Summary
Full Decision
ARBITRAL DECISION
I – REPORT
1 – A…, widow, Taxpayer ID [CF]… resident at Avª …, nº… – … …-… Lisbon, represented in the act by B…, resident at Avª … nº … – … …-… Lisbon, of the tax jurisdiction of the Finance Service … of the municipality of Lisbon, filed on 30/07/2015 a request for constitution of the arbitral tribunal, under the terms of paragraph a) of section 1 of article 2, section 1 of article 3, and paragraph a) of section 1 of article 10, all of the RJAT[1], requesting the Tax Authority and Customs Authority [AT][2], with a view to examining the legality of the tax collection acts of Stamp Duty Tax [IS][3], relating to the year 2014 affecting an urban property located at the aforementioned Avª … nºs …/…, parish of…, with floors and divisions with independent use, registered in the respective property register under article….
2 – The request for constitution of the arbitral tribunal was made without exercising the option of designating an arbitrator, and was accepted by His Excellency the President of the Administrative Arbitration Center [CAAD][4] and automatically notified to the Tax Authority on 30/07/2015.
3 – In accordance with the terms and effects of section 1 of article 6 of the RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties within the legally applicable periods, Arlindo José Francisco was designated as arbitrator, who communicated to the Deontological Council and to the Administrative Arbitration Center his acceptance of the appointment within the regularly stipulated period.
4 – The tribunal was constituted on 28/10/2015 in accordance with the provisions contained in paragraph c) of section 1 of article 11 of the RJAT, as amended by article 228 of Law nº 66-B/2012 of 31 December.
5 – With its request, the claimant seeks the declaration of illegality of the tax collection acts of item 28 of the General Table of Stamp Duty Tax [TGIS][5] which affected the patrimonial value of the parts or independent units of the aforementioned property with residential use, all as better appears in the request.
6 – It invokes for this purpose, in summary, the following:
6.1 – The property, although not constituted as condominium property, comprises 11 divisions with independent use, of which only eight have residential use, and the Patrimonial Tax Value [VPT][6] individually determined in the respective register ranges between € 1,360.00 and € 162,570.00.
6.2 – In its view, the collections here challenged suffer from the defect of violation of law, making erroneous interpretation and application of item 28.1 of the TGIS, given that article 12, section 3 of the Municipal Property Tax Code [CIMI][7] establishes a separate property register entry for each part of property susceptible to independent use with VPT also individualized.
6.3 – It considers that the legislator, in establishing the rule of incidence of IS, used the same criterion for factually and materially identical situations, regardless of their distinct legal nature.
6.4 – The VPT to be considered for purposes of IS must be that attributed in the property register to each physically individualized part and of independent use, just as would occur if the property in question were constituted as condominium property.
6.5 – None of the parts of the property with independent use has a VPT equal to or greater than € 1,000,000.00, which immediately excludes taxation in IS.
6.6 – It cites various decisions of arbitral tribunals constituted to conclude that the criterion of incidence of the tax is not the one corresponding to the sum of the VPTs attributed to the parts susceptible to independent use, as the Tax Authority intends, but rather the VPT attributed to each of them.
6.7 – The taxation criterion followed by the Tax Authority is illegal and violates the constitutional principles of legality, tax equality, and the prevalence of substantive truth over legal-formal reality, requesting not only the annulment of the tax collection acts of IS, with the consequent reimbursement of unduly paid amounts increased by compensatory interest at the legal rate.
7 – For its part, the Tax Authority, in summary, understands:
7.1 – That the tribunal is incompetent to consider the request, given that the claimant does not impugn the tax collection act, but rather the payment of two installments, a matter not contained in article 2 of the RJAT.
7.2 – It cites some decisions of arbitral tribunals constituted that upheld this point of view, requesting dismissal of the instance.
7.3 – For impugnation it considers that the VPT of the property in question is € 1,212,490.00, resulting from the appraisal carried out in 2012 under the terms of the CIMI, the claimant having presented no complaint or requested a new appraisal.
7.4 – As the property is in sole ownership, there are no autonomous fractions to which tax law attributes the qualification of property, therefore the claimant is not the owner of autonomous fractions, but of a single property.
7.5 – Thus, with the VPT of the property in question equal to or greater than € 1,000,000.00, it falls within the provision of the rule established in item 28.1 of the TGIS, there being no violation of legal rules in the collection carried out, which should be maintained in the legal order.
