Stamp Tax on Building Land Over €1M: CAAD Ruling on Clause 28.1 TGIS (542/2016-T)

DECISION

I. REPORT

A..., S.A., legal person no. ..., with registered office at ..., no. ..., ...-... Lisbon, here representing B... – Special Real Estate Investment Fund Closed-ended (hereinafter "Claimant"), with tax identification number ... and with registered office at ..., no. ..., ...-... Lisbon, hereby, pursuant to 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), wherein the Tax and Customs Authority (hereinafter AT) is Respondent, with the objective of obtaining the annulment of the rejection of the request for ex officio review submitted against the Stamp Tax assessment acts no. 2012 ... and no. 2012..., issued by AT under item 28.1 of the General Table of Stamp Tax ("GTST"), relating to the year 2012, in the amount of €10,657.35.

The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD on 26.09.2016 and automatically notified to AT.

In accordance with the provision in subparagraph c) of paragraph 1 of article 11 of RJAT, the sole Arbitral Tribunal was constituted on 25.11.2016.

AT responded, defending the lack of merit of the request, arguing for the maintenance of the assessment acts as they constitute correct interpretation of item 28 of GTST.

The hearing referred to in article 18 of RJAT and the holding of final arguments were waived given the nature of the matter contained in the case file.

The Arbitral Tribunal was duly constituted.

The parties possess legal personality and capacity, are legitimate (articles 4 and 10, paragraph 2, of the same statute and article 1 of Ordinance no. 112-A/2011 of 22 March) and are duly represented.

No nullities, exceptions or preliminary issues exist that would prevent immediate consideration of the merits of the case.

II. STATEMENT OF FACTS

Based on the elements contained in the case file, the following facts are considered proven:

- The Claimant is, within the scope of its activity, the owner of various properties, including residential properties, commercial properties and land for construction;

- In 2012, the Claimant was notified of Stamp Tax assessment acts no. 2012 ... and no. 2012..., issued under item 28.1 of GTST (documents 2 and 3);

- The Stamp Tax assessment act no. 2012 ... related to the property owned by the Claimant located at Place ..., ..., in ..., registered in the property register under article number ..., described in the real property registry office of ..., under number ..., classified as land for construction, with taxable property value of €1,009,200 (document 4);

- The Stamp Tax assessment act no. 2012 ... related to the property owned by the Claimant located at Place ..., ..., in ..., registered in the property register under article number ..., described in the real property registry office of ..., under number ..., classified as land for construction, with taxable property value of €1,065,720 (document no. 5);

- The Claimant proceeded to pay the amount underlying the Stamp Tax assessment acts, in the amount of €10,657.35 (document no. 6);

- On 30 March 2016, the Claimant submitted a request for ex officio review of the Stamp Tax assessment acts sub judice (PAT);

- On 12 May 2016, through Official Letter no. ..., the Claimant was notified of the rejection of the request for ex officio review submitted (document no. 1).

With relevance to the decision, there are no facts that should be considered unproven.

Taking into account the positions assumed by the parties, in light of article 110, paragraph 7 of the Tax Procedure and Process Code and the documentary evidence submitted with the case file, the facts listed above are considered proven with relevance to the decision.

III. LEGAL MATTERS

The main issue raised in these proceedings comes down to whether item 28.1 of GTST, in the wording given by Law no. 55-A/2012 of 29 October, which provides for the taxation of properties with value equal to or greater than €1,000,000, encompasses or does not encompass land for construction.

In this sense, the Claimant argues, in summary, the following:

- Law no. 55-A/2012 of 29 October 2012 made various amendments to the Personal Income Tax Code, the Corporate Income Tax Code, the Stamp Tax Code and the General Tax Law, seeking to "broaden the taxation of capital and property", so as to ensure "an effective distribution of the sacrifices necessary to fulfill the adjustment program".

