicant (…)" it is considered, in this case, "(…) that the Respondent was dispensed from notifying the Applicant to exercise the right of prior hearing".
The Alleged (but Non-Existent) Duplication of Assessment
3.9
Also on this matter the Respondent does not agree with the arguments invoked by the Applicant since "notwithstanding the cross-references made by the Stamp Tax Code to the Property Transfer Tax Code, similar to the countless cross-references made between Codes in the Portuguese tax legal system, it is incontestable that we are faced with two taxes distinct in their nature". [15] [16]
3.10
Thus, according to the Respondent, "duplication of assessment occurs whenever, having paid a tax, another of the same nature is assessed and demanded regarding the same tax fact and the same period of time", being "(…) fallacious the inference that the Applicant draws from its thesis (…)".
The Alleged (but Non-Existent) Unconstitutionality of the Assessment - of the Principle of Equality Stricto Sensu and in its Aspect of the Principle of Contributory Capacity
3.11
In this matter, the Respondent states that "the most recent decisions of the Constitutional Court, in the aspect that interests us here, correctly point out that the principle of equality requires that equal treatment be given to what is necessarily equal and different treatment to what is essentially different, not preventing differentiated treatment, but only arbitrary, unreasonable discriminations, i.e., distinctions in treatment that do not have justification and sufficient material foundation".
3.12
Now, according to the Respondent, "(…) the Arbitral Tribunal should not assess or discuss the merits of the legislative measure and its scope, but should limit itself to its assessment in the aspect of its conformity (…) with the constitutional text", "that is, this Tribunal should (…) only verify whether the legislative solution is absolutely intolerable or inadmissible from a legal-constitutional perspective, by (…) not finding any intelligible basis, verifying whether, in the case in question, discriminatory distinctions have been established, that is, inequalities in treatment (…) without any reasonable foundation or without any objective and rational justification", which did not happen, since "(…) item 28 is a norm in conformity with the Constitution of the Portuguese Republic". [17]
3.13
Indeed, for the Respondent, "it is, unequivocally, a norm of a general and abstract character, applicable in an indistinct manner to all cases in which its respective presuppositions of fact and law are met".
3.14
That is, "the fact that the legislator established a value (€1,000,000.00) as a delimiting criterion of the incidence of the tax, below which the provision of the tax norm is not met, constitutes a legitimate choice of the legislator as to the fixing of the material scope of the luxury residential properties that it intends to tax more heavily, especially since any other value of analogous magnitude would likewise assume, in the same manner, an artificial character (…)".
3.15
Indeed, the Respondent understands that "the different valuation and taxation of a property with residential allocation compared to a property intended for commerce, industry or services, or even a rural property, results from the different suitability of the properties in question (housing/services/commerce/industry/agricultural activity), which sustains the different treatment given by the legislator who, for economic and social reasons, decided, within the scope of its discretion to legislate, to remove from the incidence of the tax properties intended for purposes other than residential".
3.16
Thus, for the Respondent, it flows "from the statement of grounds (…) transcribed, from the declarations of the Honorable Secretary of State for Tax Affairs and from the Report that accompanied the Proposed State Budget for the year 2013, the clear intention of the legislator to integrate into the collective effort to combat budget deficit and to comply with the adjustment program (…) a broad set of sectors of Portuguese society, i.e., groups, usually exempted from these burdens, that revealed wealth through the ownership of properties whose tax patrimonial value was equal to or greater than €1,000,000.00 given that it cannot always be the same ones (…) bearing the tax burden". [18]
3.17
In these terms, the Respondent reiterates that "for the legislator, item 28.1 of the TGIS aimed to rebalance the distribution of sacrifices, so that these would not fall only on those who live from the income of their work (…)" therefore, in its view, "(…) the choice of this mechanism for obtaining revenue is legitimate, since this measure is applicable in an indistinct manner to all and any owners of properties with residential allocation of value greater than €1,000,000.00 falling on the wealth embodied and manifested in the value of properties".
Properties with Allocation Different from Residential
3.18
In this context, the Respondent reiterates that "the non-inclusion of commercial, industrial or services properties is intuitive in view of the historical, political, social and economic circumstances that surrounded the creation of item 28.1 (…)", therefore "we are (…) faced with a legitimate criterion of differentiation (…) in no way violative of constitutional principles, which imposes the limitation of the incidence of the taxation in question to luxury residential properties or those with residential allocation, with the exclusion and to the detriment of properties with strictly economic allocations".
3.19
In this manner, the Respondent continues, "as the differentiated treatment finds sufficient material justification, the principle of equality is shown to be respected, whether of itself or in its dimension of proportional equality", therefore "the AT understands that the provision of item 28 of the TGIS does not constitute any violation of the principle of equality of art. 13 of the CRP".
3.20
"In fact, the measure implemented seeks to achieve maximum effectiveness as to the objective to be attained, with the minimum of harm to other public interests that do not amount to any arbitrariness in the distinction made by Item 28.1 in function of the residential allocation of properties", being thus "(…) a legitimate, legal and constitutional option of the legislator". [19]
Activity Pursued by the Applicant
3.21
Now, the Respondent continues by stating that "taking into account the exceptional historical circumstances that presided over the elaboration of the norm (…), we have that the same does not offend any constitutional principle when in an abstract and general manner it objectively makes the tax fall on any and all Ownership, usufruct or right of surface of urban properties whose tax patrimonial value appearing in the matrix (…) is equal to or greater than (euro) 1,000,000 (…), regardless of the nature of the owner, usufructuary or surface right holder", calling "(…) to the collective effort sectors of society that were previously outside the fiscal spectrum".
