Summary
Full Decision
ARBITRATION DECISION
CAAD: Tax Arbitration
Case No. 545/2014 – T
The Arbitrator, Dr. Sílvia Oliveira, designated by the Deontological Council of the Administrative Arbitration Centre (CAAD) to form the Arbitral Tribunal, constituted on 1 October 2014, with respect to the case identified above, decided as follows:
- REPORT
1.1. "A", Lda. (hereinafter referred to as "Claimant"), Legal Entity No. …, with registered office at Street …, No. …, in Porto, filed a request for arbitral pronouncement and for the constitution of a single arbitral tribunal, on 28 July 2014, pursuant to the provisions of Article 4 and No. 2 of Article 10 of Decree-Law No. 10/2011, of 20 January [Legal Regime for Arbitration in Tax Matters (RJAT)], against the Tax and Customs Authority (hereinafter referred to as "Respondent").
1.2. The Claimant requests that the Arbitral Tribunal "judge the request for arbitral pronouncement well-founded and admissible and, consequently, annul the act of assessment of Stamp Tax identified (...) and declare the error attributable to the Services and order the refund of Stamp Tax paid as well as the other payments (...), plus the corresponding compensatory interest due".
1.3. The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD on 30 July 2014 and notified to the Respondent on 31 July 2014.
1.4. The Claimant did not proceed to appoint an arbitrator, so, pursuant to the provisions of Article 6, No. 2, letter a) of RJAT, the undersigned was designated as arbitrator by the President of the Deontological Council of CAAD, with the appointment being accepted within the prescribed time and terms.
1.5. On 16 September 2014, the parties were duly notified of this designation, and did not express any intention to challenge the arbitrator's designation, in accordance with the provisions of Article 11, No. 1, letters a) and b) of RJAT, read together with Articles 6 and 7 of the Deontological Code.
1.6. Accordingly, in compliance with the provisions of letter c) of No. 1 of Article 11 of RJAT, the Arbitral Tribunal was constituted on 1 October 2014, and an arbitral order was issued on 2 October 2014, directing the Respondent to, in accordance with the provisions of Article 17, No. 1 of RJAT, submit a response within a maximum period of 30 days and, if it so wished, request the production of additional evidence.
1.7. On 4 November 2014, the Tax and Customs Authority submitted its Response, defending itself by contesting, concluding that:
1.7.1. "The Claimant has no grounds whatsoever, and we hereby contest all arguments put forward by it".
1.7.2. "Indeed, it is the view of the TA that the property in question has the legal nature of a property with residential use, so the assessment act that is the subject of this request for arbitral pronouncement should be upheld as it embodies a correct interpretation and application of the legal provisions".
1.7.3. With the legislative amendment, "the Stamp Tax would also apply to the ownership, usufruct or surface rights of urban properties whose tax property value (TPV) recorded in the matrix, in accordance with the Urban Property Tax Code (IMI), is equal to or greater than EUR 1,000,000.00".
1.7.4. "In the absence of any definition of the concepts of urban property, land for construction and residential use in the context of Stamp Tax, one must resort to the IMI Code to find a definition that permits determination of possible Stamp Tax liability, in accordance with the provisions of Article 67, No. 2 of the Stamp Tax Code in the wording given by Law No. 55-A/2012, of 29/10".
1.7.5. "Contrary to what the Claimant proposes, the TA understands that the concept of properties with residential use, for the purposes of Item 28 of the General Stamp Tax Table (TGIS), comprises both constructed properties and land for construction, starting from the literal element of the norm".
1.7.6. "Regarding the alleged violation of the principle of non-retroactivity of fiscal law inherent in Article 103, No. 3 of the Constitution of the Portuguese Republic (CRP), the TA understands that the provision of Item 28 of TGIS does not constitute any violation of the said constitutional provision, because the norm that determines the objective scope of taxation - Article 1 of the Stamp Tax Code, has the same wording since the amendment given by Law No. 55-A/2012 of 29/10, therefore, in 2013 and 2014, there is no succession of laws with respect to this provision".
1.7.7. "(…) the Claimant herein petitions for the corresponding compensatory interest, as a consequence of payment of undue tax and now contested" but "the petition should be dismissed, starting because the conduct of the Tax Authority was guided by strict compliance with the legal provisions to which it is bound" so "in light of all that has been said, one cannot ever, except for better judgment, consider that there was error attributable to the services in the issuance of the assessment in question, an indispensable condition for the ordering of payment of compensatory interest".
1.8. In these terms, the Respondent concludes by requesting that "the request for declaration of illegality and consequent annulment of the disputed assessment be judged inadmissible, absolving the TA of the petition".
1.9. With the submission of the Response, the Respondent also filed a request for waiver of the first arbitral hearing, in accordance with the terms and for the purposes provided in Article 18 of RJAT, which was subject to an arbitral order, dated 4 November 2014, to notify the Claimant thereof and for it to pronounce itself within 5 days on its content.
1.10. Given that the Claimant said nothing within the prescribed time, the request to waive the aforementioned hearing was accepted and, by order of this Arbitral Tribunal, dated 18 November 2014, the Claimant and Respondent were notified to "in this order and successively, submit written submissions within 15 days, with the period for the Respondent beginning to run with the notification of the attachment of the Claimant's submissions".
