Summary
Full Decision
ARBITRAL DECISION
REPORT
A…, Ltd., Tax Identification Number…, with registered office at Rua…, no.…, …, Ground Floor, in Lisbon, filed a petition for arbitral decision pursuant to Articles 2º, no. 1 and 10º of the Legal Regime of Tax Arbitration approved by Decree-Law no. 10/2011 of 20 January (RJAT), as amended by Law 66-B/2012, with a view to annulling the assessments of Stamp Tax (relating to item 28.1 of the corresponding General Table and for the year 2014), with a total value of €13,906.20 (thirteen thousand, nine hundred and six euros and twenty cents).
This petition was filed with the Administrative Arbitration Center (CAAD) on 29 July 2015.
The respondent is the Tax and Customs Authority (AT).
The petitioner did not appoint an arbitrator. For this purpose, the President of the Deontological Council of the Administrative Arbitration Center appointed the undersigned, who expressly accepted this appointment. The parties were duly notified thereof and did not manifest any intention to refuse it.
The arbitral tribunal was thus constituted on 23 November 2015.
The AT attached the administrative file and timely submitted its response, raising a plea of absolute lack of jurisdiction of this arbitral tribunal and, subsidiarily, by way of challenge, sustaining the legality of the tax act in question, with corresponding total dismissal of the petition and consequent acquittal of the respondent.
The petitioner responded in writing to the plea.
The position of the parties is absolutely clear and there are no disputed questions of fact.
Having regard to the principles of autonomy of the arbitral tribunal (Article 16, paragraph c) of the RJAT) and of free conduct of proceedings (Article 19 of the RJAT), this singular arbitral tribunal considers a hearing as referred to in Article 18 to be unnecessary, as well as the submission of pleadings, the holding of which it therefore dispensed with by order, having set therein the date for pronouncement of the arbitral decision.
The tribunal was regularly constituted and is materially competent.
The parties have legal personality, judicial capacity and are legitimate.
The proceedings are not affected by any nullity.
FACTUAL MATTERS
The petitioner's request is based on an alleged defect of violation of law of the tax acts in question, due to error in the factual and legal premises.
Such tax acts correspond to the assessment of item 28.1 of the General Table of the Stamp Tax Code for the year 2014, relating to various units capable of independent use and suitable for housing, and therefore subject to autonomous property registration, comprising the urban property in full or vertical ownership (not constituted in horizontal property, therefore), registered in the urban property register of the parish of…, in the Municipality of Lisbon, under no….
The petitioner begins its petition by expressly stating that it intends to challenge the assessments of Stamp Tax (IS) relating to the year 2014, identifying the documents that would express these assessments, in a total of 13. More precisely, such documents correspond, however, to the payment notices of the first installments of these assessments, with payment deadline for voluntary payment until April 2015, inclusive. For the petitioner, the illegality derives from the fact that on 31 December 2014, none of the units of the identified property to which the assessments and payment notices in question correspond possessed a Taxable Patrimonial Value (VPT) equal to or greater than the amount of one million euros.
It thus happens that all 13 documents presented relate to the payment notices of the first installments of item 28 of the Stamp Tax for each of the autonomous property registrations in question, corresponding to the 13 units capable of independent use and intended for housing of the property referred to above (contained in the register… of said parish of…), by reference to the year 2014 and having as final payment date April 2015. Thus, there can be no doubt that those documents do not correspond to tax assessment documents, but rather to payment notices for the first installment thereof.
