AIMI Tax on Real Estate Companies: Constitutionality Challenge on Building Land (CAAD 551/2018-T)

ARBITRAL DECISION

I. REPORT

1. On 7 November 2018, the commercial company A..., Lda., NIPC..., with registered office at Rua ..., ..., Guimarães (hereinafter, Claimant), filed a request for constitution of an arbitral tribunal, under the combined provisions of articles 2, no. 1, paragraph a), and 10, nos. 1, paragraph a), and 2, of Decree-Law no. 10/2011, of 20 January, which approved the Legal Regime of Arbitration in Tax Matters, as amended by article 228 of Law no. 66-B/2012, of 31 December (hereinafter, abbreviated as RJAT), with a view to obtaining this tribunal's ruling concerning:

• Declaration of illegality and annulment of the assessment of AIMI no. 2018..., relating to the year 2018, in the total amount of € 9,662.00;

• Restitution of the amount of tax improperly paid, plus compensatory interest at the legal rate, from the date of payment until the date of its full reimbursement.

The Claimant submitted 17 (seventeen) documents and did not request the production of any other evidence.

The Respondent is AT – Tax and Customs Authority (hereinafter, Respondent or AT).

1. As results from the request for arbitral ruling, the Claimant bases its challenge to the disputed tax act, essentially, on the violation of various constitutional norms and principles, namely by alleging that:

• The principle of contributory capacity (article 104 of the CRP) is offended, inasmuch as companies engaged in real estate activity and obtaining income from it, with payment of the corresponding corporate income tax (IRC), are burdened with a new tax that, without sufficient material reason, taxes them exclusively in function of that activity;

• There is no equity and justice in the distribution of sacrifices to satisfy public interests and the norms governing AIMI manifestly exceed the limits of the prohibition of excess in terms of proportional equality (articles 13, no. 1, 104, and 18 of the CRP);

• When companies engaged in real estate activity are taxed differently both from other companies and from individual taxpayers and undivided inheritances, there is a violation of the principle of equality (article 13 of the CRP);

• It constitutes double taxation, since it covers all of the Claimant's assets and these have already been taxed under property transfer tax (IMI);

• AIMI is an arbitrary tax, since it is not required by the constitutional objectives of the tax system, it is confiscatory and expropriatory, representing a notorious and unequal decapitalization of the Claimant's financial investments, thus violating article 103, no. 2, of the CRP;

• The taxation in AIMI did not take into account the autonomy of local government (article 6 of the CRP).

1. The request for constitution of an arbitral tribunal was accepted and automatically notified to AT on 14 November 2018.

2. The Claimant did not appoint an arbitrator, wherefore, under article 6, no. 1, and article 11, no. 1, paragraph a), of the RJAT, the President of the CAAD Ethics Council appointed the undersigned as arbitrator of the singular Arbitral Tribunal, who communicated acceptance of the appointment within the applicable time limit.

4.1. On 28 December 2018, the parties were duly notified of this appointment and did not manifest a will to refuse the appointment of the arbitrator, in accordance with article 11, no. 1, paragraphs b) and c), of the RJAT and articles 6 and 7 of the CAAD Code of Ethics.

4.2. Thus, in accordance with the provision in article 11, no. 1, paragraph c), of the RJAT, the singular Arbitral Tribunal was constituted on 17 January 2019.

1. On 18 February 2019, the Respondent, duly notified for this purpose, submitted its Answer in which it specifically challenged the arguments raised by the Claimant and concluded for the dismissal of the present action and its consequent absolution from the claim.

5.1. The Respondent based its Answer, essentially, on the following arguments:

The law establishes the incidence of the tax on "land for construction" and this independently of the potential assignment that may be given to them, since they do not appear in the negative delimitation of incidence; that is, the legislator did not establish the withdrawal of the rule of tax incidence from land for construction for reasons related to its potential assignment.

The legislator's choices were equally guided by the need to mitigate the impact of this taxation on the exercise of business activities in general, through the exclusion of urban properties for industrial, commercial and service purposes and "others". Nevertheless, although having excluded from incidence urban properties classified as "industrial, commercial or for services" and "others", the legislator expressly chose to maintain other properties that also form part of the assets of companies, such as those classified as residential or building land, by not including them in the negative delimitation provided.

Building land is not merely instrumental to the exercise of economic activity; on the contrary, it forms part of the very core of economic activity, with intrinsic economic value and, normally, quotation in the real estate market, that is, it can be sold, exchanged, given as security for obligations and obviously evidences a certain economic capacity.

On the other hand, the taxation embodied in AIMI translates into a specific imposition on assets and not on income.

Therefore, it is well understood that the legislative solution is to subject all taxpayers to taxation in attention to the ownership of relevant legal situations concerning the urban properties identified in the objective incidence, independently of the legal or economic structuring that such taxpayers may possess.

Like any tax on assets, AIMI is dissociated from any realization of profit from the sale of real estate, as well as from the existence or non-existence of a negative or positive net situation, being relevant, for the purpose of the tax, only the asset value of the land.

Thus, it is not perceived that the taxation of the Claimant's real estate assets offends the principle of tax equality and contributory capacity merely because the ownership of real estate forms the very object of its economic activity.

In fact, the holding of real estate assets of high value, independently of whether or not allocated to economic activity, is tendentially revelatory of high contributory capacity, superior to that which is presumed to exist when assets of reduced value are held or when they do not exist, wherefore, in principle, there is justification for limiting taxation to the first situations.

