Process: 540/2015-T

Date: January 18, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

Arbitral Decision 540/2015-T addressed the controversial application of Stamp Tax (Imposto de Selo) under Clause 28.1 of the General Stamp Tax Table (TGIS) to land for construction. The claimant, a Portuguese corporation, challenged a €12,991.55 Stamp Tax assessment for 2014, levied under Law No. 55-A/2012 as amended by Law No. 83-C/2013, Article 194. The dispute centered on whether the legislator intended Clause 28.1 to tax terrenos para construção (land for construction) or exclusively luxury housing exceeding one million euros in patrimonial value. The claimant invoked multiple constitutional violations, arguing the tax infringed principles of equality, contributive capacity, proportionality, and justice. Specifically, the challenge highlighted arbitrary discrimination between land designated for housing construction versus land for industrial, commercial, or service purposes, despite equivalent assessed values. The claimant contended that the 2013 amendment improperly expanded the tax scope beyond the original legislative intent to target luxury residential properties, noting that parliamentary debates confirmed this purpose. Furthermore, the challenge argued that land classification as 'for housing' was premature and uncertain, since construction purposes can change even after licensing or project approval. The Tax Authority defended the assessment's legality and raised procedural exceptions regarding the timing of the arbitration request, noting only two of three installments were due when proceedings commenced. The CAAD arbitral tribunal, constituted as a singular tribunal in November 2015, dispensed with oral hearings under RJAT Article 16 and scheduled the decision for January 2016, finding the case ready for determination based on written submissions.

Full Decision

ARBITRAL DECISION

I – Report

1.1. A… – …, S.A., with tax identification number … and registered at … (hereinafter referred to as the "Claimant"), having been notified of the assessment of Stamp Tax relating to the year 2014 and effected pursuant to item 28 of the General Stamp Tax Table (TGIS) introduced by Law No. 55-A/2012, of 29/10, in the total amount of €12,991.55, filed, on 7/8/2015, a request for the constitution of an arbitral tribunal and arbitral pronouncement, pursuant to the provisions of art. 2, No. 1, al. a), of Decree-Law No. 10/2011, of 20/1 (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "RJAT"), in which the Tax and Customs Authority ("AT") is the Respondent, seeking, in summary, the "declaration of illegality and unconstitutionality of the said tax act".

1.2. On 5/11/2015 the present Singular Arbitral Tribunal was constituted.

1.3. Pursuant to art. 17, No. 1, of the RJAT, the AT was cited, as the respondent party, to file its answer. The AT filed its answer on 9/12/2015, arguing for the total lack of merit of the Claimant's claim and raising an exception. Notified, by order of 4/1/2016, to pronounce itself on the said exception, the Claimant did so through its pleading of 5/1/2016.

1.4. By order of 12/1/2016, the Tribunal considered, pursuant to the provisions of art. 16, als. c) and e), of the RJAT, that the meeting referred to in art. 18 of the RJAT was unnecessary, and that the case was ready for decision. The Tribunal also fixed the delivery of the said decision for 18/1/2016.