3.22
In this context, the Respondent reiterates that "it finds itself (…) legitimized in the choice of this mechanism for obtaining revenue, which would only be censurable, in the face of the principle of proportionality if it resulted manifestly indefensible".
Allocation of the Land to Commerce and Services
3.23
For the Respondent, "it is verified that to this property only correspond (…) allocations of housing (…) and commerce" and "being a situation covered by mass notifications, it may generate some irregularities (…) in considering the allocation with the greater percentage (housing) to the entirety of the property".
3.24
Now, "being demonstrated that the allocation of the contested property is not exclusively residential, the Tribunal should determine only the annulment of the assessment in the part relating to the non-residential allocation of that property, being maintained the assessment in the part corresponding to the residential allocation thereof, since such allocation falls within the provision of item 28.1 TGIS".
Compensatory Interest
3.25
In this matter, the Respondent states that "given that it is not verified, in the present case (…) error attributable to the services in the assessment of the tax, no compensation should be recognized to the Applicant, pursuant to the provisions of art. 53 of the LGT [General Tax Law]". [20]
Attachment of Administrative File
3.26
"With regard to the failure to attach the administrative file, the Respondent informs (…) that it is composed solely of the contested assessments, it being certain that those were not subject to any prior administrative remedy phase (…)", therefore "given the lack of institution of any amicable settlement procedure or additional information, the administrative file will be composed solely of the contested assessments, which have already been attached to the case file by the Applicant (…)".
3.27
In these terms, the Respondent concludes that "the assessments in question constitute a correct interpretation and application of the law to the facts, not suffering from any unconstitutionality, therefore should be judged unfounded the claim adduced and the (…) Respondent absolved of the request". [21]
4. PRELIMINARY JUDGMENT
4.1
The request for arbitral ruling is timely as it was submitted within the period provided for in paragraph a) of no. 1 of article 10 of the RJAT.
4.2
The parties have legal personality and procedural capacity, are legitimated as to the request for arbitral ruling and are duly represented, pursuant to the provisions of articles 4 and 10 of the RJAT and article 1 of Ordinance no. 112-A/2011 of 22 March.
4.3
The Tribunal is competent as to the appreciation of the request for arbitral ruling formulated by the Applicant.
4.4
No exceptions have been raised that need to be addressed.
4.5
No nullities are verified, therefore it is necessary to now address the merits of the request.
5. FACTS
5.1
Facts Proven
5.2
The following facts are considered proven:
5.2.1
The Applicant is the owner of an urban property (construction land), registered in the urban property matrix under no. U-..., of the Joint Parish of ...and..., in the Municipality of Oeiras, whose TPC [Tax Patrimonial Value] is fixed at EUR 1,225,308.25 (as per document no. 5 attached with the request).
5.2.2
The Applicant was notified in 2015 to make payment of the first installment of Stamp Tax for the year 2014, in the amount of EUR 4,084.36, through the collection document no. 2015..., relating to the assessment of that tax, dated 20 March 2015, in the total amount of EUR 12,253.08 (as per document no. 1 attached with the request).
5.2.3
The Applicant made payment of Stamp Tax relating to the first installment identified above on 9 June 2015, that is, after the payment deadline - April/2015 (as per document no. 1 attached with the request).
5.2.4
The Applicant was also notified in 2015 to make payment of the second installment of Stamp Tax for the year 2014, in the amount of EUR 4,084.36, through the collection document no. 2015..., relating to the assessment of that tax, dated 20 March 2015, in the total amount of EUR 12,253.08 (as per document no. 2 attached with the request).
5.2.5
The deadline for payment of the second tax installment identified in the preceding point was July/2015 (as per document no. 2 attached with the request).
5.3
No other facts capable of affecting the decision on the merits of the request were proven.
5.4
Facts Not Proven
5.5
No evidence was obtained, with the request for arbitral ruling, of payment relating to the second installment of Stamp Tax for the year 2014, without such fact having implications for the assessment of the legality of the underlying assessment. [22]
5.6
There were no facts verified as not proven with relevance for the arbitral decision.
6. GROUNDS OF DECISION
6.1
In the present case, the essential question to be decided is to determine what is the scope of item 28.1 of the TGIS, in the wording given to it by Law no. 83-C/2013 of 31 December, namely, to know whether:
6.1.1
In that norm construction land should be included and, in particular;
6.1.2
Whether construction land with TPC equal to or greater than EUR 1,000,000 are subsumed or not in the species of urban properties "with residential allocation",
so as to determine whether the Stamp Tax assessment subject of the Request for Arbitral Ruling has or does not have the defect of violation of that item no. 28.1 (due to error as to the legal presuppositions), which would justify the declaration of its illegality and respective annulment.
6.2
Preliminarily, each of the formal defects alleged by the Applicant in the request should be analyzed and whose decision is relevant at a moment prior to the analysis of the issues listed above.
