Stamp Tax on Vertical Property: CAAD Ruling on Verba 28.1 TGIS Liquidation (543/2016-T)

ARBITRAL DECISION

REPORT

1. On 1 September 2016, A..., taxpayer no. ... and B..., taxpayer no. ..., hereinafter referred to as Applicants, residents in Portugal, requested the constitution of an arbitral tribunal and made a request for arbitral pronouncement, pursuant to subsection (a) of paragraph 1 of Article 2 and subsection (a) of paragraph 1 of Article 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to only as LRAT), in which the Tax and Customs Authority (hereinafter referred to as TCA) is the Respondent.

2. The Applicants are represented, within the scope of the present proceedings, by their legal representative, Dr. C..., and the Respondent is represented by legal practitioners, Dr. D... and Dr. E....

3. The request for constitution of the arbitral tribunal was accepted by the Honourable President of CAAD and was notified to the Respondent on 26 October 2016.

4. Through the request for constitution of the arbitral tribunal and for arbitral pronouncement, the Applicants seek the annulment of the acts of assessment of Stamp Tax no. 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., and 2016..., relating to the year 2015, in the total amount of € 13,661.70, affecting the units susceptible to independent use that make up the urban property, constituted under a vertical property regime or total property, located at Rua ..., no. ... and ..., in Lisbon.

5. Having verified the formal regularity of the request presented, pursuant to subsection (a) of paragraph 2 of Article 6 of LRAT and as the Applicants did not proceed to appoint an arbitrator, the undersigned was designated by the President of the Deontological Council of CAAD.

6. The Arbitrator accepted the designation made, with the arbitral tribunal having been constituted on 30 November 2016, at the seat of CAAD, located at Avenida Duque de Loulé, no. 72-A, in Lisbon, as shown in the minutes of constitution of the arbitral tribunal that were drawn up and which are attached to the present proceedings.

7. The first meeting of the arbitral tribunal, referred to in Article 18 of LRAT, did not take place, as it was waived, given what was requested by the Respondent within the response it presented on 18.01.2017, and because, after being notified for that purpose, the Applicants made no submissions.

8. As there was no need for the production of additional evidence, beyond that which is already incorporated in the proceedings by documentary means, and as it was not envisioned that the parties need to correct their respective procedural documents, with the process having all the necessary elements for the pronouncement of the decision, for reasons of procedural economy and efficiency, the prohibition of the performance of useless acts, and given the position manifested by the parties, expressed and tacitly (given the silence of the Applicants), the Tribunal deemed it appropriate to waive the holding of the meeting referred to in Article 18 of LRAT.

9. No submissions were presented by the parties.

10. The Tribunal, in compliance with the provisions of paragraph 2 of Article 18 of LRAT, set 30 May 2017 as the date for the pronouncement of the arbitral decision, and warned the Applicants that they should proceed with the payment of the subsequent arbitral fee, pursuant to paragraph 3 of Article 4 of the Regulation of Costs in Tax Arbitration Proceedings, and communicate such payment to CAAD.

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

II. The Applicants sustain their claims, in summary, in the following manner:

The Applicants sustain the request for annulment of the acts of assessment of stamp tax to which they were subject, regarding the floors or parts susceptible to independent use, allocated to housing, of the property located at Rua ..., no. ... and ..., parish of ..., municipality of Lisbon, which is held under a vertical property regime, as illegal, as they are affected by the following defects:

a) Defect of violation of ordinary law – error in the assumptions for application of entry 28.1 of the GGST, with the Applicants defending that "for purposes of objective incidence of this tax, in the case of a property held under a vertical property regime, the relevant patrimonial value is that which is attributed to each of the floors or residential divisions", therefore, being "the patrimonial value of each of the twenty-three fractions allocated to housing, determined separately, insofar as they constitute economically independent parts, is between € 26,620.00 and €65,830.00" "and given that none of the floors with independent use, subject to the present request for arbitral pronouncement, has a patrimonial value equal to or exceeding € 1,000,000.00, the legal assumption for the incidence of stamp tax, provided for in entry 28 of the GGST, is not satisfied, and therefore, the acts of assessment subject to the present request for arbitral pronouncement are illegal."