1.5. The Arbitral Tribunal was duly constituted.

II – Submissions of the Parties

2.1. The Claimant hereby alleges, in its initial petition, that: a) "what is at issue in the case is whether the Stamp Tax assessment relating to the year 2014, effected by the application of item 28.1 of the General Stamp Tax Table (TGIS), should or should not be maintained in the legal system"; b) "the Stamp Tax assessment at issue in the case has no tax basis of support, nor any material justification, constituting a true patrimonial loss contrary to the most basic principles of equality, proportionality and justice"; c) "in addition to being illegal, the taxation intended is also manifestly unconstitutional"; d) "the measure in question [underlying Bill No. 96/XII, of 20/9/2012,] was never disclosed and understood otherwise than as taxing 'luxury housing'"; e) "this very fact resulted clearly from the discussion in the general debate of bill No. 96/XII"; f) "it appears clear and indisputable – as successively reiterated by Arbitral and Judicial Jurisprudence – that, with the said item, the legislator never intended to tax the property of land for construction"; g) "the legislative amendment [that included land for construction] aimed only at the 'effectiveness and efficiency of the tax system' if such objective is understood, as it appears to be by the AT, as revenue collection, at any cost"; h) "the taxation in Stamp Tax of land for construction 'the building of which, authorized or foreseen, is for housing', in addition to sacrificing precisely one of the sectors of activity most prejudiced by the 2008 financial crisis, violates the constitutional principles of equality in tax matters and contributive capacity"; i) "the provision that, with the wording given by article 194 of Law No. 83-C/2013, added to item No. 28 of the TGIS land for construction is tainted with unconstitutionality due to violation of the principles of equality and contributive capacity"; j) "no reason is apparent for negatively discriminating against land for construction the building of which, authorized or foreseen, is for housing, in relation to land, with a tax-assessed value exceeding one million euros, the building of which, authorized or foreseen, is, for example, for industry, commerce or services"; l) "no material, legal, fiscal, economic or other foundation appears to justify that the taxation does not apply to all uses and destinations of land for construction"; m) "with the negative, uncritical, arbitrary and random differentiation, between land for the construction of housing and land with other designations, a different treatment is conferred on situations that, from a material perspective, are in all respects similar"; n) "no foundation or minimally plausible and rational justification is apparent for defending that taxpayers who are owners of land for the construction of housing should be fiscally penalized in relation to taxpayers who are owners of land, of equal value, for the construction of industry, commerce or services"; o) "there is no material foundation to sustain the taxation of land for construction (with building, authorized or foreseen, for housing)"; p) "it is to be concluded that the interpretative elements available, including the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', clearly point to the sense that it was not intended to comprehend within the scope of application of item 28.1 land for construction"; q) "even if there is licensing or a project – and, by greater reason, when prior communication is admitted or favorable prior information is issued of a subdivision or construction operation –, the constructive purpose may come to be altered, with the construction of a building intended for another purpose"; r) "the AT cannot classify, ab initio, as if it were a concrete and consolidated reality, that land for construction is destined for housing when the same may be intended, jointly or separately, for many other purposes (e.g. commerce, services, industry, parking, storage, etc)"; s) "the taxation in question constitutes a violation of the constitutional principle of actual income"; t) "the assessment in question is sustained by an uncritical, improvised and unjustified legal amendment, aimed at imposing Stamp Tax on the tax-assessed value of land for construction – in manifest dissonance with what was, declaredly, the sense and purpose of the fiscal measure in question"; u) "this amendment is (i)legal [and] entails direct violation of the most basic constitutional principles in tax matters – namely equality and contributive capacity"; v) "article 194 of Law No. 83-C/2013, in the segment that added land for construction to item No. 28 of the TGIS, should be held materially unconstitutional, due to violation of the principles of equality and contributive capacity"; x) "considering that, according to the Claimant's understanding, the assessment in question suffers from illegality, with the merit of the present challenge, it is entitled to restitution of the tax improperly paid, plus compensatory interest."

2.2. The Claimant concludes that, in light of the above-mentioned, the present Tribunal should judge the present challenge to be well-founded and, consequently, should "a) annul the tax assessment challenged here; [...] b) condemn the Public Treasury to refund to the Claimant the tax improperly paid, plus compensatory interest; c) condemn the Public Treasury to pay costs and other expenses with the proceedings, because it gave rise to them."

2.3. For its part, the AT hereby alleges, in its response, that: a) "in the prayer relief ultimately sought, the Claimant requests the annulment of the tax assessment challenged and, consequently, the condemnation of the Respondent to refund the tax improperly paid, plus compensatory interest [...]. Considering that on the date of presentation of the request for arbitral pronouncement (2015-08-07), the 3rd installment of stamp tax to be borne by the Claimant – to occur by the end of the month of November of this calendar year – was not due, nor paid, it must, necessarily, be understood that the request for arbitral pronouncement can only have as its object the values of tax already previously due and paid (1st and 2nd installments), which would always obstruct the condemnation of the Respondent to the restitution of the total tax assessed. [...] similar understanding applies to the compensatory interest petitioned, with the Claimant having, possibly, a right to compensation only by reference to the values of tax due and already paid"; b) "the Arbitral Tribunal is incompetent ratione materiae to assess the request for a declaration of material unconstitutionality, 'due to violation of the principles of equality and contributive capacity, of article 194 of Law No. 83-C/2013, in the segment that added land for construction to item No. 28 of the TGIS'"; c) "The tax assessment challenged does not suffer from any defect, insofar as it results from the direct application of the applicable legal norm, which has objective elements as its basis, with no room for any subjective or discretionary assessment"; d) "the registration of the property in the urban registry as land for construction (originally under article …, which gave rise to the current article …) occurred following the presentation of declaration Form 1 of IMI No. …, on 2007-10-08, where the housing designation appears, in accordance with the constructive viability declaration issued by the Municipal Council of … on 2007-04-02 [...]. [...] from the subsequent assessment that ascertained the housing designation of the property [...] no request for a second assessment or challenge was presented, pursuant to articles 76 and 77 of the IMI Code. Neither to the present date has any subsequent Form 1 declaration of IMI been submitted, namely in the name of the Claimant, requesting the alteration of the designation intended for the property"; e) "being the tax administration bound by the principle of tax legality, enshrined in article 103, Nos. 2 and 3, of the Constitution and transposed to article 8 of the General Tax Law (LGT), could not fail to give full compliance to the regulations that the ordinary legislator created and which are in force in the tax legal order"; f) "the tax act of assessment challenged does not violate any constitutionally enshrined principle, namely the principle of tax equality and the principle of contributive capacity"; g) "[it can] be concluded on this regulation subject of item 28.1 of the TGIS, as has already been done in the judgment of the STA, of 9.4.2014, proc. No. 1870/12, reiterated in the judgment of the same STA of 14.1.2015, proc. No. 0541/14 that from its 'spirit', 'discernible in the preamble of the bill that is the origin of Law No. 55-A/2012 (Bill No. 96/XII – 2nd, Official Gazette of the Parliament, series A, No. 3, 21/09/2012, p. 44 [...]) nothing more emerges than the concern to raise new tax revenues, on sources of wealth 'more spared' in the past from the Tax Authority's reach than labor income, in particular capital income, securities gains and property'. And despite the amendment promoted by Law No. 83-C/2013, of 31/12, this motivation remained unchanged"; h) "in the sequel of what was learnedly asserted in judgment No. 187/2013 of the Constitutional Court [...], it is imperative to respect the primacy of the legislator's discourse (Dictum des Gesetzgebers) as to the normative-policy choices, which implies leaving to legislative freedom of configuration a broad margin of discretion over the measures that are considered necessary and appropriate to achieve the objectives of economic and fiscal policy, assumed"; i) "according to this constitutional principle, there is no apparent violation of the principle of equality or contributive capacity. This understanding advocated by the Respondent was entirely sanctioned by the very recent Judgment No. 590/2015, of 2015-11-11, of the Constitutional Court"; j) "[the learned Court] concluded [Constitutional] that the norm at issue, i.e., item 28 of the TGIS, does not suffer from any unconstitutionality, with no violation of the constitutional principles that shape the tax law, specifically, the principles of tax equality, contributive capacity and proportionality"; l) "it is clear that the stamp tax assessment challenged does not suffer from any defect, and the request for condemnation to the payment of compensatory interest should fail."

