CAAD 524/2014-T: Stamp Tax on Vertical Property Under Verba 28.1 TGIS – Annulment Request

ARBITRAL DECISION

REPORT

1. On 27 July 2014, A, taxpayer no. …, (hereinafter designated as 1st Claimant), B, taxpayer no. …, (hereinafter designated as 2nd Claimant) and C, taxpayer no. …, (hereinafter designated as 3rd Claimant), hereinafter referred to as Claimants, when referenced collectively, resident in Portugal, requested the establishment of an arbitral tribunal and submitted a request for arbitral pronouncement, pursuant to paragraph a) of article 2, paragraph 1 and paragraph a) of article 10, paragraph 1 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority (hereinafter designated as AT) is the Respondent.

2. The Claimants are represented, in these proceedings, by their legal representative, Dr. …, and the Respondent is represented by the legal advisors, Dr.ª … and Dr. ….

3. The request for constitution of the arbitral tribunal was accepted by the Honourable President of CAAD and was notified to the Respondent on 29 July 2014.

4. By means of the request for constitution of the arbitral tribunal and arbitral pronouncement, the Claimants seek the annulment of the following Stamp Tax assessment acts, relating to the year 2013, in the total amount of € 4,246.92, which affected the property registered under article … of the parish of …, municipality and district of Lisboa, in vertical ownership, concerning the floors or divisions with independent use corresponding to ground floor, 1st, 2nd, 3rd, 4th and 5th, as follows:

a) as regards the first Claimant, the assessment notices no. 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, all relating to the 1st instalment of the year 2013, in the amount of € 1,415.64;

b) as regards the second claimant, the assessment notices no. 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, all relating to the 1st instalment of the year 2013, in the amount of € 1,415.64;

c) as regards the third claimant, the assessment notices no. 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, all relating to the 1st instalment of the year 2013, in the amount of € 1,415.64.

1. Once the formal regularity of the submitted request was verified, pursuant to paragraph a) of article 6, paragraph 2 of the RJAT and given that the Claimants did not proceed with the appointment of an arbitrator, Dr. Jorge Carita was appointed by the President of the Deontological Council of CAAD.

2. The Arbitrator accepted the appointment made, and the arbitral tribunal was constituted on 29 September 2014, at the headquarters of CAAD, located at Avenida Duque de Loulé, no. 72-A, in Lisboa, as per the deed of constitution of the arbitral tribunal which was executed and is attached to these proceedings.

3. The first meeting of the arbitral tribunal did not take place as it was waived, given the request made upon submission of the response by the Respondent on 28.10.2014, and, after being notified for that purpose, the Claimants made no statement.

4. As no exceptions were raised, there was no need for production of additional evidence beyond that already incorporated in the proceedings through documents, the proceedings contained all elements necessary for pronouncement of the decision, and for reasons of procedural economy and celerity, the prohibition of performance of useless acts, in light of the position manifested by the parties, expressed and tacitly (given the silence of the Claimants), the Tribunal deemed it appropriate to waive the holding of the meeting referred to in article 18 of the RJAT, as well as the submission of written submissions.

5. The Tribunal, in compliance with article 18, paragraph 2 of the RJAT, designated 27 March 2015 for the purpose of pronouncement of the arbitral decision, and warned the Claimants that they should proceed with payment of the subsequent arbitral fee, pursuant to article 4, paragraph 3 of the Regulations of Costs in Tax Arbitration Proceedings, and communicate such payment to CAAD.

6. By petition dated 16 March 2015, the Claimants requested the amendment of the claim so that the appraisal of the present Tribunal would cover the entirety of the Stamp Tax assessment made under item 28.1 of the General Stamp Tax Table, and not only the 1st instalment thereof.

7. Duly notified, by order dated 17 March 2015, to pronounce upon the requested amendment of the claim, the AT made no statement.

8. The Claimants request the joinder of claims and the joinder of parties, alleging the existence of identity of circumstances of fact and the application of the same principles or rules of law, which being admissible, pursuant to article 104 of the Code of Tax Procedure and Process and article 3 of the RJAT, are admitted.