Lack of Authorship of the Act
6.3
In this context, doctrine has indicated as being conditions of existence of an administrative act, the existence of: [23]
a) Subject, which is the administrative body or agent;
b) Object, which is the tax fact;
c) Form, which is given by the unilateral conduct of the administration;
d) Content, which includes the definition of a concrete legal situation in the exercise of an authority power;
e) Publicity.
6.4
In the situation under analysis, the tax act in question (i.e., the Stamp Tax assessment) possesses the necessary requisites of existence in the legal order since:
6.4.1
It has a subject (it was issued by a body of the administration) and addressee;
6.4.2
It relates to unilateral conduct;
6.4.3
It defines a concrete legal situation in the exercise of an authority power; and
6.4.3
It was made known to the addressee.
6.5
On the other hand, the same Stamp Tax assessment underlying the request was carried out pursuant to the provisions of articles 46, no. 5 and 44, no. 5 of the Stamp Tax Code (wording amended by Law no. 55-A/2012 of 29/10), having been applied the provisions of articles 119 and 120 of the Municipal Property Tax Code (IMI), pursuant to which the Tax Administration services must send to each tax obligor, by the end of the month prior to that of payment, the competent collection document, with specification of the properties, the parts susceptible of independent use, the respective tax patrimonial value and the collection amount charged to each municipality of the location of the said properties.
6.6
According to the provisions of no. 7 of article 23 of the Stamp Tax Code, "when it comes to the tax 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 services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the IMI Code", pursuant to which "the tax is assessed (…) based on the tax patrimonial values of the properties and in relation to the taxpayers that appear in the matrices on 31 December of the year to which the same relates" (underlined by us).
6.7
Notwithstanding, the tax act has to obey the conditions of existence mentioned above in points 6.3 and 6.4 (even though carried out on a mass basis and being the product of a legally binding power).
6.8
Thus, we are faced with a mass or series act (that is, acts produced in large quantities), a fact that in no way prevents the singular character of the assessment in question since, given that it is an administrative act (by reference to the concept embedded in article 148 of the new Code of Administrative Procedure - CPA), the assessment is a decision that aims to produce legal effects "in an individual and concrete situation".
6.9
In that sense, the individuality of the author and addressee of the act is linked to the identification contained therein, notwithstanding that they are carried out in series, the situation to which the effects of the administrative decision relate having to be a concrete situation of the legal-tax reality.
6.10
With all these requisites respected, regardless of the doctrinal dispute over the concept of "mass or series act", and it being certain that legally computer means could have been used for the practice of the contested tax act, there is no doubt that the Stamp Tax assessment is not burdened with the defect alleged by the Applicant.
6.11
Thus, by comparing with the legal requirements to be observed as to an administrative act, we can conclude that the collection documents in the case file (doc. no. 1 and no. 2 attached with the request) meet not only the requirements of substantiation (provided for in article 77, no. 2 of the General Tax Law - LGT), indicating the applicable legal provisions, the qualification and quantification of the tax fact and the operation of determining the taxable matter and the tax, as well as also identify the author of the act, that is, the Tax and Customs Authority, in conformity with what is described in points 6.3 and 6.4 above.
Lack of Prior Hearing
6.12
The Applicant alleges in its request for arbitral ruling that before the sending of the note of "assessment of Stamp Tax provided for in item 28.1.1 of the TGIS regarding the year 2014", because it was "a relatively new tax (…)" it should not have been assessed to it "(…) without being given the opportunity to pronounce itself before the assessment, as required by art. 60, no. 1, paragraph a) of the LGT".
6.13
Indeed, article 60, no. 1 of the LGT provides that the participation of taxpayers in the formation of decisions concerning them may take place (whenever the law does not provide otherwise), by any of the forms listed there, namely, before the assessment.
6.14
Still pursuant to the article of the LGT identified in the preceding point, the right of hearing must be exercised within the period to be fixed by the tax administration in a registered letter to be sent for that purpose to the tax domicile of the taxpayer, and may be exercised orally or in writing, within a period of not less than 8 days nor more than 15 days.
6.15
In these terms, it can be concluded that the right of hearing of taxpayers integrates the principle of participation of citizens in the formation of decisions concerning them, enshrined in article 167, no. 5 of the CRP and in article 60 and et seq. of the LGT.
6.16
However, what is stated in the preceding points cannot mean the prior hearing of tax obligors before all assessment acts carried out by the Tax Administration in compliance with the law, in accordance with taxpayers' declarations or based on elements existing in its records that oblige it to carry out a taxation periodically (as is the case with taxes such as Property Transfer Tax and Stamp Tax of item 28).
6.17
In fact, in cases where, in the procedure of assessment of taxes, the Tax Administration acts with binding powers, that is, in situations where, if there is no agreement on the part of the tax obligor, he should contest the correctness of the interpretation and application of the law, there is no obligation to grant prior hearing to tax obligors. [24]
6.18
Thus, in the case under analysis, it is concluded that there was no need for prior hearing, there being no invoked illegality in not having granted its exercise to the Applicant. [25]
6.19
It should be recalled that the tax in question is subject to the constitutional regime of tax since, in accordance with the provisions of no. 3 of article 103 of the CRP "no one may be obliged to pay taxes that have not been created in accordance with the Constitution, that have a retroactive nature or whose assessment and collection are not carried out in accordance with the law".