1.11. The date of 5 February 2015 was also designated in the aforementioned order for the purpose of issuing the arbitral decision, and the Claimant was further warned that "by the date of issuance of the arbitral decision it should proceed to payment of the subsequent arbitration fee, in accordance with the provisions of No. 3 of Article 4 of the Regulations on Costs in Tax Arbitration Proceedings and communicate such payment to CAAD", which it did on 1 December 2014.
1.12. On 17 December 2014, the Claimant filed a motion to attach to the proceedings a copy of proof of payment of the third instalment relating to the tax that is the subject of the petition, which was accepted and ordered on the same date so as to notify the Respondent thereof.
1.13. The Claimant and Respondent did not submit submissions, despite being duly notified to do so (see point 1.10., above).
- GROUNDS FOR THE CLAIM
The Claimant supports its petition, in summary, as follows:
2.1. It is the owner of the "urban property registered in the matrix under No. …, of the Union of parishes of Cascais and Estoril" and was notified of the "assessment note No. 2014…, relating to Stamp Tax for the year 2013, provided for in Item 28 of TGIS with the wording introduced by Law No. 83-C/2013, of 31 December (State Budget Law for 2014), in the amount of EUR 13,067.40".
2.2. "Not agreeing (...) with the said assessment, let us see (...) the reasons that (...) are likely to compromise the legality of the decision that gave rise to the assessment under scrutiny".
On the Application of Law in Time
2.3. "In accordance with No. 3 of Article 103 of the CRP no one can be obliged to pay taxes that have not been created in accordance with the Constitution, that are retroactive in nature or whose collection and assessment are not made in accordance with law", "from which it follows that (...) the legislator is prevented from creating or retroactively increasing taxes" (our emphasis).
2.4. "In support of the interpretation of the constitutional norm (...) Article 12 of the General Tax Law (LGT) (...) provides that tax norms apply to facts occurring after their entry into force, and no retroactive taxes may be created (...)" .
2.5. "Now, in the case in question, it is the ownership of the urban property in question on 31 December 2013 that the rule of objective scope of taxation defines as the taxable event for the Stamp Tax and Law No. 83-C/2013, of 31 December, entered into force on 1 January 2014, i.e., on a date subsequent to the taxable event for Stamp Tax".
2.6. "Thus, the assessment of the tax in question should be governed by the regime enshrined in RJAT with the wording introduced by Law 55-A/2012, given that the taxable event occurred during the period of its validity" (our emphasis).
Error as to Assumptions
2.7. "The urban property in which the Stamp Tax is assessed, as regards its classification, is land for construction (...), as per the urban property record, (...) whose building capacity is defined (...)".
2.8. "On the land in question no construction is erected, forming part of the Claimant's assets for the purpose of carrying out a real estate development operation in the future".
2.9. According to the Claimant, "when the nature of the property is compared with the legal definition resulting from the IMI Code and with the rule of objective scope provided for in Item 28 of TGIS, it is easy to see that the disputed assessment does not have an enabling norm" because "(...) the rule of objective scope only subjects to Stamp Tax urban properties with residential use (...)" and "the Law cited only added Item 28.1. to TGIS, establishing no definition of what should be understood by urban property with residential use" (our emphasis).
2.10. Therefore, "considering that Item 28 of TGIS applies to properties with residential use, properties shall be considered as such only if they meet the assumptions of Art. 6 Nos. 1 and 2 of the IMI Code".
2.11. Now, being "the property in question land for construction, it is necessary to conclude that an error occurred as to the assumptions of the assessment, given that the ATA assessed Stamp Tax on property that falls within the category of land for construction, when it is certain that the rule of objective scope [not susceptible to analogical application, as per Art. 11 No. 2 of LGT] defines as a taxable event only properties with residential use" (our emphasis).
2.12. Thus, "without an enabling rule of objective scope, the impugned act is illegal in accordance with Article 99 a) of the Tax Procedure and Litigation Code (CPPT)".
2.13. Furthermore, according to the Claimant's opinion, "what the legislator intended with Law 55-A/2012 and with the amendment to TGIS was, in a context of national emergency, to tax taxpayers with enhanced tax capacity, in this specific case through the taxation of luxury properties (...) which, having residential use [and not any type of property], their TPV is greater than EUR 1,000,000.00" (our emphasis).
2.14. "It happens, however, that land for construction is not considered a luxury good, but rather an investment asset used for real estate development operations".
2.15. Thus, "the ownership of properties by a real estate company that holds in its sphere land for construction intended to carry out its corporate purpose and develop real estate development activity, does not represent a luxury assets portfolio and even less an exceptional tax capacity, so that the assessment of the tax in question, which is based on land for construction, in addition to literally not complying with the rules of objective scope, clearly affects the rationale of the legislator represented in the addition introduced to TGIS with Law 55-A/2012".