In situations where real estate activity is carried out with the ownership of the properties, it is undeniable that the patrimonial assets are indicative of a certain economic capacity of that entity, distinguishing themselves only from other owners by the nature, singular or collective. If it were not so, that would itself be unconstitutional by violation of the principle of equality by preferential treatment of owners that are collective persons to the detriment of individual owners, treating identical situations unequally, without any reason or justifying material basis for such legislative choice.

On the other hand, the constitutional order does not contemplate the principle of prohibition of double taxation; that is, the prohibition of legal double taxation does not exist as an autonomous principle as support for a judgment of constitutionality.

5.2. The Respondent submitted no documents, nor the respective administrative file as this does not exist, nor requested the production of any other evidence.

1. On 18 February 2019, an order was issued dispensing with the holding of the meeting referred to in article 18 of the RJAT, fixing a deadline for the submission of arguments and determining 15 July 2019 as the deadline for pronouncement of the arbitral decision.

2. The parties submitted arguments, in which they reiterated the positions previously assumed in their respective pleadings.

II. DISPOSITION

1. The Arbitral Tribunal was regularly constituted and is competent as to the matter, given the configuration of the subject matter of the proceedings (cf. articles 2, no. 1, paragraph a) and 5 of the RJAT).

The request for arbitral ruling is timely, having been filed within the time limit provided in article 10, no. 1, paragraph a), of the RJAT.

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

The proceedings do not suffer from nullities, and no exceptions or preliminary questions have been raised that prevent consideration of the merits and of which this tribunal needs to be apprised.

III. REASONING

III.1. OF FACT

§1. FACTS PROVEN

1. The following facts are considered proven:

a) The Claimant is a commercial company whose object is the purchase, sale and resale of real estate. [cf. document no. 1 attached to the request]

b) The Claimant is the owner of urban properties (building land), located at Place of ..., parish of ..., municipality of Guimarães, registered in the respective property register under articles..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ... and ..., and of urban properties (building land) located at Place ..., parish of ..., municipality of Guimarães, registered in the respective property register under articles ... and .... [cf. documents nos. 2 to 15 attached to the request]

c) The Claimant was notified of the AIMI assessment no. 2018..., relating to the urban properties identified in the previous proven fact and relating to the year 2018, in the total amount of € 9,662.00 (nine thousand six hundred and sixty-two euros), with payment deadline in the month of September 2018. [cf. documents nos. 16 and 17 attached to the request]

d) The Claimant made timely and full payment of the aforementioned amount of AIMI assessed. [cf. document no. 17 attached to the request]

e) On 7 November 2018, the Claimant submitted the request for constitution of an arbitral tribunal that gave rise to the present proceedings. [cf. CAAD Case Management System]

§2. FACTS NOT PROVEN

1. With relevance to the appreciation and determination of the case, there are no unproven facts.

§3. RATIONALE REGARDING FACTS

1. The relevant facts for adjudication of the case were selected and determined in function of their legal relevance, in light of the plausible solutions to the legal questions, in accordance with the combined application of articles 123, no. 2, of the CPPT, 596, no. 1, and 607, no. 3, of the CPC, applicable by virtue of article 29, no. 1, paragraphs a) and e), of the RJAT.

The tribunal's conviction was based on the facts alleged by the parties, whose adherence to reality was not challenged, and on critical analysis of the documentary evidence in the record, all as referred to in connection with each of the items of proof.

III.2. OF LAW

§1. THE THEMA DECIDENDUM

1. The substantive issue submitted to this tribunal's consideration concerns, fundamentally, the determination of the scope of subjection to the Additional Municipal Property Tax (AIMI), which the State Budget Law for 2017 (Law no. 42/2016, of 28 December) introduced and which entered into force on 1 January of that same year.

The Claimant, as stated, raises various questions of unconstitutionality, namely regarding the norm of article 135-B of the IMI Code, for violation of the principle of tax equality, in the aspect of prohibition of arbitrariness, the principle of contributory capacity, the principle of proportionality, and the principle of autonomy of local government; it further alleges that AIMI is a confiscatory and expropriatory tax and that it constitutes a situation of double taxation.

The Tribunal is further called upon to rule on the claims for reimbursement of the amount of tax paid and payment of compensatory interest.

§2. SCOPE OF INCIDENCE OF AIMI

1. The Additional Municipal Property Tax (AIMI) was created by article 219 of Law no. 42/2016, of 28 December, which approved the State Budget for 2017, by adding articles 135-A to 135-K to the IMI Code, which establish the respective legal regime, becoming chapter XV of that legal compilation.

In the Report of that State Budget, the following may be read, which is relevant here:

"The revenue-raising measures, beyond the 3% updating of IECs and ISV, focus on the introduction of two new levies: a progressive additional tax on IMI and an expansion of the IABA base to soft drinks. The two measures together represent only about 0.5% of total tax revenue. In both cases the revenue is earmarked.

The earmarking of the progressive taxation of real estate assets to the Financial Stabilization Fund of Social Security corresponds to the objective of the government's program to broaden the financing base of Social Security, while introducing a tax that falls on holders of larger real estate assets, reinforcing the overall progressivity of the system."

1. In article 135-A of the IMI Code, the subjective incidence of AIMI is defined, as follows:

Article 135-A

Subjective incidence

1 – Natural or legal persons who are owners, usufructuaries or superficiary holders of urban properties located in Portuguese territory are subject to the additional municipal property tax.

2 – For purposes of no. 1, any structures or centers of collective interests without legal personality that appear in the property registers as taxpayers of the municipal property tax are equated to legal persons.

3 – The status of taxpayer is determined in accordance with the criteria established in article 8 of this Code, with necessary adaptations, with reference to the date of 1 January of the year to which the additional municipal property tax relates.

4 – Municipal companies are not subject to the additional municipal property tax.