Consequently, the following factuality is proven:
a) In 2014, the petitioner was the owner of an urban property in vertical or full ownership, i.e. in full ownership, not constituted in horizontal property, located in the parish of…, in Lisbon, registered in the corresponding property register under article…, located in Ruas… and…, respectively Blocks 1 and 2, to which there corresponded a total VPT exceeding the value of one million euros;
b) Such property comprised various units capable of independent use, intended for commerce, offices, and 13 of them intended for housing;
c) These 13 units were subject to autonomous property registration;
d) None of these 13 units capable of independent use corresponded to a VPT equal to or greater than the value of one million euros;
e) On 20 March 2015 the AT proceeded to assess the IS for item 28.1 of the TGIS by reference to these 13 independent units intended for housing and for the year 2014;
f) The total value of these 13 assessments is €13,906.20 (thirteen thousand, nine hundred and six euros and twenty cents);
g) This value corresponds to 1% of the sum of the VPT of those 13 units with autonomous property registration;
h) The assessment acts in question gave rise to the payment notices for the corresponding first installment and referred to in the initial petition as documents 1 to 13;
i) These installments were due in April 2015.
There are no other facts relevant to the assessment of the merits of the case which are not proven.
The proven facts are based on documents provided by the petitioner, whose correspondence to reality is not disputed.
LEGAL MATTERS
Regarding the plea raised by the AT (lack of jurisdiction due to indivisibility of the assessment act)
As stated, the petitioner comes to request the constitution of an Arbitral Tribunal so that it may rule on the IS assessments pursuant to item 28.1 of the General Table of the Stamp Tax Code, amended by Article 4 of Law no. 55-A/2012 of 29/12, with reference to the year 2014, on the units capable of independent use of the aforementioned property contained in the urban property register of the parish of…, in the municipality and district of Lisbon.
For this purpose it invokes the illegality of the assessments, due to violation of law, by virtue of error in the factual and legal premises.
And, in conclusion, it requests the annulment of the tax act (in the petitioner's view) or merely of the payment notices for the 1st installment of the corresponding IS, according to the position sustained in the case by the respondent.
In this context the respondent believes, this being the plea concretely presented, that the arbitral tribunal lacks material jurisdiction, in view of the provisions of Article 2º of the RJAT, to assess the legality of an installment of the assessment act. This is because it does not correspond to a tax act, given that the law does not provide for autonomous challenge of an installment of item 28 of the General Table of IS (in this case that contained in the payment notices for the first installment).
The respondent considers that the arbitral claim of the petitioner should therefore fail due to non-arbitrability of the claim and indivisibility of the Stamp Tax assessment act. For this purpose the AT cites extensively the arbitral decision issued in case number 726/2014-T which proceeded in the arbitral tribunals functioning at the CAAD (as well as, indirectly, the decisions issued in cases numbered 205/2013-T and 120/2012-T, also of the CAAD and also the Decision of the Plenary of the Contentious Section of the SAT, of 10/4/13, in case 298/12 of the SAT), to conclude that said material lack of jurisdiction of this arbitral tribunal to assess the petitioner's claim (supposedly related to the first installment of the said assessments and its declaration of illegality and consequent annulment), with consequent total acceptance of the plea raised.
The petitioner responded in writing to the plea seeking its dismissal.
The question is thus merely to analyze the petitioner's claim. Did it come to request that the arbitral tribunal rule on the legality of an installment of a tax act or, conversely, that it assess the legality thereof, of which that is a mere consequence (in this case, the first installment of the tax supposedly owed)?
In the present case it is absolutely manifest that the petitioner aims at the annulment of the tax assessment acts (as results from the claim and the pleadings). This even though, in its introduction, it refers to the payment notices for the first installment for purposes of identifying the assessments (those already identified above).
And, indeed, what better way could be used to safely identify such assessments, when it is known that they are not the subject of any autonomous notification by the AT (here respondent), but only of issuance and dispatch of payment notices (three per assessment). It is furthermore certain that the first payment notices here in question even refer to the "assessment date" and the rules that enable the taxpayer to "protest or challenge the assessment".
Moreover, it is manifest that the petitioner expressly petitions for the "declaration of invalidity and annulment of the assessments" of Stamp Tax (introduction and final claim), quantifies the value of the claim as the value of the tax relating to the entire year 2014 (and not merely to that of the first installment) and expressly refers to the existence of three installments to be paid.
Therefore, the respondent's interpretation does not find even acceptance in the formulation of the claim, which raises not the slightest doubt, even given the absence of notification of the tax assessment (in this context, the respondent's defense does not even go far from censurable venire contra factum proprium).