- Among other amendments, the aforementioned Law added item 28 to GTST, pursuant to which Stamp Tax came to apply to: "ownership, usufruct or right of surface of urban properties whose taxable property value contained in the property register, pursuant to the Municipal Property Tax Code (MPTC), is equal to or superior to €1,000,000:

28.1 - Per property with residential use - 1%;

28.2 - Per property, when the taxpayers who are not residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ministerial ordinance of the Minister of Finance - 7.5%".

- The wording of item 28.1 was subsequently amended by Law no. 83-C/2013 of 31 December (State Budget Law for 2014), effective 1 January 2014, passing to have the following wording: "28.1 - Per residential property or per land for construction whose building, authorized or planned, is for residential use, pursuant to the provisions of the Municipal Property Tax Code - 1%", which has no application to the tax acts sub judice;

- In fact, item 28.1 of GTST should encompass only properties that are effectively devoted to residential purposes, i.e., properties that have (already) a residential use;

- Thus, having regard to the literal wording of item 28.1 of GTST, its scope of application cannot include properties that have another use – other than residential – or properties that do not have any defined use, given that they are not effectively devoted to residential purposes;

- In view of the above analysis, it is evident that the scope of application of item 28.1 of GTST, in its original version, did not include properties that do not have a defined use or that are devoted to purposes other than residential. Indeed, such properties cannot be considered "properties with residential use".

- In this sense, properties registered in the property register as "land for construction" cannot be subject to the special taxation enshrined in item 28.1 of GTST.

- Now, the Stamp Tax assessments sub judice relate to properties that are registered in the property register as "land for construction", pursuant to article 6 of the Municipal Property Tax Code.

- The properties in question are not built, and it is not possible, in their current state, to give them any "residential use".

- In fact, although there is the expectation that, in the future, such properties may be built and that, at that moment, they will meet the conditions necessary for "residential use", currently such properties are not devoted to that use, nor could they be.

- Thus, and in accordance with what was set forth above, the properties in question do not constitute properties with "residential use" and, as such, cannot be included within the scope of application of item 28.1 of GTST of the Stamp Tax Code.

- Therefore, contrary to what results from AT's decision, the Stamp Tax assessments sub judice do not result from the application of the law, being instead manifestly illegal.

- As a subsidiary argument, and without prejudice to what was set forth above, the Claimant understands that the taxation enshrined in item 28 of GTST is contrary to the fundamental principle of equality, enshrined in article 13 of the Constitution of the Portuguese Republic and, in parallel, contrary to the principle of tax equality and contributive capacity enshrined in article 104, paragraph 3 of the same compendium.

- In fact, on the one hand, the special taxation in question applies only to a portion of real estate assets with value superior to €1,000,000.00, i.e., real estate assets intended for residential use – and, in accordance with the wording in effect since 1 January 2014, land for construction whose building, authorized or planned, is for residential use –, with all high-value property intended for other purposes being excluded.

- The rule, not subjecting to taxation urban properties that are not devoted to residential use – even if they have a taxable property value far exceeding €1,000,000.00 – differentiates taxpayers without regard to their respective contributive capacity (cf. article 104, paragraph 3 of the Constitution of the Portuguese Republic).

- On the other hand, this special taxation, in the manner it was implemented – by applying to urban properties, considered individually – fails to effectively "penalize" or "aggravate" all owners who have high-value real estate assets and who, as such, demonstrate superior "contributive capacity".

- In fact, given the tax solution advocated in item 28 in question, if an owner holds only a single urban property and it has a taxable property value superior to €1,000,000.00, it will be subject to special taxation; differently, if an owner holds multiple urban properties with individual value inferior to €1,000,000.00, but which in total amount to a much higher value, it will not be subject to this special taxation.

- The application of the item in question thus generates situations in which unequal treatment is given to equal factual situations, infringing against the general principle of equality and against the principle of contributive capacity, presupposition and criterion of taxation.