Duplication of Assessment
6.20
In this context, the Applicant alleges that there is "a situation of duplication of assessment (…)" since the same tax fact and in the same temporal period were subject to taxes of identical nature "(…) on the totality of the TPC (…) Property Transfer Tax being paid (…)".
6.21
In general terms, and taking into account the tax incidence presuppositions (carefully protected by the principle of fiscal legality, resulting from the provisions of article 103, no. 2 of the CRP), article 205 of the Code of Tax Procedure and Process (CPPT) provides that "there shall be duplication of assessment (…) when, having paid a tax in full, another of equal nature is demanded from the same or a different person, relating to the same tax fact and the same period of time".
6.22
Notwithstanding, jurisprudence and doctrine have understood that duplication of assessment only occurs when the following requirements are cumulatively met:
a) A tax has been paid;
b) Another tax of equal nature is demanded from the same or a different person;
c) Such tax relates to the same period of time. [26]
6.23
According to Jorge Lopes de Sousa, "duplication of assessment results from the application of the same legal provision more than once to the same tax fact or concrete tax situation (…)" becoming "however (…) necessary that the factual reality that underlies the plurality of assessments be the same (…)" (underlined by us). [27] [28]
6.24
However, in the situation under analysis, we have that to a construction land (property of the Applicant) were applied, in the year 2014, two taxes, Property Transfer Tax and Stamp Tax under item 28.1 of the TGIS:
6.24.1
Now, if Property Transfer Tax is a municipal tax that "(…) falls on the tax patrimonial value of rural and urban properties located in Portuguese territory (…)", being "(…) assessed annually, in relation to each municipality, by the central services of the General Tax Authority, based on the tax patrimonial values of the properties and in relation to taxpayers that appear in the matrices on 31 December of the year to which the same relates" (underlined by us);
6.24.2
Now Stamp Tax of item 28.1 of the TGIS is a tax introduced by Law no. 55-A/2012 of 29 October, through which the legislator intended to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of surface of certain luxury urban properties (with residential allocation) having considered, as the determining element of contributory capacity, urban properties in the conditions described, of high value (considered luxury), that is, of value equal to or greater than EUR 1,000,000.00, on which it would (and did) become subject to a special rate of Stamp Tax.
6.25
In fact, as regards Stamp Tax, in the preamble of the Bill of Law that introduced the amendments regarding item 28 of the TGIS, the following reasons were presented for the creation of a rate under this tax falling on urban properties with residential allocation whose TPC is equal to or greater than one million Euros:
6.25.1
"The pursuit of the public interest, in view of the economic-financial situation of the Country, requires a strengthening of budget consolidation that will require, in addition to a permanent activism in reducing public expenditure, the introduction of fiscal measures inserted in a broader set of measures to combat budget deficit" (underlined by us).
6.25.2
"These measures are fundamental to strengthen the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary to comply with the adjustment program (…) with the Government 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" (underlined by us).
6.25.3
"In accordance with this objective, this diploma broadens the taxation of income from capital and securities gains, equitably encompassing a broad set of sectors of Portuguese society" (underlined by us).
6.26
Thus, it results from this motivation of the legislator that the taxation in question aims at "an effective distribution of sacrifices", making such taxation fall on property (as opposed to work income, already affected by other measures), therefore it can be concluded that the substantiation of the measure designated "special rate on urban residential properties of higher value" is based on the invocation of the principles of social equity and fiscal justice (calling to contribute in a more aggravated manner the owners of properties of high value intended for housing), in making the new special rate fall on "houses of value equal to or greater than 1 million Euros" (underlined by us).
6.27
But, it should be noted that also from the very "spirit" of Law no. 55-A/2012 [apprehensible in the statement of grounds of Bill no. 96/XII – 2nd (Journal of the Assembly of the Republic, series A, no. 3, 21/09/2012, page 44)] nothing more flows than the concern with "obtaining new fiscal revenues from sources of wealth more spared in the past from the voracity of the Tax Authority (…), in particular, income from capital, securities gains and property (…)". [29]
6.28
Thus, in light of the above, this Arbitral Tribunal understands that we are not faced with a case of duplication of assessment but, at most, a situation of double taxation, since there are various tax incidence provisions (even though of different taxes) that apply to the same tax fact, this not being illegal but rather desired by the legislator, in light of the reasons above set forth. [30]
Unconstitutionality – of the Alleged Violation of Constitutional Principles of Legality, Justice, Equality and Impartiality
6.29
In this matter, the Applicant argues that with the amendment made by Law no. 83-C/2013 of 31 December [which came to amend the wording of item 28.1 of the TGIS, the new wording now including, from 01/01/2014, "construction land whose building, authorized or planned, is housing (…)"], that item is "unconstitutional due to violation of the constitutional principles of legality, justice, equality and impartiality (…) reason why it should be disapplied".
