Summary
Full Decision
ARBITRAL DECISION
I. Report
A…, Lda, collective person no…, with head office at…, no…, …, …-…, Lisbon (hereinafter referred to as the Claimant), filed on 30/07/2015 a request to establish a singular arbitral tribunal, in accordance with the combined provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority is the Respondent.
The request to establish the arbitral tribunal was accepted by the President of CAAD on 31/07/2015 and notified to the Tax and Customs Authority on 31-08-2015.
In accordance with the provisions of subparagraph a) of section 2 of article 6 and subparagraph b) of section 1 of article 11 of RJAT, the Deontological Council appointed as arbitrator of the singular arbitral tribunal the undersigned, who communicated acceptance of the assignment within the applicable period, and notified the parties of this appointment. They accepted the designation of the indicated arbitrator, whereby, in compliance with the provisions of subparagraph c) of section 1 of article 11 of RJAT, the arbitral tribunal was constituted on 28-10-2015.
On 3-11-2015 an arbitral order was issued, in accordance with article 17 of RJAT, and accordingly the ATA was notified to present its Response, which was presented in the case file on 1-12-2016, which is hereby fully reproduced.
On 7-12-2015 the Respondent filed in the case file a request to annex Court Decision No. 590/2015, of the Constitutional Court, issued on 11-11-2015.
On 15-12-2015 an arbitral order was issued, dispensing with the holding of the meeting provided for in article 18 of RJAT, in which a deadline was set for the parties to present, if they so wished, their written submissions and a date was set for the issuance of the arbitral decision by 15-02-2016. On 11-01-2016 and 27-01-2016 the parties came, respectively Claimant and Respondent, to present their submissions, which are hereby fully reproduced.
The Claimant requests a declaration of illegality of the Stamp Tax assessment issued with reference to the year 2014 and to the property identified in the case file, which gave rise to three single collection documents (DUC) attached as documents 1, 2 and 3 to the arbitral request, respectively with the numbers 2015…, 2015… and 2015…, corresponding to the three instalments of Stamp Tax assessed, in the amount of €7,286.05 each, which results in a total annual amount of €21,858.15.
The amount of stamp tax (IS) assessed and contested in this arbitral request refers to the year 2014 and relates to the urban property designated as "land for construction", registered in the urban property register of the parish of …, municipality and district of Lisbon, under property registration number …, with the TTP of €2,185,815.12 determined in 2012, as shown in the property record, attached to the case file as document no. 4. The described property thus consists of a plot of land for the construction of buildings with different uses for residential and commercial purposes.
The tax assessment was made by applying item no. 28.1 of the General Table of Stamp Tax and with article 6 of Law No. 55-A/2012, of 29 October, as amended by Law 83-C/2013 of 31 December (State Budget Law for 2014), which provides for taxation in IS of "Ownership, usufruct or right of superficies of urban properties whose taxpayer patrimonial value contained in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000.00 – on the taxpayer patrimonial value used for IMI purposes.
28.1 – Per residential property or per land for construction whose authorized or planned construction is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code"
The Claimant requests a declaration of illegality of this assessment on the basis of unconstitutionality of the norm contained in the aforementioned item 28.1, whereby it claims the annulment of the tax act and respective collection notices relating to the three processed instalments, with all legal consequences, including the condemnation of the ATA to the payment of compensatory interest.
The Claimant does not accept the tax assessment contested. To substantiate its request, it develops a set of arguments, from which it is concluded in summary that it does not accept the new wording of the norm contained in item 28.1 of the TGIS, introduced by the State Budget Law for 2014, as it understands that the same violates constitutional principles, namely the principle of constitutional equality. It also invokes arguments in defense of the thesis of unconstitutionality of item 28.1, as far as land for construction is concerned, as it understands that it undermines the principle of contributive capacity, as it translates a double taxation of the same fact and a clear disregard for the social purpose of collective entities engaged in the economic activity of construction and investment in real estate, residential and non-residential, intended for sale or lease, as is the case with the Claimant.