2.4. The AT concludes, from the above stated, that: "the dilatory exception supra invoked should be held to be well-founded, and the Respondent should accordingly be absolved from this proceeding as to the respective petition" and, if that is not to be understood, "the present request for arbitral pronouncement should be held to be without merit, and, consequently, the Respondent should be absolved of all petitions, all with the due and legal consequences."

III – Proven, Unproven Facts and Respective Grounds

3.1. The following facts are considered proven:

i) The Claimant has as its object the carrying out of investments in the real estate area, namely the purchase and sale of properties, for itself or for resale, construction, urbanization, subdivision, administration and leasing of real estate property of its own or third parties, among other activities.

ii) The Claimant was the owner of the property registered in the urban property registry of the Union of Parishes of … and …, under article U – …, which corresponds to land for construction, destined for 'housing' (see PA attached to the case file, namely pp. 12 et seq.), to which a tax-assessed value of €1,299,155.11 was assigned.

iii) In compliance with item No. 28.1 of the TGIS, in the wording given by Law No. 83-C/2013, of 31/12, the Respondent proceeded, on 20/3/2015, to the assessment of Stamp Tax with reference to the period 1/1/2014 to 31/12/2014.

iv) According to what is provided for in art. 120, No. 1, al. c), of the IMI Code, applicable by virtue of the provision of No. 5 of art. 44 of the Stamp Tax Code (CIS), payment of the tax is made in three installments, in the months of April, July and November. On the date of presentation of the request for arbitral pronouncement (7/8/2015), the 3rd installment of stamp tax to be borne by the Claimant was not (unlike the first two installments, as can be seen from pp. 6 to 11 of the PA attached to the present case file) either due or paid.

v) The Claimant proceeded with the disposal of the property in question, in March 2015, to company B… – …, S.A., for the value of €650,000.00 (see doc. No. 2 attached to the initial petition).

vi) Dissatisfied with the assessments in question, the Claimant presented the present request for arbitral pronouncement on 7/8/2015.

3.2. There are no unproven facts relevant to the decision of the case.

3.3. The facts considered pertinent and proven (see 3.1) are grounded in the analysis of the positions expounded by the parties and the documentary evidence attached to the case file.

IV – Preliminary Questions

As to the first question, relating to the value of the case, it is important to note, first of all, that, similarly to what occurs with IMI installments, payment of each of the Stamp Tax installments does not constitute partial payment of the assessment, but rather a mere tax collection technique.

In this sense, several Arbitral Decisions have pronounced themselves, as is the case, for example, of the AD handed down in proc. 726/2014-T, of 10/3/2015, or of the AD handed down in proc. No. 205/2013-T, of 7/3/2014.

In the same sense as those Decisions, see, for example, the AD handed down in proc. 90/2015-T, of 25/9/2015: "the tax assessment is only one and only it will constitute a harmful act, capable of being the object of a single challenge, so that when the law provides for its payment in various installments, staggered in time, the annulment of the tax act will have consequences relating to all of them [...]. What the law does not provide for, either in arbitral proceedings or in judicial challenge proceedings, is the intention to annul payment of isolated tax installments since such effect will only result from the annulment of the tax assessment act which, as we have seen, consists of the quantification of the total amount to be paid and which is only and solely a single tax act. Thus, from the above it results that the Stamp Tax collection notes, object of the [...] request for arbitral pronouncement, are not challengeable per se, insofar as they do not constitute acts of tax assessment". (Emphasis ours.)

