CAAD 536/2018-T: Stamp Tax on Building Land Under Clause 28 of TGIS - Tax Liquidation Annulment

ARBITRAL DECISION

I. REPORT

A... – CLOSED REAL ESTATE INVESTMENT FUND, with registered office in ... through its managing entity B... – REAL ESTATE INVESTMENT FUND MANAGEMENT COMPANY, S.A., a company with registered office in ..., no. ..., ...-..., Lisbon, with the single registration and collective person number..., hereinafter referred to as the "Applicant", requested the establishment of an Arbitral Tribunal, under articles 2, no. 1, paragraph a) and 10 et seq. of the Legal Framework for Tax Arbitration ("RJAT"), approved by Decree-Law no. 10/2011, of 20 January, in conjunction with articles 99 and paragraph e) of no. 1 of article 102 of the Code of Procedure and Tax Process ("CPPT"), with the Respondent being the Tax and Customs Authority ("AT").

The Applicant filed a REQUEST FOR ESTABLISHMENT OF AN ARBITRAL TRIBUNAL with a view to declaring the illegality of the Stamp Duty (IS) assessments nos. 2018..., 2018..., 2018..., 2018..., all dated 25/05/2018, requesting from the Arbitral Tribunal:

a) The annulment of the aforementioned tax acts and, consequently,

b) The reimbursement of the amount of tax paid, plus the respective indemnity interest, calculated at the legal rate in force.

The request for establishment of the arbitral tribunal was accepted by the President of CAAD on 30/10/2018 and automatically notified to the Tax and Customs Authority.

The Applicant did not proceed with the appointment of an arbitrator, wherefore, under the terms of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, the President of the Deontological Council appointed the undersigned as arbitrators of the collective arbitral tribunal, who communicated their acceptance of the appointment within the prescribed period.

On 18/12/2018 the parties were notified of the appointment of the arbitrators and raised no objection.

In accordance with the provisions of paragraph c) of no. 11 of the RJAT, the collective arbitral tribunal was constituted on 9 January 2019.

Accordingly, the Arbitral Tribunal is regularly constituted to examine and decide on the object of the proceedings.

To support its request, the Applicant alleges, in summary, that:

A) On 31/12/2014 and 31/12/2015 it was the owner of two urban properties dedicated to industry;

B) In June 2013 it submitted to the Lisbon City Council a request for prior information regarding a subdivision operation for buildings intended for commerce, services and tourism;

C) The Lisbon City Council issued a conditionally favourable decision on the request for prior information;

D) Following the response issued by the Lisbon City Council and with a view to correcting the respective areas, it submitted IMI Model I declarations concerning the aforementioned properties;

E) In the assessments carried out by the AT as a result of the submission of the aforementioned IMI Model I, and for the calculation of the Tax Patrimonial Value (VPT) of the properties in question, the coefficient 1.00 was applied, which corresponds to the housing coefficient, and the IMI assessments contested here were issued;

F) It considers that the assessments in question suffer from illegality insofar as the buildings to be constructed on the urban properties sub judice will not be dedicated to housing, for which reason the ownership of the urban properties in question is not covered by the objective scope of Item 28.1 of the GIST;

G) Additionally, it considers that, from the ratio of Item 28.1 of the GIST, it is unequivocal that the legislator did not intend to tax the ownership of urban properties with housing dedication, nor of building land, when dedicated to the exercise of an economic activity;

H) It considers, finally, that the Stamp Duty on property as defined in Item 28.1 of the GIST suffers from material unconstitutionality, by violation of the principles of equality and progressivity provided for in articles 13, 103, no. 1 and 104, no. 3, all of the CRP.