Article 135-B defines the objective incidence of AIMI, providing as follows:

Article 135-B

Objective incidence

1 - The additional municipal property tax applies to the sum of the tax asset values of urban properties located in Portuguese territory of which the taxpayer is the owner.

2 - The following are excluded from the additional municipal property tax: urban properties classified as "commercial, industrial or for services" and "others" pursuant to paragraphs b) and d) of no. 1 of article 6 of this Code.

This regime excludes from AIMI incidence "urban properties classified as 'commercial, industrial or for services' and 'others' pursuant to paragraphs b) and d) of no. 1 of article 6" of the Municipal Property Tax Code (CIMI), so that only urban properties for residential purposes and building land are covered, as defined in that article 6.

Article 6 of the IMI Code establishes the species of urban properties, providing as follows:

Article 6

Species of urban properties

1 – Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Building land;

d) Others.

2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, that have the normal destination for each of these purposes.

3 – Building land is considered to be land situated within or outside an urban agglomeration for which construction or subdivision licensing or authorization has been granted, prior notification admitted or a favorable preliminary information issued for subdivision or construction operations, and also those so declared in the acquisition title, excepting land for which the competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land planning plans, are allocated to spaces, infrastructure or public facilities.

4 – Encompassed in the provision of paragraph d) of no. 1 are land situated within an urban agglomeration that is not building land nor covered by the provision of no. 2 of article 3, and also buildings and constructions licensed or, in the absence of a license, having the normal destination for other purposes than those referred to in no. 2, and also those in the exception of no. 3.

1. It is evident that the legislator, in defining the negative delimitation of AIMI incidence by reference to urban properties classified as "commercial, industrial or for services" and "others", pursuant to paragraphs b) and d) of no. 1 of article 6 of the IMI Code, is precisely referring to this typology of properties in accordance with the characterization itself that the Code attributes to them.

The tax exclusion covers, therefore, properties classified as commercial, industrial or for services, understood as buildings or constructions licensed for these purposes or having the normal destination for each of these purposes. Said exclusion covers, moreover, the residual species mentioned in paragraph d) of no. 1 of the cited article 6, there being included land situated within or outside an urban agglomeration that is not building land nor rural property, and also buildings and constructions that do not fit into any of the previous classifications.

The scope of objective incidence, by effect of the reference to said article 6, was thus defined not only by reference to a certain species of urban property, but also by reference to the administrative procedure through which the classification was effected or, in the absence of a license, to the normal destination of such properties for commercial, industrial, service, or other purposes.

In this framework, the understanding that it was intended to exclude from the scope of AIMI incidence properties allocated to economic activities, on the grounds that it was the legislator's intention not to overburden fiscally those taxpayers who possess real estate by reason of their corporate purpose, has no support in the letter of the law nor in the rational and systematic elements of interpretation.

Such an understanding would presuppose that the legislator, instead of having defined the scope of AIMI incidence through characterized types, would have opted for a case-by-case evaluation based on the actual allocation of the property to an economic activity or to the operation of a legal person.

In this regard, the following considerations are made in the arbitral award issued in case no. 420/2018-T, with which we concur and which, with all due respect, we make our own:

"The wording of article 135-B of the CIMI that was approved does not remove the incidence of AIMI on properties allocated to housing and building land used by legal persons in the context of their economic activity.

The legislative concern to 'avoid the impact of this tax on economic activity' was announced in the Proposal for the State Budget Law for 2017 and was concretized, to some extent, through the exclusion from the scope of incidence of 'urban properties classified as the species "industrial", as well as urban properties licensed for tourism activity, the latter provided that their destination is duly declared and proven' and the deduction from the taxable value of the amount of '€ 600,000.00, when the taxpayer is a legal person with agricultural, industrial or commercial activity, for properties directly allocated to its operation'.

However, it was not on the basis of the activity to which the properties are allocated that the exclusion of incidence came to be defined, since in the wording that was approved the non-incidence was defined solely on the basis of the types of properties indicated in article 6 of the CIMI, without any reference to allocation to the operation of legal persons.

Distinct concepts are the allocation of a property, which presupposes a use, and the purpose for which it is intended, the 'normal destination', underlying the classifications of properties referred to in no. 2 of article 6 of the CIMI.

If the final version of the Budget had maintained the legislative intent to withdraw incidence from properties directly allocated to the operation of legal persons, the reference to this allocation that appeared in the proposal and that clearly expressed this legislative option would certainly have been maintained.

Thus, having been omitted this reference to the allocation of properties, there is no legal support for concluding that residential properties and building land allocated to the activities of legal persons are not relevant to AIMI incidence.

Therefore, it must be concluded that the allocation of properties to the economic activities of legal persons does not exclude taxation in AIMI (except in cases where these are properties that previously were exempt or not subject to taxation in IMI, which are not counted for AIMI purposes, pursuant to no. 3 of article 135-B of the CIMI).

The holding of real estate assets of high value, independently of whether or not allocated to economic activity, is tendentially revelatory of high contributory capacity, superior to that which is presumed to exist when assets of reduced value are held or when they do not exist, wherefore, in principle, there is justification for limiting taxation to the first situations.

However, there do not explicitly result from the Report of the Budget for 2017 nor from its parliamentary discussion the reasons that may underlie the distinction, for purposes of taxation in AIMI, between the asset values of properties classified as residential or building land for construction (independently of their actual allocation to these purposes) and those of urban properties that have other classifications, in light of article 6 of the CIMI."

This has indeed been the orientation of CAAD's arbitral jurisprudence on this matter, that is, that taxation operates independently of the nature of the activity developed, and as an example, the following decisions may be consulted (independently of the final decision as to the merits or otherwise of the arbitral claim):

a) Real Estate Investment Funds: cases nos. 664/2017-T and 686/2017-T;

b) Financial institutions: case no. 676/2017-T;

c) Financial leasing institutions: case no. 696/2017-T;

d) Construction and urban development companies: case no. 6/2018-T.

