Summary
Full Decision
ARBITRAL DECISION
1. Report
A – General
1.1. A..., S.A., with registered office at Lugar..., ..., in Maia, registered at the Commercial Registry Office under the single registration and tax identification number ... (hereinafter referred to as "Claimant"), submitted, on 15.10.2018, an application for constitution of a sole arbitral tribunal in tax matters, which was accepted, aiming, in mediate terms, at the annulment of the assessment act for the Additional Municipal Property Tax (hereinafter "AIMI"), for the year 2017, identified with number 2017..., in the amount of € 14,070.42 (fourteen thousand and seventy euros and forty-two cents) levied on real property of which it is the owner.
1.2. Pursuant to the provisions of paragraph a) of item 2 of article 6 and paragraph b) of item 1 of article 11 of the Legal Regime for Tax Arbitration, approved by Decree-Law No. 10/2011, of 20 January, as amended by article 228 of Law No. 66-B/2012, of 31 December (LRTA), the Ethics Council of the Administrative Arbitration Centre (CAAD) appointed the undersigned as arbitrator, and the Parties, after being duly notified, did not raise any objection to this appointment.
1.3. By dispatch of 25.10.2018, the Tax and Customs Authority (hereinafter referred to as "Respondent") proceeded to appoint Dr. B... and Dr. C... to intervene in the present arbitral proceedings, in the name and representation of the Respondent.
1.4. In accordance with the provision in paragraph c) of item 1 of article 11 of the LRTA, the Arbitral Tribunal was constituted on 27.12.2018.
1.5. On 28.12.2018, the highest-ranking official of the Respondent's service was notified to, if willing, submit a response within 30 days, request additional evidence production and attach to the file a copy of the administrative procedure.
1.6. On 04.02.2019, the Respondent submitted its Response.
B – Position of the Claimant
1.7. The Claimant is a commercial joint-stock company engaged in real estate activity.
1.8. The Claimant is the owner of the urban properties mentioned in the assessment in the present proceedings being challenged, namely two properties intended for housing and four construction land to which the location coefficient for industry was applied.
1.9. Following the entry into force of the AIMI regime, the Claimant was notified of the said assessment, which falls on the properties referred to in 1.8.
1.10. The properties in question are recorded in the Claimant's sphere as "inventory".
1.11. The real property referred to, subject of the AIMI now being challenged, is destined solely and exclusively for the Claimant's exploitation, within the scope of its economic activity.
1.12. The Claimant, although dissatisfied, voluntarily paid the tax that was assessed against it.
1.13. Disagreeing with the assessment now mediately challenged, the Claimant submitted a request for administrative review against it, which was dismissed by the dispatch also here, in mediate terms, being challenged.
1.14. In the assessment note here challenged, the Claimant was applied a rate of 0.4% on the tax property value (hereinafter "TPV") of the properties in which it appears in the matrix as the holder, pursuant to the provisions of paragraph a) of item 1 of article 135-F of the Municipal Property Tax Code (hereinafter "MPTC").
1.15. Pursuant to item 2 of article 135-B of the MPTC, "excluded from the additional municipal property tax are urban properties classified as 'commercial, industrial or for services' and 'others' pursuant to paragraphs b) and d) of item 1 of article 6 of this Code", which means that AIMI falls on properties with housing use, as well as on construction land, regardless of their use.
1.16. It is, in the Claimant's view, manifestly lacking in material support, on the tax level, for the application of AIMI to properties that form part of the assets of a real estate company, as is the case of the Claimant.
1.17. AIMI replaced the previous mode of taxation of "luxury real estate property", whose rate was provided for in item 28 of the General Table of Stamp Tax (hereinafter "GTST") – as amended by Law No. 55-A/2012, of 29 October and by Law No. 83-C/2013, of 31 December.
1.18. Despite the differences in regime between AIMI and item 28 of the GTST, the fact is that AIMI suffers from the same defects as its predecessor – above all because, with respect to properties essential in obtaining income within the scope of economic activity, it lacks the same material support on the tax level.
1.19. AIMI violates the principle of equality, materialized in its aspect of contributive capacity, pursuant to what has already been advocated by case law and doctrine when discussing item 28 of the GTST, duly adapted to the characteristics of AIMI.