The Respondent filed a Reply and attached the administrative file. In the Reply presented, the Respondent presented a defence by exception and by impugnation as described below in summary:

A) It considers that the Arbitral Tribunal is materially incompetent to examine the request for a declaration of material unconstitutionality of Item 28 of the General Table of Stamp Duty (GIST), which constitutes a dilatory exception leading to dismissal of the instance with regard to the respective request, in accordance with articles 576, no. 2, 577, paragraph a) and 278, no. 1, paragraph a) of the CPC, applicable ex vi article 29, paragraph e) of the RJAT;

B) Without prejudice thereto, it states that, upon consulting the property record on which the present assessment is based, it verifies that the building land is dedicated to housing;

C) Urban properties that are building land and to which housing dedication has been attributed in the course of their respective assessments, appearing as such in the respective matrices, are subject to Stamp Duty;

D) Law no. 55-A/2012, of 29 October, which amended article 1 of the Stamp Duty Code, added Item 28.1 to the General Table of this tax, such that the tax came to apply also to the ownership, usufruct or surface right of urban properties whose tax patrimonial value is equal to or greater than €1,000,000.00;

E) In the absence, under Stamp Duty law, of a definition of what is meant by "urban property", "building land" and "housing dedication", it is necessary to resort secondarily to the Real Estate Tax Code;

F) Under the terms of this legal compendium, the dedication of the property (aptitude or purpose) is a coefficient that contributes to the valuation of the property, in determining its respective tax patrimonial value, equally applicable to building land;

G) The legislator does not refer to "property intended for housing", having instead opted for the notion of "housing dedication", an expression that is different and broader, whose sense is to be found in the need to integrate other realities beyond those identified in article 6, no. 1, paragraph a) of the Real Estate Tax Code;

H) It further considers that the interpretation it proposes derives from the logical element of interpretation;

I) It argues, finally, that there is no unconstitutionality of the aforementioned rule by violation of the principle of equality, insofar as, in addition to applying indistinctly to all holders of properties with housing dedication of value exceeding €1,000,000.00, the rule in question constitutes a mechanism for obtaining revenue, which would only be censurable, in light of the principle of proportionality, if it resulted in a manifestly indefensible position, which, in its view, is not the case in the matter at hand.

Notified on 13/02/2019 to, under the principle of contradiction provided for in paragraph a) of article 16 of the RJAT, pronounce itself on the exception raised by the Respondent, the Applicant responded on 25/02/2019 arguing for the rejection thereof.

On 02/03/2019, the Arbitral Tribunal issued an order dispensing with the meeting referred to in article 18 of the RJAT and granting the parties a period of 15 days to file Submissions. 9 July 2019 was further set as the deadline for issuing the decision.

On 22/03/2019 and 04/04/2019, respectively, the parties filed their respective Submissions in which they maintain, in substance, the positions set out in the request for establishment of the Arbitral Tribunal and in the Reply.

II. PROCEDURAL CLARIFICATION

1. Procedural Presuppositions

The Tribunal was regularly constituted and is competent ratione materiae, given the configuration of the object of the proceedings (cf. articles 2, no. 1, paragraph a) and 5 of the RJAT).

The request for arbitral pronouncement is timely, being presented within the period prescribed in paragraph a), of no. 1, of article 10 of the RJAT.

The parties enjoy legal personality and capacity, have standing and are regularly represented (cf. articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

The joinder of claims is admissible since we are dealing with the same circumstances of fact and the interpretation and application of the same principles or rules of law (cf. article 3, no. 1 of the RJAT).

The proceedings do not suffer from nullities.

1. On the Exception Raised by the Tax Authority

The Respondent raises the exception of material incompetence because the present Tribunal is, in its view, incompetent ratione materiae to examine the request for a declaration of material unconstitutionality of Item 28.1 of the General Table of Stamp Duty.

Let it be stated from the outset that its position is not correct.

First of all, it should be clarified that the Applicant merely argues the illegality of the assessment challenged by reason of non-conformity of Item 28 of the General Table of Stamp Duty by violation of Constitutional rules, and not properly requesting the declaration of unconstitutionality of that rule.

It is true that the Respondent is directly subordinate to the Law and must act in conformity therewith. However, this does not prejudice the right of individuals (and of the Tax Authority itself) to raise, in disputes specifically submitted to the judgment of courts, the unconstitutionality of certain rules or interpretations thereof, nor can it prevent courts, including arbitral courts, from examining questions of unconstitutionality which are put to them, applying or disapplying the rules in question, in the exercise of the powers constitutionally conferred (cf. articles 204, 209 and 280 of the CRP).