Additionally, as José Maria Fernandes Pires states (The Additional IMI and Personal Taxation of Assets, Coimbra, Almedina, 2017, p. 7), AIMI aimed to "tax wealth progressively, above a certain value, when the owners are natural persons and all the wealth of legal persons, regardless of value and at a proportional rate", wherefore it should be considered that it was never in the mind of the legislator to exclude economic activities, but rather to exclude urban properties classified in function of a purpose.

Indeed, if that were the intention, given that the majority of legal persons conduct economic activities, it would no longer make any sense to tax legal persons from the subjective perspective.

1. Therefore, there is no scope whatsoever for attempting to extend the legislative formula used to properties allocated to economic activity or to the operation of a company, independently of the specific characterization as commercial, industrial or service properties. Having the legislator defined an exclusion from incidence by express and precise reference to certain species of urban properties, which are immediately identifiable in the context of the law, it is not possible to effect an extensive interpretation so as to include other typologies that the legislator manifestly did not wish to contemplate; one cannot even attempt to reach this interpretive result on the basis of mere considerations of pragmatic order or teleological identity.

§3. ON THE (UN)CONSTITUTIONALITY OF THE AIMI TAXATION REGIME

1. As already stated, the Claimant raises the unconstitutionality of the AIMI taxation regime in multiple respects, namely regarding the norm of article 135-B of the IMI Code, and it is necessary to appreciate and determine whether or not any of the cited violations of constitutional norms and principles are verified.

2. With regard to the constitutional principles of tax equality and contributory capacity, Casalta Nabais (Tax Law, 11th Edition, Coimbra, Almedina, 2019, pp. 154 to 157) states the following:

"…the principle of tax equality has always had inherent especially the idea of generality or universality, under which all citizens are bound by the obligation to pay taxes, and of uniformity, requiring that such obligation be assessed by the same criterion – the criterion of contributory capacity. This thus implies equal tax for those with equal contributory capacity (horizontal equality) and different tax (in qualitative or quantitative terms) for those with different contributory capacity in proportion to this difference (vertical equality).

Configuring the general principle of equality as material equality, the principle of contributory capacity as the tertium comparationis of equality in the domain of taxes, does not require a specific and direct constitutional provision. Its constitutional foundation is, therefore, the principle of equality articulated with other principles and provisions of the respective 'fiscal constitution' and not any other.

(…) contributory capacity is the assumption and the criterion of taxation. As an assumption, it requires not only that all taxes, in which naturally are included extrafiscal taxes, but also the very tax benefits have 'tax goods' as their object, thereby excluding from taxation both the existential minimum and the so-called confiscatory maximum. (…)

As a criterion of taxation, contributory capacity rejects that the whole of taxes (the tax system) and each of the taxes per se have any other criterion as their basis, whether at the level of the respective norms or at the level of the corresponding results. Given its scope, such a criterion applies, in objective terms, only to tax levies and concerning the respective tax obligation, and relates, in subjective terms, only to taxpayers (and not to other tax subjects), whether citizens or foreigners, natural or legal persons."

Regarding the same principles, Jónatas Machado and Paulo Nogueira da Costa state (Manual of Tax Law, Coimbra, Almedina, 2016, pp. 61 and 62) as follows:

"The principle of tax equality translates into a requirement for equal treatment, requiring equality of treatment of taxpayers in the same income bracket (horizontal equality) and differentiated treatment, requiring differentiation of taxpayers placed in different income brackets in the socioeconomic spectrum (vertical equality), that is, it should be understood in material sense and not in merely formal sense.

This principle points to the consideration of the criterion of contributory capacity in the exercise of tax power.

Contributory capacity can be evidenced through income, assets and consumption, and constitutes a legitimate criterion for differentiation of treatment of taxpayers. Thus, whoever reveals greater economic capacity to pay taxes should pay more and whoever reveals lesser economic capacity should pay less. It can thus be affirmed that contributory capacity functions as a concretizing principle of the principle of equality, understood in material sense."

In the same vein, Sérgio Vasques (Manual of Tax Law, 2nd edition, Coimbra, Almedina, 2018, pp. 294 and 295) states as follows:

"The principle of contributory capacity represents the material criterion of equality adequate to taxes. (…)

Contributory capacity is the distribution criterion to which the principle of equality points unequivocally as soon as we project it onto the domain of taxes, reason why the principle of contributory capacity does not require explicit constitutional consecration, being sufficient, to base it in this area of the system, the general principle of equality accepted by article 13 of the Constitution."

1. The Constitutional Court pronounced itself, on diverse occasions, on the cited constitutional principles, and it is important to begin by noting the alert it makes regarding the principle of contributory capacity, to the effect that "one should recognize that it is not easy to draw very clear and sure legal consequences from the principle of contributory capacity, translated into a judgment of constitutional inadmissibility of certain or certain solutions adopted by the tax legislator" (judgment no. 84/2003, of 12 February 2003).

Still from the Constitutional Court, in a global analytical perspective of the principles in question, let us invoke judgment no. 430/2016, in which the following is affirmed:

"12.1 The relationship between the principles invoked – tax equality, contributory capacity, (…) – has been pointed out by doctrine and jurisprudence.