The Tax and Customs Authority (ATA) contends, in its response and in the submissions presented, that the assessment is legal since it results expressly from the letter of the law, by virtue of the amendment introduced by the State Budget Law for 2014, which also establishes that land for construction, if the legally provided conditions are met, is subject to stamp tax, as from 01-01-2014. It also states that, in the perspective of the ATA, there is no violation of constitutional principles from which the alleged defect of unconstitutionality results.
In reinforcement of its allegation and all the arguments it developed in the response and submissions presented, the ATA invokes constitutional jurisprudence, with particular emphasis on the Decision issued on 15-11-2015, which it attached to the case file, which specifically refers to items 28 and 28.1 of the TGIS, having decided "not to declare unconstitutional the norm contained in item 28 and 28.1 of the General Table of Stamp Tax, amended by article 4 of Law No. 55-A/2012, of 29 October, to the extent that it imposes annual taxation on the ownership of urban properties with residential use, whose taxpayer patrimonial value is equal to or greater than €1,000,000.00."
It concludes by arguing for the legality of the tax act and consequently the inadmissibility of the arbitral request.
The arbitral tribunal was regularly constituted and is materially competent, in light of the provisions of articles 2, section 1, subparagraph a), and 30, section 1, of RJAT.
It should be noted that it follows from the request and the cause of action alleged that the Claimant's claim is based on the alleged unconstitutionality of the norm contained in item 28.1 of the TGIS when applied to land for construction. It is on this assumption that the Claimant bases its request for a declaration of illegality of the stamp tax assessment act relating to the year 2014 and to the property described in these proceedings. The request for illegality of the stamp tax assessment act, in the case of these proceedings, will necessarily depend on the prior assessment and decision, by the Arbitral Tribunal, of the (un)constitutionality of the norm in question.
The Arbitral Tribunal does not have the power to determine the unconstitutionality of tax norms, however, given the request formulated by the Claimant, seeking a declaration of illegality of the stamp tax assessment act sub judice, it is to be considered that the arbitral tribunal is competent to rule on this request, despite such declaration of illegality depending on the non-application of the norm in question, on the basis of the alleged unconstitutionality. Arbitral Tribunals have the competence to not apply, in the specific case, legal norms on the basis of their unconstitutionality as well as to apply legal norms whose unconstitutionality has been invoked. Whereby the tribunal is competent ratione materiae.
The parties have personality and judicial capacity, are legitimate (articles 4 and 10, section 2, of the same statute and article 1 of Ordinance No. 112-A/2011, of 22 March) and are properly represented.
The proceedings do not suffer from any nullities.
II. Matter of Fact
1. Facts considered proven
a) The Claimant, in the year 2014, was the owner of the land for construction, located in the parish of …, municipality and district of Lisbon, identified by property registration number …, as results from document no. 4, attached to the request for arbitral decision, the content of which is hereby reproduced;
b) This land had, as at the reference date for the assessment contested (year 2014), the taxpayer patrimonial value (TTP) of €2,185,815.12;
c) The urban property in question consists of a plot of land for construction, with use intended for the construction of residential buildings and commercial premises (see document no. 4 above referred to);
d) The Claimant was notified, through the tax portal, of the single collection documents for payment of each of the three instalments of stamp tax assessed, in the amount of €7,286.05 each, with payment due dates in April (1st), July (2nd) and November (3rd) - (see documents nos. 1, 2 and 3, attached to the request for arbitral decision, the content of which is hereby reproduced);
e) The stamp tax assessment (IS) contested was made under item 28.1 of the General Table of Stamp Tax, in the amount of €21,858.15 relating to the year 2014, with reference to the property described above;
f) The Claimant paid the first two instalments of assessed tax, as evidenced by payment receipts attached to the arbitral request;
g) On 30-07-2015, the Claimant filed the request to establish the arbitral tribunal (CAAD computer system);
h) The Claimant also paid the 3rd instalment of assessed tax, as evidenced by the receipt attached to the case file on 18-12-2015.
2. Facts considered not proven
There are no facts not proven to be considered, with relevance for the final decision.
3. Basis for the proven matter of fact
The proven facts are based on the documents indicated for each of the points, whose authenticity and correspondence to reality were not questioned.