Thus, the cause of action and claim do not raise any doubt, nor does the claim merit any censure, and for this reason the jurisdiction of this arbitral tribunal is manifest.
Moreover, this was decided in the tax proceedings of the year 2015 that proceeded in the arbitral tribunals functioning at the CAAD with numbers 207, 236 to 238, 250, 253, 263, 273, 280, 302, 305, 306, 323, 329, 340, 399, 411, 444, 461, 463 and 520.
Therefore it is concluded that this arbitral tribunal has jurisdiction and that the claim is arbitrable (invalidity of the IS assessment pursuant to item 28 of the TGIS relating to 2014), and the plea raised by the respondent is not upheld.
In view of this it is necessary to analyze the substantive issue of the assessment.
POSITION OF THE PARTIES
As is clear, the issue in the case corresponds to the application, in situations of the so-called vertical property ownership, of the new Stamp Tax assessment on urban properties with housing allocation and VPT equal to or greater than one million euros. This new assessment was introduced in 2012 to strengthen budget control measures on the revenue side, in a context of financial necessity (or economic-financial necessity, cf. Sustainability and Solidarity in Times of Crisis, Suzana Tavares da Silva, in Fiscal Sustainability in Times of Crisis, Coord. José Casalta Nabais and Suzana Tavares da Silva, pages 61 et seq).
It is well known that this new Stamp Tax assessment raises strong doubts, considerable contestation, and numerous case law. This is not only for specific cases of its application (e.g., vertical property, co-ownership, land for construction or its application to the year 2012), but also in general terms, due to its possible unconstitutionality, whether of its general regime or of its transitional regime (see Luís Menezes Leitão, On the Stamp Tax Assessment of Luxury Real Estate (item 28.1 TGIS), in Tax Arbitration no. 1, pages 44 et seq).
Petitioner
Now, the petitioner comes precisely to contest the application of the new item 28.1 of the TGIS to urban properties not constituted in horizontal property ownership, but which include units capable of independent use, in which the minimum value threshold set by law is reached by the sum of the VPT of the separate or autonomous property registrations corresponding to those various units, but not by any of them individually considered.
The petitioner argues that it is not the owner of a property with VPT equal to or greater than said minimum amount, but rather the owner of a property in vertical ownership in which the VPT exceeding that value is only achieved by the sum of the VPT of the units capable of independent use allocated to housing, without any of them, considered individually, reaching that minimum threshold of tax relevance.
For this reason, for the petitioner, the assessments in question suffer from a defect of violation of law, which would render them voidable (due to error in their factual and legal premises).
Respondent
Conversely and in subsidiary manner, as has been seen, the respondent contests this understanding, instead sustaining the maintenance of the assessments. For this purpose it emphasizes, in summary, that full or vertical property ownership always corresponds to a single property, and this is the reality to be considered in determining whether the minimum value threshold (one million euros) referred to in the incidence rule is met. For the respondent, the VPT relevant for purposes of tax incidence is therefore the VPT of the urban property and not the VPT of each of the parts comprising it, even though these are capable of independent use and allocated to housing. In support of this thesis it also stresses that the unity of the property is not affected in these cases, and its distinct parts cannot be legally equated to autonomous units of a property constituted in horizontal property ownership, especially because ownership thereof is necessarily attributed to only one owner (or more than one, but in cases of co-ownership).
Thus, the AT argues that the patrimonial value relevant for purposes of tax incidence is the total patrimonial value of the urban property and not the patrimonial value of each of the parts comprising it, even though capable of independent use, recalling that the reference to the CIMI postulates "necessary adaptations" and that the taxation in question respects the principle of adequacy, the criterion established not being arbitrary.
In this sense it further refers to the binding ruling of the AT with order of 11.2.13 from the Deputy Legal Advisor to the Director General of the AT, also cited in the brief information contained in the administrative file, with successive agreed orders.
Summary of Disputed Issues
In summary, in the present case, the relevant question is merely to determine which VPT is to be considered in cases of vertical property ownership.