II. The Claimants sustain their claims, in summary, as follows:

The Claimants support the request for annulment of the stamp tax assessment act to which they were subject, in relation to the floors or parts susceptible to independent use, dedicated to housing, of the property registered under article … in the respective cadastre, located at Rua …, no. …, parish of …, municipality of Lisboa, which is held in vertical ownership, as illegal, as they are affected by the following defects:

a) Error regarding the assumptions for application of item 28.1 of the General Stamp Tax Table, "in that, whether the property is registered in the property cadastre in horizontal ownership or in vertical ownership, the taxable base subject to IMI was and is always the patrimonial value of each of the divisions susceptible to separate lease, as was already the case under the Property Contribution and Municipal Contribution. Therefore, if it was and is so in relation to the calculation of IMI (…), the challengers do not see reason why the same should not apply to Stamp Tax, having it also apply to the patrimonial value of each of the said divisions.", since the "legislator could never have had any other thought than that of taxation of "luxury units" and "high patrimonial value";

b) They further add that: "if the legislator said nothing regarding the form of taxation of such properties under stamp tax at the rate of 1% and did not make any distinction between properties in vertical ownership and properties in horizontal ownership, dedicated to housing and with tax patrimonial values lower than such € 1,000,000.00, per floor or division susceptible to separate lease, as was the case in this instance and remains so, it is well known that he intended to give them the same treatment in terms of taxation under stamp taxes, similar to what has been and remains the case at the level of taxation under IMI and previously under the Property Contribution and Municipal Contribution."

c) They further argue that: "the Tax Authority, disregarding the tax patrimonial value relating to each of the autonomous housing units of the property in the calculation of the stamp tax of item 28 of the General Table, clearly failed to respect the "ratio juris" of the provision, which can only provide for the incidence of the tax in relation to "luxury units" with tax patrimonial value equal to or greater than € 1,000,000.00".

d) Defect of violation of constitutional law, namely of the principle of equality, prevalence of material truth, good faith, trust and legal certainty, in that, on one hand, "the AT, acting as it acted, used and uses «two weights and two measures», (…) the AT, through such action, ended up giving, with or without intention, relevance to form, disregarding substance, when (…) the opposite should have happened, that is, it should have valued substance, disregarding form, similar to the path it has followed on many other occasions and in other circumstances."; "Because subjecting such housing to Stamp Tax, solely due to the non-existence of the legal instrument that would formalize horizontal ownership, is to entirely deny the principle that prevails in Tax Law of "Prevalence of Substance over Form";

e) It further argues that: "it is not credible that, knowing the legislator the reality of cadastral registrations, the Law would suddenly appear and be applied to taxpayers in such circumstances (as in the cases of the challengers), clearly violating, among many others, the principles of legal certainty and good faith that should exist in the conduct between the Administration and individuals, enshrined, principally, in article 59 of the LGT, article 7 of the Code of Administrative Procedure, provisions which had their origin in articles 22, 266 and 267 of the Constitution of the Republic."

III. In its Response, the Respondent invoked, in summary, the following:

For its part, the AT alleges, in its response:

a) Regarding the alleged error concerning the assumptions of the assessments, the Respondent understands that: "as regards the assessment of Stamp Tax, being a property in total ownership, the Patrimonial Value that serves as the basis for its calculation will undoubtedly be the Patrimonial Value that the present Respondent defines as «global value of the property», in that,

b) "for purposes of Stamp Tax the property in its entirety is relevant since divisions susceptible to independent use are not considered as property, but only autonomous fractions in the horizontal ownership regime, as per article 2, paragraph 4 of the Property Tax Code."

c) It further adds that, "in accordance with the rules of the Property Tax Code, specifically article 113, paragraph 1, the assessment is carried out based on the tax patrimonial values of the properties and in relation to the taxpayers listed in the cadastres on 31 December of the year to which they refer (in the case of the tax for 2013)."

d) Therefore, "being the property in the total ownership regime, not possessing autonomous fractions, to which tax law attributes the qualification of property, because from the notion of property in article 2 of the Property Tax Code, only autonomous fractions of properties in horizontal ownership regime are considered as properties – paragraph 4 of the aforementioned article 2 of the Property Tax Code –

e) Concluding, therefore, that "the defect of violation of law due to error concerning the assumptions of law should be judged unfounded, the assessments challenged remaining in the legal order as they constitute a correct application of the law to the facts."