Defect in Reasoning
2.16. The Claimant further states that "in addition to being illegal due to error as to the assumptions, the contested assessment is also illegal due to a defect in reasoning", because "the duty to provide reasons is a requirement directly arising from the constitutional text, specifically from Article 268 of the CRP (...)" "which, in accordance with Article 99 of CPPT, causes its voidability (...)".
2.17. Finally, the Claimant also petitions for payment of compensatory interest due, "in accordance with Article 43 of LGT (...)" for "(...) error attributable to the Services resulting in the payment of a debt exceeding the amount due, which in this case corresponds to the entirety".
- RESPONSE OF THE RESPONDENT
3.1. The Respondent responded by sustaining the inadmissibility of the request for arbitral pronouncement and invoking the following arguments:
3.2. According to the Respondent, "it is the view of the TA that the property in question has the legal nature of a property with residential use, so the assessment act that is the subject of this request for arbitral pronouncement should be upheld as it embodies a correct interpretation and application of the legal provisions" (our emphasis).
3.3. With the addition of Item 28 to TGIS, "the Stamp Tax would also apply to the ownership, usufruct or surface rights of urban properties whose TPV recorded in the matrix, in accordance with the IMI Code, is equal to or greater than EUR 1,000,000.00".
3.4. Thus, according to the Respondent, "the Stamp Tax would apply to all acts, contracts, documents, securities, papers and other facts or legal situations provided for in TGIS, including gratuitous transfers of goods".
3.5. "In the absence of any definition of the concepts of urban property, land for construction and residential use in the context of Stamp Tax, one must resort to the IMI Code to find a definition that permits determination of possible Stamp Tax liability, in accordance with the provisions of Art. 67, No. 2 of the Stamp Tax Code in the wording given by Law No. 55-A/2012, of 29/10".
3.6. "In accordance with the said legal provision, to matters not regulated in the Code, relating to Item No. 28 of TGIS, the provisions of the IMI Code apply subsidiarily" and the definitions described therein of "property" (Article 2, No. 1) and of "urban property" (Article 6, No. 1).
3.7. "Contrary to what the Claimant proposes, the TA understands that the concept of properties with residential use, for the purposes of Item 28 of TGIS, comprises both constructed properties and land for construction, starting from the literal element of the norm".
3.8. "Regarding the alleged violation of the principle of non-retroactivity of fiscal law inherent in Art. 103, No. 3 of the CRP, the TA understands that the provision of Item 28 of TGIS does not constitute any violation of the said constitutional provision, because the norm that determines the objective scope of taxation - Art. 1 of the Stamp Tax Code, has the same wording since the amendment given by Law No. 55-A/2012 of 29/10".
3.9. "Therefore, in 2013 and 2014, there is no succession of laws with respect to this provision" (our emphasis).
3.10. "Regarding the alleged defect of lack of reasoning in the assessment now impugned, the TA must disagree with such understanding (...) because (...) the jurisprudence of the SAC has uniformly come to understand that the reasoning of the act is a relative concept that varies according to the type of act and the circumstances of the specific case, and that the reasoning is sufficient when it allows a normal recipient to understand the cognitive and evaluative path followed by the author of the act, that is, when the recipient can know the reasons that led the author of the act to decide that way and no other".
3.11. "However, if there is a situation of lack or insufficiency of reasoning (...) it was incumbent upon the Claimant to request the issuance of the certificate provided for in Article 37 of CPPT", so "not having the Claimant used the faculty conferred by law, it is necessary to conclude that the act sub judice contained, and contains, all the elements necessary for its full understanding and that the proclaimed defect from which it suffered was cured".
3.12. As regards the request for compensatory interest, the Respondent argues that "the petition should be dismissed, starting because the conduct of the Tax Authority was guided by strict compliance with the legal provisions to which it is bound (...) one cannot consider that there was error attributable to the services in the issuance of the assessment in question, an indispensable condition for the ordering of payment of compensatory interest" (our emphasis).
3.13. In these terms, the Respondent concludes that "the disputed assessment embodies a correct interpretation and application of law to the facts (...) and should consequently be judged inadmissible and the Respondent Entity be absolved of the petition".
- PRELIMINARY ORDER
4.1. The request for arbitral pronouncement is timely as it was presented within the period provided in letter a) of No. 1 of Article 10 of RJAT.
4.2. The parties have legal personality and legal capacity, are legitimate regarding the request for arbitral pronouncement and are properly represented, in accordance with the provisions of Articles 4 and 10 of RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March.
4.3. The Tribunal is competent to assess the request for arbitral pronouncement filed by the Claimant.
4.4. No exceptions have been raised that require adjudication.
4.5. No nullities have been found, so it is now necessary to adjudicate on the merits of the claim.
- FACTUAL MATTERS
5.1. Proven Facts
5.2. The following facts, documented by the documents attached to the record, are considered proven:
5.2.1. The Claimant is the owner of land for construction registered in the urban property matrix under article …, of the union of parishes of Cascais and Estoril (as per documents No. 2 and 3, attached with the petition);
5.2.2. The TPV of the property is EUR 1,306,740.00 (as per document No. 2, attached with the petition);
5.2.3. The Claimant was notified of the assessment of Stamp Tax, dated 18 March 2014, relating to the year 2013, in the amount of EUR 13,067.40;
5.2.4. The Claimant was notified to proceed with payment of the 1st, 2nd and 3rd instalments relating to the Stamp Tax assessment identified above in point 5.2.3., having paid the tax relating to the 1st instalment, in the amount of EUR 4,355.80, on 5 May 2014 (as per document No. 4, attached with the petition) and having paid the tax relating to the 3rd instalment, of the same amount, on 5 December 2014 (as per document No. 1, attached with the motion filed on 17 December 2014).