b) Defect of violation of constitutional law, by violation of the principles of tax legality, fiscal equality, contributive capacity, justice, the prevalence of material truth over legal-formal reality, and proportionality in tax matters, set forth in the Constitution of the Portuguese Republic, insofar as the Applicants understand that the TCA, on the one hand, treats "equal situations in a different manner (...) by defending that urban properties, registered in the property matrix in accordance with the same legal rules, will be subject to stamp tax, by the application of entry 28 of the GGST (...) [the] truth is that the Tax Authority treats equal situations in a distinct manner:

• when it considers, for purposes of IMI assessment, the registration in the matrix of properties held under a vertical property regime, in accordance with the IPIT (which is based on the same registration rules applied in the registration of properties constituted under a horizontal property regime) - assessed individually in relation to each of the parts, floors or divisions with independent use;

• as for the incidence of stamp tax by the said entry no. 28 of the GGST, even though it proceeds to its assessment individually, floor by floor, the truth is that, in order to reach the value of € 1,000,000.00, required by the said tax entry, it adds all the respective patrimonial values contained in the respective matrices."

c) And on the other hand, that "[the] distinction "created" by the Tax Administration, between properties constituted under a horizontal property regime and a total property regime is an "innovation" without legal support and justification, especially because nothing is provided either within entry 28.1 of the General Table of Stamp Tax, or under the IPIT, and therefore, it is that which violates the principle of tax equality."

d) Furthermore stating, as to this matter that "[entry] 28 of the GGST was based on the constitutional principle of contributive capacity, being in the sense that urban properties, with housing allocation, of value equal to or exceeding € 1,000,000.00, insofar as they are considered luxury properties, should be subject to a special rate of stamp tax, permitted by the principle of taxation on extraordinary wealth in the ownership, usufruct, or right of superficies of luxury properties with housing allocation, based on the said principle of contributive capacity, and which justifies the realization of an additional contributive effort. The criterion of the sum of the patrimonial values attributed to each part or division, with independent use for purposes of stamp tax assessment, normative interpretation upheld by the Tax Authority, completely undermines and violates the constitutional understanding of the principle of contributive capacity."

e) Defect of erroneous quantification of income and patrimonial values, the Applicants understand that having married "under a regime of separation of property (...)" they are "co-owners of the urban property on which the present stamp tax assessments, subject to the present request for arbitral pronouncement, were levied (...)" Thus, and in this sequence, they defend that "pursuant to the provisions of Article 1403 of the Civil Code, the now applicants are simultaneously holders of the right of ownership over the said urban property, and insofar as nothing was determined to the contrary, their respective shares over that property are quantitatively equal, therefore, in truth, each of them is owner of only half of the mentioned property." In this manner, the Applicants conclude that "therefore not only does the property not have a value equal to or exceeding one million euros, but also each of the two co-owners is not the owner of a property of that value, but, at most, and without conceding, of a property of half that value."

f) Concluding in the sense that "the subjection of the property in question to the assessment of stamp tax by entry 28.1 represents a complete illegality on the part of the Tax Administration", still petitioning, finally, the payment of compensatory interest.

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

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

a) As to the alleged error regarding the assumptions of the assessments, the Respondent understands that: "what is at issue are assessments that result from the direct application of the legal norm, which is expressed in objective elements, without any subjective or discretionary appraisal. The concept of property is defined in Article 2, paragraph 1, of IPIT, being provided in its paragraph 4 that, under the horizontal property regime, each autonomous fraction is held to constitute a property. It follows from the analysis of the normative provision that a "property held under a total property regime with floors or divisions susceptible to independent use" is, unequivocally, different from a property held under the horizontal property regime, constituted by autonomous fractions, that is, several properties."

b) The Respondent further states that "[being] the property held under a total property regime (not having autonomous fractions, to which tax law attributes the qualification of property, because the notion of property in paragraph 4 of Article 2 of IPIT results in only the autonomous fractions of properties held under a horizontal property regime being held as properties), it is the global patrimonial value of the property that must, therefore, be relevant."