1.20. Within the scope of item 28 of the GTST, case law, both arbitral and from superior courts, came to understand that construction land could not be considered, for purposes of Stamp Tax application, as urban properties with housing use, which is why the legislator hastened to add to the law a rule of application that would encompass "construction land".
1.21. What was intended to be taxation on real estate property of high value, inasmuch as such ownership revealed, by itself, the manifestation of significant contributive capacity, was distorted and ended up being an unjust and unequal imposition, violating the most basic canons of equality, proportionality and contributive capacity.
1.22. The principle of equality referred to in article 13 of the Constitution of the Portuguese Republic (hereinafter "CRP"), has an evident refraction in article 103 of the same Fundamental Law, which enshrines the principle of contributive capacity.
1.23. The principle of equality, which is also found in article 5 of the General Tax Law (hereinafter "GTL"), operates as a limit to legislative discretion, preventing the establishment of distinctions devoid of objective and rational justification.
1.24. Concretizing the principle of equality in matters of property taxation, the CRP itself establishes a central orientation in item 3 of its article 104, when it provides that the taxation of property should contribute to equality among citizens, which is precisely the opposite of what happens in the present proceedings.
1.25. The principle of tax equality does not only require that it be verified that this requirement respects the economic strength of each taxpayer, and that it represents a fair distribution of the tax burden, but also requires that it be assessed whether this burden is not excessive, in terms similar to those that the Constitution establishes to admit other restrictions on fundamental rights.
1.26. Now, the State Budget Bill Proposal for 2017, from which AIMI emerged, aimed to tax the ownership of real estate property that revealed superior contributive capacity of its holder, thus implementing the principle of fair distribution and contributive capacity.
1.27. It happens that the Claimant holds the properties on which AIMI fell within the scope of its economic activity and because of it, constituting them an essential means for pursuing its corporate purpose, true production factors, and the ownership thereof cannot be seen as any typical manifestation of the contributive capacity that authorizes and is at the genesis of this taxation.
1.28. Companies whose corporate purpose is the pursuit of real estate activity can only exercise such activity if they are owners of real properties and AIMI, when attempting to apply itself to production factors of some companies, the real estate ones, and not others, those not pursuing this activity, promotes arbitrary taxation, which materializes in an unjustified negative discrimination of companies engaged in the sale of construction land, which makes it suffer from unconstitutionality, due to violation of the principle of equality.
1.29. When the State Budget Bill Proposal for 2017 was discussed in detail, it was established that excluded from the scope of AIMI application, in addition to properties classified as industrial and urban properties licensed for tourist activity, would be urban properties classified as "commercial, industrial or for services" and "others" pursuant to paragraphs b) and d) of item 1 of article 6 of the MPTC – as it came to be in the law, and such exclusion was based on the consideration of an instrumental function with respect to a certain productive activity.
1.30. It was not intended to encompass within the scope of AIMI application properties with use for services, industry or commerce, that is, properties devoted to an economic activity, not accepting that the real estate sector is the only activity sector effectively taxed by ownership of production goods as purported manifestation of increased contributive capacity.
1.31. In the case of the present proceedings, there is no minimally perceptible and rational material ground to advocate negative discrimination, at the fiscal level, of real estate companies in relation to others, which is why the assessment now being challenged violates the principle of fiscal equality provided for in article 13 and the principle of contributive capacity provided for in article 104, both of the CRP.
1.32. It also violates the principle of proportionality, in its various dimensions, there being, pursuant to the CRP, a binding relationship between prohibition of excess, proportionality, Rule of Law and Justice.
1.33. In fact, there is evidence of a negative, uncritical, arbitrary and random differentiation, between, on the one hand, properties (residential) held by companies that use them in pursuing their economic activity, and, on the other hand, properties of equal value held by companies that devote them to industry, commerce and services.
C – Position of the Respondent
1.34. The Respondent begins by stressing that AIMI assumes the nature of a real tax, in that the calculation of the amount to be paid abstracts from the economic dimension of the respective taxpayers.
1.35. As the Claimant acknowledges, AIMI falls only on urban properties devoted to housing purposes and construction land, as defined in article 6 of the MPTC, and it was precisely in these terms that the Respondent proceeded to assess the AIMI now being challenged.