First of all, in the words of Judgment no. 197/2016 (cf. II – Reasoning, 3):

"(…) As the Constitutional Court has affirmed, the principle of contributory capacity, although not expressly enshrined in the Constitution, is nothing more than 'the (qualified) expression of the principle of equality, understood in material sense, in the domain of taxes, that is, equality in taxation'. And, in that sense, it constitutes the corollary tax of the principles of equality and tax justice and from which derives a command to the ordinary legislator to the effect of architecting the tax system with a view to the contributory capacities of each one (cf. judgment no. 187/2013 and the jurisprudence cited there)."

As explained by JOSÉ CASALTA NABAIS, '[c]onfiguring the general principle of equality as material equality, the principle of contributory capacity as the tertium comparationis of equality in the domain of taxes, does not require a specific and direct constitutional provision. Its constitutional foundation is, therefore, the principle of equality articulated with other principles and provisions of the respective "fiscal constitution" and not any other.' (Manual of Tax Law, cited, p. 153). It is thus the assumption, the limit and the criterion of taxation (thus, SÉRGIO VASQUES, Manual of Tax Law, cited, p. 296).

(…)

The Constitutional Court has also pronounced itself on diverse occasions on the principle of tax equality. In summary and on the same principle, Judgment no. 590/2015 (cf. II. Reasoning, 12):

"The constitutional principle of tax equality, as a specific expression of the general structuring principle of equality (article 13 of the Constitution), finds concretization 'in the generality and uniformity of taxes. Generality means that all citizens are bound to the payment of taxes (…); in turn, uniformity means that the distribution of taxes among citizens obeys the same identical criterion for all' (TEIXEIRA RIBEIRO, Lessons of Public Finance, 5th edition, p. 261). And such criterion, as emphasized by CASALTA NABAIS, is found in the principle of contributory capacity: 'This thus implies equal tax for those with equal contributory capacity (horizontal equality) and different tax (in qualitative or quantitative terms) for those with different contributory capacity in proportion to this difference (vertical equality)' (Tax Law, 7th edition, 2012, p. 155). As a presupposition and criterion of taxation, the principle of contributory capacity 'on one hand, constituting the ratio or cause of taxation, removes the tax legislator from arbitrariness, obliging it that in the selection and articulation of tax facts, it adheres to revelations of contributory capacity, that is, it sets as object and taxable matter of each tax a certain economic presupposition that is a manifestation of that capacity and is present in the various legal hypotheses of the respective tax' (CASALTA NABAIS, op. cit., p. 157).

The Constitutional Court has affirmed this, of which Judgment no. 84/2003 is an example:

'The principle of contributory capacity expresses and concretizes the principle of fiscal or tax equality in its aspect of "uniformity" – the duty of all to pay taxes according to the same criterion – with contributory capacity filling the unitary criterion of taxation', understanding this criterion as one in which 'the incidence and distribution of taxes – of 'tax levies' more precisely – should be made according to the economic capacity or 'spending capacity' (…) of each one and not according to what each one might eventually receive in public goods or services (benefit criterion). (…) Notwithstanding the silence of the Constitution, it is generalized understanding of doctrine that 'contributory capacity' continues to be a basic criterion of our 'fiscal Constitution' and that it can (or should) be reached from the structuring principles of the tax system formulated in articles 103 and 104 of the CRP (…)'.

This Court has, however, emphasized that the principle of contributory capacity does not dispense with the concurrence of other constitutional principles. As referred in Judgment no. 711/2006, 'it is clear that the "principle of contributory capacity" must be made compatible with other principles with constitutional dignity, such as the principle of the Social State, the legislator's freedom of configuration, and certain requirements of practicability and cognoscibility of the tax fact, also indispensable for the fulfillment of the purposes of the tax system'. And it continues: 'To ascertain, however, the existence of a sufficiently distinct particularity to justify an inequality of legal regime, and to decide on the circumstances and factors to be taken as relevant in such ascertainment, is a task that primarily falls to the legislator, who holds the primacy of concretization of constitutional principles and the corresponding freedom of configuration. Therefore, the principle of equality presents itself fundamentally to legal operators, in the context of constitutionality control, as a negative principle (…) – as prohibition of arbitrariness'.

In summary, in the synthesis of Judgment no. 695/2014, 'the principle of tax equality can be concretized through diverse aspects: a first one is in the generality of the tax law, in its application to all without exception; a second one is in the uniformity of the tax law, in treating in the same way taxpayers who find themselves in equal situations and in a different way those who find themselves in different situations, to the extent of the difference, to be assessed by contributory capacity; a last one is in the prohibition of arbitrariness, in preventing the introduction of discriminations between taxpayers that are devoid of rational foundation'."

1. With regard to the principle of proportionality and, inherently, to the problem of confiscatory and expropriatory taxation (characteristics pointed out by the Claimant regarding AIMI), Américo Fernando Brás Carlos (Taxes, General Theory, 4th Edition, Coimbra, Almedina, 2014, pp. 43, 130 and 131) tells us the following:

"Confiscation is the public appropriation of a private individual's assets without just compensation. An act, moreover, prohibited by no. 2 of article 62 of the CRP.

(…)

The obligation of proportionality is a duty shaping the activity of administrative bodies and agents (art. 266 of the CRP). Proportionality is, however, more than that: it is a constitutional principle (art. 18, no. 2, of the CRP) that extends to legislative bodies and is a cornerstone of the democratic rule of law, with obvious reflexes in the area of taxation.

By force of the obligation of proportionality, the tax legislator and the Tax Administration are subject to the prohibition of excess. In its action, the lesion of taxpayers' assets should not exceed what is strictly necessary for the realization of the public interest and should be tolerable when confronted with the public purposes pursued and with other principles, such as that of equality. There will be unconstitutionality when the law imposes an unnecessary, even if partially, or disproportionate taxation. The most evident unconstitutionality will occur in the confiscation of property by way of taxation (…)

The proportionality of which we speak here concerns the comparison between the public purposes pursued with the tax and the private costs necessary to achieve them."