c) The Respondent further states that "[in] fact, although the assessment of IS, in the situations provided for in entry no. 28.1 of the GGST, is carried out in accordance with the rules of IPIT, the truth is that the legislator reserves the aspects that require the necessary adaptations, namely those in which, as is the case with properties held under a total property regime, even with floors or divisions susceptible to independent use (although IMI is assessed in relation to each part susceptible to independent use) for purposes of IS the property is relevant in its entirety since the divisions susceptible to independent use are not held as a property, but only the autonomous fractions under the horizontal property regime, as in paragraph 4 of art. 2 of IPIT. What, expressly, results from the letter of the law is that the legislator intended to tax with entry 28.1 under discussion properties as a single legal-tax reality."

d) With respect to the defect of violation of constitutional law, the Respondent argues that "the provision of entry 28.1 of the GGST does not constitute any violation of the principles of tax legality, fiscal equality, contributive capacity, justice, the prevalence of material truth over legal-formal reality, and proportionality in tax matters, set forth in the Constitution of the Portuguese Republic", because there is no "any discrimination in the taxation of properties constituted under a horizontal property regime and properties held under a total property regime with floors or divisions susceptible to independent use, or between property with housing allocation and properties with other allocations. Horizontal property and vertical property are differentiated legal institutions. The constitution of horizontal property implies, it is a fact, a mere legal alteration of the property, without there being an appraisal, but the legislator may, nevertheless, submit to a distinct legal-tax framework, therefore, discriminatory, properties held under a horizontal property regime and vertical property, in particular, benefiting the legally more evolved institute of horizontal property, without such discrimination being necessarily considered arbitrary. (...) The fact that the Applicants legitimately disagree with such discrimination does not imply the violation of any principle of tax law."

e) The Respondent further adds that entry 28.1 of the GGST is "a general and abstract norm, applicable in an indistinct manner to all cases in which the respective assumptions of fact and law are met." (...) "In fact, the constitution under horizontal property results in the division/splitting of total property and the independence or autonomy of each of the fractions that constitute it, for all legal purposes, pursuant to paragraph 2 of Article 4 of IPIT and Articles 1414 et seq. of the Civil Code (CC), whereas a property held under a total property regime constitutes, for all purposes, a single legal-tax reality."

f) Concluding in the sense that "the notifications issued for payment of the tax in question did not violate any legal principle, and should, therefore, be maintained."

g) As to the requested compensatory interest, the Respondent understands that the same is not owed, as the condition provided for in paragraph 1 of Article 43 of the LGT is not met.

h) In view of the above, and in summary, the Respondent understands that "the stamp tax collection notes, entry 28 of the GGST, challenged in the present proceedings, remain valid and legal, concluding as to the legality of the same."

IV. Case Management

The Tribunal is competent and is regularly constituted, pursuant to subsection (a) of paragraph 1 of Article 2 and Articles 5 and 6, all of LRAT.

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

- Preliminary Issues -

The Respondent in the Response it presents to the request for arbitral pronouncement of the Applicants, raises its defense by way of exception and by way of challenge. Now, considering that, with regard to the exception, - insufficiency of the initial petition - and since the same, if it proceeds, prevents the examination of the merits of the claim, it is important to examine it beforehand, which we propose to do immediately.

Thus,

In its response, the Respondent raises the dilatory exception of insufficiency of the initial petition, provided for in Article 186, paragraphs 1 and 2, subsection (a) of the Code of Civil Procedure (CCP) applicable by virtue of Article 29, paragraph 1 of the Legal Regime for Arbitration in Tax Matters (LRAT), by arguing that there is an "absence of the claim".

Now, Article 186 of the CCP provides that:

"1 - Every process is null when the initial petition is insufficient.

2 - An initial petition is said to be insufficient:

a) When the indication of the claim or cause of action is absent or unintelligible;

b) (...)"