7.6 – As to the invoked unconstitutionality of the rule contained in item 28.1 of the TGIS, it invokes judgment of the Constitutional Court [TC][8] 590/2015 which declared it not to judge the rule in question unconstitutional, it not being incumbent upon the respondent to make judgments regarding the unconstitutionality or constitutionality of the rules, its action being subordinate to the law.
7.7 – As to the request for compensatory interest, it is unfounded, given that there is no error attributable to the services.
II – CASE MANAGEMENT
The tribunal was regularly constituted and is competent ratione materiae, in accordance with article 2 of the RJAT.
The parties have legal personality and capacity, show themselves to be legitimate, and are regularly represented in accordance with articles 4 and 10, section 2 of the RJAT and article 1 of Ordinance nº 112-A/2011, of 22 March.
In its response, the Tax Authority made its defense by exception considering the tribunal incompetent, given that the claimant does not impugn the tax collection act, but the payment of 2 installments, which, in its view, would be equivalent to requesting the annulment of 2/3 of a tax collection act, a matter not contained whatsoever in article 2 of the RJAT and which would have raised the exemption of the meeting of article 18 of the RJAT and the joining of the Administrative Process [PA][9].
Faced with the response of the Tax Authority, the tribunal issued, on 27/11/2015, the following order: "I invite the claimant to, within 10 days, if it wishes, pronounce itself regarding the proposal to dispense with the meeting of article 18 of the RJAT, as formulated by the Tax Authority, as well as the dispensing of the joining of the administrative process. Notify."
In a submission of 09/12/2015, the claimant adhered to what was proposed by the Tax Authority regarding the dispensing of the meeting of article 18 of the RJAT and the joining of the AP, but regarding the exception raised in the response of the Tax Authority, it considered it to be "clearly fallacious reasoning in resorting to the tribunal's incompetence," making various considerations on the same to conclude that the Tax Authority has no merit.
It further requested the expansion of the request regarding the return of amounts paid, which from its point of view were unduly paid, since in the meantime it was notified and paid the 3rd installment.
On 16/12/2015, the tribunal issued the following order: "I invite the respondent to, within 10 days, if it wishes, pronounce itself on the expansion of the request."
On 22/01/2016, and given the silence of the respondent, the following order was issued: "The tribunal accepts the expansion of the request formulated by the claimant, without opposition from the respondent. Having in view the manifested will of the parties regarding the unnecessary joining of the AP, holding of the meeting provided for in article 18 of the RJAT, as well as the production of written or oral arguments, the tribunal understands that conditions are met for the pronouncement of the decision, fixing for such purpose the day 17 February 2016. The claimant is advised that it must, until the date of pronouncement, provide proof to the CAAD of payment of the subsequent arbitration fee."
The process not suffering from any nullities, we consider the conditions met for the decision to be pronounced.
III – GROUNDS
1 – Questions to be resolved in the present case
1.1 – First of all, to evaluate and decide on the exception of tribunal incompetence and the non-challengeability of the acts.
1.2 – If the exception is to be considered unfounded, whether item 28.1 of the TGIS applies to the sum of the VPTs of the parts or divisions susceptible to independent use, intended for housing when it equals or exceeds € 1,000,000.00, or whether it only applies to the individual VPT of each of them when the same equals or exceeds € 1,000,000.00, just as happens in the case of condominium properties.
1.3 – If the request is to be declared well-founded, whether or not there will be place for payment of compensatory interest on the amounts paid by the claimant.
2 – Factual matters
The relevant factual matters proven based on the elements joined to the proceedings are the following:
a) The claimant is the owner of an urban property in sole ownership, with parts or divisions susceptible to independent use intended for housing with the exception of 3, basement F intended for commerce, basement 1 intended for warehouse, and basement 2 intended for storage, registered in the property register of the parish of … under article … of the area of the finance service of Lisbon….
b) The property comprises, according to the register, 11 divisions susceptible to independent use with residential use and others, as already seen, whose total VPT is € 1,212,490.00.
c) None of the floors or divisions susceptible to independent use has a VPT equal to or greater than € 1,000,000.00 and which is found individually determined in the respective register and ranging between € 1,360.00 and € 162,570.00.
d) The claimant was notified for the payment, in installments, of IS for 2014, determined individually for each floor or division susceptible to independent use, as per the collection documents sent and joined to the proceedings.
e) From these it appears that the Tax Authority calculated IS individually for each of the parts or divisions susceptible to independent use, and that none of them has a value equal to or greater than € 1,000,000.00.
f) However, it considered that the total VPT of the property exceeded that value and then made the sum of the tax determined individually for the parts with residential use and arrived at the taxation challenged here.