III. Matter of Law
The issue that is the subject of this arbitral request is whether the taxation of land for construction, with construction authorized or planned for residential purposes, as expressly provided in the norm contained in item 28.1 of the TGIS (as amended by the State Budget Law for 2014) is or is not illegal, due to violation of the constitutional principles of equality and contributive capacity, as alleged by the Claimant.
For the decision of the issue for which this arbitral tribunal was constituted, it is necessary to take into account the evolution of the law and the amendments introduced by the State Budget Law for 2014.
1. Regime of Law No. 55-A/2012, of 29 October
Law No. 55-A/2012, of 29 October, made several amendments to the Stamp Tax Code and added item 28 to the TGIS, with the following wording:
28 – Ownership, usufruct or right of superficies of urban properties whose taxpayer patrimonial value contained in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000 – on the taxpayer patrimonial value used for IMI purposes:
28.1 – Per property with residential use – 1%;
28.2 – Per property, when the taxpayers that are not natural persons are residents in a country, territory or region subject to a clearly more favorable fiscal regime, contained in the list approved by ordinance of the Minister of Finance – 7.5%.
In the transitional provisions contained in article 6 of that Law No. 55-A/2012, the following rules were established relating to the assessment of the tax provided in that item:
1 – In 2012, the following rules must be observed with reference to the assessment of stamp tax provided in item no. 28 of the respective General Table:
a) The taxable event occurs on 31 October 2012;
b) The taxpayer of the tax is the one mentioned in section 4 of article 2 of the Stamp Tax Code on the date referred to in the preceding subparagraph;
c) The taxpayer patrimonial value to be used in the tax assessment corresponds to that resulting from the rules provided in the Municipal Property Tax Code with reference to the year 2011;
d) The tax assessment by the Tax and Customs Authority must be carried out by the end of November 2012;
e) The tax must be paid, in a single instalment, by taxpayers by 20 December 2012;
f) The applicable rates are as follows:
i) Properties with residential use assessed in accordance with the Municipal Property Tax Code: 0.5%;
ii) Properties with residential use not yet assessed in accordance with the Municipal Property Tax Code: 0.8%;
iii) Urban properties when the taxpayers that are not natural persons are residents in a country, territory or region subject to a clearly more favorable fiscal regime, contained in the list approved by ordinance of the Minister of Finance: 7.5%.
2 – In 2013, the assessment of stamp tax provided in item no. 28 of the respective General Table must be based on the same taxpayer patrimonial value used for the purposes of municipal property tax assessment to be carried out in that year.
3 – The failure to deliver, in whole or in part, within the specified period, of the amounts assessed as stamp tax constitutes a tax infringement, punished in accordance with the law."
In the aforementioned item 28.1 and in subparagraphs i) and ii) of subparagraph f) of section 1 of article 6 of Law No. 55-A/2012, a concept was used that is not used in any other tax legislation, in these precise terms, which is that of "property with residential use".
Specifically in the CIMI, which in several norms of the Stamp Tax Code introduced by that Law indicates it as a diploma of subsidiary application with respect to the tax provided in the aforementioned item no. 28 [articles 2, section 4, 3, section 3, subparagraph u), 5, subparagraph u), 23, section 7, and 46 and 67 of the Stamp Tax Code], a concept with that designation is not used.
However, Law No. 83-C/2013, of 31 December, which entered into force on 1 January 2014, amended the wording of that norm (item no. 28.1), giving it the following wording:
28.1 - Per residential property or per land for construction whose construction, authorized or planned, is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code – 1%
In the case under examination, the period to which the assessment contested refers to the year 2014, with payment period in 2015, broken down into three instalments, due in April, July and November. Accordingly, the resolution of the present case must comply with the version of the law in force at the time of the taxable event, which expanded the scope of the tax, now referring to residential properties and to land for construction whose authorized or planned construction is for residential purposes.
Thus the concept of property for the purposes of the scope of stamp tax is now more in accordance with the concept of property established in the CIMI.