In truth, and in light of this norm, everything comes down to knowing whether or not the applicants mentioned, in the initial petition, the determining facts of the cause of action and properly identified the claim, it being certain that insufficiency of the petition only arises when the indication of the claim or cause of action is absent or unintelligible.

In fact, and examining the initial petition presented by the Applicants, we cannot affirm that the claim is completely absent from the initial petition, since, on one hand, it mentions that it submits "a request for arbitral pronouncement, (...) concerning the tax acts of assessment of stamp tax, relating to the year 2015, carried out by the Honourable Head of Finance of the Finance Service of Lisbon-..., which affected the urban property located at Rua ..., nos. ... and ..., ... - ... Lisbon, of which the applicants are co-owners, with the basis of their illegality, which, in the case sub judice, and in accordance with Article 99 of the TCPT, applicable by virtue of Article 10, paragraph 2, subsection (c) of LRAT, is embodied in the erroneous qualification of the tax fact, in error regarding the assumptions of law – the normative interpretation underlying the present assessments being unconstitutional - and in the erroneous quantification of income and patrimonial values in question", and on the other hand, the Respondent presented its response, defending itself by way of exception and by way of challenge. The defense by way of challenge leads one to believe that it will have grasped, therefore, the scope of the claim formulated by the Applicants, since it directly challenges the arguments of fact and law raised by them.

Furthermore, note that only the complete absence (and not the scarcity) or unintelligibility of the claim or cause of action generates the insufficiency of the initial petition. (Decision of the Court of Appeal of Coimbra rendered in proceeding no. 7630/05.2TBLRA.C1, of 17 May 2007).

Moreover, and with regard to the lack of unintelligibility of the claim, we cannot fail to note that paragraph 3 of the said Article 186 of the CCP provides that "if the defendant contests, despite raising insufficiency with the basis of subsection (a) of the preceding number, the raising of insufficiency shall not be judged well-founded when, heard the plaintiff, it is verified that the defendant correctly interpreted the initial petition". That is, the raising of insufficiency shall not be judged well-founded, given that it was possible for the Respondent to correctly and certainly interpret the initial petition.

For this reason, we conclude that the initial petition is not insufficient, by reason of the fact that the Respondent understood its tenor, claim, and cause of action, against which it presented defense duly founded as a matter of challenge.

V. Factual Matters

With interest for the decision, the following facts are given as proven:

• The Applicants are co-owners of the urban property located at Rua ..., no. ... and ..., parish of ..., municipality of Lisbon, registered in the urban property matrix under article ... – R/C D, R/C E, R/C F, 1st A, 1st B, 1st C, 1st D, 2nd A, 2nd B, 2nd C, 2nd D, 3rd A, 3rd B, 3rd C, 3rd D, 4th A, 4th B, 4th C, 4th D, 5th A, 5th B, 5th C, and 5th D (cf. Doc. no. 47 attached with the initial petition and administrative proceeding);

• The Applicants married under a regime of separation of property (cf. Doc. no. 48);

• The property comprises a total of twenty-four floors and divisions with independent use, allocated to housing, whose patrimonial value for tax purposes (PV), determined under the Municipal Property Tax Code (IPIT), varies between € 26,620.00 and € 65,830.00 and totals € 1,366,170.00. (cf. Doc. no. 47 attached with the initial petition and administrative proceeding);

• The property in question is held under a vertical property regime or total property. (Doc. no. 47 attached with the initial petition and administrative proceeding);

• The sum of the PVs of the mentioned autonomous fractions allocated to housing amounted to € 1,366,170.00 (one million three hundred sixty-six thousand, one hundred and seventy euros), each of them individually having a PV lower than € 1,000,000.00 (one million euros) (Doc. no. 47 attached with the initial petition and administrative proceeding);

• The matrix registration no. ... identifies separately each of the fractions, with the respective PV resulting from the general appraisal also being itemized (cf. Doc. no. 47 attached with the initial petition and administrative proceeding);

• The Applicants were notified of the acts of assessment of Stamp Tax relating to the year 2015, carried out under entry no. 28.1 of the General Table of Stamp Tax, regarding the floors and divisions with independent use allocated to housing, in the total amount of € 13,661.70 (thirteen thousand, six hundred and sixty-one euros and seventy cents). (cf. Doc. no. 1 to 46 attached with the initial petition);

• The Applicants proceeded with the payment of the amounts corresponding to the IS assessments subject to the present request for arbitral pronouncement. (Cf. Doc. no. 1 to 46 attached with the initial petition).