- Given what was set forth above, item 28 of GTST – added by articles 4 and 6 of Law no. 55-A/2012 – should be disapplied in the present case because manifestly unconstitutional and, consequently, the Stamp Tax assessments sub judice should be annulled.

- The assessment acts in question are manifestly illegal in accordance with what was set forth above, so the Claimant should be reimbursed the amount of Stamp Tax assessed on the basis of the same, because it was not due.

- The Claimant further requests that, should the present arbitral decision be judged to have merit, it shall be paid, pursuant to article 24, paragraph 1, subparagraph b) and paragraph 5 of RJAT and articles 43 and 100, both of the General Tax Law, the respective compensatory interest for the unduly paid portion of the tax acts in question.

For its part, AT argues, in summary, the following:

- In the absence of any definition of the concepts of urban property, land for construction and residential use under Stamp Tax law, recourse must be had to the Municipal Property Tax Code, in search of a definition that permits assessment of possible subjection to Stamp Tax;

- Pursuant to paragraph 1 of article 2 of the Municipal Property Tax Code, "property is any tract of territory, comprising waters, plantations, buildings and constructions of any nature incorporated or situated thereon, with character of permanence, provided it forms part of the assets of a natural or legal person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the above circumstances, endowed with economic autonomy in relation to the land where they are located, although situated on a tract of territory that constitutes an integral part of diversely-owned assets or has no patrimonial nature";

- In turn, article 6, paragraph 1 of the Municipal Property Tax Code provides on the types of urban properties, considering that land for construction is integrated in this concept, that is, land situated within or outside an urban settlement, for which a license or authorization has been granted, prior notification admitted, or favorable advance information issued for a subdivision or construction operation, and also those that have been declared as such in the title of acquisition, excepting land in which the competent entities prohibit any of those operations;

- The reference to properties with residential use contained in item 28 of GTST of the Stamp Tax Code should be understood broadly, encompassing both built residential properties and land for construction, starting with the very wording of the rule and the concept used.

- Thus, taxation under Stamp Tax shall obey the criterion of adequacy, applying indiscriminately to all holders of properties with residential use with value superior to €1,000,000.00, applying to the wealth evidenced in the value of properties.

- The disputed tax acts constitute, in substance, an interpretation and application in accordance with the law and the Constitution of the Portuguese Republic, and should be upheld.

Let us see what should be understood.

The issue of the inclusion of land for construction within the scope of the substantive rule provided in item 28.1 of GTST, in the wording given by Law no. 55-A/2012 of 29 October, has already been the subject of various arbitral and also judicial decisions, which we follow, in the sense that that rule only encompasses properties with residential use and not land for construction.[1]

Let us thus see the grounds for the legal framework advocated.

1. Regime of Law no. 55-A/2012 of 29 October

Law no. 55-A/2012 of 29 October made various amendments to the Stamp Tax Code and added item 28 to GTST, with the following wording:

"28 – Ownership, usufruct or right of surface of urban properties whose taxable property value contained in the property register, pursuant to the Municipal Property Tax Code (MPTC), is equal to or superior to €1,000,000 – on the taxable property value used for purposes of the Municipal Property Tax:

28.1 – Per property with residential use – 1%;

28.2 – Per property, when the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ministerial 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 concerning the assessment of the tax provided in that item:

"1 – In 2012, the following rules shall 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 in relation to the tax is the one mentioned in paragraph 4 of article 2 of the Stamp Tax Code (hereinafter Stamp Tax Code) on the date referred to in the preceding subparagraph;

c) The taxable property value to be used in the assessment of the tax corresponds to that which results from the rules provided in the Municipal Property Tax Code with reference to the year 2011;

d) The assessment of the tax by the Tax and Customs Authority shall be carried out by the end of November 2012;

e) The tax shall be paid, in a single installment, by taxpayers by 20 December 2012;

f) The applicable rates are the following:

i) Properties with residential use evaluated pursuant to the Municipal Property Tax Code: 0.5%;

ii) Properties with residential use not yet evaluated pursuant to the Municipal Property Tax Code: 0.8%;

iii) Urban properties when the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ministerial ordinance of the Minister of Finance: 7.5%.