6.30
As to this alleged unconstitutionality of item 28 of the TGIS, the Respondent stated that "as flows from the very recent Decision rendered on 11 November 2015 by the (…) Constitutional Court, in the context of case no. 542/14, already referring to the amendments introduced by Law no. 83-C/20123 of 31 December decided (…) not to judge unconstitutional the norm of item 28 and 28.1 of the General Table of Stamp Tax, added by article 4 of Law no. 55-A/20121 of 29 October, to the extent that it imposes annual taxation on the ownership of urban properties with residential allocation whose tax patrimonial value is equal to or greater than € 1,000,000.00", "there being no verification of the violation of constitutionality parameters (…), nor any others (…)" (underlined by us).
6.31
In this matter, according to the Respondent, "concludes the learned tribunal that (…) item 28 of the TGIS does not suffer from any unconstitutionality, there being no violation of the constitutional principles that shape tax law, specifically of the principles of tax equality, contributory capacity and proportionality (…)".
6.32
Now, in this context it will be important to begin by analyzing that the amendments resulting from Law no. 55-A/2012 of 29 October, in the concrete case, the addition to the TGIS of item 28, with the following wording (underlined and bold by us):
"28. Ownership, usufruct or right of surface of urban properties whose TPC appearing in the matrix, pursuant to the Property Transfer Tax Code, is equal to or greater than EUR 1,000,000.00 – on the TPC for purposes of Property Transfer Tax:
28.1 - For property with residential allocation - 1%.
28.2 - For property, when the tax obligors who are not natural persons are resident in a country, territory or region subject to a regime clearly more favorable, appearing in the list approved by ordinance of the Finance Minister - 7.5%"
6.33
Indeed, that diploma "introduced a set of amendments to the codifying diplomas of three taxes – Personal Income Tax, Corporate Income Tax and Stamp Tax – as well as to the General Tax Law, among which the norm under analysis, all guided by the supplementary obtaining of tax revenue and, in general, to counter budget imbalance". [31]
6.34
Thus, "invoking the principles of social equity and fiscal justice, taxation on income from capital and securities gains was aggravated, measures were introduced to strengthen the fight against tax fraud and evasion, through the strengthening of the regime applicable to demonstrations of wealth of tax obligors and to transfers to and from tax havens, to which was added the introduction, within the scope of Stamp Tax, of the taxation of legal situations (…) which were understood to be capable of bearing increased fiscal burden, thereby distributing more equitably the burden for achieving the budget consolidation required from taxpayers" (underlined by us). [32]
6.35
In this matter, the Constitutional Court pronounced itself within the scope of the Decision invoked by the Respondent and identified above (see point 6.30 above) as to the alleged unconstitutionality of item 28 of the TGIS due to alleged violation of the principles of proportionality, equality and contributory capacity.
6.36
Indeed, and as regards the principle of tax equality and contributory capacity, that Tribunal dispels the "fog" of unconstitutionality, since:
6.36.1
"As was seen, the legislative amendment was intended to broaden the taxation of assets, making it fall more intensely on property which, by its value considerably higher than (…) that of the generality of urban properties with residential allocation, reveals greater indicators of wealth and, as such, is susceptible of founding the imposition of an increased contribution for the sanitation of public accounts to its owners, in realization of the mentioned principle of social equity in austerity" (underlined by us).
6.36.2
On the other hand, that Decision further clarifies that "the constitutional principle of tax equality (…) finds realization in the generality and uniformity of taxes. Generality means that all citizens are bound by the payment of taxes (…)" and "uniformity means that the distribution of taxes among citizens obeys the same identical criterion for all" (underlined by us). [33]
6.36.3
And such criterion, as underscores Casalta Nabais, cited in that Decision, is found in the principle of contributory capacity, in that it implies "(…) equal tax for those who have equal contributory capacity (horizontal equality) and different tax (in qualitative or quantitative terms) for those who have different contributory capacity in proportion to this difference (vertical equality)". [34]
6.37
Now, "as presupposition and criterion for taxation, the principle of contributory capacity (…) distances the tax legislator from arbitrariness, obliging him to that in the selection and articulation of tax facts he adheres to manifestations of contributory capacity, that is, erects as the object and taxable matter of each tax a determined economic presupposition that is a manifestation of such capacity and is present in the diverse hypotheses of the respective tax" (underlined by us). [35] [36]
6.38
On the other hand, the same Decision refers that "the principle of contributory capacity does not dispense with the concurrence of other constitutional principles", that is, "the principle of the Social State, the freedom to legislate of the legislator and certain requirements of practicality and cognoscibility of the tax fact, also indispensable to the fulfillment of the purposes of the tax system". [37]
6.39
In summary, "(…) the principle of tax equality can be realized through diverse aspects", whether "in the generality of the tax law, in its application to all without exception", whether "in the uniformity of the tax law, in treating equally taxpayers that find themselves in equal situations and differently taxpayers that find themselves in different situations, in the measure of the difference, assessed by contributory capacity", or also "in the prohibition of arbitrariness, in preventing the introduction of discriminations between taxpayers that are devoid of rational foundation" (underlined by us). [38]
6.40
Thus, "the incidence of Stamp Tax (…) remits here, as regards essential elements of the tax assessment (…) to the regulation contained in the Property Transfer Tax Code (…)", being that "doctrine itself attributes to it the condition of additional rate of Property Transfer Tax, directed to discriminate properties of higher tax patrimonial value and subject them to a more burdensome tax regime than the remaining ones (…) explaining the creation of a new tax fact subject to Stamp Tax, beyond the heterogeneity that characterizes this tax, by the necessity of increasing the tax revenue of the State, since Property Transfer Tax revenue reverts in favor of municipalities and Stamp Tax is a revenue of the State" (underlined by us). [39]
6.41
On the other hand, and as regards the principle of proportionality, that Tribunal also dispels the alleged unconstitutionality invoked by the Applicant, since (and we quote):
6.41.1
"The legislator did not aim only through this means at the objective of rebalancing public accounts (…) intended (…) to broaden the taxable base to wealth externalized in the ownership of urban properties intended for housing of high value and (…) as a tool for obtaining more revenue and (…) for the relief of the burden that could affect other sources of revenue or the reduction of public expenditure, with a view to complying with the goals of the public deficit, there is no doubt that the amounts of Stamp Tax collected through the incidence provided for in item no. 28, whatever their amount, are suitable and fitting to realize the purposes of broadened distribution of effort in a period of additional fiscal and financial sacrifices that the legislator sought to achieve" (underlined by us).