VI. Motivation of Factual Matters

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

VII. Facts Given as Not Proven

There are no facts given as not proven, because all facts relevant to the appraisal of the claim were given as proven.

VIII. Grounds of Law

In the present case, there are two disputed questions of law:

1. to know whether the subjection to stamp tax, pursuant to what is provided by entry no. 28 of the GGST, relating to the year 2015, is determined by the PV that corresponds to each of the parts of the property with housing allocation, or whether, instead, it is determined by the global PV of the property, which would correspond to the sum of all the PVs of the floors that comprise it - Incidence of entry 28.1 of the GGST;

2. to know whether the provision of entry no. 28 of the GGST is unconstitutional by violation of the principle of equality, as well as the provision in Article 104, paragraph 3, of the CRP, in the interpretation that the TCA makes of it;

3. to know whether the Respondent, should the foregoing questions proceed, has the right to compensatory interest.

Let us see,

I – On the Incidence of Entry 28.1 of the GGST

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

2. The fundamental amendment, which conditions all the others, is contained in Article 4 of Law no. 55-A/2012, which adds to the General Table of Stamp Tax (GGST), attached to the Stamp Tax Code (STC), a new entry, no. 28, with the following wording:

"28. Ownership, usufruct, or right of superficies of urban properties whose patrimonial value for tax purposes contained in the matrix, pursuant to the Municipal Property Tax Code (IPIT), is equal to or exceeding € 1,000,000 - on the patrimonial value for tax purposes used for purposes of IMI:

28.1 Per property with housing allocation ----------------------------------------- 1%

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

1. Thus, in accordance with the said entry, and in what is relevant to us here, only the ownership, usufruct, right of superficies of are subject to Stamp Tax:

a) "urban properties,

b) with housing allocation,

c) and whose patrimonial value for tax purposes contained in the matrix, pursuant to the Municipal Property Tax Code (IPIT), is equal to or exceeding € 1,000,000;" (emphasis added)

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

2. The taxation of capital income is aggravated, the list of manifestations of fortune is expanded, the taxation of income obtained in Portugal by entities domiciled in tax havens is aggravated, and finally, to all of this is added the taxation of properties for housing, of value exceeding € 1,000,000.00.

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

4. In truth, the legislator upon introducing this legislative innovation, considered as the determining element of contributive capacity urban properties, with housing allocation, of high value (luxury), more precisely, of value equal to or exceeding € 1,000,000.00, on which a special rate of stamp tax began to apply, intending to introduce a principle of taxation on wealth expressed through ownership, usufruct, or right of superficies of urban properties of luxury with housing allocation. Therefore, the criterion was the application of the new rate to urban properties with housing allocation, whose PV is equal to or exceeding € 1,000,000.00.

5. This same conclusion is reached from the analysis of the discussion of legislative proposal no. 96/XII in the Assembly of the Republic, available for consultation in the Journal of the Assembly of the Republic, I series, no. 9/XII/2, of 11 October 2012.

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

7. In fact, the legislator clearly considered that this value, when attributed to a housing unit (house, autonomous fraction, or floor with independent use) expressed a contributive capacity above the average and, as such, susceptible to determining a special contribution to ensure the fair distribution of the tax effort.

8. Also following these principles inspiring the legislative innovation under consideration, it must be concluded that the existence of a property held under a vertical or horizontal property regime cannot be, in itself, an indicator of contributive capacity.

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

10. In fact, the existence in each property of independent housing units, under a horizontal or vertical property regime, may be susceptible to triggering the incidence of the new tax, but only if the PV of each of the parts or fractions is equal to or exceeding the limit defined by law: € 1,000,000.00.