This is, as stated in the CAAD Decision dated 07/01/2016 and issued in the context of case 321/2015-T, "a diffuse, concrete and incidental review, under which the legal rule that grounds the assessment act may be judged unconstitutional and, consequently, disapplied in the specific case, thus founding the illegality derived from the assessment act – illegality in the sense of legal illegitimacy, by being grounded, in this case, in violation of the Constitution, and derived, since it is not an intrinsic defect of the act itself, but rather a defect which the same comes to suffer in its genesis by reason of the original defect of unconstitutionality suffered by the rule which is its condition of validity".

It is, fundamentally, the review provided for in article 204 of the CRP, according to which courts may disapply rules that infringe the provisions of the Constitution or the principles enshrined therein. And it is a review which the present Arbitral Tribunal, by constituting one of the categories of courts in light of the prevailing legal-constitutional regime (ex vi no. 2 of article 209 of the CRP), may carry out within the scope of the control of legality of the aforementioned tax acts and which, note, has even express legal repercussion in article 25 of the RJAT.

It should also be said that this understanding is firmly settled in the case law of CAAD – cf. by way of example, the CAAD Decisions dated 2016-01-07, 04/05/2018 and 2018-12-13 and issued, respectively, within the scope of cases nos. 312/2015-T, 675/2017-T and 212/2018-T.

The alleged exception is thus without merit.

III. GROUNDS

A. FACTS

1. Proved Facts

With relevance for the present proceedings, the following facts are considered proved:

A) The Applicant is a closed investment fund that invests in real estate assets;

B) On 31/12/2014 and 31/12/2015 it was the owner of the following urban properties:

(i) Urban property consisting of building land, located in ... Street, in the municipality of Lisbon, in the ... parish, registered in the urban property matrix under article ...; and

(i) Urban property consisting of building land, located in ... Street, in the municipality of Lisbon, in the ... parish, registered in the urban property matrix under article ...;

C) In the years 2014 and 2015, the aforementioned properties were dedicated to industry;

D) On 06/06/2013 the Applicant submitted to the Lisbon City Council for examination a request for prior information regarding a subdivision operation for the urban properties identified above and which aimed at carrying out a subdivision operation for buildings intended for commerce, services and tourism.

E) The Lisbon City Council issued a conditionally favourable decision on the request for prior information where it refers, in particular, to the following:

"4 - In total, 68,132 m2 of floor surface is proposed, corresponding to a buildability index of 1.5, distributed among services with 39,395 m2, tourism with 6,460 m2 and commerce with 22,277 m2;"

F) On 09/06/2017, the Applicant submitted a request for a Subdivision Operation Licence which included the properties mentioned above, which was approved;

G) In the examination of the proposed subdivision and on which the approval order fell, the following is stated: "Lot 1 corresponds to a fuel station to be maintained (L 1A) and a building with 11 floors + 1 recessed for tertiary and commercial use. Lots 2 and 3 present two volumes with a maximum number of floors of 9 + 1 also recessed for tertiary and commercial use. The floor surface proposed allocates 3,278m2 to commercial use; 64,855m2 for services, totalling a floor surface of 68,133m2. This composition also includes two parcels for cession of public domain, one intended for collective facilities and equipment and another located at the edge of Lot 1A for green spaces";

H) In the deliberation that approved the conditionally favourable decision on the request for prior information (Deliberation of the Lisbon City Council no. .../CM/2016) there appears, in particular, the following: "The present proposed subdivision covers an area of 45,422 m2, as shown in the topographic survey, the same being to be corrected in the CRP (...)";

I) In the examination of the proposed subdivision which was the subject of the approval order, the following is stated: "The area of intervention described in the Certificate of the property register is equal to 45,834.0 m2, whereas the area of intervention of the urban development operation is equal to 45,422 m2, a value that needs to be corrected with the Registry Office. Furthermore, the sum of the area of the lots with the area of the cessions is equal to 45,421m2 a slip to be corrected";