However, reading the present case file, it is verified that the request for arbitral pronouncement is not aimed at the autonomous challenge of the (first) Stamp Tax installments (and, for that reason, does not identify them, as such, as being the object of the present request for arbitral pronouncement) – it states, instead, that it intends the "declaration of illegality and unconstitutionality of the said tax act" (and not, per se, of installments of the same).

However – and as the AT correctly points out in its answer –, if it is true that the Claimant requests "the annulment of the tax assessment challenged and, consequently, the condemnation of the Respondent to refund the tax improperly paid, plus compensatory interest [...]. [it cannot fail to be relevant to note that,] considering [the] date of presentation of the request for arbitral pronouncement (2015-08-07), the 3rd installment of stamp tax to be borne by the Claimant [...] was not due, nor paid, [so that] it must, necessarily, be understood that the request for arbitral pronouncement can only have as its object the values of tax already previously due and paid (1st and 2nd installments)". In addition, there is no evidence in (nor was brought to) the case file of proof that the 3rd installment was paid at a later time.

In these terms, with which we agree, the value of the case now under analysis is altered to €8,661.02 (= €4,330.51+€4,330.51). This delimitation does not imply alteration of the value of the costs.

As to the second preliminary question, relating to the exception invoked by the AT that there is "material incompetence of the Arbitral Tribunal to assess the request for a declaration of material unconstitutionality of article 194 of Law No. 83-C/2013, of 31/12, in the segment that added land for construction to item No. 28 of the TGIS" (request that appears in art. 146 of the request for arbitral pronouncement), it is verified that the Respondent is likewise correct.

With effect, there is no doubt whatsoever that the said request for declaration of unconstitutionality was petitioned ("article 194 of Law No. 83-C/2013, in the segment that added to item No. 28 of the TGIS land for construction, should be held materially unconstitutional, due to violation of the principles of equality and contributive capacity") and that the present Arbitral Tribunal does not have competence to declare the unconstitutionality of the said norm (or any other).

From the above, it is concluded that the present Arbitral Tribunal is incompetent to assess (and decide on) the said request (which does not exhaust the petitions subject of the present dispute), as a dilatory exception occurs leading to the absolution of the AT from this proceeding as to the same, in accordance with the provisions of arts. 576, No. 2, and 577, al. a), and 278, No. 1, all of the Code of Civil Procedure, ex vi art. 29, No. 1, al. e), of the RJAT.

V – On the Law

In the present case, the essential questions that arise are whether, as the Claimant alleges: i) "the taxation in Stamp Tax of land for construction 'the building of which, authorized or foreseen, is for housing' [...] violates the constitutional principles of equality in tax matters and contributive capacity [...] [and] constitutes a violation of the constitutional principle of actual income"; ii) "the interpretative elements available, including the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', clearly point to the sense that it was not intended to comprehend within the scope of application of item 28.1 land for construction"; iii) "the assessment in question is sustained by an uncritical, improvised and unjustified legal amendment". Finally, the Claimant's request for restitution of the tax allegedly "improperly paid, plus compensatory interest" will be analyzed [iv)].

i) to iii) For the resolution of the enumerated questions, it is important to have in mind the evolution and framework of the said item 28, both before and after the amendment determined by art. 194 of Law No. 83-C/2013, of 31/12 (which is the wording applicable to the present case).

In that sense, reference becomes useful to the Judgment of the STA of 9/4/2014 (proc. No. 1870/13), which, like other STA judgments – e.g.: Judgment of 9/4/2014 (proc. No. 48/14); Judgments of 23/4/2014 (proc. Nos. 270/14, 271/14 and 272/14); Judgment of 25/11/2015 (proc. 1338/15) – carries out a detailed historical and chronological analysis of the evolution and framework of item 28 now under analysis:

"The concept of 'urban property (building) with housing designation' was not defined by the legislator. Neither in Law No. 55-A/2012, which introduced it, nor in the IMI Code, to which No. 2 of article 67 of the Stamp Tax Code (equally introduced by that Law), refers in a subsidiary manner. And it is a concept which, probably due to its imprecision – a fact all the more serious given that a function of it shapes the scope of objective application of the new taxation –, had a short life, as it was abandoned upon the entry into force of the Law of State Budget for 2014 (Law No. 83-C/2013, of 31 December), which gave new wording to that item No. 28 of the General Table, and which now shapes its objective scope of application through the use of concepts that are legally defined in article 6 of the IMI Code.