In this vein, Jónatas Machado and Paulo Nogueira da Costa state (op. cit., pp. 93 to 95) as follows:

"The principle of proportionality in the broad sense is a concretizing sub-principle of the principle of the rule of law, comprising the evaluation of any state conduct, normative or not, on the basis of five fundamental criteria or tests.

The first concerns the legitimacy of the ends. This criterion is generally satisfied, to the extent that taxes serve to realize public interests of constitutional and legal relevance.

The second is connected with the assessment of the prima facie legitimacy of the means, directed at investigating the existence of any express prohibition on the use of a certain means. (…)

The third test is connected with the adequacy of the means to the realization of the intended ends, from the point of view of empirical-rational cause-and-effect relationships. (…)

The fourth test is connected with the necessity or exigibility of the means, from the spatial, temporal, subjective and objective point of view. The same means that the tax burden should limit itself to what is strictly necessary for the promotion of satisfaction of the State's financial needs and the promotion of tax justice, with the inherent requirements of universality and equality, refraining, insofar as possible, from compromising economic efficiency.

Finally, the proportionality in the strict sense of the means to be employed is evaluated on the basis of a cost-benefit analysis. In this analysis, one takes into account the question of whether the administrative and economic costs of application and compliance with tax norms are duly compensated by the benefits of taxation. Similarly, the role of the tax system in creating conditions for progress and justice, on economic and social plans, is at issue.

(…)

From the principle of proportionality results the prohibition of the application of excessive rates, together with the pursuit of the optimal rate, compatible with the maintenance of taxable income."

1. Having said this, the following is affirmed in the arbitral award issued in case no. 668/2017-T, which we subscribe to and which, mutatis mutandis, has full application to the case sub judicio:

"As has been uniformly understood by the Constitutional Court, the principle of equality, as a limit to legislative discretion, does not require equal treatment of all situations, but rather implies that those in equal situations be treated equally and those in unequal situations be treated unequally, so as not to create arbitrary and unreasonable discriminations, because lacking sufficient material foundation. The principle of equality does not prohibit the establishment of distinctions, but rather distinctions devoid of objective and rational justification.

The creation of AIMI, as a complementary levy on real estate assets, which aimed to introduce into taxation 'a progressive element of personal basis, taxing higher the more substantial assets' (Report of the Budget for 2017, page 60) is compatible with the objective that the taxation of assets should contribute to equality among citizens, affirmed in no. 3 of article 104 of the CRP, since progressivity has as its corollary, tendentially, imposing greater taxation on those with greater contributory capacity.

On the other hand, the exclusion from taxation of properties specially suited for productive activity, namely those 'commercial, industrial or for services', finds constitutionally acceptable foundation in the obligation of the State to promote the increase of economic well-being, which presupposes good functioning of productive activities and constitutes one of its priority tasks within the economic sphere [article 81, paragraph a), of the CRP].

Furthermore, in line with what was understood in the arbitral award of 17-03-2016, issued in case no. 507/2015-T, it should be understood that, while the ownership of high-value real estate assets intended for housing is a tendentially secure indication of economic abundance, superior to that of the generality of citizens, one cannot consider that there is a secure indication of superior contributory capacity when one is faced with the ownership of rights to properties intended for the exercise of economic activities (commercial, industrial, provision of services or similar), since they must be adequate to the operation of the respective companies, their dimension and correlative value not being an indication of abundance.

Thus, there will be constitutionally acceptable foundation for the restriction of AIMI incidence to residential properties and building land for residential properties, which came to be enshrined in the wording approved for no. 2 of article 135-B of the CIMI, in the interpretation that was previously adopted.

The specific situation of real estate investment funds, as collective investment entities holding real estate assets intended for housing, does not appear to merit special treatment relative to the generality of citizens who individually find themselves in the same situation.

In fact, the activities that the funds can develop, indicated in article 210 of the General Regime of Collective Investment Entities, approved by Law no. 16/2015, of 24 February (acquisition of properties for rent or intended for other forms of paid exploitation; acquisition of properties for resale; acquisition of other rights to properties with a view to their economic exploitation; carrying out improvement works, expansion and requalification of properties; development of construction and rehabilitation projects for properties), are freely accessible to the generality of property owners, even outside business structures.

On the other hand, the ownership of a high-value real estate asset by real estate investment funds evidences, as in relation to any owner of property intended for housing, a special economic capacity to contribute additionally to the Financial Stabilization Fund of Social Security, to which AIMI revenue is earmarked, and that 'corresponds to the objective of the government's program to broaden the financing base of Social Security' (Report of the Budget for 2017, page 57).

Therefore, the non-incidence of AIMI on the values of residential properties or building land for housing belonging to real estate investment funds would constitute an unjustified preferential tax treatment relative to the generality of other property owners with those characteristics.

By the foregoing, the imposition on real estate investment funds of AIMI regarding their assets constituted by residential properties and building land intended for housing does not appear to be materially unconstitutional, in light of the principles of equality and contributory capacity."

In the same sense, the following is affirmed in the arbitral award issued in case no. 664/2017-T:

"The ownership of real estate assets for purposes of sale and transformation, with a view to obtaining economic results, does not cease to constitute a patrimonial asset that is revelatory of an increased contributory capacity, which goes beyond the tax that applies to the taxable income in reason of the economic activity developed. What is at issue, therefore, is not the taxation of the actual income earned by those entities through the activity developed, but the additional contributory capacity that results from the ownership of assets and that by itself can facilitate the obtaining of credit or the strengthening of its bargaining position in the conclusion of various contracts (…)."