J) Following the response issued by the Lisbon City Council, the Applicant submitted IMI Model 1 declarations concerning the aforementioned properties where it corrected their respective areas;

K) In the assessments carried out by the Tax Authority as a result of the submission of the aforementioned declarations, and for the calculation of the Tax Patrimonial Value (VPT) of the properties in question, the coefficient 1.00 was applied;

L) As a result of these assessments, the Stamp Duty assessments nos. 2018..., 2018..., 2018..., 2018..., all dated 25/05/2018, were issued, in the amounts of €81,619.50, €165,840.30, €81,619.50 and €165,840.30, respectively;

M) On 31/07/2018, the Applicant proceeded to pay the aforementioned assessments.

1. Unproved Facts

With relevance for the examination and decision of the case, there are no facts that have not been proved.

1. Reasoning on Matters of Fact

The Tribunal's conviction was based on the facts articulated by the parties and documents attached, whose truthfulness was not disputed, as well as on the administrative file.

B. LAW

Given the positions of the parties assumed in the pleadings submitted, the central question to be resolved by the present tribunal consists of examining the legality of the Stamp Duty assessment acts for the years 2014 and 2015.

The merit of the defects invoked by the Applicant will lead to the annulment of the tax acts.

The Applicant invokes the defect of violation of law by error regarding the factual and legal presuppositions. Its possible merit will prevent the renewal of the act.

1. Defect of Violation of Law

The question at hand consists in determining whether there was indeed a defect of violation of law with the application of the provision establishing the scope of Stamp Duty to the building land identified above and of which the Applicant was, at the time of the assessments, the owner.

However, it is important to recall that Item 28.1 of the GIST was subject to a substantial amendment with the entry into force of the State Budget for 2014 (approved by Law no. 83-C/2013, of 31 December).

Law no. 55-A/2012, of 29 October, amended article 1 of the Stamp Duty Code (CIS), adding to the General Table of this tax Item 28, which came to provide that Stamp Duty would also apply to:

"28 – Ownership, usufruct or surface right of urban properties whose tax patrimonial value listed in the matrix, under the terms of the Real Estate Tax Code (CIMI), is equal to or greater than €1,000,000 – on the tax patrimonial value used for IMI purposes:

28.1 – For a property with housing dedication – 1%;

28.2 – For a property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, appearing on the list approved by ordinance of the Minister of Finance – 7.5%".

In effect, with the entry into force of item 28.1 of the GIST, properties with housing dedication with a tax patrimonial value (VPT) equal to or greater than €1,000,000.00 (one million euros) became subject to Stamp Duty, at the rate of 1%.

In other words, in the original wording of Item 28.1, building land for urban development, whether or not it had a VPT equal to or greater than €1,000,000.00, was excluded from taxation.

However, with the entry into force of the State Budget for 2014, approved by Law no. 83-C/2013, of 31 December, Item 28.1 came to provide that Stamp Duty applies to:

"28.1 For a residential property or for building land, the authorized or anticipated construction of which is for housing, as provided for in the Real Estate Tax Code – 1%" (emphasis added).

Thus, with regard to the "building land" at issue here, it is essential to take this legislative evolution into account, insofar as, as stressed, until the entry into force of the State Budget for 2014, the legislator only provided in the provision establishing the scope of Stamp Duty for urban properties with housing dedication, leaving out building land. With the new wording of Item 28.1, following the entry into force of the State Budget for 2014, the legislator came to expressly provide for the taxation of building land "the authorized or anticipated construction of which is for housing, as provided for in the Real Estate Tax Code".

Given this, it is important to assess in concreto whether building land with a value equal to or greater than €1,000,000, the construction of which is authorized for residential purposes, is or is not subject to Stamp Duty, in light of the wording of Item 28.1, which came to provide for the subjection to Stamp Duty of building land the construction of which, authorized or anticipated, is for housing and whose VPT, ascertained under the terms of the CIMI, is equal to or greater than €1,000,000 (one million euros).