f) As regards the alleged defect of violation of constitutional law – by violation of the principle of legality, tax equality and contributory capacity, the Respondent defends itself by stating, regarding the alleged violation of the principle of equality, that there is no "any discrimination in the taxation of properties constituted in horizontal ownership and properties in total ownership with floors or divisions susceptible to independent use", because "they are differentiated legal institutions."

g) It further understands that the "norms, evaluation procedures, norms on cadastral registration, and also norms on the assessment of parts susceptible to independent use, do not permit asserting that an equation should exist between the property in the total ownership regime and the vertical ownership regime, that is, because (…) it would be illegal and unconstitutional".

h) It refers, furthermore, that item 28.1 of the General Stamp Tax Table is "a general and abstract norm, applicable in an indistinct manner to all cases where the respective assumptions of fact and law are met." (…) "In effect, the constitution in horizontal ownership determines the division/partition of total property and the independence or autonomy of each of the fractions that constitute it, for all legal purposes, pursuant to article 4, paragraph 2 of the Property Tax Code and articles 1414 et seq. of the Civil Code, while a property in total ownership constitutes, for all purposes, a single legal-fiscal reality."

i) Concluding that: "one cannot conclude from an alleged discrimination in violation of the principle of equality when, in truth, we are faced with distinct realities, valued by the legislator in different ways."

j) And concludes that "the tax acts in question did not violate any legal or constitutional principle, and should be maintained."

IV. Preliminary Matters

The Tribunal is competent and properly constituted, pursuant to paragraph a) of article 2, paragraph 1 and articles 5 and 6, all of the RJAT.

The parties have legal personality and capacity, are shown to be legitimate and are properly represented.

There are no nullities, exceptions or preliminary questions that prevent consideration of the merits of the claim.

V. Matters of Fact

With relevance to the decision, the following facts are deemed proven:

• The Claimants are owners of the property located at Rua …, no. …, parish of …, municipality and district of Lisboa, registered in the urban property cadastre under article … – Ground Floor, 1, 2, 3, 4 and 5. (vide Documents no. 1 to no. 19 attached to the initial petition);

• Each of the Claimants is owner of a 1/4 share of the property identified above. (vide Documents no. 1 to no. 19 attached to the initial petition);

• The property comprises a total of six floors and divisions with independent use, dedicated to housing, whose tax patrimonial value (TPV), determined pursuant to the Property Tax Code, varies between € 171,910.00 and € 192,810.00 and totals € 1,132,480.00. (vide Documents no. 1 to no. 19 attached to the initial petition);

• The property in question is held in vertical ownership or total ownership regime. (Document no. 19 attached to the initial petition);

• The sum of the TPVs of the aforementioned autonomous fractions dedicated to housing amounts to € 1,132,480.00 (one million, one hundred and thirty-two thousand, four hundred and eighty euros), with each of them individually having a TPV lower than € 1,000,000.00 (one million euros) (Documents no. 1 to no. 19 attached to the initial petition);

• The cadastral registration no. … separately identifies each of the autonomous units of independent use, with the respective TPV resulting from the general evaluation also being itemized (vide Document no. 19 attached to the initial petition);

• The Claimants were notified of the Stamp Tax assessment acts relating to the year 2013, carried out under item no. 28.1 of the General Table of Stamp Tax, according to their ownership share, on the floors and divisions with independent use dedicated to housing, as regards the 1st instalment, in the total amount of € 4,246.92, as follows (vide Documents no. 1 to no. 18 attached to the initial petition):

• The third Claimant proceeded with payment of the amounts corresponding to the Stamp Tax assessments, relating to its ownership share, which is the subject of the present request for arbitral pronouncement. (Vide Document no. 20 attached to the initial petition).

VI. Justification of Matters of Fact

For the conviction of the Arbitral Tribunal regarding the proven facts, the documents attached to the proceedings were relevant, as well as the administrative file, all analyzed and weighed in conjunction with the pleadings, from which agreement regarding the factuality presented by the Claimant in the request for arbitral pronouncement results.

VII. Facts Deemed Unproven

There are no facts deemed unproven, because all facts relevant to the consideration of the claim were deemed proven.

VIII. Grounds of Law

- Amendment of the Claim –

The Claimants submitted, on 16 March 2015, a petition with amendment of the claim, covering not only and as per the initial request for constitution of the arbitral tribunal the 1st instalment, but the stamp tax assessment to which they were subject, in its entirety. Notified to pronounce upon this request for amendment, the AT made no statement.