11. It does not seem sensible that properties can be encompassed in the normative provision as a whole, i.e., constituted by independent units, with separate PV appraisals.

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

13. Now, the property in question belongs to the Applicants, and is composed of 23 divisions with independent use, all with housing allocation.

14. It is the understanding of the TCA that the sum of the PVs relating to these 23 divisions with independent use that have housing allocation, totaling a global PV of € 1,366,170.00 (one million three hundred sixty-six thousand, one hundred and seventy euros), in the year 2015, gives rise to the incidence of stamp tax, which is why it understood to proceed with the assessment of Stamp Tax challenged in the present proceedings.

15. Thus, from the perspective of the TCA, for a property held under a vertical property regime (or not constituted under a horizontal property regime) the criterion for determining the incidence of stamp tax is the global PV of the floors and divisions intended for housing.

16. Let us see whether the TCA's thesis convinces.

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

18. However, it says nothing regarding the qualification of the concepts at issue, namely, regarding the concept of "property with housing allocation," which is relevant to us here.

19. However, Article 67, paragraph 2 of the Stamp Tax Code, added by the said Law, provides that "to matters not regulated in the present code respecting entry 28 of the General Table, the IPIT applies subsidiarily."

20. Thus, we have that the incidence norm refers to urban properties, whose concept is what results from the provisions of Article 2 of IPIT, with the determination of PV following the terms of the provisions of Article 38 et seq. of the same code.

21. Consulting the IPIT, it is verified that its Article 6 merely indicates the different types of urban properties, among which it mentions housing properties (see subsection (a) of paragraph 1), clarifying in paragraph 2 of the same article that "housing, commercial, industrial, or service properties are buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal purpose each of these uses."

22. From this we can conclude that, from the legislator's perspective, the legal-formal rigor of the concrete situation of the property does not matter, but rather, its normal use, the purpose to which the property is intended.

23. Further, we ascertain that, for the legislator, the situation of the property held under a vertical property regime or a horizontal property regime did not matter, since no reference or distinction is made between one and the other. What does matter is the material truth underlying its existence as an urban property and its use.

24. In fact, subjection to stamp tax contained in entry no. 28.1 of the GGST is determined by the combination of three facts, namely:

a) we are dealing with an urban property;

b) housing allocation; and

c) the PV contained in the matrix equal to or exceeding € 1,000,000.00.

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

2. This position has been assumed in various decisions of the Arbitral Tribunal, on the subject of "Stamp Tax – Entry 28, vertical property," which we indicate here, by way of example, such as proceedings no. 428/2014-T, no. 206/2014-T, no. 30/2014-T, no. 181/2013-T, no. 132/2013-T, no. 50/2013-T, no. 248/2013-T of CAAD, no. 849/2014 T, no. 179/2015 T (among others), whose legal reasoning this tribunal adheres to in its entirety, as regards the matter of the incidence of entry 28.1 of the GGST.

3. As well as, in the Decision of the Supreme Administrative Court, which we follow, rendered in proceeding no. 047/15, of 09.09.2015, according to which:

"I - With respect to properties held under a vertical property regime, for purposes of the incidence of Stamp Tax (Entry 28.1 of the GGST, as worded by Law no. 55-A/2012, of 29 October), subjection is determined by the combination of two factors: housing allocation and the PV contained in the matrix equal to or exceeding € 1,000,000.

II - In the case of a property constituted under a vertical property regime, the incidence of IS must be determined, not by the PV resulting from the sum of the PV of all divisions or floors susceptible to independent use (itemized in the matrix article), but by the PV attributed to each of those floors or divisions intended for housing."

1. Thus, the understanding of the TCA that the sum of the PVs of the various fractions or divisions with independent use allocated to housing, resulting in a global PV equal to or exceeding € 1,000,000, legitimates the incidence of stamp tax, under entry 28 of the GGST, under the general regime, is manifestly illegal!