1.36. Nor by interpretive means is what is advocated by the Claimant achieved, it being clear that what this intends is merely the abrogating interpretation of the law, giving it a meaning that was not established by the legislator in the respective text, even if imperfectly expressed, thus expanding the scope of the exclusion from taxation to encompass all properties held by real estate companies.
1.37. The interpretation proposed by the Claimant, being abrogating, if adopted, violates the constitutional principle of separation and interdependence of powers, established in articles 2 and 111 of the CRP, constituting itself as reference and limit to the powers of cognition of courts in the exercise of its function within the Rule of Law (articles 202 and 203 of the CRP) and, likewise, the principle of legality formulated in article 103, item 2 and in article 165, item 1, paragraph i), also of the CRP.
1.38. It is clear that the legislative purpose (ratio legis) at the genesis of the exclusion of the objective scope of AIMI application intended to mitigate the impact of this tax on the exercise of business activities in general, through the exclusion of urban properties for industrial, commercial and services purposes, and "others".
1.39. The Claimant argues, systematically and repeatedly, to "attach" the AIMI regime to that present in the repealed item 28.1 of the GTST, which makes no sense.
1.40. In fact, the case law of the Constitutional Court does not allow for the conclusion sought by the Claimant.
1.41. The properties excluded from AIMI application, pursuant to item 2 of article 135-B of the MPTC, are those that perform an instrumental function with respect to industrial, commercial or services economic activities, inasmuch as they constitute buildings that serve as support for the operation of such activities, not being by themselves generators of income, being rather economically recognized as production factors, as capital, residing in this aspect the reason for this exclusion.
1.42. In delimiting the objective scope, both by the letter and spirit of the law, it is clear that the criterion adopted intends to be universally objective, inducing greater uniformity and equality in the treatment of properties subject to taxation, to the detriment of other criteria that would appeal to case-by-case verifications about the actual destination given to properties.
1.43. This means that the taxation embodied in AIMI translates into a specific imposition on property (article 4, item 1 of the GTL) and not on income, thus falling on manifestations of contributive capacity consisting of elements of real estate property, which possess the characteristics indicated in article 135-B of the MPTC, without individualizing the taxpayers, that is, subjecting every and any entity that is a holder of real rights over properties encompassed, which requires that all those who are holders of the same form of wealth be taxed in the same manner.
1.44. Not only is there in the text of the law a minimum of verbal correspondence that would support the interpretation advocated by the Claimant, but, as the law is the normative standard that governs its action, it would not be for the Respondent to proceed with corrective interpretations of tax application norms, nor to issue judgments of constitutionality on applicable norms, as it is not authorized to do so.
1.45. It follows from the law that administrative bodies and agents do not have the competence to decide on the non-application of norms in relation to which doubts about constitutionality are raised.
1.46. The AIMI regime also does not violate the constitutional principle of equality, which requires that what is necessarily equal be treated equally and as different what is essentially different, not preventing, however, differential treatment, but only arbitrary and unreasonable discriminations (i.e., distinctions in treatment that do not have justification and sufficient material foundation).
1.47. Now, courts cannot scrutinize the soundness of any legislative measures and their scope, and the analysis should be limited to their conformity with the constitutional text and the principles enshrined therein, and should verify only if they present themselves as absolutely intolerable or inadmissible, from a constitutional-legal perspective, because no intelligible foundation can be found for them.
1.48. On the other hand, contributive capacity, in addition to income and the use of assets, is also expressed, pursuant to the law, through the ownership of property, as enshrined in item 1 of article 4 of the GTL.
1.49. It is not the circumstance that other taxpayers holding identically valuable real estate property are exempted from the tax that would justify specific constitutional censure of the norm under review, since AIMI does not concern overall property taxation, nor even real estate property taxation.
1.50. The Respondent argues that the circumstance that AIMI falls on all construction land does not violate any constitutional principle, since such land is capable of indicating that its owner is a holder of assets that, by themselves, evidence the specific and typical affluence elected by the legislator within the scope of its legislative discretion.
1.51. Finally, the Respondent understands that no indemnity interest is owed, either because the challenged assessment does not suffer from any defect or because it is clear that the tax and customs authority cannot be imputed any factual or legal error, as its action, as could not be otherwise, scrupulously respected applicable legislation.