5.3. No other facts susceptible of affecting the decision on the merits of the claim have been proven.
5.4. Unproven Facts
5.5. Although the Claimant indicated, in Article 153 of the petition, the intention to pay "the remaining instalments that will fall due throughout the calendar year 2014", no documentary evidence was obtained of payment of the second instalment of Stamp Tax relating to the assessment identified above in point 5.2.3.
5.6. No facts have been established as unproven with relevance to the arbitral decision.
- LEGAL GROUNDS
6.1. In this case, the essential issue to be decided is what is the scope of Item 28.l. of TGIS, in the wording given to it by Law No. 55-A/2012 of 29 October, namely, whether land for construction should be included in that norm and, specifically, whether land for construction with TPV equal to or greater than EUR 1,000,000 falls or does not fall within the category of urban properties "with residential use", in order to determine whether the Stamp Tax assessments that are the subject of the Request for Arbitral Pronouncement are vitiated by a violation of that Item No. 28.1., due to error as to assumptions of law, which would justify the declaration of their illegality and respective annulment.
6.2. On the other hand, having regard to the provisions of the State Budget Law for 2014 regarding amendments introduced to Item 28.1. of TGIS, with the express introduction in the wording of the norm of the provision "land for construction intended for housing", it is necessary to ascertain whether such amendments in the text of the law will apply to the Stamp Tax assessment that is the subject of these proceedings.
6.3. The answer to these questions requires an analysis of the legal norms applicable to the specific case, in order to determine what is the correct interpretation in light of the Law and the Constitution, given that it is a matter of assessing a prerequisite for the incidence of tax, carefully protected by the principle of fiscal legality, resulting from the provisions of Article 103, No. 2 of the CRP.
On the Scope of Item 28.l. of TGIS (in the wording given to it by Law No. 55-A/2012 of 29 October)
6.4. Law No. 55-A/2012 made several amendments to the Stamp Tax Code and added Item 28 to TGIS, with the following wording:
"28. Ownership, usufruct or surface rights of urban properties whose TPV recorded in the matrix, in accordance with the IMI Code, is equal to or superior to EUR 1,000,000.00 – on the TPV for the purpose of IMI:
28.1 – For property with residential use – 1%.
28.2 – (…)".
6.5. Notwithstanding the fact that the text of Law No. 55-A/2012 (in force since 30 October 2012) did not define the concepts contained in the said Item No. 28, in particular, the concept of "property with residential use", if we observe the provisions of Article 67, No. 2, of the Stamp Tax Code (also added by the said Law), we find that "to matters not regulated in the present Code, relating to Item 28 of TGIS, the IMI Code applies, subsidiarily" (our emphasis).
6.6. Now, from reading the IMI Code, it is easy for us to see that the concept of "property with residential use" refers, naturally, to the concept of "urban property", defined in accordance with Articles 2 and 4 of that Code.
6.7. Indeed, in accordance with the provisions of Article 2, No. 1 of the IMI Code, "(…) property is any portion of territory, including waters, plantations, buildings and constructions of any kind incorporated or based thereon, with a character of permanence, provided that 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 circumstances aforesaid, endowed with economic autonomy in relation to the land on which they are situated, although located in a portion of territory which constitutes an integral part of different assets or does not have a patrimonial nature" (our emphasis).
6.8. Also in accordance with No. 2 and 3 of the same article, "buildings or constructions, even if movable by nature, are considered to have a character of permanence when used for non-transitory purposes", and it is presumed "the character of permanence when the buildings or constructions are based in the same place for a period of more than one year" (our emphasis).
6.9. On the other hand, in accordance with the provisions of Article 4 of the IMI Code, "urban properties are all those that should not be classified as rural (…)".
6.10. In this context, among the various types of "urban properties" provided for in Article 6 of the IMI Code, "land for construction" is expressly mentioned [No. 1, letter c)], and No. 3 of the same article adds that "land for construction is understood to be land located within or outside an urban agglomeration, for which building or construction authorization or permission has been granted, prior notice admitted or favorable prior information issued for subdivision or construction operations, and also those so declared in the acquisition title, except for land where the competent entities prohibit any of those operations, in particular those located in green areas, protected areas or which, in accordance with the municipal territorial planning plans, are used for public spaces, infrastructure or facilities" (our emphasis).
6.11. As can be seen from the provisions of the IMI Code transcribed above, it is not possible to extract what the legislator intended to say when referring in the text of the law to "properties with residential use", because that concept is not used in the classification of properties, nor is that terminology found in any other law.