This amendment – to which the legislator did not attribute an interpretative character, nor does it appear to us that it did –, merely makes unequivocal for the future that land for construction the building of which, authorized or foreseen, is for housing is comprised within the scope of item 28.1 of the General Stamp Tax Table (provided that its respective tax-assessed value is of a value equal to or exceeding 1 million euros)". [End of citation.] (Emphasis ours.)

Before the legislative amendment that innovatively proceeded to include the said land for construction, it was necessary to ascertain, making use of diverse interpretative elements, whether, in the absence of literal reference, such land could, nonetheless, be included within the objective scope of application of the said item 28. And, for that reason, the said judgment proceeded, saying:

"[With the legislator] offering no clarification [in relation to past situations [i.e., assessments prior to 2014], such as that which is at issue in the present case, it does not appear possible to follow [as to these] the recurrent's interpretation, insofar as it does not result unequivocally either from the letter, or from the spirit of the law that the intention thereof was, ab initio, to comprise within its objective scope of application land for construction for which the construction of residential buildings was authorized or foreseen, as results today unequivocally from item 28.1 of the General Stamp Tax Table. [Emphasis ours.]

From the letter of the law nothing unequivocal results, furthermore, for it itself by using a concept which it did not define and which was also not defined in the act to which it referred in a subsidiary manner lent itself, unnecessarily, to ambiguities, in a matter – of tax incidence – in which certainty and legal security should also be supreme concerns of the legislator.

And from its 'spirit', discernible in the preamble of the bill that is the origin of Law No. 55-A/2012 (Bill No. 96/XII – 2nd, Official Gazette of the Parliament, series A, No. 3, 21/09/2012, p. 44 [...]) nothing more emerges than the concern to raise new tax revenues, on sources of wealth 'more spared' in the past from the Tax Authority's reach than labor income, in particular capital income, securities gains and property, reasons which make no relevant contribution to the clarification of the concept of 'buildings (urban) with housing designation', as they take it for granted, without any concern to clarify it. Such clarification would, however, have emerged – as reported in the Arbitral Decision handed down on 12 December 2013, in process No. 144/2013-T, available in the CAAD database –, upon the presentation and discussion in the Parliament of that bill, in the words of the Secretary of State for Tax Affairs, who would have expressly referred, as is gathered from the Official Gazette of Parliament (DAR I Series No. 9/XII – 2, of 11 October, p. 32) that: 'The Government proposes the creation of a special tax on urban residential properties of higher value. It is the first time in Portugal that a special tax is created on properties of high value intended for housing. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses of a value equal to or exceeding 1 million euros' (emphasis ours), from which it is gathered that the reality to be taxed bearing in mind are, after all, and despite the terminological imprecision of the law, 'buildings (urban) residential', in current language 'houses', and not other realities.

[...]. [...] referring the norm of tax incidence of stamp tax to urban buildings with 'housing designation', without a specific concept being established for that purpose, cannot from it be extracted that it contains a future potentiality, inherent to a distinct building that perhaps may come to be erected on the land.

It is concluded therefore, in conformity with what was decided in the judgment under appeal, that, resulting from article 6 of the IMI Code a clear distinction between urban buildings 'residential' and 'land for construction', the latter cannot be considered as 'buildings with housing designation' for the purposes of what is provided for in item No. 28.1 of the General Stamp Tax Table, in its original wording, which was given to it by Law No. 55-A/2012, of 29 October." [End of citation.]

In summary, from this it is deduced that: 1) with the new wording of item 28.1 of the TGIS, given by art. 194 of Law No. 83-C/2013, of 31/12 (applicable to the present case, as it is a tax of the year 2014), the objective scope of application of the norm was innovatively broadened, by explicitly including land for construction the building of which, authorized or foreseen, is for housing; 2) the application of the said wording is unequivocal, leaving no room for doubt, in light of the literal element of the norm.

With effect, for the correct legal interpretation it is necessary to consider, from the outset, the starting point and limit that constitutes the literal element.

In the same sense, see, among many other judgments, the following: "To interpret the law is to attribute to it a meaning, to determine its sense in order to understand its correct application to a concrete case. Legal interpretation is carried out through elements, means, factors or criteria that should be used harmoniously and not in isolation. The first are the words in which the law expresses itself (literal element); the others which are subsequently resorted to, constitute the elements, generally called logical (historical, rational and teleological). The literal element, also called grammatical, are the words in which the law expresses itself and constitutes the starting point of the interpreter and the limit of interpretation." (Judgment of the STA of 29/11/2011, proc. 701/10).

From the above it results that the possibility of making use of the various interpretative elements is not excluded, in order, from them, to reconstruct the legislative thought (see art. 9, No. 1, of the Civil Code); however, always keeping in mind that such legislative thought will have to have a minimum correspondence with the letter of the law (see art. 9, No. 2) and that, in fixing the sense and scope of the law, the interpreter has to presume that the legislator enshrined the most appropriate solutions and that it knew how to express its thought in adequate terms (see art. 9, No. 3).
Otherwise, there would be the risk of falling into a subjectivism that the said art. 9 does not permit – a risk that could, without any justifiable reason, prevent the application of clear legal texts, simply because of the overvaluation of elements foreign to it but which were deemed to translate the "true will of the legislator".