D – Conclusion of Report and Sanitation
1.52. By dispatch of 21.05.2019, the Arbitral Tribunal dispensed with the meeting provided for in article 18 of the LRTA, as it understood that the Parties had already submitted to the proceedings the elements of fact necessary and sufficient for the rendering of the decision, which was expected to take place until 24.06.2019.
1.53. The Parties did not intend to present arguments.
1.54. The Arbitral Tribunal is materially competent, pursuant to the provisions of article 2, item 1, paragraph a) of the LRTA.
1.55. The Parties have legal capacity and standing, are duly represented and have legitimacy pursuant to article 4 and item 2 of article 10 of the LRTA, and article 1 of Ordinance No. 112-A/2011, of 22 March.
1.56. The proceedings do not suffer from any nullity.
2. Factual Matters
2.1. Proven Facts
2.1.1. The Claimant is a commercial joint-stock company engaged in real estate activity (consensus of the Parties).
2.1.2. The Claimant is the owner of the six properties listed in the document with reference 2017... attached to the request for arbitral opinion as document No. 2, by which the Respondent made known to the Claimant the AIMI assessment act No. 2017... falling on those properties (document No. 2 attached to the file with the request for arbitral opinion).
2.1.3. Of the six properties referred to in 2.1.2., two are intended for housing and four are construction land to which the location coefficient for industry was applied (consensus of the Parties).
2.1.4. The Claimant was notified of the AIMI assessment No. 2017..., which falls on the properties referred to in 2.1.2., in the amount of € 14,070.42 (fourteen thousand and seventy euros and forty-two cents) (document No. 2 attached to the file with the request for arbitral opinion).
2.1.5. In the assessment note referred to in 2.1.4., a rate of 0.4% on the TPV of the properties in which it appears in the matrix as the holder was applied to the Claimant (document No. 2 attached to the file with the request for arbitral opinion).
2.1.6. The Claimant, on 29.09.2017, made payment of € 14,070.42 (fourteen thousand and seventy euros and forty-two cents), the amount that was required of it as title of AIMI (document No. 2 attached to the file with the request for arbitral opinion).
2.2. Unproven Facts
There are no facts relevant to the appreciation of the merits of the case that have been found to be unproven.
2.3. Reasoning for Determination of Factual Matters
The facts were found to be proven based on documents submitted to the proceedings by the Parties and on the positions assumed by them in the pleadings presented.
3. Matters of Law
3.1. Question to be Decided
It results from what has been stated above that the question to be considered is, fundamentally, whether the properties held by the Claimant, because they constitute the substratum of its economic activity, are encompassed by the rules of objective scope of AIMI, or, from another perspective, whether the tax application rule of AIMI on which the challenged assessment is based is affected by unconstitutionality, due to violation of the principle of fiscal equality and the principle of contributive capacity, when interpreted in the sense that the scope of AIMI application encompasses the ownership of real property, namely construction land, when these correspond to the substratum of the actual economic activity developed by its owner company.
3.2. The Additional IMI – Subjective and Objective Scope
AIMI was created by Law No. 42/2016, of 28 December (State Budget Law for 2017), which added to the MPTC Chapter XV comprised of articles 135-A to 135-K.
Article 135-A defines the subjective scope of AIMI. As of the date to which the facts reported, this was its text:
Article 135-A
Subjective Scope
1 - The taxpayers of the additional municipal property tax are natural or legal persons who are owners, usufructuaries or superficiaries of urban properties situated in Portuguese territory.
2 - For purposes of item 1, any structures or centers of collective interests without legal personality that appear in the matrices as taxpayers of municipal property tax are equated to legal persons, as is an undivided succession represented by its head.
3 - The status of taxpayer is determined in conformity with the criteria established in article 8 of this Code, with the necessary adjustments, having as reference the date of 1 January of the year to which the additional municipal property tax relates.
4 - Municipal enterprises are not taxpayers of the additional municipal property tax.
Therefore, taxpayers of AIMI are natural or legal persons who are owners, usufructuaries or superficiaries of urban properties situated in Portuguese territory, it being important to emphasize that any structures or centers of collective interests without legal personality that appear in the matrices as taxpayers of municipal property tax are equated to legal persons. Thus, it is clear that, from the subjective perspective, companies engaged in real estate activities are AIMI taxpayers.
For its part, the objective scope of this additional tax is outlined as follows:
Article 135-B
Objective Scope
1 - The additional municipal property tax falls on the sum of the tax property values of urban properties situated in Portuguese territory of which the taxpayer is the owner.