3 – Of the Law
3.1 – Regarding the exception of tribunal incompetence and non-challengeability of the acts raised by the respondent, to be considered first.
a) The Tax Authority supports its point of view on the fact that the claimant does not impugn the tax collection act, but rather the payment of two installments of the collection act, and thus does not impugn the act itself, but only 2/3 of the tax collection act, a matter not contained in article 2 of the RJAT, which establishes the competence of arbitral tribunals.
b) On the other hand, the installments are not challengeable per se, given that they are nothing more than a technique of tax collection, citing some arbitral decisions in the sense it advocates.
c) Having analyzed the petition, it is verified that the claimant uses the term "collection acts relating to stamp duty tax for the year 2014" and it is true that it makes reference to the payment of the 1st and 2nd installments, but if there were any doubts as to its intent, they would be dispelled, given that ultimately the economic value attributed to the request corresponds to the total value of the collection in question.
d) Faced with such circumstances, the tribunal has no doubt that the claimant intended to attack the collection act itself and not the installment payment technique permitted by law and much less 2/3 of the collection act as the respondent states.
e) In fact, the collection documents are not challengeable per se, but the object of the present proceedings is directed to the collection act broadly understood, which encompasses all operations intended for the determination of the amount to be paid, being that the economic value, as already seen, the one attributed by the claimant to the process.
f) Under these circumstances, the tribunal declares the raised exception unfounded and, under article 2, section 1, paragraph a) of the RJAT, considers itself competent to examine the collection of the tax in question.
3.2 – Applicability of item 28.1 of the TGIS to the case at hand, the exception being unfounded
a) The question to be resolved is whether, in accordance with the terms of item 28.1 of the TGIS, one should or should not consider the sum of the VPT of each of the parts or divisions susceptible to independent use, given that none of them has a value equal to or greater than € 1,000,000.00, or whether we should consider their individual VPT for purposes of taxation in IS.
b) Taking into account that the Stamp Duty Code [CIS][10] refers to the CIMI for the regulation of the concept of property and of matters not regulated regarding item 28 of the TGIS (section 6 of article 1 and section 2 of article 67, both of the CIS), it is in the CIMI that we must observe the concepts that will allow us to resolve the question.
c) The general concept of property is contained in article 2 of the CIMI, in article 3 of the same statute the legislator, using criteria of use and location, established the concept of rural properties, and then, in a classification by negation, in its article 4, establishes that urban properties will be all those that should not be classified as rural.
d) Article 6 of the CIMI divides urban properties into residential, commercial, industrial or service-related, land for construction, and others.
e) In the concrete case we are in the presence of urban property with 8 parts or divisions susceptible to independent use with residential use, and 3 with other uses (commerce, storage, and warehouse).
f) Each of the parts or divisions susceptible to independent use that comprise the property in question fulfills the concept of property established in article 2 of the CIMI, insofar as they are physically and economically independent and form part of a patrimony, in this case of a natural person.
g) In accordance with section 4 of article 2 of the CIMI, each autonomous fraction, in the condominium regime, is deemed to constitute a property, but there is nothing in the law that permits making the discrimination between properties in condominium and vertical ownership, regarding their identification as urban residential properties.
i) Nor can it be said that the property register entry of each part susceptible to independent use is not autonomous by register, the system is similar to that of condominium property, in fact in this regime there is only one article and the respective fractions belong to that article, just as in vertical ownership there is only one article and the independent parts belong to that article.
j) There is no legal support for the taxation in IS of the parts or divisions with independent use with residential use, fulfilling, each of them, the concept of property stated in article 2 of the CIMI, which have a VPT less than € 1,000,000.00, a requirement necessary for there to be taxation in IS.
k) Nor can it be said that there is a different valuation and taxation of a property in sole ownership with parts or divisions susceptible to independent use, compared to a property in condominium. In fact, it does not exist in Municipal Property Tax [IMI][11], just as it cannot exist in IS, since the applicable legislation is the same, with the necessary adaptations.
l) The taxation criterion must be uniform, that is, if a residential fraction of a condominium property is only taxed in IS if its VPT is equal to or greater than € 1,000,000.00, equally a floor or part of a property susceptible to independent use of a property in vertical ownership with residential use will only be taxed in IS if its VPT is equal to or greater than € 1,000,000.00.