6.12. On the other hand, since Law No. 55-A/2012, of 29/10, has no preamble, neither can the legislator's intention at the time of its preparation be derived therefrom.
6.13. Thus, in the absence of exact terminological correspondence of the concept of "property with residential use" with any other concept used in other laws, several interpretative hypotheses can be envisaged, and the text of the law should be the starting point for the interpretation of that expression, because it is on the basis of it that the legislative thought must be reconstructed, in accordance with the provisions of No. 1 of Article 9 of the Civil Code (applicable under the provisions of Article 11, No. 1, of LGT).
On the Interpretation of the Concept of "Urban Property with Residential Use"
6.14. Indeed, in accordance with the provisions of Article 9 of the Civil Code, "interpretation should not be limited to the letter of the law, but should reconstruct, from the texts, the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied", and cannot "the interpreter consider legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed" (our emphasis) [1].
6.15. In these terms, the concept most closely corresponding to the literal tenor of the expression "property with residential use" is manifestly that of "residential properties", referred to in Article 6, No. 1 of the IMI Code and defined in No. 2 of the same article, comprising buildings or constructions licensed for residential purposes or, in the absence of licensing, those having residential purposes as their normal destination (our emphasis) [2].
6.16. If it is to be understood that the expression "property with residential use" coincides with that of "residential properties", it is manifest that the assessment under analysis will be vitiated by error as to the factual and legal assumptions, because the property with respect to which the Stamp Tax was assessed under said Item No. 28.1. is land for construction, without any building or construction required to meet that concept of "residential properties" (our emphasis).
6.17. Therefore, adopting the interpretation that "property with residential use" means "residential property", the assessment whose declaration of illegality is requested will, in fact, be illegal, because there is no building or construction on the land with that type of use.
6.18. Finally, it will also be important to inquire into what is the ratio legis underlying the rule of Item 28.1. of TGIS and, in obedience to the provisions of Article 9 of the Civil Code [3], what are the circumstances in which the norm was drafted and what are the specific conditions of the time in which it is applied.
6.19. Indeed, in this context, the legislator intended to introduce a principle of taxation on the wealth manifested in the ownership, usufruct or surface rights of urban properties of luxury with residential use, having considered, as a determining element of tax capacity, urban properties with residential use, of high value (luxury), that is, of value equal to or greater than EUR 1,000,000.00, on which a special rate of Stamp Tax would (and did) apply (our emphasis).
6.20. In truth, in the preamble of the Bill that introduced amendments regarding Item 28 of TGIS the following reasons were presented:
6.20.1. "The pursuit of the public interest, in light of the Country's economic-financial situation, requires a strengthening of budgetary consolidation which will require, in addition to permanent activism in reducing public expenditure, the introduction of fiscal measures inserted in a broader set of measures to combat the budgetary deficit".
6.20.2. "These measures are fundamental to reinforce the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary to comply with the adjustment program (...) and the Government is strongly committed to ensuring that the distribution of these sacrifices will be made by all and not only by those who live from their work income".
6.20.3. "In line with this objective, this law expands the taxation of capital and property income, equitably covering a broad set of sectors of Portuguese society".
6.20.4. "A tax rate is created under Stamp Tax applicable to urban properties with residential use whose TPV is equal to or greater than one million Euros" (our emphasis).
6.21. Thus, from this motivation of the legislator it follows that the taxation in question aims at "an effective distribution of sacrifices", imposing this taxation on property (as opposed to work income, already affected by other measures).
6.22. However, because the statement of reasons for the adoption of the said measures is too broad, it has contributed little to the interpretation of the concept of "urban property with residential use".
6.23. And we understand that this same conclusion can also be drawn from the analysis of the discussion of the Bill No. 96/XII in the Assembly of the Republic[4], which was at the origin of the proposal for amendments, with no discernment of an interpretative rationale different from that presented here [5].
6.24. Indeed, the justification for the measure called "special tax on residential urban properties of the highest value is based on the invocation of the principles of social equity and fiscal justice, calling to contribute (...) the holders of high-value properties intended for housing, thus imposing the new special tax on houses valued at EUR 1 million or more" (our emphasis).
6.25. Now, if such logic seems to make sense when applied to a "residence" (be it a house, an autonomous fraction, a part of property with independent use or an autonomous unit) whenever it represents, on the part of its holder, a tax capacity above the average (and, to that extent, liable to determine a special contribution to ensure the fair distribution of fiscal burden), it would not make any sense if applied to "land for construction" (our emphasis).
6.26. In fact, as the Claimant notes, "the ownership of properties by a real estate company that holds in its sphere land for construction intended to carry out its corporate purpose and develop real estate development activity would not represent a luxury assets portfolio and even less exceptional tax capacity, and such land is not considered a luxury good but rather an investment asset used for real estate development operations conducted by the company".
6.27. Thus, "ownership of such properties would not, in itself, demonstrate a tax capacity above the average, so as to justify a solidarity tax" such is the case with the Stamp Tax provided for in Item 28.1. of TGIS.
6.28. In these terms, the Respondent cannot make distinctions where the legislator itself understood not to do so, on pain of violating the coherence of the tax system and the principles of fiscal legality (Article 103, No. 2 of the CRP), justice, equality and fiscal proportionality, included therein.