2 – In 2013, the assessment of the stamp tax provided in item no. 28 of the respective General Table shall apply to the same taxable property value used for purposes of assessing municipal property tax to be carried out in that year.

3 – The failure to deliver, in total or in part, within the indicated period, the amounts assessed as stamp tax constitutes a tax violation, punished in accordance with the law."

2. Interpretation of the Law

Having regard to the principles of interpretation of the Law, it will be necessary to determine what is the scope of the concept of property with residential use, in order to determine whether or not land for construction is encompassed therein.

Article 11 of the General Tax Law (GTL) establishes the essential rules for interpretation of tax laws as follows:

"Article 11

Interpretation

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

2. Whenever, in tax rules, terms specific to other branches of law are employed, they shall be interpreted in the same sense that they have therein, unless otherwise directly resulting from the law.

3. Where doubt persists regarding the meaning of the substantive rules to be applied, account shall be taken of the economic substance of the taxable facts.

4. Gaps resulting from tax rules covered by the reservation of law of the Assembly of the Republic are not susceptible to analogical integration."

The general principles of interpretation of laws, to which paragraph 1 of article 11 of the GTL refers, are established in article 9 of the Civil Code, which establishes the following:

"Article 9

Interpretation of the law

1. Interpretation shall not be limited to the letter of the law, but shall reconstruct from the texts the legislative intent, having especial regard to the unity of the legal system, the circumstances in which the law was enacted and the specific conditions of the time in which it is applied.

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

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

To proceed with the interpretation of item 28 of GTST, here in dispute, it will be necessary to determine what should be understood as property with residential use, seeking its definition in the Municipal Property Tax Code.

In the Municipal Property Tax Code, the types of properties are enumerated in its articles 2 through 6 as follows:

"Article 2

Concept of property

1 - For purposes of this Code, property is any tract of territory, comprising waters, plantations, buildings and constructions of any nature incorporated or situated thereon, with character of permanence, provided it forms part of the assets of a natural or legal person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the above circumstances, endowed with economic autonomy in relation to the land where they are located, although situated on a tract of territory that constitutes an integral part of diversely-owned assets or has no patrimonial nature.

2 - Buildings or constructions, even though mobile by nature, are deemed to have character of permanence when devoted to non-transitory purposes.

3 - Character of permanence is presumed when buildings or constructions are situated on the same site for a period exceeding one year.

4 - For 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 land situated outside an urban settlement, except those to be classified as land for construction, pursuant to paragraph 3 of article 6, and those having as normal destination a use generating commercial and industrial income, provided that:

a) They are devoted to or, in the absence of concrete devotion, have as normal destination a use generating agricultural and forestry income;

b) Not having the devotion 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 - Rural properties also include land situated within an urban settlement, provided that, by virtue of legally approved provision, they cannot be put to a use generating any income or can only be put to a use generating agricultural or forestry income and are actually being put to this use.

3 - Also rural properties are:

a) Buildings and constructions directly devoted to the production of agricultural or forestry income, when situated on the land referred to in the preceding paragraphs;

b) Waters and plantations in the situations to which paragraph 1 of article 2 refers.

4 - For purposes of this Code, urban settlements are considered, beyond those situated within legally fixed perimeters, nuclei with a minimum of 10 dwelling units served by public use roads, with their perimeter delimited by points distanced 50 m from the axis of the roads, in the transversal sense, and 20 m from the last building, in the direction of the roads.

5 - The qualification of income referred to in the present statute is that which is considered for purposes of the personal income tax (PIT).

Article 4

Urban Properties

Urban properties are all those that should not be classified as rural, without prejudice to the provision in 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 principal part.