The legal matter shall therefore address this question, which shall now be developed, beginning with a brief framework of the circumstances of the new assessment and its inclusion in the Stamp Tax Code.
LEGAL MATTERS
Vertical Property Ownership
As stated, Law no. 55-A/2012 of 29 October amended the Stamp Tax Code, adding a new item to the corresponding General Table.
On the issue of determining the (minimum) VPT relevant for the application of item 28.1 of the TGS in cases of vertical property ownership, among others and beyond those referred to above, the CAAD decisions in case numbers 50/2013-T, 132/2013, 181/2013-T, 183/2013-T, 272/2013 2013-T, 280/2013-T, 26/2014-T, 30/2014-T, 88/2014-T, 177/2014-T and 206/2014-T have already ruled, which were later confirmed by various other arbitral decisions.
In all of them the question was, as in the present case, to determine whether the VPT relevant for the incidence rule (28.1 of the TGIS) is the VPT corresponding to each of the units capable of independent use separately considered in the register or whether, on the contrary, the relevant VPT should correspond to the sum of all such units capable of independent use but comprising a single property and allocated to housing.
And the answer, in those decisions, was always for the first option and it is understood that correctly. Let us now examine the reasons underlying such case law and the interpretation followed here.
The Stamp Tax Code
The new item was inserted in the Stamp Tax Code, a choice that does not offer relevant contribution to systematically frame the new tax, as that tax "has as its subject matter a heterogeneous multiplicity of facts or acts… without a common feature conferring identity upon them", which was moreover aggravated by the 2003/2004 Taxation Reform of Assets, making even more complex "the problem of the classification of this tax" (cf. José Maria Fernandes Pires, Op. Cit., page 422).
But it is known that this new item was introduced as a way to strengthen budget control measures on the revenue side, in a context of financial necessity (or economic-financial necessity, cf. Sustainability and Solidarity in Times of Crisis, Suzana Tavares da Silva, in Fiscal Sustainability in Times of Crisis, Coord. José Casalta Nabais and Suzana Tavares da Silva, pages 61 et seq), with the purpose of identifying new forms of externalization of contributory capacity that could be called upon to support the purpose of reducing the negative budget balance.
And it did so by choosing to make the new assessment apply exclusively to certain assets, thus implying a strong negative discrimination thereof, which postulates an enhanced explanation of that choice, so as not to place the principle of equality in crisis, or equity in the terminology of Glória Teixeira, either in its sense of horizontal equity or in that of vertical equity (Glória Teixeira, Manual of Tax Law, page 56, 2nd ed., Almedina).
Now, it seems possible to discern in the legislator's thinking the intention to identify in real estate with VPT equal to or greater than one million euros intended for housing ("luxury"), a non-arbitrary referential of an additional contributory capacity, capable of broadening the spectrum of contributions to the desired and necessary budgetary balance.
In this context, the question to be decided is whether a property constituted in full or vertical ownership, but with floors or units with independent uses, is a "property with housing allocation" for purposes of application of Article 1º of the Stamp Tax Code and item 28.1 of the TGIS, amended by Article 4º of Law no. 55-A/2012 of 29 October (especially since, as in the present case, it may have areas allocated to non-housing purposes) or whether by "property" one should rather consider the units separately considered in the property register and, furthermore, what VPT is relevant (whether the VPT relating to the property, whether the VPT inherent to the sum of its parts with housing allocation, or whether rather the VPT relating, autonomously, to each of these).
For this purpose, it is important to bear in mind that each floor or part of a property capable of independent use is separately considered in the property registration of the total property, which also discriminates its taxable patrimonial value (no. 2 of Article 12º of the Municipal Property Tax Code), and the Municipal Property Tax is assessed individually in relation to each floor or part of a property capable of independent use (Article 119º, no. 1 of the Municipal Property Tax Code).
And, if this is so in Municipal Property Tax, it should also be so in Stamp Tax. Let us see why.