In the same line, the following is stated in the arbitral award issued in the context of case no. 420/2018-T, which is transposed to the case sub judicio:

"The intention with AIMI is not to burden the taxation of luxury properties, as was primarily sought with item 28.1 of the TGIS, since high-value real estate assets can be constituted by a plurality of low-value properties, but rather to create yet another means of subsidizing the social security system, which is one of the constitutional incumbencies of the State, provided in article 63, no. 2, of the CRP.

The sustainability and stability of Social Security, always in doubt, is a permanent concern that has justified numerous initiatives, well evidenced in the Major Options of the Plan for 2017 (Law no. 41/2016, of 28 December) and for 2018 (Law no. 113/2017, of 29 December), among which is included the diversification of financing sources, which is a principle long adopted in the Framework Laws of Social Security (article 78 of Law no. 17/2000, of 8 August, article 107 of Law no. 32/2002, of 20 December, and article 88 of Law no. 4/2007, of 16 January).

The essence of the principle of diversification of Social Security financing sources consists in the broadening of the bases for obtaining financial resources, aimed at, namely, reducing non-wage labor costs (article 79 of Law no. 17/2000, article 108 of Law no. 32/2002, and article 88 of Law no. 4/2007, of 16 January), which can explain that the new AIMI taxation is not applied to legal persons holding properties intended for commercial, industrial and service activities, since the holding of properties of these types by legal persons is normally associated with the exercise of these activities, with the corresponding payment of contributions to Social Security, as employer entities [article 92, paragraph b), of Law no. 4/2007, and articles 3, paragraph a), and 14, paragraph a), of Decree-Law no. 367/2007, of 2 November].

From this perspective, in which the legislator, lacking financing for Social Security, privileges the role of tax collector to the concern with the balance of company taxation, some foundation may be glimpsed for distinguishing between the ownership of real estate assets by persons who, presumably, will develop activities connected with the financing of Social Security (which will already contribute to that financing) and the holding of properties not intended for those activities, whose owners, tendentially, will not be associated in the same way with that financing, at least not with the same intensity.

Article 13 of the Constitution of the Portuguese Republic proclaims the principle of equality of citizens before the law. As has been uniformly understood by the Constitutional Court, the principle of equality, as a limit to legislative discretion, does not require equal treatment of all situations, but rather implies that those in equal situations be treated equally and those in unequal situations be treated unequally, so as not to create arbitrary and unreasonable discriminations, because lacking sufficient material foundation. The principle of equality does not prohibit the establishment of distinctions, but rather arbitrary distinctions, devoid of objective and rational justification.

By what was stated, it will not be completely devoid of objective and rational explanation the creation of a special taxation of high-value assets intended to ensure the financing of Social Security limited to real estate assets that will not be tendentially connected with that financing.

On the other hand, the creation of AIMI, as a complementary levy on real estate assets, which aimed to introduce into taxation 'a progressive element of personal basis, taxing higher the more substantial assets' (Report of the Budget for 2017, page 60), is compatible with the objective that the taxation of assets should contribute to equality among citizens, affirmed in no. 3 of article 104 of the CRP, since progressivity has as its corollary, tendentially, imposing greater taxation on those with greater contributory capacity.

The contributory capacity of business legal persons, relevant to the assessment of the application of the principle of tax equality, is not evidenced only by income, namely by the results of the activity to which the properties are intended. In fact, 'assets provide its owner a special contributory capacity, advantages that by their nature escape the tax on personal income: thus, the ownership of assets facilitates the obtaining of credit, strengthens the bargaining position of its owner in the conclusion of various contracts, makes it easier to multiply wealth allowing him to risk where in principle he would not. In this light, the tax on assets is seen as something more than a prolongation of the tax on personal income - it is not a matter of overloading here income that is already subject to it but of reaching manifestations of contributory capacity that in fact escape it' (...) Taxes on assets will be justified in allowing the transfer of resources for the benefit of the working class, instituting a "qualitative progressivity" complementary to the progressivity in quantity of taxes on personal income'. (SÉRGIO VASQUES, Contributory Capacity, Income and Assets, in Taxation, no. 23, page 36)

On the other hand, if it is certain that the different destinations of properties do not necessarily imply a distinction in the level of contributory capacity, the exclusion from taxation of properties specially suited for productive activity, namely those 'commercial, industrial or for services', will find another justification (beyond what was already mentioned regarding the presumable greater contribution of these activities to Social Security by way of contributions), since it amounts, ultimately, to a favoring of these activities, which is harmonious with (and, therefore, will have constitutionally acceptable foundation in) the obligation of the State to promote the increase of economic well-being, which presupposes the good functioning of wealth-creating activities and constitutes one of its priority tasks within the economic sphere [article 81, paragraph a), of the CRP]. Being this an incumbency constitutionally considered priority, the first listed in this norm, it is certainly that it will not be incompatible with the CRP to give it preferential protection when confronted with the constitutional duties of the State in housing matters indicated in article 65 of the CRP, which, obviously, are also protected through the good functioning of wealth-creating activities.

Thus, if it is certain that the AIMI regime creates situations of discrimination in the taxation of companies with the same contributory capacity evidenced by assets, on the assumption that there is need for money and new forms must be found to collect it (as referred in the Report of the Budget for 2017), there will be some justification for taxation being imposed on some companies and not others with the same or greater contributory capacity inherent to assets, above all in light of the majority Constitutional jurisprudence cited by the Tax and Customs Authority, which shows that it is tolerably constitutional that the interests of the State as tax collector (in this case, the sustainability of Social Security, demanded by the principles of trust and security) are superimposed on strict respect for the principle of equality.