2. If neither part can be classified as principal, the property is deemed 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 buildings or constructions licensed for such or, in the absence of a license, that have as normal destination each of these purposes.

3 - Land for construction shall be considered land situated within or outside an urban settlement, for which a license or authorization has been granted, prior notification admitted, or favorable advance information issued for a subdivision or construction operation, and also those that have been declared as such in the title of acquisition, excepting land in which the competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land use plans, are devoted to spaces, infrastructure or public facilities.

4 - Included in the provision of subparagraph d) of paragraph 1 are land situated within an urban settlement that are not land for construction nor are covered by the provision in paragraph 2 of article 3 and also buildings and constructions licensed or, in the absence of a license, that have as normal destination purposes other than those referred to in paragraph 2 and also those of the exception in paragraph 3."

From the foregoing it results that, in the classification of properties contained in the Municipal Property Tax Code, the concept of "property with residential use" has no place, with no other legal provision being known that uses this concept.

Thus, in the absence of exact terminological correspondence of the concept of "property with residential use" with any other used in other statutes, various interpretive hypotheses may be advanced.

The starting point for interpretation of that expression "properties with residential use" is, naturally, the text of the law, with it being on the basis of this that the "legislative intent" must be reconstructed, as imposed by paragraph 1 of article 9 of the Civil Code, applicable by virtue of the provision in article 11, paragraph 1, of the GTL.

As results from the decision of CAAD, rendered in the context of process no. 53/2013-T:

"The concept closest to the literal wording of this expression used is manifestly that of 'residential properties', defined in paragraph 2 of article 6 of MPTC as encompassing 'buildings or constructions' licensed for residential purposes or, in the absence of a license, that have as normal destination residential purposes.

If it is understood that the expression 'property with residential use' coincides with that of 'residential properties', it is manifest that the assessments would be tainted by error regarding the factual and legal presuppositions, for all properties with respect to which Stamp Tax was assessed under the aforementioned item no. 28.1 are land for construction, without any building or construction, required to satisfy that concept of 'residential properties'."

However, the non-coincidence of the terms of the expression used in item no. 28.1 of GTST with that derived from paragraph 2 of article 6 of MPTC points in the sense that it was not intended to use the same concept.

The word "devotion" or "use", in this context of the use of a property, has the meaning of "action of destining something to determined use".

"When, as is the rule, rules (legislative formulas) bear more than one meaning, then the positive function of the text translates into giving stronger support to or suggesting more strongly one of the possible senses. For among the possible senses, some will correspond to the more natural and direct meaning of the expressions used, whereas others will only fit within the verbal framework of the rule in a forced, contrived manner. Now, in the absence of other elements inducing the choice of the less immediate sense of the text, the interpreter should opt in principle for that sense which best and most immediately corresponds to the natural meaning of the verbal expressions used, and namely to its technical-legal meaning, in the assumption (not always exact) that the legislator knew how to express its intent correctly."

The relevance of the text of the law is especially emphasized in matters of interpretation of substantive rules of Stamp Tax, which reduce to a mixture, under a common denomination, of an incongruous set of taxes of completely distinct natures (on income, on expenditure, on patrimony, on acts, etc.), which leaves no appreciable margin for application of the primary interpretive criterion, which is the unity of the legal system, which demands its overall coherence.

The acknowledged lack of coherence of Stamp Tax is particularly exuberant in the case of this item no. 28.1, hastily included at the margin of the General State Budget, by a fiscal legislator without perceptible overall fiscal orientation, that is successively implementing norms of fiscal aggravation in keeping with the vicissitudes of budgetary execution, the impositions of international institutional creditors (represented by the "troika") and the oversight of the Constitutional Court.