2. Therefore, as there is not, in this manner, a single fraction or division with independent use, allocated to housing, with PV equal to or exceeding € 1,000,000, the TCA could never subject the Applicants to stamp tax, under entry 28 of the GGST, for the year 2015, which is now being challenged, as it would be illegal.

3. With regard to the alleged defect of unconstitutionality by violation of the principles of tax legality, fiscal equality, contributive capacity, justice, the prevalence of material truth over legal-formal reality, and proportionality in tax matters, set forth in the Constitution of the Portuguese Republic, knowledge of such questions is barred by the declaration of illegality of the Stamp Tax assessments at issue, by a substantive defect that prevents their re-issuance or renewal.

4. As stated in the Commentary on the Code of Procedure in Administrative Courts, Almedina, 2005, by Mário Aroso de Almeida and Carlos Cadilha, in annotation to Article 95 of that statute, p. 483 (applicable by referral of Article 2, subsection (c) of the TCPT and Article 29, paragraph 1, subsections (a) and (c) of LRAT) "If the court ruled favorably on the principal claim, the jurisdictional power is barred as to a subsidiary claim or formulated as an alternative; and, in the same manner, if the pronouncement adopted as to one issue consumes or leaves prejudiced other aspects of the case that are correlated with it."

5. In these terms, given the material interpretation advocated, knowledge and appraisal of the other defects attributed to the impugned assessment acts is barred.

II – On Compensatory Interest

1. The Applicants further petition that the right to compensatory interest be recognized, based on error attributable to the services.

2. Article 43, paragraph 1 of the LGT and Article 61 of the Code of Tax Procedure and Process provide that compensatory interest is owed when it is determined in a gracious reclamation or judicial challenge that there was error attributable to the services resulting in the payment of a tax debt in an amount exceeding the legally due amount.

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

4. Now, resulting from the tax acts challenged that the obligation to pay tax exceeding what would be due, compensatory interest is owed pursuant to the legally provided terms, the legislator presuming, in these cases, in which the annulment of the assessment is verified, that a loss occurred in the sphere of the taxpayer by virtue of having been deprived of the patrimonial sum that he had to deliver to the State by virtue of an illegal assessment. Consequently, the taxpayer has the right to such compensation, independent of any allegation or proof of the loss suffered.

5. In the present case, it will be unquestionable that, following the establishment of the illegality of the assessment acts, there will be place for a reimbursement of the tax by virtue of the provisions of paragraph 1 of Article 43, and Article 100, both of the LGT, necessarily passing through this the reestablishment of the "situation that would exist if the tax act subject to the arbitral decision had not been performed".

6. In the same manner, it is understood that it will be free of doubt that the illegality of the act is attributable to the Tax Authority, which autonomously performed it in an illegal manner.

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

8. Accordingly, being in the presence of a defect of violation of substantive law, which is embodied in error regarding the assumptions of law, attributable to the Tax Authority, the Applicants have the right to compensatory interest, in accordance with Articles 43, paragraph 1 of the LGT, and 61 of the TCPT, calculated on the amount of € 13,661.70, and counted from the payment of the tax until the complete reimbursement of the said amount.

DECISION

In accordance with the above, it is decided:

• Annul all the acts of assessment of Stamp Tax challenged by the Applicants, relating to the year 2015, as illegal.

• Condemn the Tax and Customs Authority to reimburse the Applicants of the amount they paid, plus compensatory interest, calculated, at the legal rate, from the payment of the tax until the complete reimbursement.

Value of the Case

The value of the case is set at € 13,661.70 (thirteen thousand, six hundred and sixty-one euros and seventy cents) pursuant to Article 97-A, paragraph 1, (a), of the TCPT, applicable by virtue of subsections (a) and (b) of paragraph 1 of Article 29 of LRAT and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

Costs

Costs to be borne by the Respondent in accordance with Article 22, paragraph 2 of LRAT, Article 4 of RCPAT, and Table I attached to the latter, which are set at the amount of € 918.00.

Let it be notified.

Lisbon, 30 May 2017

The Arbitrator

(Jorge Carita)