Now, having regard to the provisions of article 265, paragraph 2 of the Code of Civil Procedure, applicable by virtue of article 29 of the RJAT, according to which "the claimant may, at any time, reduce the claim and may amend it until the conclusion of the discussion in first instance if the amendment is the development or consequence of the original claim," and taking into consideration the provisions of article 44, paragraph 5 of the Stamp Tax Code, in the wording given by Law No. 55-A/2012, of 29.10, in conjunction with article 120 of the Property Tax Code, this Tribunal understands that the legal assumptions for the requested amendment of the claim are met, and therefore, in the event that the allegations of the Claimants are upheld, the amendment of the initial claim from € 4,246.92 to € 8,493.66 is admitted, the value of the proceedings being changed to this latter amount, € 8,493.66.

- On the Disputed Questions –

In the present case, there are three disputed legal questions:

1. whether the subjection to stamp tax, pursuant to item no. 28 of the General Stamp Tax Table, relating to the year 2013, is determined by the TPV corresponding to each part of the property with residential purpose, or whether, instead, it is determined by the global TPV of the property, which would correspond to the sum of all TPVs of the floors that compose it - Incidence of item 28.1 of the General Stamp Tax Table;

2. whether the provision in item no. 28 of the General Stamp Tax Table is unconstitutional due to violation of the principle of equality, as well as the provision in article 104, paragraph 3, of the Constitution, in the interpretation given to it by the AT.

3. whether the Claimant, should the preceding questions be upheld, has the right to compensatory interest.

Let us examine:

I – On the Incidence of Item 28.1 of the General Stamp Tax Table

1. Law No. 55-A/2012, of 19 October (hereinafter referred to as Law No. 55-A/2012 or simply Law), made amendments to, among others, various articles of the Stamp Tax Code, more specifically 12 of its articles.

2. The fundamental amendment, which conditions all others, is contained in article 4 of Law No. 55-A/2012, which adds to the General Stamp Tax Table (TGIS), annexed to the Stamp Tax Code, a new item, no. 28, with the following wording:

"28. Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value appearing in the cadastre, pursuant to the Property Tax Code, is equal to or greater than (euros) 1,000,000 - on the tax patrimonial value used for purposes of Property Tax:

28.1 For property with residential purpose ------------------------------------ 1%

28.2 For property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the list approved by regulation of the Minister of Finance ----------------------------------------------------------------- 7.5%"

1. Thus, in accordance with the said item, and insofar as it is relevant here, only the ownership, usufruct, right of superficies are subject to Stamp Tax of:

a) "urban properties,

b) with residential purpose,

c) And whose tax patrimonial value appearing in the cadastre, pursuant to the Property Tax Code, is equal to or greater than (euros) 1,000,000;" (emphasis ours)

1. The logic of taxation of wealth and fortune prevails, with greater or lesser intensity, within the scope of this statute, a conclusion which results from the general aggravation of the tax burden, in the financial logic, exclusively directed to fiscal situations that would produce immediate revenue.

2. Taxation of returns on capital is aggravated, the list of manifestations of fortune is expanded, taxation of returns obtained in Portugal by entities domiciled in tax havens is aggravated, and finally, to all this is added the taxation of housing property with value exceeding € 1,000,000.00.

3. And if the legislator includes in this statute properties for housing, setting a value above which they would begin to be taxed by another tax, this could only mean that the legislator considered that whoever was the owner of such valued property thereby expressed an indicative element of additional means of fortune that could be called upon to participate in the collective effort of supplementary tax revenue collection.

4. In fact, the legislator in introducing this legislative innovation, considered as the determining element of contributory capacity urban properties with residential purpose, of high value (luxury), more precisely, of value equal to or greater than € 1,000,000.00, on which a special rate of stamp tax then applied, intending to introduce a principle of taxation on wealth manifested through ownership, usufruct or right of superficies of urban properties of luxury with residential purpose. For this reason, the criterion was application of the new rate to urban properties with residential purpose, whose TPV is equal to or greater than € 1,000,000.00.

5. This same conclusion is drawn from analysis of the discussion of bill no. 96/XII in the Assembly of the Republic, available for consultation in the Diário da Assembleia da República, I series, no. 9/XII/2, of 11 October 2012.