2 - Excluded from the additional municipal property tax are urban properties classified as "commercial, industrial or for services" and "others" pursuant to paragraphs b) and d) of item 1 of article 6 of this Code.
AIMI thus falls on the sum of the tax property values of urban properties situated in Portuguese territory of which the taxpayer is the owner, with reference to 1 January, with the exclusion of urban properties classified as "commercial, industrial or for services" and "others", with referral to paragraphs b) and d) of item 1 of article 6 of the MPTC. The referral to article 6 of the MPTC has the sole purpose of clarifying what is meant by urban properties "commercial, industrial or for services" and "others", for purposes of the exclusion from the objective scope of AIMI application.
This is the text of the aforementioned article 6 of the MPTC:
Article 6
Species of Urban Properties
1 - Urban properties are divided into:
a) Residential;
b) Commercial, industrial or for services;
c) Construction land;
d) Others.
2 - Residential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of a license, that have as their normal destination each of these purposes.
3 - Construction land is understood as land situated within or outside an urban agglomeration for which a license or authorization has been granted, an advance notice admitted or favorable advance information issued for a subdivision or construction operation, and also those that have been declared as such in the acquisition title, except for land on which the competent entities forbid any of such operations, namely those located in green areas, protected areas or that, in accordance with municipal land use plans, are devoted to public spaces, infrastructure or equipment.
4 - Encompassed in the provision of paragraph d) of item 1 are lands situated within an urban agglomeration that are not construction land nor are covered by the provisions in item 2 of article 3 and also buildings and constructions licensed or, in the absence of a license, that have as their normal destination other purposes than those referred to in item 2 and also those of the exception in item 3.
The legislator, in defining the negative delimitation of the scope of the tax by reference to urban properties classified as "commercial, industrial or for services" and "others" pursuant to paragraphs b) and d) of item 1 of article 6 of the MPTC, is precisely referring to this typology of properties according to the very characterization that the Code attributes to them.
The tax exclusion thus encompasses, consequently, properties classified as commercial, industrial or for services, being understood as such the buildings or constructions licensed for these purposes or that have as their normal destination each of these purposes. Said exclusion includes, moreover, the residual species referred to in paragraph d) of item 1 of that article 6, including lands situated within or outside an urban agglomeration that are not construction land nor rural properties and also buildings and constructions that do not fall within any of the previous classifications.
The objective scope, by effect of the express referral to that article 6, was thus defined not only by reference to a certain species of urban properties, but also by reference to the administrative procedure through which the classification was effected or, in the absence of a license, to the normal destination of such properties for commercial, industrial and services or other purposes.
From the text of article 135-B of the MPTC, it results that the legislator chose to formulate the negative delimitation of the objective scope using exclusively the classification of properties, there being nothing in the text of the law that suggests that the intended exclusion can be expanded, namely to properties not included therein when they are the substratum of a certain economic activity of the tax taxpayer. In truth, it seems crystal clear that there is no support whatsoever in the text of the law nor in any other hermeneutical element for the understanding that the legislator intended to exclude from the scope of the tax properties devoted to economic activities, so as not to overburden fiscally the taxpayers who own properties as a result of their corporate purpose. There is equally no reason suggesting that the legislator failed to express his thinking in adequate terms, as must be presumed, pursuant to item 3 of article 9 of the Civil Code.
It is to be believed that had this been the legislator's intention, instead of having delimited the scope of the tax through characterized types of properties, as was done, surely the choice would have been for a case-by-case assessment based on the actual, effective devotion of the property to an economic activity or to the functioning of a legal person.
Having the law delimited the scope of the tax as it did, resorting to juridical-technical concepts used elsewhere in the system, to which it expressly refers, it is surely with that meaning that the scope of application of this legal provision must be grasped. Norms sometimes admit more than one meaning and then the positive function of the text translates into giving stronger support to or more strongly suggesting one of the possible meanings. However, if the legislator resorted to special, clear juridical-technical language to express its thinking with greater precision, it falls to the interpreter to avail itself of the juridical-technical meaning of the expressions used, dispensing with the use of circumstantial elements that could only lead to an interpretive result foreign to the legislator's intention.