In this same sense, see the following judgment: "BAPTISTA MACHADO refers, with respect to the position of our Civil Code regarding the problem of interpretation: 'Art. 9 of this Code, which addresses the subject, did not take a position in the controversy between the subjectivist doctrine and the objectivist doctrine. This is evidenced by the fact that it does not refer, either to the 'will of the legislator', or to the 'will of the law', but rather points to the 'legislative thought' as the aim of interpretative activity (art. 9, 1). This expression, purposefully colorless, means precisely that the legislator did not wish to commit itself. [...] The said text begins by stating that interpretation should not be limited to the letter but reconstruct from it the 'legislative thought'. Letter (text) and spirit (thought) of the law are contrasted, declaring that interpretative activity should – as it must – seek this from that. The letter (the linguistic statement) is, thus, the starting point. But not only, as it also performs the function of a limit, pursuant to art. 9, 2: it cannot be considered as understood among the possible senses of the law that legislative thought (spirit, sense) 'that does not have in the letter of the law a minimum of verbal correspondence, although imperfectly expressed'. It may be necessary to proceed to an extensive or restrictive interpretation, or even perhaps to a corrective interpretation, if the verbal formula was highly unfortunate, to the point of completely missing the mark. But, even in this latter case, it will be necessary that from the text 'misfired' at least indirectly an allusion to that sense is gathered that the interpreter comes to adopt as a result of the interpretation. In this way, the excess of an extreme subjectivism that tends to abstract completely from the legal text when, through whatever elements outside the text, it discovers or judges to discover the will of the legislator is avoided. This does not mean that it is not possible to verify the possibility of texts appearing in such a way ambiguous that only the resort to those external elements enables us to extract from them some sense. But, in such hypotheses, this sense can only have value if it is still possible to establish some relationship between it and the unfortunate text that is intended to be interpreted.'» (Judgment of the STJ No. 4/2015, of 24/3/2015).

Now, from the present legal text none of the exception situations supra identified is drawn (and which, in theory, could lead to a restrictive or even corrective interpretation): the text in question does not yield an allusion even to the sense that the Claimant proposes for it in the case file; and there is no insuperable contradiction or ambiguity (neither small nor great) in it that justifies resorting to external elements to determine, by them, what should be understood from the linear reading of the literal text. These conclusions were already implicit in the analysis that the Judgment – supra cited – of the Venerable STA made of the inclusion "unequivoc[al] for the future [of] land for construction the building of which, authorized or foreseen, is for housing [in the] scope of item 28.1 of the General Stamp Tax Table".

From the above, it is concluded that the Claimant is not correct when it says that "the assessment in question is sustained by an uncritical, improvised and unjustified legal amendment", or again when it seeks to impose an interpretation that makes use of "interpretative elements" (such as the historical, or the teleological) without minimum correspondence with the new literal wording of the norm.

What is undeniable to recognize is that the literal amendment in question, in addition to being unequivocal, expresses a change in legislative thought to which the applier cannot be insensitive (under penalty of passing from "interpretation" to "alteration of sense" of the norm, which, as is known, is prohibited to him); in addition to which it is evident that the new wording allows identifying, more clearly, and with recourse to concepts legally defined in art. 6 of the IMI Code, the objective scope of application of the norm in question.

Regarding the Claimant's allegation that "the taxation in Stamp Tax of land for construction 'the building of which, authorized or foreseen, is for housing' [...] violates the constitutional principles of equality in tax matters and contributive capacity [...] [and that] constitutes a violation of the constitutional principle of actual income", it is appropriate to refer, in its entirety, to the grounds of the recent Judgment of the Constitutional Court No. 590/2015, of 11/11/2015, according to which the norm of items 28 and 28.1 of the TGIS does not violate the mentioned constitutional principles when imposing annual taxation on the ownership of urban buildings with housing designation whose tax-assessed value is of a value equal to or exceeding €1,000,000.00 (note, in this respect, that, although this decision analyzes the prior wording of the norm – and, therefore, does not specifically consider land for construction –, there is no reason to see why not to extend to the same the line of argumentation used). With effect, read the following excerpts:

"The recurrent believes that the questioned regulation deserves constitutional censure, due to violation of the principles of proportionality, equality and contributive capacity, fundamentally on the basis of the consideration, on the one hand, that the measure is not apt for the stated purpose and, on the other, that it strikes arbitrarily only some property owners of some assets. [...] the recurrent's argument [considers that the taxation at issue], in its perspective, assumes an unsystematic and arbitrary character, on the basis of the consideration that the taxation of real estate property should be made under IMT and IMI, and because it discriminates without rational foundation taxpayers with the same contributive capacity. Without reason, it is advanced. First, from the inscription of the taxation under analysis within the scope of Stamp Tax, and not of other types of taxes, there does not result, in itself, infraction of any parameter of constitutionality. Even if it were to be concluded that the introduction of a factor of incoherence, or even of imbalance, in the system of taxation of real estate property [...], the mere unsystematic nature of the questioned norm is not apt to determine constitutional censure [...]. Neither is there to be found in the norm of tax incidence at hand an arbitrary fiscal measure, because devoid of rational foundation. [...] the legislative amendment [determined by Law No. 55-A/2012, of 29/10] had as its purpose to broaden the taxation of property, making it fall more intensely on property which, by its value substantially superior to that of the generality of urban buildings with housing designation, reveals greater indicators of wealth and, as such, is susceptible of founding the imposition of the increased contribution for the sanitation of public accounts on its holders, in realization of the aforesaid 'principle of social equity in austerity'. [...]. It is to be referred that the Constitution does not impose the creation of a general tax on property, attributing to taxation the function of contributing to equality among citizens (article 104, No. 3, of the Constitution), with the legislator being free as to the solution to adopt. It can, as CASALTA NABAIS points out, in pursuit of such constitutional objective, 'proceed to the discrimination of property, taxing the highest and exempting the lowest or adopting progressive rates' (ibid., p. 436). And even if the principle of contributive capacity may extract a general model on property with a tax base broadened to all manifestations of wealth, the practical obstacles opposed to it are susceptible of leading in reality to the creation of inequalities among taxpayers. [...]. [...] there persists an effective connection between the tax contribution and the economic prerequisite selected for the object of the tax, without infringing the principle of contributive capacity, whose reach, not being excluded, diminishes within the scope of taxation of property, as opposed to what happens in taxation on income. [...]. With no violation of the parameters of constitutionality invoked by the recurrent, nor of any others, the [...] appeal fails." (Judgment of the Constitutional Court No. 590/2015, of 11/11/2015).

The Claimant further alleges that, "even if there is licensing or a project – and, by greater reason, when prior communication is admitted or favorable prior information is issued of a subdivision or construction operation –, the constructive purpose may come to be altered, with the construction of a building intended for another purpose", and that "the AT cannot classify, ab initio, as if it were a concrete and consolidated reality, that land for construction is destined for housing when the same may be intended, jointly or separately, for many other purposes (e.g. commerce, services, industry, parking, storage, etc.)".

There is no way such arguments can succeed. With effect, the norm of item 28 is quite explicit when it states that it includes land for construction "the building of which, authorized or foreseen, is for housing". This means, proceeding with a mere declarative interpretation, that the provision of building for housing is contemplated, even if such provision does not come to be concrete, or if the constructive purpose can, in a hypothetical plane, come to be altered. Having been attached to the case file the sufficient elements to consider that, in the present case – and as can be seen from pp. 12 et seq. of the PA –, it is a matter of land for construction with authorized building, it is concluded that the Claimant is correct in no way.

iv) In light of the provision of No. 5 of art. 24 of the RJAT – in the part where it says that "payment of interest, regardless of its nature, is due, pursuant to the terms provided for in the general tax law and in the Code of Tax Procedure and Process" –, it has been understood that such norm permits the recognition of the right to compensatory interest in arbitral proceedings.

It is justified, from the above stated, to analyze the Claimant's request for payment of compensatory interest.

Compensatory interest is due when it is determined, in gracious objection or judicial challenge, that there was error attributable to the services from which resulted payment of the tax debt in an amount superior to that legally due (see art. 43, No. 1, of the LGT).

It is, therefore, a necessary condition for the attribution of the said interest the demonstration of the existence of error attributable to the services. In that sense, see, for example, the following judgments: "The right to compensatory interest provided for in No. 1 of art. 43 of the LGT [...] depends on having been demonstrated in the proceedings that that act is affected by error as to the facts or law attributable to the AT." (Judgment of the STA of 30/5/2012, proc. 410/12); "The right to compensatory interest provided for in No. 1 of article 43 of the General Tax Law presupposes that in the proceedings it is determined that in the assessment 'there was error attributable to the services', understood as the 'error as to the facts or law attributable to the Tax Administration'" (Judgment of the STA of 10/4/2013, proc. 1215/12).

Now, as does not result from what was said with respect to points i) to iii), there was no error attributable to the services – which, therefore, determines the maintenance of the assessment in the legal order and prevents the return of the amount paid – it is concluded, in conformity, for the lack of merit of the request for payment of compensatory interest to the Claimant.

VI – DECISION

In light of the above stated, it is decided:

  • To hold the dilatory exception, for material incompetence, to be well-founded, regarding the request for a declaration of material unconstitutionality of article 194 of Law No. 83-C/2013, of 31/12, in the segment that added land for construction to item No. 28 of the TGIS.