6. The justification of the measure designated as "special tax on the highest value urban residential properties" is based on the invocation of the principles of social equity and tax justice, calling upon those holding properties of high value intended for housing to contribute in a more intense manner, by imposing the new special rate on "houses with value equal to or greater than 1 million euros."

7. In effect, the legislator clearly considered that this value, when attributed to a housing unit (house or autonomous fraction) represented above-average contributory capacity and, as such, susceptible to determining a special contribution to ensure just distribution of the tax burden.

8. Also following these considerations that inspired the legislative innovation under examination, it must be concluded that the existence of a property in vertical or horizontal ownership cannot by itself be an indicator of contributory capacity.

9. On the contrary, from the law it follows that both should receive the same tax treatment, in compliance with the principles of justice, tax equality and material truth.

10. In effect, the existence in each property of independent housing, in horizontal or vertical ownership regime, may be susceptible to triggering the incidence of the new tax, but only if the TPV of each part or fraction is equal to or greater than the limit defined by law: € 1,000,000.00.

11. It does not seem reasonable that properties could be classified within the normative provision, urban properties as a whole, i.e., composed of independent units with separate TPV evaluations.

12. As mentioned, the introduction of Law No. 55-A/2012, of 19 October, intended to tax wealth in fact.

13. Now, the property in question belongs to the Claimants, and is composed of 6 floors or divisions with independent use, all with residential purpose.

14. It is the understanding of the AT that the sum of the TPVs relating to these 6 floors or divisions with independent use that have residential purpose, totaling a global TPV of € 1,132,480.00 (one million, one hundred and thirty-two thousand, four hundred and eighty euros), in the year 2013, gives rise to the incidence of stamp tax, for which reason the AT understood to proceed with the assessment of Stamp Tax challenged in the present proceedings.

15. Thus, from the perspective of the AT, for a property in vertical ownership (or not constituted in the horizontal ownership regime) the criterion for determining the incidence of stamp tax is the global TPV of the floors and divisions even if with independent use, intended for housing.

16. Let us see if the AT's thesis is convincing.

17. Law 55-A/2012, of 29 October entered into force on the day following its publication, that is, on 30 October 2012.

18. However, it says nothing regarding the qualification of the concepts in question, namely, regarding the concept of "property with residential purpose," which is relevant here.

19. However, article 67, paragraph 2 of the Stamp Tax Code, added by said Law, provides that "for matters not regulated in the present code relating to item 28 of the General Table, the Property Tax Code is applied subsidiary."

20. Thus, we have that the provision of incidence refers to urban properties, whose concept is that which results from article 2 of the Property Tax Code, with the determination of TPV following the terms of article 38 et seq. of the same code.

21. Consulting the Property Tax Code, it is found that its article 6 only indicates the different types of urban properties, among which it mentions residential ones (see paragraph a) of paragraph 1), clarifying in paragraph 2 of the same article that "residential, commercial, industrial or service buildings or structures are those licensed for such purpose or, failing a license, that have as their normal destination each of these purposes."

22. From this we can conclude that, in the legislator's view, the formal-juridical rigor of the concrete situation of the property is not what matters, but rather its normal use, the purpose for which the property is intended.

23. Furthermore, we ascertain that, for the legislator, the situation of the property in vertical or horizontal ownership was not relevant, as no reference or distinction is made between one and the other. What is relevant is the material truth underlying its existence as an urban property and its use.

24. In effect, the subjection to stamp tax contained in item no. 28.1 of the General Stamp Tax Table is determined by the combination of three facts, namely:

a) we are dealing with an urban property;

b) residential purpose and

c) the TPV appearing in the cadastre equal to or greater than € 1,000,000.00.

1. Now, being a property with the characteristics described above, the subjection to stamp tax must be determined, not by the TPV of the property "as a whole", but by the TPV attributed to each of the floors or divisions with independent use, dedicated to housing.

2. In this manner, the understanding of the AT that the sum of the TPVs of the various fractions or divisions with independent use dedicated to housing, resulting in a global TPV equal to or greater than € 1,000,000, legitimizes the incidence of stamp tax under item 28 of the General Stamp Tax Table in the standard regime, is manifestly illegal!

3. Thus, there being, in this manner, not a single fraction or division with independent use, dedicated to housing, with TPV equal to or greater than € 1,000,000, the AT could never have subjected the Claimants to stamp tax under item 28 of the General Stamp Tax Table for the year 2013, which is now being challenged, as the same is illegal, and for this reason unacceptable and non-compliant with, among others, the principle of tax legality, as well as with the principle of equality, provided for in article 13 of the Constitution of the Portuguese Republic.