m) As already stated, the floor or part of a property susceptible to independent use of a property in vertical ownership meets the concept of property established in the CIMI, just as the autonomous fractions of condominium properties.
n) In this perspective, and considering that none of the parts or divisions susceptible to independent use with residential destination or use has a VPT equal to or greater than € 1,000,000.00, it is necessary to conclude that the collection acts of IS are illegal for not having observed the conditions defined in item 28 of the TGIS.
o) The criterion used by the Tax Authority in considering the sum of the VPTs of the parts or divisions susceptible to independent use, arguing that the property is not constituted as condominium property, lacks legal support, it being the contrary that results from the application of the rules of the CIMI, applicable by reference.
p) From the tribunal's point of view, regardless of the question of constitutionality of item 28.1 of the TGIS already decided in judgment of the Constitutional Court 590/2015, what is at issue is the application of the rule made by the Tax Authority, in taxing individually patrimonial values less than € 1,000,000.00, a situation contrary to the provision of the rule.
3.3 – Compensatory Interest
a) Being declared the illegality of the debt and the consequent annulment, the Tax Authority is obliged to restore the situation that would exist if the annulled collection act had not been performed, in accordance with the provisions contained in article 100 of the General Tax Law [LGT][12].
b) In this sense, Diogo Leite Campos/Benjamim Silva Rodrigues/Jorge Lopes de Sousa pronounce themselves in annotation to the aforementioned article 100 of the LGT, 2nd edition.
c) In this way, verifying that the Tax Authority applied item 28.1 of the TGIS to values below the provision of the rule (€ 1,000,000.00), without adequate legal support, and in view of the proven payment, it is understood that the claimant has the right to payment of compensatory interest in the precise terms of section 1 of article 43 of the LGT and article 61 of the Code of Tax Procedure and Process [CPPT][13], applicable by force of section 1, paragraphs a), b), and c) of article 29 of the RJAT.
IV – OPERATIVE PART
Faced with the foregoing, the tribunal decides as follows:
a) To declare the request for arbitral pronouncement well-founded with the consequent annulment of the collection acts of IS here impugned relating to the year 2014 in the total amount of € 11,511.00.
b) To fix the value of the proceedings at € 11,511.00, considering the provisions contained in articles 299, section 1 of the Code of Civil Procedure [CPC][14], 97-A of the CPPT, and article 3, section 2 of the Regulation of Costs in Tax Arbitration Processes [RCPAT][15].
c) To declare the obligation of the Tax Authority to reimburse the tax comprovedly paid increased by compensatory interest, calculated at the legal rate, from the date when the payment occurred to the date when the reimbursement occurs.
d) Costs at the charge of the respondent, under section 4 of article 22 of the RJAT, fixing its amount at € 918.00 in accordance with Table I of the RCPAT.
Notify.
Lisbon, 17 February 2016
Text prepared by computer, in accordance with article 131, section 5 of the CPC, applicable by reference of article 29, section 1, paragraph e) of the RJAT, with blank verses and revised by me.
The sole arbitrator,
Arlindo José Francisco
[1] Acronym for Legal Regime for Tax Arbitration (Regime Jurídico da Arbitragem em Matéria Tributária)
[2] Acronym for Tax Authority and Customs Authority (Autoridade Tributária e Aduaneira)
[3] Acronym for Stamp Duty Tax (Imposto do Selo)
[4] Acronym for Administrative Arbitration Center (Centro de Arbitragem Administrativa)
[5] Acronym for General Table of Stamp Duty Tax (Tabela Geral do Imposto do Selo)
[6] Acronym for Patrimonial Tax Value (Valor Patrimonial Tributário)
[7] Acronym for Municipal Property Tax Code (Código de Imposto Municipal sobre Imóveis)
[8] Acronym for Constitutional Court (Tribunal Constitucional)
[9] Acronym for Administrative Process (Processo Administrativo)
[10] Acronym for Stamp Duty Code (Código do Imposto do Selo)
[11] Acronym for Municipal Property Tax (Imposto Municipal sobre Imóveis)
[12] Acronym for General Tax Law (Lei Geral Tributária)
[13] Acronym for Code of Tax Procedure and Process (Código de Procedimento e de Processo Tributário)
[14] Acronym for Code of Civil Procedure (Código de Processo Civil)
[15] Acronym for Regulation of Costs in Tax Arbitration Processes (Regulamento de Custas nos Processos de Arbitragem Tributária)
Frequently Asked Questions
Automatically Created