As must be concluded, the intended extension of the legislative formula used to properties devoted to the economic activity of the company, regardless of the specific characterization as commercial, industrial or services properties, has no place whatsoever in light of the general criteria of juridical hermeneutics.
This does not mean, however, that the legislator, in the context of AIMI, entirely disregarded the specificities of real estate companies. It is true that, in principle, taxpayers who acquire residential urban properties for sale or construction land for buildings, whatever their purpose, and who make this their corporate activity, hold the properties for an ultimate purpose of commercial nature. One could thus think that the difference to which the legislator attends—excluding these properties from the scope of the tax relief provision—does not possess the nature and weight sufficient to justify differential treatment.
However, the fiscal situation of such companies is already considered within the internal scope of IMI itself, in which AIMI is integrated. In fact, in cases of acquisition of properties for resale and of construction land, it is provided in paragraphs d) and e) of item 1 of article 9 of the MPTC that they are not subject to IMI for three and four years, respectively, and, by force of paragraph a) of item 3 of article 135-C of the same enactment, that they are not subject to AIMI, in relation to taxpayers who are registered to exercise this activity. During this period of "non-taxation" there is no tax effect whatsoever to be considered in the context of IMI, the property not being a reality qualified as property for tax purposes. The reason for the non-taxation consideration is found in the fact that the property during this period of time is understood as merchandise for all other tax purposes.
3.3. On the Unconstitutionality of AIMI
The Claimant understands that articles 135-A et seq. of the MPTC should be disapplied, to the extent that they are affected by unconstitutionality, due to violation of the constitutional principle of equality.
The Claimant argues that AIMI promotes differentiated treatment and unjustified inequality among taxpayers, in violation of the principle of fiscal equality, to the extent that the ownership of properties constitutes the patrimonial substratum of the economic activity itself, constituting an essential means for pursuing its corporate purpose, such that the ownership of such properties cannot be understood as an indicator of increased contributive capacity or a manifestation of wealth.
To answer this question, one must begin by effecting, albeit briefly, the characterization of the constitutional principles of progressivity, fiscal equality and contributive capacity.
As the Constitutional Court has repeatedly stated, one of the essential constitutionally defined objectives of the fiscal system, alongside the satisfaction of the financial needs of the State and other public entities, is that of fair distribution of income and wealth, as is apparent from article 103, item 1, of the Constitution. It is in this binding of the fiscal system to the idea of social justice and the reduction of inequality in the social distribution of income and wealth that the progressivity of the tax is founded.
This progressivity is expressly enshrined within personal income taxation. According to item 1 of article 104 of the CRP, the tax on personal income aims at "the reduction of inequalities and shall be unique and progressive, having regard to the needs and income of the household unit".
Fiscal progressivity requires that the relationship between the tax paid and the level of income be more than proportional, which can only be achieved by applying to taxpayers with higher incomes a higher tax rate.
The Constitution requires a progressivity with the intrinsic capability of contributing to a reduction of income inequality.
The progressivity of the tax also constitutes a requirement of the principle of material equality. The principle of fiscal equality has inherent above all "the idea of generality or universality, whereby all citizens are bound by the duty to pay taxes, and of uniformity, requiring that such duty be assessed by the same criterion—the criterion of contributive capacity. This thus implies equal tax for those with equal contributive capacity (horizontal equality) and different tax (in qualitative or quantitative terms) for those with different contributive capacity in proportion to this difference (vertical equality)".
As the general principle of equality configures itself as material equality, the principle of contributive capacity, as the tertium comparationis of equality in the domain of taxes, does not require a specific and direct constitutional provision. Its constitutional foundation is the principle of equality articulated with the other principles and provisions of the so-called "fiscal constitution" and, in particular, those that already result from the structural principles of the fiscal system contained in articles 103 and 104 of the Constitution.
As a presupposition and criterion of taxation, the principle of contributive capacity "distances the tax legislator from arbitrariness, obliging him in the selection and articulation of tax facts to abide by revelations of contributive capacity, that is, to erect as the object and taxable matter of each tax a certain economic presupposition that is a manifestation of that capacity and is present in the various legal hypotheses of the respective tax".
The principle of tax equality can be concretized through diverse aspects: a first is in the generality of the tax law, in its application to all without exception; a second is in the uniformity of the tax law, in the equal treatment of taxpayers who find themselves in equal situations and different treatment from those who find themselves in different situations, to the extent of the difference, to be assessed by contributive capacity; a final one is in the prohibition of arbitrariness, in preventing the introduction of discriminations among taxpayers that are devoid of rational foundation.