6.29. Thus, in light of the foregoing, and in response to the first of the questions raised above (see point 6.1.), it is concluded that Stamp Tax as referred to in Item No. 28.1. of TGIS, in the wording provided by Law No. 55-A/2012, cannot apply to "land for construction", and the assessment act that is the subject of the Request for Arbitral Pronouncement presented by the Claimant is illegal.
On the Amendment Introduced by the State Budget Law for 2014
6.30. As we have seen, the concept of "property (urban) with residential use" was not defined by the legislator, neither in the text of 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 (also introduced by that Law) refers subsidiarily.
6.31. In truth, this is a concept that had a very short life, as it was abandoned upon the entry into force of the State Budget Law for 2014 [6] (on 1 January 2014), which gave new wording to that Item No. 28.1. of TGIS and which came to delimit its scope of objective taxation through the use of concepts that are legally defined in Article 6 of the IMI Code [7].
6.32. This amendment, "to which the legislator did not attribute an interpretative character, merely makes clear, for the future, that land for construction whose construction, authorized or foreseen, is for housing purposes is covered within the scope of Item 28.1. of TGIS (provided that its respective TPV is of a value equal to or greater than 1 million Euros), but clarifies nothing, however, with respect to past situations (assessments of 2012 and 2013)", as is the case with the assessment relating to the year 2013 that is in question in these proceedings (our emphasis) [8].
6.33. Now, it does not clearly result, either from the letter or from the spirit of the law, that its intention was, ab initio, to cover within its scope of objective taxation land for construction for which authorization for or provision for the construction of residential buildings has been made, as results, since 1 January 2014, from the text of Item 28.1. of TGIS, (after the wording introduced by the State Budget Law for 2014) (our emphasis).
6.34. In this context, nothing unequivocal results from the letter of the law because it itself, by using a concept that it did not define (and which was also not defined in the law to which it referred subsidiarily) unnecessarily lent itself to ambiguities regarding tax scope (a matter in which certainty and legal security should be the legislator's primary concern).
6.35. And from its "spirit", ascertainable in the statement of reasons of the bill that is at the origin of Law No. 55-A/2012, nothing more follows than the concern to raise new tax revenues from sources of wealth "more spared" in the past by the tax legislator than work income (in particular capital income, securities gains and property), reasons which make no relevant contribution to the clarification of the concept of "properties (urban) with residential use", because it assumes it as established, with no concern whatever to clarify it.
6.36. Such clarification did, however, emerge when the Bill No. 96/XII – 2nd (which gave rise to Law No. 55-A/2012, of 29 October) was presented and discussed in the Assembly of the Republic, in the words of the Secretary of State for Tax Affairs, who expressly stated that "the Government proposes the creation of a special tax on residential urban properties of the highest value (...) and is (...) creating special taxation on high-value properties intended for housing. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013 and will apply to houses valued at EUR 1 million or more" [9].
6.37. Thus, it can be ascertained that the reality that was intended to be taxed was after all, in common language (and notwithstanding the imprecision of the law's terminology with the expression "properties (urban) residential"), that of "houses", and not any other realities.
6.38. Furthermore, the expression "residential use" always appears in the IMI Code as relating to "buildings" or "constructions", because only these can be inhabited, which is not the case with land for construction which do not, in themselves, have conditions for this, and cannot be used for housing unless and until the construction authorized and foreseen for them is erected on them (our emphasis).
6.39. Thus, given that land for construction (whatever the type and purpose of the building that will be, or may be, erected thereon) does not, by itself, satisfy any condition for being so licensed (or for it to be possible to define it as having housing as its normal purpose) and the rule of objective scope of Stamp Tax refers to urban properties with "residential use" (without establishing any specific concept for this purpose), it cannot be derived therefrom that it contains a future potential, inherent in a property that may possibly be built on that land (our emphasis).
6.40. It can thus be concluded that, as results from Article 6 of the IMI Code a clear distinction between urban properties "residential" and "land for construction", these cannot be considered as "urban properties with residential use", for the purposes of the provisions of Item No. 28.1. of TGIS, in its original wording (as given to it by Law No. 55-A/2012, of 29 October) (our emphasis) [10].
Principle of Non-Retroactivity of Fiscal Law
6.41. As regards the question of the applicability to the Stamp Tax assessment relating to the year 2013 of the amendments introduced to Item 28.1. by the State Budget Law for 2014 (with the express introduction in the wording of the norm of the provision "land for construction intended for housing"), it will be necessary to analyze the question of the principle of non-retroactivity of fiscal law, constitutionally provided.
6.42. Now, in this context, in accordance with the provisions of Article 103 of the Constitution of the Portuguese Republic:
6.42.1. "The tax system aims to satisfy the financial needs of the State and other public entities and a fair distribution of income and wealth.
6.42.2. Taxes are created by law, which determines the scope of taxation, the rate, tax benefits and taxpayer guarantees.
6.42.3. No one can be obliged to pay taxes that have not been created in accordance with the Constitution, that are retroactive in nature or whose collection and assessment are not made in accordance with law".