6.41.2
Thus, "while a fiscal measure aimed at more intensely affecting the owners of real property rights of enjoyment on urban properties with residential vocation and of higher value, there are no reasons to conclude by disrespect of the dimensions of necessity or just measure, contained in the principle of proportionality" (underlined by us).
6.42
Thus, it is reiterated here that, for the reasons set out above, the alleged unconstitutionality of item 28 of the TGIS is set aside as regards the constitutional principles above referred to.
6.43
In these terms, in compliance with the new regulation, and notwithstanding the text of the aforementioned Law no. 55-A/2012 (in force since 30 October 2012) has not proceeded to qualify the concepts contained in the aforementioned item no. 28 (namely, the concept of "property with residential allocation"), if we observe the provisions of article 67, no. 2 of the Stamp Tax Code (also added by the aforementioned Law), it is verified that "to the matters not regulated in this Code, concerning item 28 of the General Table the Property Transfer Tax Code applies, subsidiarily".
6.44
From reading the Property Transfer Tax Code, we easily become aware that the concept of "property with residential allocation" remits, naturally, to the concept of "urban property", defined pursuant to that Code. [40] [41] [42]
6.45
In this context, among the various species of "urban properties" referred to in article 6 of the Property Transfer Tax Code, "construction land" is expressly mentioned [no. 1, paragraph c)], the no. 3 of the same article adding that are considered "construction land the land (…) for which a building license or authorization has been granted, prior communication admitted or favorable preliminary information issued for a land development or building operation (…)" (underlined by us).
6.46
As can be seen from the norms of the Property Transfer Tax Code above transcribed, it was not possible to extract, in the years 2012 and 2013, what the legislator intended to say when referring in the text of the law to "properties with residential allocation" (since this concept was not used in the classification of properties, nor was this concept found, with this terminology, in any other statute), so that in the absence of exact terminological correspondence of the concept of "property with residential allocation" with any other concept used in other diplomas, the text of the law was the starting point for the interpretation of that expression (since it was based on it that one would have to reconstruct the legislative intent, as flows from the provisions of no. 1 of article 9 of the Civil Code, applicable by virtue of the provisions of article 11, no. 1 of the LGT). [43]
6.47
Thus, taking into account the provisions of article 9 of the Civil Code that "interpretation should not be limited to the letter of the law, but reconstruct, from the texts, the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied", it being unable to "be considered by the interpreter the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed", it was understood in diverse Arbitral Decisions that the concept most similar to the literal tenor of the expression "property with residential allocation" was manifestly that of "residential properties" (referred to in article 6, no. 1 of the Property Transfer Tax Code and defined in no. 2 of the same article), encompassing buildings or constructions licensed for residential purposes or, in the absence of license, that have as their normal destination residential purposes (underlined by us). [44] [45] [46]
6.48
Finally, it is also important to note that in the interpretive activity above described it was always important to inquire into what was the ratio legis underlying the rule of item 28.1 of the TGIS in the wording in effect in the years 2012 and 2013 and, in obedience to the provisions of article 9 of the Civil Code, what were the circumstances in which the norm was elaborated and what were the specific conditions of the time in which it was applied. [47]
6.49
And if, as a result of the legislator's motivation, the taxation introduced by the addition of item 28 of the TGIS aimed at "an effective distribution of sacrifices", making such taxation fall on property (by contrast, namely, to work income, already affected by other measures), being too broad, the statement of grounds underlying the adoption of the new measures brought little contribution to the interpretation of the concept of "urban property with residential allocation", contributing to the uncertainty as to the inclusion therein of "construction land" (underlined by us). [48]
6.50
Now, if such logical argument of the grounds underlying the introduction of the new taxation seemed to make sense when applied to a "dwelling", whenever the same represented, on the part of its owner, above-average contributory capacity (and, to that extent, susceptible of determining a special contribution to ensure the fair distribution of the fiscal effort), it would make no sense if applied to "construction land", so it was understood, once again, in diverse Arbitral Decisions that "the Respondent cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the tax system and the principles of fiscal legality (article 103, no. 2 of the CRP), of justice, equality and proportionality in tax matters (included therein)" (underlined by us).