Literal Interpretation
As stated in the decision taken in case 206/2014-T: "Given that the Stamp Tax Code refers to the Municipal Property Tax Code, it must be concluded that the registration in the property register of properties in vertical ownership, comprised of different parts, floors or units with independent use, follows the same registration rules as horizontal properties".
Since the Municipal Property Tax and the Stamp Tax are "assessed individually in relation to each of the parts", the "legal criterion for defining the incidence of the new tax must be the same". Consequently, there will be incidence of item 28.1 of the TGIS (only) if some of those parts, floors or units with independent use has a VPT, at least equal to the amount provided in the incidence rule.
Thus, for this purpose the property shall be the independent area, considered separately and autonomously in the register, and subject to Stamp Tax if two requirements are met: being intended for housing purposes and having a VPT equal to or greater than one million euros, the criterion for assessing "luxury" housing properties. Otherwise, a reality not foreseen by the legislator would be created: that of a, so to speak, "housing property", possibly inserted within a larger property with various purposes, in which the VPT thereof, spurious to property registrations, would consist of the fiction of a VPT given by the addition of the autonomous VPT of each unit (independent and with housing purpose) considered in the property registration. That is, where the legislator considered two realities, the interpreter would now have, without support in the legislative text, as occurs in the assessments now in question, to invent a third reality, hybrid, midway between the totality of the urban property and each of its independent housing units. Units to which the legislator of the Municipal Property Tax, and of the Stamp Tax by reference to the Municipal Property Tax Code, understood to give tax relevance.
Also in the decision issued in case 272/2013-T (CAAD) it is stated that "considering that the registration in the property register of properties in vertical ownership, comprised of different parts, floors or units with independent use, pursuant to the Municipal Property Tax Code, follows the same registration rules as properties constituted in horizontal property ownership, the respective Municipal Property Tax, as well as the new Stamp Tax, being assessed individually in relation to each of the parts, offers no doubt whatsoever that the legal criterion for defining the incidence of the new tax must be the same". Moreover, it is further stated in that same decision that the AT's position "finds no legal support and is contrary to the criterion applicable in the context of the Municipal Property Tax Code and, by reference, in the context of Stamp Tax", reason for which "the adoption of the criterion defended by the AT violates the principles of legality and tax equality, as well as that of the prevalence of material truth over the legal-formal reality".
And in the same sense it is stated in the arbitral decision of case 30/2014-T (CAAD) to find in the doctrine of the AT a "non-conformity with the literal element of the final part of the incidence rule (item 28 of the TGIS) which states that the tax applies to "the taxable patrimonial value used for purposes of the Municipal Property Tax" and therefore should not apply to the sum of taxable patrimonial values of properties, parts of properties or floors, not having legal support the operation of addition of taxable patrimonial values of floors or parts of property capable of independent use, of housing allocation, separated from the VPT of others with different purposes, so as to reach the threshold of eligible taxation of 1,000,000.00 euros or more".
As is also stated in the arbitral decision taken in case 30/2014-T (CAAD), what happens with respect to urban properties with housing allocation, in vertical ownership, with floors or units capable of independent use, is that the AT proceeds, in the operations of assessment of the Stamp Tax, as it did in the present case, to adapt the rules of the Municipal Property Tax Code (adding the taxable patrimonial values of a single property, without considering those corresponding to parts of the property with a non-housing purpose, thus giving rise to a new and hybrid VPT). Indeed, this "adaptation" corresponds to "summing the VPT of each floor or independent unit allocated to housing purposes (separated from the VPT of floors or units intended for other purposes), creating a new legal reality, without legal support, which is a global VPT of urban properties in vertical ownership, with housing allocation", which offends "the literal element of the incidence rule" (incidence on "the taxable patrimonial value used for purposes of the Municipal Property Tax"). Thus, "in urban properties with housing allocation, in vertical ownership, with floors or units capable of independent use", the taxable patrimonial value should be considered "which results exclusively from no. 3 of Article 12º of the Municipal Property Tax Code. Both for the Municipal Property Tax and for this Stamp Tax".