2. Concepts of properties used in the CIMI
In the IMI, the types of properties are listed in its articles 3 to 6 as follows:
Article 2
Concept of Property
1 – For the purposes of this Code, a property is any fraction of territory, including waters, plantations, buildings and constructions of any nature incorporated therein or located thereon, with a character of permanence, provided that it forms part of the assets of a natural or collective person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances aforesaid, endowed with economic autonomy in relation to the land where they are located, although situated in a fraction of territory that constitutes an integral part of a diverse assets or does not have a patrimonial nature.
2 – Buildings or constructions, even if movable by nature, are deemed to have a character of permanence when intended for non-transitory purposes.
3 – The character of permanence is presumed when the buildings or constructions are located in the same place for a period exceeding one year.
4 – For the purposes of this tax, each autonomous fraction, under the horizontal property regime, is deemed to constitute a property.
Article 3
Rural Properties
1 – Rural properties are plots of land located outside an urban agglomeration that are not to be classified as land for construction, in accordance with section 3 of article 6, provided that:
a) They are intended for or, in the absence of concrete allocation, have as their normal destination a use generating agricultural income, such as are considered for the purposes of personal income tax (IRS);
b) Not having the allocation indicated in the preceding subparagraph, they are not built or have only buildings or constructions of an accessory nature, without economic autonomy and of reduced value.
2 – Also rural properties are plots of land located within an urban agglomeration, provided that, by virtue of legally approved provision, they cannot have use generating any income or can only have use generating agricultural income and are actually having this allocation.
3 – Also rural properties are:
a) Buildings and constructions directly intended for the production of agricultural income, when located on the plots referred to in the preceding sections;
b) Waters and plantations in the situations to which section 1 of article 2 refers.
4 – For the purposes of this Code, urban agglomerations are considered, in addition to those located within legally fixed perimeters, nuclei with a minimum of 10 dwellings served by public use roads, with their perimeter delimited by points spaced 50 m from the axis of the roads, in the transverse direction, and 20 m from the last building, in the direction of the roads.
Article 4
Urban Properties
Urban properties are all those that should not be classified as rural, without prejudice to the provisions of the following article.
Article 5
Mixed Properties
1 – Whenever a property has rural and urban parts it is classified, in full, in accordance with the main part.
2 – If neither of the parts can be classified as main, the property is deemed to be mixed.
Article 6
Types of Urban Properties
1 – Urban properties are divided into:
a) Residential;
b) Commercial, industrial or for services;
c) Land for construction;
d) Other.
2 – Residential, commercial, industrial or for services are the buildings or constructions licensed for such purpose or, in the absence of a license, that have as their normal destination each of these purposes.
3 – Land for construction are plots of land located within or outside an urban agglomeration, for which a license or authorization has been granted, admitted prior notification or issued favorable prior information for a subdivision or construction operation, and also those that have been declared as such in the title of acquisition, except for plots of land where the competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land planning plans, are intended for public spaces, infrastructure or equipment. (Amended by Law No. 64-A/08, of 31-12)
4 – The provision of subparagraph d) of section 1 includes plots of land located within an urban agglomeration that are not land for construction nor are covered by the provision of section 2 of article 3, as well as buildings and constructions licensed or, in the absence of a license, that have as their normal destination purposes other than those referred to in section 2 and also those of the exception of section 3.
In light of the content of the aforementioned norms and taking into account the letter of the currently applicable law, that is, the wording of item 28.1 of the TGIS introduced by Law 83-C/2013 of 31 December (State Budget Law for 2014), the concept of property contained in the rule of scope of the tax encompasses land for construction whose authorized or planned construction is for residential purposes.
As is known, a different conclusion was drawn from the previous version, as has been widely recognized by arbitral jurisprudence, as well as by the jurisprudence of our superior courts. But the current wording of the norm contained in item 28.1 leaves no room for doubt, resulting in clear the intention of the legislator to broaden the scope of the rule so as to also encompass land for construction, provided that it is authorized or licensed for residential construction.
Accordingly, the question of whether or not stamp tax applies to land for construction is today resolved, clearly and expressly by law, which leads us to conclude that the solution to the case in question is achieved by the application of the subconstitutional rule, in the exact terms now in force.