II – On the Violation of Constitutional Law

1. In accordance with other arbitral decisions issued within the scope of the matter that concerns us here, to which we adhere, as we agree with them, we have that the constitutional principle of tax equality, as a specific expression of the general structuring principle of equality (article 13 of the Constitution), is not limited to the rule of universality of taxes, according to which these apply to all those who have contributory capacity, also determining that all should be bound to payment of taxes on the basis of the same criterion - the rule of uniformity of taxes.

2. According to this rule, what is equal should be taxed equally, and what is unequal should be taxed unequally, to the extent of that inequality.

3. The tax legislator cannot treat equal situations differently. Now, if the property were held in horizontal ownership regime, none of its residential fractions would be subject to the incidence of the new tax.

4. For this very reason, article 12, paragraph 3 of the Property Tax Code states that "each floor or part of property susceptible to independent use is considered separately in the cadastral registration which likewise itemizes the respective tax patrimonial value."

5. As a consequence, the discrimination that is verified, and which is being operated by the AT in the concrete case, constitutes an arbitrary and illegal discrimination. Nothing in the law imposes the obligation to constitute horizontal ownership.

6. On the other hand, it is known that many of the properties existing in vertical ownership are old, with undeniable social utility, as in many cases they house tenants with modest and more accessible rents, factors which must necessarily be taken into account. And, certainly, taking into account all this social and economic reality, the tax legislator itself in the Property Tax Code treated the two situations (horizontal and vertical ownership) equitably, applying the same criteria.

7. The AT cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the tax system, as well as the principle of tax legality, provided for in article 103, paragraph 2 of the Constitution, and also the principles of justice, equality, legal certainty and security and tax proportionality.

8. However, it must be noted that the constitutional principles are invoked here only as support for an interpretation according to the Constitution, since the stamp tax assessment operation carried out by the AT in the situation of the case is not in conformity with item 28 of the General Stamp Tax Table and paragraph 7 of article 23 of the Stamp Tax Code.

9. Following this reasoning, and transcribing what has already been upheld in the CAAD Decision in case no. 30/2014 T to which we adhere in its entirety:

"The question does not, in our view, require to be raised at the level of violation of the Constitution, being sufficient, in compliance with paragraph 7 of article 23 of the Stamp Tax Code, to carry out a reading, 'with the necessary adaptations of the rules of the Property Tax Code' which will be to consider that the expression 'each urban property' comprises not only floors in horizontal ownership (which are urban properties ope legis) but also 'floors or parts of property susceptible to independent use' (paragraph 3 of article 12 of the Property Tax Code).

That is, at the level of interpretation of tax norms, the very particular rule found in paragraph 3 of article 11 of the General Tax Law may be used: 'if doubt persists regarding the meaning of the provisions of incidence to be applied, regard should be had to the economic substance of the tax facts'.

Now, if for example for the floors that compose the autonomous fractions of urban residential properties, in horizontal ownership, (even if by definition and ope legis they are urban properties) the TPVs are not added to determine the threshold of the TPV eligible for subjection to Stamp Tax (1,000,000.00 euros) of item 28 of the General Stamp Tax Table (operation for determination of the taxable matter), why should the same occur for the 'parts of property or floors' of properties in vertical ownership?

In both cases the same contributory capacity of the taxpayers is manifested (their level of wealth at the level of real property).It is the same 'economic substance' analyzed from different perspectives.

Items 28 and 28-1 of the General Stamp Tax Table, while provisions of incidence of Stamp Tax, in the reading that is advocated in this decision, do not suffer from any non-conformity with the text of the fundamental law.(…)

In truth it is the aforementioned provision, in its literality, namely the final part of item 28 of the General Stamp Tax Table, combined with paragraph 7 of article 23 of the Stamp Tax Code, that permits concluding, with the 'necessary adaptations of the rules of the Property Tax Code' that the AT should not add the TPVs of the floors or part of the property identified above to find a new TPV relating to those that are dedicated to residential purposes, separate from the TPV of those dedicated to other purposes.»