Indeed, in the present case, it would be necessary to obtain an innovative VPT, given by the sum of some of the independent units, specifically the 13 intended for housing, to reach the minimum value externalizing special contributory capacity (or, which amounts to the same, subtract from the VPT of the property in vertical ownership the VPT of the independent units not intended for housing to confirm that still a total VPT equal to or greater than one million euros was maintained). And, this clearly, without any support, as will be seen, in the letter or in the rationale of the law.
Concretely, as concluded in the decision issued in case 26/2014-T of the CAAD, "for purposes of application of item 28 of the TGIS to properties in vertical ownership, the same rules of the Municipal Property Tax Code applicable to properties in horizontal ownership are applied, and in the same sense the VPT for purposes of application of the item is the individual VPT of each independent housing unit, in the present case none of the units exceeding the criterion of incidence of 1,000,000.00€", as precisely also occurs in the case of the present proceedings.
It is thus concluded, in summary, as clearly results from the cited decisions, that the literal interpretation of the new item of the TGIS cannot but be different from that sustained by the AT, moreover, the opposite, given the clear and indisputable reference made with respect to the new item of the TGIS to the rules of the Municipal Property Tax Code, the interpreter of the rule not being able to "create" a new concept of property to thus obtain a hybrid VPT, in cases of properties with housing and non-housing uses, not recognized in the register and without any support in the text of the law. What should also apply to properties in vertical ownership whose units are all intended for housing purposes and, by majority or identity of reason to properties in which this is not the case.
Economic Substance
Moreover, as well stated in Decision 117/2013 T of the CAAD, "interpretation based exclusively on the literal wording.... cannot be accepted, because in the interpretation of tax rules the general rules and principles of interpretation and application of laws are observed (Article 11º, no. 1 of the General Tax Law) and Article 9º no. 1 expressly prohibits interpretations based exclusively on the literal wording of the rules by providing that «interpretation should not be confined to the letter of the law», but should rather «reconstitute from the texts the legislative thinking, taking above all into account the unity of the legal system, the circumstances in which the law was elaborated and the conditions specific to the time in which it is applied». Since to verify a correspondence between the interpretation and the letter of the law it will suffice «a minimum of verbal correspondence, even if imperfectly expressed» (Article 9º, no. 3 of the Civil Code), which will only prevent the adoption of interpretations that cannot in any way be reconciled with the letter of the law, even recognizing therein imperfection in the expression of the legislative intention".
And if we now look at the economic substance of the tax facts, in compliance with Article 11º, no. 3 of the General Tax Law, without adhering thereto to an economic interpretation of tax law rules, today condemned by Doctrine (cf. Taxes, General Theory, Américo Fernando Brás Carlos, page 196, 2014, 4th ed. Almedina), we shall equally have to recognize that the expression "each urban property" used in no. 7 of Article 23º, by identity of reasons, encompasses not only urban properties in horizontal property ownership, but also floors, units or parts of urban properties in vertical ownership, insofar as they are allocated to housing purposes, always proceeding, in any of the cases, from a single tax base for all legal purposes: the taxable patrimonial value used for purposes of the Municipal Property Tax (final part of item 28 of the TGIS), as concluded in the arbitral decision of case 177/2014-T (CAAD).
Or, as is stressed in the decision issued in case 272/2014-T of the CAAD, "from the legislator's perspective, what matters is not the legal-formal rigor of the concrete situation of the property but rather its normal use, the purpose to which the property is intended", thus "for the legislator the situation of the property in vertical or horizontal ownership was irrelevant, as neither reference nor distinction is made between them. What matters is the material truth underlying its existence as an urban property and its use".
That is, what matters is the economic reality of the holding of independent parts, e.g. capable of independent use or independent leasing, just as the autonomous units in the case of horizontal ownership, and therefore capable of allowing the use or obtaining of income in a similar manner and thus externalizing, therefore, equal contributory capacity (as would be externalized by the sum of the VPT of various autonomous units of a single property in horizontal ownership or of various properties whose VPT, taken together, exceeded the value of one million euros, without the legislator having considered this as an externalization of relevant contributory capacity for purposes of Stamp Tax).