6.51
In these terms, it has been concluded in diverse Arbitral Decisions that it can be assessed that the reality that was intended to be taxed (in the years 2012 and 2013), for the reasons above stated, was in fact, in common parlance, that of "houses", and not any other realities. [49]
6.52
In these terms, it was concluded that, resulting from article 6 of the Property Transfer Tax Code a clear distinction between urban properties "residential" and "construction land", the latter could not be considered as "urban properties with residential allocation", for purposes of the provision in item no. 28.1 of the TGIS in its original wording (given to it by Law no. 55-A/2012 of 29 October). [50]
6.53
Thus, the concept of "urban property with residential allocation" (contained in the text of the law in effect for the years 2012 and 2013), probably owing to its imprecision (a fact so much more grave since it is in function of it that the scope of the objective incidence of the new taxation is defined) was abandoned when Law of the State Budget for 2014 came into effect (Law no. 83-C/2013 of 31 December, in effect from 1 January 2014), which gave new wording to that item no. 28.1 of the TGIS, defining the scope of its objective incidence through the use of concepts that are legally defined in article 6 of the Property Transfer Tax Code. [51] [52]
6.54
Indeed, this amendment, "to which the legislator did not attribute an interpretive character, merely makes unequivocal for the future that construction land whose building, authorized or planned, is for housing is comprised within the scope of item 28.1 of the TGIS (…)" (underlined by us). [53]
6.55
In these terms, in accordance with the new wording of the item referred to in the preceding point, the Stamp Tax assessments relating to the year 2014 and thereafter will also unequivocally fall on (bold by us):
"28. - Ownership, usufruct or right of surface of urban properties whose tax patrimonial value appearing in the matrix pursuant to the Property Transfer Tax Code (…) is equal to or greater than (euro) 1,000,000 - on the tax patrimonial value used for purposes of Property Transfer Tax:
28.1. - For residential property or for construction land whose building, authorized or planned, is for housing, pursuant to the provisions of the Property Transfer Tax Code – 1%.
28.2. - For property, when tax obligors who are not natural persons are resident in a country, territory or region subject to a regime clearly more favorable, appearing in the list approved by ordinance of the Finance Minister – 7.5%".
Allocation of the Land to Commerce and Services
6.56
In this context, the Applicant states that the "property in question (…) corresponds to Lot 43 of the Development Permit no. .../2009 issued by the Municipal Chamber of Oeiras", being "intended for the construction of 3,775 m2 of housing" and "70 m2 of commerce/services and as such was registered in the respective urban matrix and subsequently assessed (…)".
6.57
Now, taking into account the provisions of Law no. 83-C/2013 of 31 December (applicable in the case under analysis), the same "came to amend the wording of item 28.1 of the TGIS (…) the new wording now including for purposes of taxation (…), construction land whose building, authorized or planned, is housing (…)".
6.58
Thus, for the Applicant, "in the manner in which the norm is worded and keeping in mind the grounds underlying its approval, nothing allows us to interpret it in the sense that it encompasses construction land other than those intended for building for housing (…)", therefore not having been carried out the "(…) prior separation of the part intended for construction of housing, with the calculation of its respective TPC (…)", "this operation has no coverage in the law (…), which means that (…) the tax computed in those terms would always be illegal".
6.59
In this matter, the Respondent accepts that the "(…) Stamp Tax should fall only on the part of the property with residential allocation", therefore "being possible to determine the amount corresponding to the part with residential allocation, the tax should fall on that part".
6.60
In summary, as to the Stamp Tax assessment subject to the request for arbitral ruling, in light of the above:
6.60.1
In general terms, the provision of item no. 28.1 of the TGIS (in the wording given by the State Budget Law for 2014) is applicable to construction land in the conditions legally defined, since this reality is subject to Stamp Tax provided for in that item no. 28.1 of the TGIS;
6.60.2
However, in the case under analysis, taking into account the different allocations of the land property of the Applicant (housing and commerce/services), the assessment act subject to the request should fall only on the part of the land allocated to housing [according to the information in the case file, of the total area of the land (3,845 m2), 3,775 m2 relate to the area allocated to housing and 77 m2 to the area allocated to commerce and services)].
6.61
Thus, the assessment act subject to the request (and, in consequence the collection notes flowing therefrom) should be maintained only insofar as it relates to the area of land allocated to housing (which will represent 98% of the collection), being annulled, because illegal, in the part that concerns commerce/services (which will represent 2% of the collection).
Reimbursement of Tax Paid, with Compensatory Interest
6.62
In these terms, and taking into account the conclusion referred to in the preceding point, the reimbursement of Stamp Tax paid by the Applicant will have to be carried out in proportion to the annulment of the tax assessment, in the terms described above.
6.63
On the other hand, and as regards the payment of compensatory interest, in accordance with the provisions of no. 5 of article 24 of the RJAT "payment of interest is due, regardless of its nature, in the terms provided for in the LGT and in the CPPT", from which results that an arbitral decision is not limited to the assessment of the legality of the tax act.