Notwithstanding this, and given the issues raised by the Claimant, it is important to determine whether there will be any reason of a constitutional nature that would impose its non-application to the specific case. The Arbitral Tribunal is bound by the law, which must be interpreted in accordance with the rules of interpretation and application of the legal norm and in accordance with the Constitution.
3. Rules on interpretation of laws
Article 11 of the General Tax Law establishes the essential rules for the interpretation of tax laws as follows:
Article 11
Interpretation
-
In determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.
-
Whenever, in tax norms, terms proper to other branches of law are used, they must be interpreted in the same sense as they have there, unless otherwise directly provided for by law.
-
If doubt persists about the meaning of the applicable scope norms, the economic substance of the tax facts must be taken into account.
-
The gaps resulting from tax norms covered by the reserve of law of the Assembly of the Republic are not susceptible to analogical integration.
The general principles of the interpretation of laws, to which section 1 of article 11 of the LGT refers, are established in article 9 of the Civil Code, which establishes the following:
Article 9
Interpretation of Law
-
Interpretation must not be confined to the letter of the law, but must reconstruct from the texts the legislative thinking, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.
-
However, the interpreter cannot consider the legislative thinking that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.
-
In fixing the meaning and scope of the law, the interpreter will presume that the legislator adopted the most correct solutions and knew how to express his thinking in adequate terms.
Having as reference the principles arising from the aforementioned norms, it is necessary to assess its application to the specific case.
4. Application to the Specific Case
The major change introduced by the legislator with the State Budget Law for 2014 consisted in the amendment of the concept of reference for the scope of the tax, which ceased to be that of "property with residential use", the legislator having amended and broadened the scope of the tax to residential properties or land for construction, provided that the authorized or planned construction is for residential purposes, in accordance with the provisions of the CIMI.
Such a norm appears clear and does not allow any doubt about the legislator's purposes to include land for construction whose construction is intended for residential purposes within the scope of the tax. In this sense, the property in question in these proceedings meets the legal conditions for its qualification as an object of tax scope.
It is true that interpretation must not be confined to the letter of the law, but the applicator of the legal norm cannot reach an interpretation that deviates from or even contradicts what clearly results from it. It must reconstruct from the texts the legislative thinking, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied, so as to achieve the "ratio legis", the meaning and scope of the norm, if this raises doubts about the legislator's thinking.
The legislator was clear in its intention to introduce within the scope of the norm contained in item 28.1 of the TGIS land for construction, if the planned or authorized construction is for residential purposes. The reasons of fiscal policy, underlying this normative, may be criticizable but appear clear, starting from the explicitly stated starting point in the preparatory work, which point in the direction of taxing properties of greater patrimonial value, intended for residential purposes (built or to be built) of "luxury". This very fact explains the high value to which the legislator resorted as a quantitative criterion from which the scope of the tax applies.
However, the Claimant argues that the norm in question, as it results from the current version, violates constitutional principles, and should, therefore, not be applied and the tax assessment annulled. In support of this understanding it invokes the Arbitral Decision issued in case 744/2014, which it attached to the case file as document no. 7. It also argues that, contrary to the ATA's claim, the Constitutional Court Decision No. 590/2015, of 15-11, declares the non-unconstitutionality of the norm contained in item 28 and 28.1, but with reference to a concrete case different from that discussed in these proceedings. Lastly, among other reasons it invokes in its submissions, it concludes that it is merely an isolated Constitutional Court decision that does not bind the arbitral tribunal in its decision.
The Arbitral Tribunal is not bound by the decision contained in the Constitutional Court Decision, and it is true that the case sub judice in that Decision concerns exclusively the application of that norm to residential properties, that is, the Constitutional Court did not address the issue relating to land for construction whose authorized or planned construction is for residential purposes. However, the reasons that the Constitutional Court invokes for the case there under examination apply, with the necessary adaptations, to the case that now concerns us.