6.43. As Article 103, No. 3, of the CRP consecrates the prohibition of authentic, or proper, retroactivity of fiscal law (covering cases where the taxable fact that the new law intends to regulate has already produced all its effects under the old law), it is not possible to permit the application of the new wording of Item 28.1. of TGIS (in force since 1 January 2014) to Stamp Tax assessments relating to the year 2013, because we would be faced with the application of a new law to an earlier taxable fact, thus verifying a situation of authentic retroactivity prohibited by Article 103, No. 3 of the Constitution (our emphasis) [11].
6.44. Now, in accordance with the provisions of Article 3 of Law No. 55-A/2012, of 29 October, (as worded in Article 23, No. 7 of the Stamp Tax Code) "the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the IMI Code", that is, "the tax is assessed annually, in relation to each municipality, by the central services of the Directorate-General for Taxes, on the basis of the TPVs of the properties and in relation to the taxpayers appearing in the matrices on 31 December of the year to which it relates" with this assessment "carried out in the months of February and March of the following year" (our emphasis) [12].
6.45. In these terms, it is easy to understand that the wording of Item 28.1. of TGIS, in force from 1 January 2014, cannot be applicable to assessments carried out with respect to the year 2013 because, in light of the foregoing, the taxable fact giving rise to them occurs on 31 December 2013, which is a date prior to the entry into force of the new wording of the law.
6.46. In this matter, and in support of the interpretation of the constitutional norm, it is also important to mention the provisions of Article 12, No. 1 of LGT, under which "tax norms apply to facts occurring after their entry into force, and no retroactive taxes may be created".
6.47. Also in judicial matters, the Constitutional Court (TC), in its most recent jurisprudence regarding tax matters, specifically in Decisions (AC) No. 128/2009, of 12 March and No. 85/2010, of 3 March, considered that the retroactivity enshrined in Article 103, No. 3, CRP is only authentic.
6.48. Indeed, in accordance with what is argued in TC AC No. 128/2009, "it follows from this constitutional provision that any tax norm (...) will be constitutionally censured when it assumes a retroactive nature, with the expression retroactivity being used, here, in its proper or authentic sense", that is, "the application of a new tax law (...) to a taxable fact occurring within the scope of the old tax law (...) is prohibited" (our emphasis) [13].
6.49. In these terms, in light of the foregoing, both as regards the fact that "land for construction" cannot be considered as "property with residential use", for the purposes of the provisions of Item No. 28.1. of TGIS, in its original wording (see points 6.4. to 6.40., above), and as regards the impossibility of the new wording of Item 28.1. of TGIS (in force from 1 January 2014) being applicable to assessments carried out with respect to the year 2013 (given that the taxable fact giving rise to them is earlier because it occurs on 31 December 2013 and is therefore prior to the date of entry into force of the new wording of that Item 28.1. of TGIS) (see points 6.41. to 6.48., above), it is concluded that the Stamp Tax assessment that is the subject of these proceedings is illegal [14].
On the Defect in Reasoning
6.50. In this context, having regard to the fact that it has already been concluded, in light of the foregoing, that the Stamp Tax assessment that is the subject of these proceedings is illegal, the analysis of the issue relating to the alleged defect in reasoning of the said assessment, raised by the Claimant in its request for pronouncement, is thus moot by reason of being unnecessary.
On the Request for Refund of Tax Paid, Plus Compensatory Interest
6.51. Finally, as regards the request presented by the Claimant for "refund of Stamp Tax paid as well as the other payments (...), plus the corresponding compensatory interest", it is important to note that, in accordance with the provisions of letter b), No. 1, of Article 24 of RJAT, and in conformity with what is established therein, "the arbitral decision on the merits of the claim from which no appeal or challenge may be brought binds the tax administration from the end of the period established for appeal or challenge, the administration being required to restore the situation that would have existed if the tax act that is the subject of the arbitral decision had not been carried out, adopting the acts and operations necessary for this purpose" (our emphasis) [15].
6.52. In truth, in accordance with the provisions of Article 100 of LGT, applicable to the case by virtue of the provisions of letter a), No. 1, of Article 29 of RJAT, "the tax administration is obliged, in case of full or partial granting of complaints or administrative appeals, or of judicial proceedings in favor of the taxpayer, to immediate and full restoration of the situation that would have existed if the illegality had not been committed, including the payment of compensatory interest, in accordance with the terms and conditions provided by law" (our emphasis).
6.53. In the situation under analysis, and as a consequence of the illegality of the assessment act already identified above, there must be a refund of the amounts already paid by the Claimant, as Stamp Tax, as a means of achieving the restoration of the situation that would have existed if the illegality had not been committed.
6.54. As regards the compensatory interest petitioned by the Claimant, it appears that, in light of what is established in Article 61 of CPPT and the requirements for the right to compensatory interest being met (that is, verifying the existence of error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due, as provided for in No. 1 of Article 43 of LGT), the Claimant is entitled to compensatory interest at the legal rate, calculated on the amounts paid relating to the Stamp Tax assessment dated 18 March 2014 (and relating to the year 2013), which shall be calculated in accordance with the provisions of No. 3 of Article 61 above mentioned, that is, from the date of payment of the undue tax until the date of issuance of the respective credit note.