In truth, although in the "Statement of Reasons" of the Bill no. 96/XII/2nd of which Law no. 55-A/2012 was based, reference is made to the praiseworthy concern of the Government to "reinforce the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary to fulfill the adjustment program" and to its commitment "to ensure that the distribution of those sacrifices will be made by all and not only by those who live from the income of their work", it is manifest, on the one hand, that those reasons of equity, certainly existing, did not begin to apply in mid-2012, already existing at the beginning of the year, when the General State Budget entered into effect, and on the other hand, that the reach of item no. 28.1, by taxing additionally properties with residential use and not also properties that do not have it, allows one to perceive that the concerns of social equity and the proclaimed intention of distribution of sacrifices by all, affects far more some than properly all.

In this context, with no interpretive elements available that permit the detection of legislative coherence in the solution adopted in the aforementioned item no. 28.1 or the correctness or incorrectness of the adopted solution (relevant for interpretive purposes in light of paragraph 3 of article 9 of the Civil Code), the content of the legal text must be the primary element of interpretation, in accordance with the presumption, imposed by the same paragraph 3 of article 9, that the legislator knew how to express its intent in adequate terms.

In light of those meanings of the words "devotion" and "devoted to", which are "give destination" or "apply", the formula used in that item no. 28.1 of GTST, manifestly encompasses properties that are already applied to residential purposes, so it is important to inquire whether it will also encompass properties that, although not yet applied to residential purposes, are destined to these and those whose destination is unknown.

In light of the literal wording of item no. 28.1, it is to be excluded from the scope of Stamp Tax provided therein the land for construction of some claimants that still do not have any defined use, for they are not yet applied or destined to residential purposes. That is, land for construction that does not have defined use cannot be considered property with residential use, for it does not yet have any devotion or other destination than construction of unknown type. An interpretation in the sense that item no. 28.1 refers to properties whose devotion is unknown has not the slightest verbal correspondence in the letter of that rule, so a hypothetical legislative intent of that type cannot be considered by the interpreter of the law, in light of the prohibition that is in paragraph 2 of article 9 of the Civil Code.

(…)

For this reason, it shall be necessary to clarify when it can be understood that a property is devoted to a residential purpose, namely whether it is when that destination is set for it in a licensing act or similar, or only when the actual assignment of that destination is materialized.

From the outset, the comparison of item no. 28.1 of GTST with paragraph 2 of article 6 of the Municipal Property Tax Code, which defines the concept of residential properties, points manifestly in the sense that an actual devotion is necessary.

In truth, a building or construction licensed for residential purposes or, even without a license, but that has residential purposes as its normal destination, is, in light of paragraph 2 of that article 6, a residential property.

For this reason, on the presumption that the legislator of Law no. 55-A/2012 knew how to express its intent in adequate terms (as imposed by article 9, paragraph 3, of the Civil Code that one presume), if it intended to refer to those properties already licensed for residential purposes or that have residential purposes as their normal destination, it would certainly have used the concept of "residential properties", which would express perfectly and clearly its intent, in light of the definition given by that paragraph 2 of article 6 of MPTC.

Consequently, it should be presumed that the use of a different expression is intended to be a different reality, so, in proper hermeneutics, "property with residential use" cannot be a property merely licensed for residential purposes or destined to that purpose (that is, it will not suffice that it be a "residential property"), having to be a property that already has actual devotion to that purpose.

That this is the sense of the expression "devotion", in the same context of classification of properties that MPTC does, is confirmed by article 3 in which, regarding rural properties, reference is made to those "devoted to or, in the absence of concrete devotion, have as normal destination a use generating agricultural income", which shows that devotion is concrete, actual. In truth, as can be seen from the final part of this text, a property can have as destination a determined use and be or not be devoted to it, which shows that devotion is, at the level of the link of a property to a determined use, something more intense than mere destination and which may or may not occur, downstream of this and not upstream.

Moreover, the text of the law by adopting the formula "property with residential use", instead of "urban properties of residential use", which appears in the aforementioned "Statement of Reasons", points strongly in the sense that it is required that residential devotion already be materialized, for only thus the property will be with that devotion.