1. Having said this, the unequal taxation of the present claimants, compared with a situation in which the property were held in horizontal ownership of identical characteristics, is manifestly illegal in considering as the reference value that corresponding to the sum of the TPVs attributed to each part or division, because it is a clear violation, among others, of the principle of equality and proportionality in tax matters, nothing legitimizing the interpretation that the AT makes of the applicable legal norms.

2. Finally, it must be noted the recent case law of the CAAD, delivered on the topic "Stamp Tax – Item 28, vertical ownership," in cases no. 428/2014-T, no. 206/2014-T, no. 30/2014-T, no. 181/2013-T, no. 132/2013-T, no. 50/2013-T, no. 248/2013-T of the CAAD, among others, whose legal reasoning, the present tribunal adheres to in its entirety, insofar as the matter of incidence of item 28.1 of the General Stamp Tax Table is concerned.

3. In light of the foregoing, there being, in this manner, not a single fraction or division with independent use, dedicated to housing, with TPV equal to or greater than € 1,000,000, the acts of assessment of Stamp Tax relating to the year 2013, in the amount of € 8,493.66 are null, for violation of the provision in item 28.1 of the General Stamp Tax Table and article 13 of the Constitution.

III – On Compensatory Interest

1. The 3rd Claimant also petitions that recognition be given of the right to compensatory interest, on the grounds of error attributable to the services.

2. Article 43, paragraph 1 of the General Tax Law and article 61 of the Code of Tax Procedure and Process provide that compensatory interest is due when it is determined in a gracious reclamation or judicial challenge that there was error attributable to the services from which results the payment of a tax debt in an amount greater than that legally due.

3. Error attributable to the administration is considered to exist when the error is not attributable to the taxpayer and is based on erroneous assumptions of fact that are not the responsibility of the taxpayer.

4. Now, resulting from the impugned tax acts the obligation to pay tax in an amount greater than that which would be due, compensatory interest is due pursuant to the terms legally provided, the legislator presuming, in these cases, where annulment of the assessment occurs, that there occurred in the sphere of the taxpayer a loss by virtue of having been deprived of the patrimonial amount that the taxpayer had to deliver to the State by virtue of an illegal assessment. Consequently, the taxpayer has the right to this indemnification, independent of any allegation or proof of the loss suffered.

5. In the present case, it will be unquestionable that, following the acknowledgment of the illegality of the assessment acts, there will be a basis for refund of the tax by force of article 43, paragraph 1 of the General Tax Law, and article 100 of the General Tax Law, necessarily passing through this the restoration of the "situation that would exist if the tax act which is the subject of the arbitral decision had not been carried out".

6. Similarly, it is understood that it will be free from doubt that the illegality of the act is attributable to the Tax Authority, which carried it out autonomously in an illegal manner.

7. As to the concept of "error", it has been understood that only in cases of annulments based on defects relating to the tax legal relationship will there be a basis for payment of compensatory interest, such right not being recognized in the case of annulments for procedural or formal defects.

8. Thus being, as we are faced with a defect of violation of substantive law, which is embodied in error in the assumptions of law, attributable to the Tax Authority, the 3rd Claimant has the right to compensatory interest, in accordance with articles 43, paragraph 1 of the General Tax Law, and 61 of the Code of Tax Procedure and Process, calculated on the amount of € 1,415.64, and counted from payment of the tax until full refund of the said amount.

DECISION

In accordance with the foregoing, it is decided:

1. To annul all acts of assessment of Stamp Tax challenged by the Claimants, relating to the year 2013.

2. To condemn the Tax and Customs Authority to refund the 3rd Claimant the amount paid, plus compensatory interest, calculated at the legal rate, from payment of the tax until full refund.

Value of the Proceedings

The value of the proceedings is set at € 8,493.66 (eight thousand, four hundred and ninety-three euros and sixty-six cents) pursuant to article 97-A, paragraph 1, a), of the Code of Tax Procedure and Process, applicable by virtue of paragraphs a) and b) of article 29, paragraph 1 of the RJAT and paragraph 2 of article 3 of the Regulations of Costs in Tax Arbitration Proceedings.

Costs

Costs at the charge of the Respondent in accordance with article 22, paragraph 2 of the RJAT, article 4 of the Regulations of Costs in Tax Arbitration Proceedings, and Table I annexed hereto, which are set at the amount of € 918.00.

Let notification be made.

Lisboa, 27 March 2015

The Arbitrator

Jorge Carita