System Coherence
And if we look at the totality of the tax system we shall not find indications that come to infirm the conclusion drawn up to now.
As stated in the Decision issued in case 26/2014-T of the CAAD, there is no indication of any censure of the legislator regarding vertical ownership. Indeed, "it could be said, not without reasonableness, that the legislator, for purposes of taxation under the Municipal Property Tax, opted to confer autonomy, independence, upon each of the parts or each of the floors of a single property, insofar as they show independent use, to the point of providing for individualized registration in the register of each of those independent parts and of imposing upon the taxation under the Municipal Property Tax an also autonomous collection. Despite the legal existence of a single property, it is the legislator himself who not only recommends but imposes autonomous consideration of each of the independent parts, for purposes of taxation of assets". Moreover, as results from an economic interpretation of the fact, with prevalence of its substance over its form, as stated above. And if this is so in Municipal Property Tax, it would not be understood why it would not be the same in Stamp Tax, particularly in the case of the new taxation on "luxury" properties (in the sense used in the Portuguese Parliament by the then Secretary of State for Tax Affairs and referred to below).
Indeed, if the legislator is indifferent to one or the other form of structuring the ownership of urban properties in the Municipal Property Tax Code, it would not be understood that it now intended to favor one to the detriment of the other, particularly by considering one form of structuring more advanced than the other. In fact, as decided in cases 26/2014-T and 272/2014-T of the CAAD, "the current legal regime does not impose the obligation to constitute horizontal property ownership", reason for which "the discrimination operated by the AT translates an arbitrary and illegal discrimination", because "the AT cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the fiscal system, as well as the principle of fiscal legality provided in Article 103º, no. 2 of the Portuguese Constitution, and also the principles of fiscal justice, equality and proportionality."
That is, the literal interpretation initially reached continues to hold.
Intention of the Legislator
And the fact is that nothing induces the interpreter to the conclusion that the concrete legislator of the new item of the TGIS, contrary to the legislator of the Municipal Property Tax, which moreover remains unchanged, intended to discriminate vertical ownership against horizontal. As well recalled in the Decision issued in the already mentioned case 26/2014-T of the CAAD, "at the time of presentation and discussion, in Parliament, of the bill no. 96/XII (2nd), the Secretary of State for Tax Affairs expressly stated: "The Government proposes the creation of a special tax on high-value residential urban properties. This is the first time that Portugal has created a special tax on high-value properties intended for housing. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses with a value equal to or greater than 1 million euros" (cf. Parliamentary Records, I Series no. 9/XII -2 of 11 October, page 32). Now, as is stressed in that Decision, "the Secretary of State for Tax Affairs presents this bill by clearly referring to the expression "houses"… with a value equal to or greater than 1 million euros", thus "it results with meridian clarity that item 28.1 of the TGIS cannot be interpreted in the sense that it comprises each of the floors, units or parts capable of independent use when only from the sum thereof results a VPT exceeding that provided in the same item". This is because, in that case, "none of the "houses"… presents, of itself, "value equal to or greater than 1 million euros"".
It is therefore clear, as stated in the aforementioned decision 272/2014-T, that for the legislator only that amount of one million euros, insofar as it is allocated to "a housing unit (house, autonomous unit or floor with independent use) translates an above-average contributory capacity and, as such, capable of determining a special contribution to ensure just distribution of the fiscal burden".
And if this is so, we must then pay attention to the concept of "house" as a physical reality that enables a housing purpose, a unit capable of independent use, including its leasing, because it is in this economic reality that we shall find the externalization of contributory capacity associated with "luxury housing" that the legislator considered relevant. Moreover, if this were not so, the legislator would proceed to a discrimination that would not be justified, because, as already seen, neither is there in the system a censure of vertical ownership when compared with horizontal. Moreover, that distinction would collide with a necessary equity among identical externalizations of the same contributory capacity.