Regarding article 45 of MPTC, it has no relation to the classification of properties, merely indicating the factors to be weighed in the evaluation of land for construction. What is weighed there, by making reference to the "building to be constructed" is the weighing of the destination of the land, which, as has been seen, is something that, in the context of MPTC, does not imply devotion and occurs before this.

The correctness of this interpretation in the sense that only properties that are actually devoted to residential purposes are included within the scope of item no. 28.1 of GTST is also confirmed by the perceptible ratio legis of the restriction of the field of application of the rule to properties with residential use, in the context of the "circumstances in which the law was enacted and the specific conditions of the time in which it is applied", which article 9, paragraph 1, of the Civil Code also establishes as interpretive elements.

From the outset, the limitation of taxation in Stamp Tax to "properties with residential use" allows one to perceive that it was not intended to encompass within the scope of taxation properties with devotion to services, industry or commerce, that is, properties devoted to economic activity, which is understood in a context in which, as is notorious, the economy is in a recessionary spiral, publicly proclaimed at the highest level, with unemployment rates reaching maximum historical levels, with an avalanche of business closures derived from economic unsustainability.

(…)

For this reason, it is to be concluded that the available interpretive elements, including the "circumstances in which the law was enacted and the specific conditions of the time in which it is applied", point clearly in the sense that it was not intended to encompass within the scope of item no. 28.1 situations of properties that are not yet devoted to residential use, namely land for construction held by companies."

Thus, having regard to the foregoing and considering that the property, subject of the Stamp Tax assessment acts sub judice, constitutes land for construction, with no allegation or proof being made of its actual residential devotion, such property cannot be understood as a property with actual residential use, so Stamp Tax provided in item 28.1 of GTST does not apply to that property.

In this way, the Stamp Tax assessment acts are tainted by a violation of law, by error regarding the legal presuppositions, being therefore illegal.

IV. DECISION

Accordingly, this Arbitral Tribunal decides:

A) To judge the request for arbitral pronouncement to have merit, as proven, and, consequently, to declare illegal and annul the act rejecting the request for ex officio review submitted and the Stamp Tax assessment acts identified in the case file;

B) To judge the request for payment of compensatory interest to have merit, as proven, condemning the Respondent to payment of compensatory interest counted from the date of unduly paid amount until the date of processing of the respective credit note, in accordance with the provision in paragraph 1 of article 43 of the General Tax Law in conjunction with the provision in paragraph 5 of article 61 of the Tax Procedure and Process Code;

C) To condemn the Respondent in the costs of the present proceedings, as the losing party.

V. VALUE OF THE PROCEEDINGS

In accordance with the provision in article 306, paragraph 2 of the Code of Civil Procedure, 97-A, paragraph 1 a) of the Tax Procedure and Process Code and article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the request is fixed at €10,657.35.

VI. COSTS

Pursuant to the provisions in articles 12, paragraph 2 and 22, paragraph 4, both of RJAT, and in article 4, paragraph 4 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the arbitration fee is fixed at €918, in accordance with Table I of the aforementioned Regulation, at the charge of the Respondent.

Notification ordered.

Lisbon, 20 January 2017

The Arbitrator

Magda Feliciano

(The text of the present decision was prepared using a computer, pursuant to article 131, paragraph 5, of the Code of Civil Procedure, applicable by remission of article 29, paragraph 1, subparagraph e) of Decree-Law no. 10/2011 of 20 January (RJAT), with its drafting governed by the orthography prior to the Orthographic Agreement of 1990.)

[1] See decisions of CAAD at www.caad.org.pt and judgments of the Supreme Administrative Court of 9.04.2014, rendered in the context of process no. 1870/13, of process no. 1876/13, of process 1876/13; of 14.05.2014 rendered in process no. 1871/13; of 2.07.2014, rendered in process no. 467/14; of 14.05.14, rendered in process no. 317/14, among others.