Let it first be said that, in the present case, the buildings to be constructed on the urban properties in question would not be intended for housing, for which reason it is necessary to clarify whether the ownership thereof is covered by the objective scope of Item 28.1 of the GIST.

Thus, the answer to the question posed will pass through the specification of the concept of "residential property".

Articles 2 to 6 of the Real Estate Tax Code (CIMI) contain the definitions of "property" and of the various species of properties provided for. In none of these articles is the concept of "property with housing dedication" found. The notion that comes closest to the literal meaning of this expression is that of "residential properties", which no. 2 of article 6 of the CIMI defines as including "buildings or constructions" licensed for residential purposes or, in the absence of a licence, that have as their normal purpose each of these ends.

The lack of coincidence between the terms of the expression used in Item 28.1 of the GIST and that which is extracted from article 6, no. 2 of the CIMI, points to the conclusion that it was not intended to use the same concept.

Moreover, this concept – with this terminology – is also not found in any other statute.

Let us then examine the relevant provisions for the solution of the case before us:

"Article 2 – Concept of Property

1 – For the purposes of the present Code, property is every fraction of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or erected thereon with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances mentioned above, endowed with economic autonomy in relation to the land on which they are located, although situated in a fraction of territory that constitutes an integral part of a different patrimony or does not have a patrimonial nature.

2 – Buildings or constructions, even if movable by nature, are considered as having a character of permanence when dedicated to non-transitory purposes.

3 – The character of permanence is presumed when buildings or constructions have been erected in the same location 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 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 its entirety, in accordance with the main part.

2 – If neither of the parts can be classified as the principal part, the property is deemed to be mixed.

Article 6 – Species of Urban Properties

1 – Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Building land;

d) Others.

2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of a licence, that have as their normal purpose each of these ends.

3 – Building land is understood as land situated within or outside an urban agglomeration, for which a licence or authorization has been granted, prior notification admitted or favourable prior information on a subdivision or construction operation issued, and also those that have been so declared in the title of acquisition, with the exception of land with respect to which the competent entities prohibit any of those operations, in particular land located in green areas, protected areas or which, in accordance with municipal land use plans, are dedicated to public spaces, infrastructure or facilities."

As can be clearly seen, the CIMI does not resort, at any moment, when classifying urban properties, to the concept of "residential property". Indeed, such concept was not defined by the legislator, either in the CIMI or in any other legislative statute.

As stated, from the comparison between nos. 2 and 3 of article 6 of the CIMI one can conclude that there is autonomy between urban properties that are "residential" and urban properties that are "building land".

Thus, it becomes necessary to interpret the concept, following the rules, tax and general, on the interpretation of laws, first of all article 11 of the General Tax Law (LGT) and article 9 of the Civil Code (CC):

"Article 11 – Interpretation (LGT)

1. In determining the meaning of tax rules and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

2. Whenever, in tax rules, terms specific to other branches of law are used, they should be interpreted in the same sense as they have there, unless something else follows directly from the law.

3. Where doubt persists regarding the meaning of the applicable rules establishing the scope of taxation, account should be taken of the economic substance of the tax facts.

4. Lacunae resulting from tax rules covered by the reserve of law of the Assembly of the Republic are not susceptible to integration by analogy".

"Article 9 – Interpretation of Law (CC)

1. Interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative thought, taking above all into account the unity of the legal system, the circumstances in which the law was drawn up and the specific conditions of the time in which it is applied.

2. However, the interpreter cannot consider legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

3. In fixing the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most correct solutions and knew how to express its thought in adequate terms".

As to the concept of "housing dedication", the Applicant believes that "the holding and enjoyment of an urban property with housing dedication presupposes, in truth, that its owner from the outset inhabits it (on a permanent or merely sporadic basis)" and that "for this reason, it can only be considered that the urban properties whose ownership is sought to be taxed in this connection must necessarily be dedicated to personal purposes" (cf. articles 99 and 100 of the request for arbitral pronouncement).