  • To hold the request for arbitral pronouncement to be without merit, regarding the assessment of Stamp Tax for the year 2014, maintaining the same integrally in the legal order, and accordingly absolving the respondent entity from the petition.

  • To hold the request also to be without merit in the part relating to the recognition of the right to compensatory interest in favor of the claimant.

The value of the case is fixed at €8,661.02 (eight thousand six hundred sixty-one euros and two cents), pursuant to articles 32 of the Code of Tax Procedure and Administrative Procedure and 97-A of the Code of Tax Procedure and Process, applicable by virtue of the provision of art. 29, No. 1, als. a) and b), of the RJAT, and article 3, No. 2, of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

Costs to be borne by the claimant, in the amount of €918.00, pursuant to Table I of the RCPAT, and in compliance with the provisions of articles 12, No. 2, and 22, No. 4, both of the RJAT, as well as of article 4, No. 4, of the said Regulation.

Notify.

Lisbon, 18 January 2016.

The Arbitrator,

Miguel Patrício

Document prepared on computer, pursuant to the provision of article 131, No. 5, of the Code of Civil Procedure, applicable by referral of art. 29, No. 1, al. e), of the RJAT.

The drafting of this decision is governed by the spelling prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto de Selo) applicable to land for construction under Clause 28.1 of the TGIS?
Under the amendment introduced by Article 194 of Law No. 83-C/2013, Stamp Tax under Clause 28.1 of the TGIS is applicable to land for construction where the building authorized or foreseen is for housing purposes, when the patrimonial tax value exceeds one million euros. However, this application remains legally controversial, with multiple arbitral and judicial decisions questioning whether the legislator genuinely intended to include terrenos para construção within the scope of this provision, which was originally presented to Parliament as targeting luxury housing properties rather than undeveloped construction land.
What constitutional principles were invoked to challenge the Stamp Tax assessment on high-value properties?
The constitutional principles invoked to challenge the Stamp Tax assessment included: (1) the principle of equality in tax matters (igualdade fiscal), arguing that land for housing construction was arbitrarily discriminated against compared to equally-valued land for industrial, commercial, or service construction; (2) the principle of contributive capacity (capacidade contributiva), contending the tax lacked correlation to actual economic capacity or income; (3) the principle of proportionality, claiming the tax was excessive and unjustified; (4) the principle of justice; and (5) the principle of actual income (rendimento real), as the tax was imposed on asset ownership without generating income or liquidity.
How does the CAAD arbitral tribunal process work for contesting Stamp Tax liquidations in Portugal?
The CAAD (Centro de Arbitragem Administrativa) arbitral tribunal process for contesting Stamp Tax liquidations follows the Legal Framework for Arbitration in Tax Matters (RJAT - Decree-Law No. 10/2011). The taxpayer files an arbitration request under Article 2(1)(a) of RJAT, naming the Tax and Customs Authority as respondent. An arbitral tribunal is constituted (singular or collective depending on the amount). The AT is formally cited to file a written response and may raise exceptions. Under Article 16 of RJAT, the tribunal may dispense with oral hearings if the case is suitable for decision based on written submissions. The tribunal must deliver its decision within the statutory deadline, typically after allowing parties to address any preliminary exceptions raised.
Did the legislator intend Clause 28.1 of the TGIS to apply to terrenos para construção or only luxury housing?
According to the claimant's arguments supported by parliamentary debate records and the legislative history of Bill No. 96/XII of 2012, the legislator expressly intended Clause 28.1 of the TGIS to apply exclusively to luxury housing properties - completed dwellings with high patrimonial values. The measure was publicly presented and discussed as targeting wealthy property owners. The subsequent inclusion of terrenos para construção (land for construction) through Article 194 of Law No. 83-C/2013 was characterized as a legislative amendment focused solely on 'effectiveness and efficiency of the tax system' understood as revenue collection. Multiple arbitral and judicial decisions had concluded that the legislator never originally intended to tax construction land, making the 2013 amendment a controversial expansion lacking material justification.
What was the outcome of Arbitral Decision 540/2015-T regarding the 2014 Stamp Tax assessment under Law 55-A/2012?
The complete outcome of Arbitral Decision 540/2015-T is not fully provided in the text excerpt, which concludes mid-argument during the Tax Authority's response regarding procedural timing issues. The tribunal scheduled delivery of its decision for January 18, 2016, after determining that oral hearings were unnecessary under Article 16 of RJAT. Based on the arbitral tribunal's case management decisions and the substance of arguments presented, the tribunal would have addressed whether the €12,991.55 Stamp Tax assessment for 2014 under Clause 28.1 should be annulled on grounds of illegality and unconstitutionality, and whether the claimant was entitled to reimbursement plus compensatory interest for amounts already paid.