6.64
Likewise, in accordance with the provisions of article 24, no. 1, paragraph b) of the RJAT, it should be understood that the request for compensatory interest is a claim relating to tax acts (e.g., assessment acts) which aims to make explicit/concrete the content of the duty to "restore the situation that would exist if the tax act subject to the arbitral decision had not been carried out, adopting the acts and operations necessary for the purpose".
6.65
As states Jorge Lopes de Sousa "it falls within the competencies of the arbitral tribunals that function in the CAAD the fixing of the effects of the arbitral decision that can be defined in a process of judicial contestation, namely the annulment of the acts whose declaration of illegality is requested, the conviction of the Tax and Customs Authority to the payment of compensatory interest (…)". [55] [56]
6.66
Thus, in tax arbitral proceedings there may be place for the payment of compensatory interest, pursuant to the provisions of articles 43, nos. 1 and 2, and 100 of the LGT, when it is determined that there was error attributable to the services from which results payment of the tax debt in an amount greater than that legally due (underlined by us).
6.67
In these terms, the right to compensatory interest will always depend on the verification of an error attributable to the services of the Respondent, from which resulted payment of tax debt in an amount greater than that legally due.
6.68
As a result of the partial illegality of the assessment act already identified (see point 6.61 above) and in accordance with the provisions of paragraph b), no. 1 of article 24 of the RJAT (in conformity with what is established therein), "the arbitral decision on the merits of the claim as to which there is no recourse or contestation binds the tax administration from the end of the period provided for recourse or contestation, this having to restore the situation that would exist if the tax act subject to the arbitral decision had not been carried out, adopting the acts and operations necessary for the purpose", therefore there will have to be place for partial reimbursement of the amount paid by the Applicant as title of the tax borne (see point 6.62 above), as a manner of achieving the reconstitution of the situation that would exist if the illegality had not been committed.
6.69
Thus, in light of what is established in article 61 of the CPPT, the requirements of the right to compensatory interest having been met (that is, verified the existence of error attributable to the services from which results payment of the tax debt in an amount greater than that legally due, as provided for in no. 1 of article 43 of the LGT), the Applicant has the right to compensatory interest at the legal rate, computed on the part of the amount paid, in the framework of the Stamp Tax assessment subject to the request for arbitral ruling, in the proportion declared illegal, which will be counted in accordance with the provisions of no. 3 of article 61 of the CPPT, that is, from the date of eventual payment of undue tax until the date of issuance of the respective credit note.
Responsibility for the Payment of Arbitral Costs
6.70
In accordance with the provisions of article 22, no. 4 of the RJAT, "the arbitral decision issued by the arbitral tribunal includes the fixing of the amount and the distribution among the parties of the costs directly resulting from the arbitral proceedings".
6.71
In consonance with the preceding point, and in accordance with the provisions of article 527, no. 1 of the CPC (ex vi 29, no. 1, paragraph e) of the RJAT) it must be established that the Party that caused them or, in the absence of a winning action, who derived benefit from the proceedings shall be condemned in costs.
6.72
In this context, no. 2 of the aforementioned article specifies the expression "caused them" according to the principle of proportional fault, understanding that the defeated party causes the costs of the proceedings in the proportion in which it is defeated. [57]
6.73
In these terms, taking into account the above analyzed, the responsibility regarding arbitral costs should be imputed to the Applicant and to the Respondent in proportion to their respective defeat, that is, in 98% and in 2%, respectively.
7. DECISION
7.1
In the case under analysis, taking into account what is stated in the preceding chapter, the principle of proportionality imposes that the responsibility for arbitral costs be attributed, in a shared manner, to the Applicant and to the Respondent in proportion to their respective defeat (98% and 2%, respectively), in accordance with the provisions of article 12, no. 2 of the RJAT and article 4, no. 4 of the Regulation of Costs in Tax Arbitration Proceedings.
In these terms, taking into account the analysis carried out, this Arbitral Tribunal decided:
To partially grant the request for arbitral ruling submitted by the Applicant in the terms set out above, condemning in this measure the Respondent to the annulment of the Stamp Tax assessment subject to the request in the part that concerns the allocation of the land to commerce/services (2% of the total area of the land),
To partially condemn the Respondent to the reimbursement of the amounts unduly paid by the Applicant in the framework of the Stamp Tax assessment now partially annulled, in the part relating to the tax incidence regarding the area of land allocated to commerce/services (2% of the total area of the land), increased in this case with compensatory interest at the legal rate, counted in accordance with the legal terms;
To condemn the Applicant and the Respondent to the payment of the costs of the present proceedings in proportion to their respective defeat (in 98% and in 2%, respectively).
Value of the Proceedings: Taking into account the provisions of articles 306, no. 2 of the CPC, article 97-A, no. 1 of the CPPT and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings the value of the proceedings is fixed at EUR 12,253.08.
Costs of the Proceedings: Pursuant to the provisions of Table I of the Regulation of the Costs of Tax Arbitration Proceedings, the value of the costs of the Arbitral Proceedings is fixed at EUR 918.00, being 98% chargeable to the Applicant and 2% chargeable to the Respondent, in accordance with article 22, no. 4 of the RJAT.
Notify the parties.
Lisbon, 29 January 2016
The Arbitrator
Sílvia Oliveira
Frequently Asked Questions
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