This tribunal concurs with the position advocated in the arbitral decision dated 18/09/2013, issued in the context of case no. 49/2013, which is reproduced below: «The expression "with housing dedication" inculcates, upon a simple reading, an idea of real and present functionality. From the rule in question it is not possible to extract, by interpretation, that, as is stated in the respondent's reply, the legislator's choice of that expression is intended to integrate "other realities" beyond those identified in article 6, no. 1, paragraph a), of the CIMI.» Now, in the view of this tribunal, such interpretation has no legal support in light of the principles contained in articles 9 of the Civil Code and 11 of the General Tax Law.

And if the legislator had intended to include in the scope of taxation other realities than those resulting from the classification set out in article 6 of the CIMI, it would have expressly indicated this. However, it did not.

For its part, the Respondent argues that "the legislator does not refer to 'property intended for housing', having instead opted for the notion of 'housing dedication', an expression that is different and broader, whose sense is to be found in the need to integrate other realities beyond those identified in article 6, no. 1, paragraph a) of the CIMI" (cf. article 34 of the Reply).

In the specification of the concept of "property with housing dedication", this tribunal closely follows the decisions dated 18/10/2013 and 13/11/2016 and issued in the context of cases nos. 42/2013-T and no. 215/2016-T.

Thus,

"The expression «housing dedication» does not appear to be able to have any other meaning than that of residential use, that is, urban properties that have an actual use for residential purposes, either because they are licensed for such purpose or because they have that normal purpose.

And we cannot confuse an «housing dedication» which implies an actual dedication of an urban property to that end, with the expectation, or potentiality, of an urban property being able to come to have a «housing dedication».

Building land, not being constructed, does not satisfy, by itself, any condition to be considered as properties with housing dedication, since, on one hand, it does not have a licence of use for housing, and, on the other hand, it is not habitable (because it is simply not constructed).

Therefore, it does not seem to us to be sufficient for it to be encompassed in the rule establishing the objective scope in question that there exists the expectation of an urban property being able to come to have a housing dedication, or of having the potentiality of being able to come to have a housing dedication" (emphasis added).

In effect, the concept of housing dedication must be reduced to something that is capable of being inhabited.

Thus, with regard concretely to building land, what we find is a mere expectation that the same, after construction, may come to have a housing dedication. Therefore, only after the implementation of this dedication – i.e. only after the construction of the property intended for housing – can we consider that that urban property falls within the scope of item 28 of the GIST.

Although in the future of that building land may result properties with housing dedication – which, in the present case, was not to be expected by virtue of the purposes indicated in the request for Subdivision Operation Licence (purposes of commerce and services) filed by the Applicant – so long as it retains its qualification as building land, it cannot be included in the field of application of item 28 of the GIST, in the wording in force at the time of the facts.

On the other hand, the thesis of the Respondent that building land should be classified as properties with housing dedication by force of the provisions of article 45 CIMI, also cannot proceed.

The Respondent argues that: "in the assessment of building land the legislator intended that the methodology of assessment of urban properties in general be applied, thus consideration should be given to all the coefficients, mentioned above, in particular the dedication coefficient provided for in article 41 of the CIMI, moreover such legal requirement results from no. 2 of article 45 of the CIMI, by referring to the value of the authorized or anticipated buildings on the same building land".

In other words, the Respondent states that the notion of dedication of the property is a coefficient that contributes to the valuation of the property in determining the tax patrimonial value, with the dedication coefficient also being applicable in the context of assessment of building land, as provided for in article 41 and in no. 2 of article 45, both of the CIMI.

This tribunal does not, however, agree with the Respondent's understanding, that the notion of dedication of the urban property also results from the provisions of those articles. In fact, one thing is for the legislator to determine that the VPT of building land is determined in a certain way, another is to extract from the rules that set the calculation of VPT, a definition of housing dedication.

On the contrary, and strictly speaking, the specification of the concept of housing dedication must be prior to the determination of the VPT, insofar as that concept is part of the very provision of the rule.