- DECISION
7.1. In accordance with the provisions of Article 22, No. 4, of RJAT, "the arbitral decision issued by the arbitral tribunal includes the setting of the amount and distribution among the parties of the costs directly resulting from the arbitration proceedings".
7.2. In this context, the basic rule regarding responsibility for process costs is that the party that caused them should be condemned, it being understood that the losing party causes the costs of the proceedings, in proportion to the extent to which it loses [Article 527, No. 1 and 2 of the Civil Procedure Code (CPC)].
7.3. In the case under analysis, having regard to the foregoing, the principle of proportionality imposes that full responsibility for costs be attributed to the Respondent.
7.4. In these terms, having regard to the analysis carried out, this Arbitral Tribunal decided:
7.4.1. To judge well-founded the request for arbitral pronouncement presented by the Claimant and to condemn the Respondent regarding the request for declaration of illegality of the Stamp Tax assessment dated 18 March 2014, relating to the year 2013 (and identified in this case), annulling, as a consequence, the respective tax act;
7.4.2. To judge well-founded the request for the Respondent to be ordered to refund the amounts unduly paid by the Claimant, plus compensatory interest at the legal rate, calculated in accordance with the legal provisions;
7.4.3. To condemn the Respondent to payment of the costs of these proceedings.
Value of the Case: Having regard to the provisions of Articles 306, No. 2 of CPC, Article 97-A, No. 1 of CPPT and Article 3, No. 2 of the Regulations on Costs in Tax Arbitration Proceedings, the value of the case is set at EUR 13,067.40.
Costs of the Proceedings: Pursuant to the provisions of Table I of the Regulations on the Costs of Tax Arbitration Proceedings, the value of the Arbitration Case Costs is set at EUR 918.00, to be borne by the Respondent, in accordance with Article 22, No. 4 of RJAT.
Notify.
Lisbon, 5 February 2015
The Arbitrator
Sílvia Oliveira
Text prepared by computer, in accordance with No. 5 of Article 131 of CPC, applicable by virtue of the reference in letter e) of No. 1 of Article 29 of Decree-Law No. 10/2011, of 20/01.
The wording of this decision is governed by the old spelling.
[1] To the effect that tax norms are interpreted as any others, see AC TCAS Process 07648/14, of 10 July.
[2] In this sense, see CAAD Arbitral Decision No. 48/2013-T, of 9 October.
[3] According to this article, the interpretation of the legal norm should not be limited to the letter of the Law, but reconstruct the legislative thought from the texts and other interpretative elements, taking into account the unity of the legal system. However, "the norms determining the scope of taxation of taxes must be interpreted in their exact terms, without resorting to analogy, making certainty and security in their application prevail" (in this sense, see AC TCAS Process 5320/12, of 2 October, AC TCAS Process 7073/13, of 12 December and AC TCAS 2912/09, of 27 March 2014.
[4] Available for consultation in the Journal of the Assembly of the Republic, I Series, No. 9/XII/2, of 11 October 2012.
[5] As already referred to in several Arbitral Decisions issued by CAAD, in particular, in the aforementioned Process No. 48/2013-T, of 9 October.
[6] Introduced by Law No. 83-C/2013, of 31 December.
[7] See in this sense AC STA 048/14, of 9 April and AC STA 0272/14, of 23 April.
[8] In this sense, see AC mentioned in the previous point.
[9] Available for consultation in the Journal of the Assembly of the Republic, I Series, No. 9/XII/2, of 11 October 2012 (p. 32).
[10] See AC STA 048/14, of 9 April, AC STA 0272/14, of 23 April, AC STA 0505/14, of 29 October and AC STA 0740/14, of 10 September.
[11] See AC TC 128/2009, of 12 March, referred to in AC STA 01375/12, of 14 February 2013.
[12] As provided in Article 113, No. 1 and 2 of the IMI Code.
[13] In the doctrine, and advocating authentic retroactivity and not improper or "inauthentic" retroactivity, see V. Casalta Nabais, Fiscal Law, p. 147; Rui Guerra da Fonseca, Commentary on the Constitution of the Portuguese Republic, II volume, coordinated by Paulo Otero, pp. 872 et seq., Américo Fernando Brás Carlos, Taxes, p. 145 et seq.).
In the opposite sense, see V. Paz Ferreira - Constitution of the Portuguese Republic Annotated, Jorge Miranda and Rui Medeiros, Volume II, Coimbra, 2006, p. 223, following the position of Diogo and Mónica Leite de Campos and Jorge Bacelar Gouveia.
[14] In this sense, there are several decisions issued by CAAD, in particular, Arbitral Decision 511/2014-T, of 26 January 2015, issued by the undersigned.
[15] In this regard, regarding the "refund of the total amount paid and compensatory interest", there are several decisions issued by CAAD, in particular, Arbitral Decision 511/2014-T, above mentioned and Arbitral Decision 578/2014-T, of 28 January 2015, both issued by the undersigned.
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