The Claimant's viewpoint regarding the alleged violations of the Constitution, in the case in question, is not accepted, despite all the reservations it raises for us regarding this new face of Stamp Tax, from the perspective of a tax on assets intended for residential purposes. It is true that the tax results in being distorted but that is also a choice of the legislator, which, while it may not be the best, does not mean, for that reason alone, that it is unconstitutional.
Thus, although this is not the proper forum to assess the unconstitutionality of norms, the truth is that it is not seen that item 28.1 in its current version violates the principle of equality or contributive capacity. It maintains, from the outset, as the underlying principle for the scope of the tax the distinction between the properties targeted based on their patrimonial value. The principle of equality imposes equal treatment for situations that appear equal and different treatment for those that appear distinct. As the Constitutional Court well states in the aforementioned Decision, the assessment of respect for the principle of fiscal equality in its material dimension must be referred to the unit property intended for residential purposes, which leads to the conclusion that the legislator did not establish an arbitrary distinction between taxpayers, introducing moreover a relevant substantive criterion, reflected in the application of the tax only to properties whose taxpayer patrimonial value exceeds a certain amount.
The same applies to land for construction, such as that in question in these proceedings.
No violation of the principle of equality or contributive capacity is perceived, which was considered by the legislator in establishing the quantitative criterion determining the scope of the tax.
To the above is added the fact that the arguments of unconstitutionality based on double taxation and even on violation of the principle of separation of powers do not appear evident or sustained in reality.
In a period of manifest crisis in public finances and general increase of all taxes, with emphasis on income taxes, it does not appear disproportionate to ask for a greater contribution from the holders of real estate with high value or greater patrimonial value. As a fiscal measure aimed at the taxation of holders of real rights of enjoyment over residential real estate or land for construction whose construction authorized or planned is for residential purposes, of higher value, which are only within the reach of taxpayers with greater purchasing power or wealth (thus greater contributive capacity) there is no reason to conclude for the unconstitutionality of the norm, which reveals a balance and proportionality that does not violate the principle of equality, justice and proportionality.
In the case of these proceedings, it is certain that on the land in question there are no constructions but only an aptitude for such, but still, it meets the legal requirements for the scope of the tax, since it is a property of high value with constructive aptitude for residential purposes. It should be recalled that, being the Claimant a company with activity in the construction of properties for residential and other purposes, it may always pass on to the final price (whether in the price of sale of the properties to be constructed or in the rents to be collected) the costs with the tax values now incurred.
Any other understanding would lead the tribunal to substitute the legislator himself, guided by considerations of an ideological and economic order that are typically inspirers of the policy choices of those who govern and legislate, which may be criticizable, but are nonetheless the emanation of the representative power of the people, duly safeguarded in the Constitution.
As for the hypothetical violation of the principle of separation of powers, it is not seen that any violation of this principle by item 28.1 of the TGIS occurs, in the version currently in force. For all that has been set out above, it is the understanding of this Tribunal that item 28.1, as amended by Law No. 83-C/2013 of 31 December, applies to land for construction whose authorized or planned construction is for residential purposes, and that this application does not suffer from any unconstitutionality. In these terms, the present arbitral request should be considered ungrounded, maintaining the stamp tax assessment acts with reference to the year 2014 in the terms and for the reasons set out above.
IV. Decision
In these terms, this Arbitral Tribunal decides:
a) To declare the arbitral request entirely ungrounded.
b) To condemn the Claimant to payment of arbitral costs.
V. Value of the Proceedings
In accordance with the provisions of article 315, section 2, of the Code of Civil Procedure and article 97-A, section 1, subparagraph a), of the Code of Tax Procedure and article 3, section 2, of the Regulation on Costs in Tax Arbitration Proceedings, the value of the proceedings is set at €21,858.15
VI. Costs
In accordance with article 22, section 4, of RJAT, the amount of costs is set at €1,224.00, in accordance with Table I attached to the Regulation on Costs in Tax Arbitration Proceedings, to be borne by the Claimant.
Notify.
Lisbon, 15 February 2016
The Arbitral Judge,
(Prof. Dr. Maria do Rosário Anjos)
Frequently Asked Questions
Automatically Created