It should not, however, be overlooked that article 45 of the CIMI provides for the assessment of building land, considering as one of its elements the authorized or possible purpose, in function of urban planning conditions. However, and as decided by the arbitral tribunal in the context of the aforementioned case no. 42/2013-T: "We are once again merely in the field of potentialities, of expectations, and this is not sufficient to alter the nature of the property, which continues to be considered as building land, nor to sustain that the property in question comes to have a "housing dedication" for the purposes of the objective scope of item 28.1 of the GIST."

The word "dedication", in this context of the use of a property, has the meaning of "action of assigning something to a particular use".

As can be read in the CAAD decision dated 02/10/2013 issued in case

no. 53/2013-T: "in good hermeneutics, "property with housing dedication", cannot be a property merely licensed for housing or intended for that purpose (that is, it will not be sufficient for it to be a "residential property", having to be a property that already has actual dedication to that purpose".

Thus, "it is to be concluded that the interpretative elements available, including the "circumstances in which the law was drawn up and the specific conditions of the time in which it is applied", clearly point to the conclusion that it was not intended to include within the scope of item no. 28.1 situations of properties that are not yet dedicated to housing, in particular building land held by companies".

A restrictive interpretation of the provision is therefore required, to the effect that it is considered that building land is subject to taxation, but only and solely in the case where the authorized or anticipated construction is intended for residential purposes, that is, for residential units with a value exceeding €1,000,000 (one million euros).

In summary, this tribunal concludes that the Stamp Duty assessments sub judice are illegal by reason of a defect of violation of law, which determines their respective annulment under the terms of article 163 of the Code of Administrative Procedure, applicable under the terms of articles 29, no. 1, paragraph d) of the RJAT and 2, paragraph c) of the LGT.

The request for arbitral pronouncement is thus, entirely well founded.

1. As to the Subsidiary Request for Examination of Unconstitutionality Issues

The Applicant raised, as a subsidiary matter, issues of unconstitutionality of Item 28.1 of the GIST in the event that it were understood that it encompasses building land. By virtue of the interpretation adopted in this decision, the examination of the unconstitutionality of the rule ceases to be useful.

1. As to the Request for Indemnity Interest

It is indeed true that, without fault of the Applicant, acts were committed which the tribunal deems to be illegal.

For the Tax Administration to be condemned to pay indemnity interest, it is necessary, under the terms of no. 1 of article 43 of the General Tax Law, that "(…) it be determined (…) that there was error attributable to the services from which resulted payment of the tax debt in an amount greater than that legally owed".

Thus, by reason of the inescapable illegality of the assessment acts attributable to the AT, which committed them without legal basis, and in light of the proven payment of the tax debt by the Applicant, the latter has the right to payment of indemnity interest under the terms of no. 1 of article 43 of the LGT and article 61 of the CPPT.

C. DECISION

Accordingly, the Tribunal hereby decides as follows:

a) To judge the exception raised by the Respondent to be without merit;

b) To judge the arbitral request filed to be well founded and, consequently, to annul the assessment acts that are the subject of the present arbitral action.

c) To judge well founded the request for condemnation of the Tax and Customs Authority to reimburse to the Applicant the amount of tax paid, plus indemnity interest under the legal terms, from the date on which such payment was made until the date of complete reimbursement thereof;

d) To condemn the Tax and Customs Authority to payment of the costs of the present proceedings.

D. VALUE OF THE PROCEEDINGS

The value of the proceedings is fixed at €494,919.60, under the terms of article 97-A, no. 1, a), of the Code of Procedure and Tax Process, applicable by force of paragraphs a) and b) of no. 1 of article 29 of the RJAT and of no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

E. COSTS

Costs in the amount of €7,650.00 in accordance with Table I attached to the RCPAT, and with the provisions of articles 12, no. 2 and 22, no. 4 of the RJAT, 4, no. 5 of the Regulation of Costs in Tax Arbitration Proceedings and 527, nos. 1 and 2 of the Code of Civil Procedure, ex vi article 29, no. 1, paragraph e) of the RJAT.

Lisbon, 30 April 2019.

Let notification be made.

The Arbitrators,

Fernanda Maçãs (president)

Carla Castelo Trindade (member)

Isaque Marcos Ramos (member)