AIMI, as a complementary tax on a portion of real estate property, did not entirely ignore the element of progressivity in taxation, taxing more highly the larger patrimony on which it falls.
It has likewise been understood that property taxation, alongside income taxation, constitutes a projection of contributive capacity, functioning as a prolongation of the personal tax on income and as the reinforcement of qualitative discrimination.
It is not seen, in this context, that the taxation, in the context of AIMI, of real estate property of commercial companies, not even those that are statutorily dedicated to the pursuit of real estate activities, violates the principle of tax equality and contributive capacity merely because the ownership of immovable property constitutes the very object of their economic activity.
The ownership of real estate property, for purposes of sale and transformation, in view of obtaining economic results, does not cease to constitute a patrimonial asset that is revealing of an increased contributive capacity, which goes beyond the tax that falls on taxable profit by reason of the economic activity developed. More so. The law permits the deduction of AIMI from the IRC collection, this deduction being limited to the part corresponding to income generated by properties and subject to IRC, within the scope of rental or hospitality activity, or alternatively, the expense of paying AIMI can be considered as fiscally accepted expense for purposes of determining taxable profit.
What is at stake, therefore, is not the taxation of actual income earned by such entities through the activity developed, but the complementary contributive capacity resulting from mere ownership of property and which, by itself, can facilitate the raising of credit or the strengthening of its negotiating position in the conclusion of contracts.
The specific circumstance that real estate companies center their activity on the performance of operations on properties does not distinguish them from any other taxpayer who, individually or at the business level, engages in the acquisition and commercialization of properties.
Moreover, it does not appear arbitrary, in terms of legislative policy, the different taxation, namely in the context of AIMI, of real estate property intended for housing and construction land, on the one hand, and of properties destined, themselves, to the exercise of commercial, industrial activities, provision of services or related, on the other. One and the other do not perform identical functions within the economic framework and the difference in taxation may well reside in this difference.
It thus appears that there is a constitutionally acceptable foundation for the restriction of AIMI application to residential properties and construction land in contrast with properties classified as commercial, industrial or for provision of services, thus removing the invoked unconstitutionality based on violation of the principles of equality and contributive capacity.
3.4. Questions Made Unnecessary
The analysis of the other arguments used by the Respondent to support the legality of the AIMI assessment act being challenged is rendered unnecessary.
4. Decision
On the basis of the grounds set out above, the Arbitral Tribunal decides:
a) To rule entirely against the request for arbitral opinion, absolveing the Respondent; and
b) To condemn the Claimant for the costs of the proceedings.
5. Value of the Proceedings
When an assessment act is being challenged, the value of the case is that of the amount whose annulment is sought, which corresponds to the economic utility of the request. Thus, in accordance with the provisions in item 2 of article 306 of the CPC, in article 97-A of the TPPC and also in item 2 of article 3 of the Regulation for Costs in Tax Arbitration Proceedings, the value of the proceedings is set at € 14,070.42 (fourteen thousand and seventy euros and forty-two cents).
6. Costs
For purposes of the provisions in item 2 of article 12 and item 4 of article 22 of the LRTA and item 4 of article 4 of the Regulation for Costs in Tax Arbitration Proceedings, the amount of costs is set at € 918.00 (nine hundred and eighteen euros), pursuant to Table I attached to said Regulation, to be borne entirely by the Claimant.
7. Notification to the Public Prosecutor
The Respondent requested, by appeal to the provisions in article 280, item 3 of the CRP and in article 72, item 3 of the Law of the Constitutional Court, the notification of this arbitral decision to the Public Prosecutor.
Since the Public Prosecutor does not have special representation before the arbitral tribunals that function with the CAAD (article 4, item 1 of the Status of the Public Prosecutor), let this decision be communicated to the Attorney General's Office for the appropriate effects.
Lisbon, 18 June 2019
The Arbitrator
(Nuno Pombo)
Text produced by computer, pursuant to item 5 of article 131 of the CPC, applicable by referral of paragraph e) of item 1 of article 29 of Decree-Law No. 10/2011, of 20 January, and according to the spelling prior to the said Orthographic Agreement of 1990.
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