Contributory Capacity and Interpretation in Accordance with the Constitution
It is certain that the tax legislator is subject to the principle of equality, which, as well stated by Sérgio Vasques (Manual of Tax Law, pages 249 et seq, 2011, Almedina), is more than a mere negative limit and imposes something more than mere prohibition of arbitrariness, rather postulating a distribution of taxes according to the criterion of contributory capacity. Thus, the legislator must anchor taxation in reasonable and non-arbitrary economic elements, capable of justifying the tax claim in a contributory capacity concretely externalized by the taxpayer.
In this manner it is imperative to seek in the text of the new item a reading that gives effect to those principles. Or, which amounts to the same, not to extract from that text a meaning that violates them.
Now, the contributory capacities externalized by the ownership of a property comprised of a set of autonomous units in horizontal property ownership or by a set of units of independent use in vertical property ownership regime cannot but be considered identical, if not even, possibly, smaller in the case of the second hypothesis. That is, a property does not have, certainly, a greater market value for being organized as vertical ownership. It is the same (allowing equal benefit from its use or equal income via its leasing, as stated above), or will even have a smaller value, since the alternatives of transferability will be possibly fewer. And we know that VPT is intended to be an approximation, precisely, to the market value of properties and will therefore be the measure and the limit of the contributory capacity relevant to the new item of the TGIS.
Thus, the interpretation advocated by the AT, finding no hermeneutical justification, as has been seen up to now, would further lead to a manifest inequality between owners of real estate in horizontal and vertical ownership (and it has also been seen that no penalizing intention toward the latter is discerned, even if it were admitted that such were constitutionally permissible). In the same sense, as well stated in the decision of case 272/2014-T of the CAAD, the "existence of a property in vertical or horizontal ownership cannot be, of itself, an indicator of contributory capacity. On the contrary, from the law it results that both must receive the same tax treatment in obedience to the principles of justice, tax equality and material truth".
Concluding, "material truth is what imposes itself as the determinant criterion of contributory capacity and not the mere legal-formal reality of the property, since the constitution of horizontal property ownership implies a mere legal alteration of the property not even imposing a new assessment" (as stated in the decision issued in case 26/2014-T of the CAAD). And this fact "does not appear coherent with the decision of the AT to tax the housing parts of a property in vertical ownership, based on the global VPT of the property and not on what is effectively attributed to each part". Thus, "the AT cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the fiscal system, as well as the principle of fiscal legality… and also the principles of fiscal justice, equality and proportionality", as was said by the ex novo creation of an innovative concept and a hybrid VPT, frequently corresponding to part of a property.
CONCLUSION
In these terms, the tax acts in question suffer from a defect of violation of law, due to error in the legal and factual premises, as no part of the property possesses a VPT of value equal to or greater than the threshold resulting from the applied rule, which renders said tax acts voidable (which must therefore be declared).
OPERATIVE PART
As a result of the foregoing, it is decided to judge the plea raised by the AT to be wholly without merit and the petition of the petitioner to be wholly upheld and, in consequence, to annul the assessment acts in question, on the ground of violation of law, resulting from error in the premises.
VALUE
As stated above, the assessments subject to the petition and annulment amount to a total value of €13,906.20, this being the value of the action and of the petition.
Thus, and in accordance with the provisions of Article 306º, nos. 1 and 2 of the Code of Civil Procedure and 97º-A, no. 1, paragraph a) of the Tax Procedure Code and 3º, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the said value of €13,906.20 (thirteen thousand, nine hundred and six euros and twenty cents) is fixed as the value of the proceedings.
COSTS
Pursuant to Article 22º, no. 4 of the RJAT, the amount of costs is fixed at €918.00 (nine hundred and eighteen euros), in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, entirely borne by the Tax and Customs Authority, here respondent.
Lisbon, 30-03-2016
Text prepared by computer, pursuant to the Code of Civil Procedure (CPC), applicable by reference to Article 29º, no. 1, paragraph e) of the RJAT, with blank lines, reviewed and signed by the undersigned arbitrator.
The Arbitrator
(Jaime Carvalho Esteves)
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