On the other hand, the legislative objective not being the taxation of luxury housing but rather obtaining yet another means of financing Social Security, in harmony with the policy choice of diversification, through 'a tax that falls on holders of larger real estate assets, reinforcing the overall progressivity of the system' (page 57 of the report of the State Budget for 2017), it is in function of these objectives that it is necessary to assess whether there is a violation of the principle of proportionality.

From this perspective, it appears that this new taxation is not incompatible with the principle of proportionality, since it is adequate to the end in view (it provides for the increase in revenues that is intended to be obtained), it is necessary (in light of the legislative choice to increase Social Security revenues through diversification of sources), and a reasonable measure is not exceeded, namely as to legal persons, since the rates of the new tax are not high (and are lower for legal persons than for natural persons, pursuant to article 135-F), the tax paid is deductible from the taxable matter of corporate income tax (article 135-J), considerable amounts are deducted from the taxable value (article 135-C), and it is not demonstrated, nor is there reason to believe, that the amounts collected exceed what is necessary for the purpose of reinforcing the sustainability and stability of Social Security.

Therefore, it appears that it is not demonstrated that there is a violation of the principle of proportionality.

By the foregoing, the taxation of AIMI is not incompatible with the principles of equality, proportionality and contributory capacity (…)."

1. In this conformity, contrary to what is alleged by the Claimant, it is not perceived that the taxation in AIMI and, specifically, the norm of article 135-B of the IMI Code, suffers from unconstitutionality by violation of the principles of equality, namely in the aspect of prohibition of arbitrariness, of contributory capacity and of proportionality, nor that it is confiscatory and expropriatory.

2. The Claimant also argues that the taxation in AIMI violates the principle of autonomy of local government, without, however, specifying the concrete dimensions in which such occurs.

With regard to local autonomy and its different dimensions, the Constitutional Court has had occasion to pronounce itself in various judgments, being cited here, as an example and for its analytical comprehensiveness, judgment no. 949/2015, issued on 07/10/2015 in case no. 1129/14, in which the following is affirmed:

"8 - Local autonomy is one of the fundamental pillars on which the territorial organization of the Portuguese Republic is based, as results from article 6, no. 1, of the Constitution.

In this context, local autonomy should be associated with the general constitutional principle of State unity and, read in context with regional autonomy, the principle of subsidiarity and administrative decentralization (Gomes Canotilho/Vital Moreira, Constitution of the Portuguese Republic Annotated, vol. I, Coimbra Editor, 2007, p. 232). The central importance of this matter has as a consequence the jurisprudential treatment developed by the Constitutional Court on the scope of the constitutional guarantee of local autonomy (cf. A. Maurício, 'The constitutional guarantee of local autonomy in light of the Constitutional Court's jurisprudence', in Studies in honor of Counselor José Manuel Cardoso da Costa, Coimbra Editor, 2003, pp. 625-657). The principle of local autonomy, of which it is important to now deal, is developed in the Constitution in its title VIII, relating to Local Power, of part III (Organization of political power). The supralegal framework of local authorities is, moreover, completed by the European Charter of Local Autonomy, approved by the Resolution of the Assembly of the Republic no. 28/90, of 23 October, and ratified by Decree of the President of the Republic no. 58/90, of 23 October, in force in our legal order by virtue of article 8, no. 2, of the Constitution.

9 - Article 235 of the Constitution establishes that the 'democratic organization of the State comprises the existence of local authorities', which are 'territorial collective persons endowed with representative bodies, which aim at the pursuit of interests specific to their respective populations'. This constitutional norm guarantees and imposes the existence of local authorities throughout the country and 'has a sense of institutional guarantee, assuring the existence of autonomous local government administration' (Judgment no. 296/2013, no. 12).

Local authorities are more than 'mere autonomous administration of the State', since they 'contribute, by their very existence, to the democratic organization of the State. Justified that they are by the values of freedom and participation, local authorities shape a 'sphere of democracy' (Ruiz Miguel), in a system that precisely counts on the basic principle that every person has the right to participate in the adoption of collective decisions that affect him' (cf. Judgment no. 432/93, no. 1.2., see also Judgment no. 296/2013, no. 13, and Judgment no. 109/2015, no. 10). In this context, José de Melo Alexandrino, defines local authority as 'the specific form of territorial organization, in which a community of residents in a territorially defined circumscription within the territory of the State pursues local interests, through the exercise of autonomous public powers', the Author emphasizing a set of ideas from which we highlight 'the relevance and inescapable political feature of local entities' and 'a certain degree of immediacy of public powers (given by the self-government inherent to the legitimacy and democratic representativeness of the bodies), but also independence relative to external guidelines or conditioning powers, namely state ones' ('Law of Local Authorities', in Treatise of Special Administrative Law, vol. IV, Almedina, 2010, pp. 111-112).

Local authorities have as their constitutionally drawn objective the pursuit of interests specific to their respective populations (article 235, no. 2). Also pursuant to article 3, no. 1, of the European Charter of Local Autonomy, 'the principle of local autonomy presupposes and requires, among others, the right and capacity of local authorities to regulate and manage, in accordance with the law, under their responsibility and in the interest of their respective populations, a significant part of public affairs' (Judgment no. 296/2013, no. 14). José de Melo Alexandrino understands that the institutional guarantee of local autonomy, 'in the formula enshrined by the German Federal Constitutional Court', is 'an institutional guarantee of all attributions rooted in the local community or specifically referred to it and that it be capable of carrying out autonomously and under its own responsibility' (op. cit., pp. 83-84). In the words of Judgment no. 432/93, (no. 1.2. and 1.3.), those specific interests of the populations:

'[...] justify the autonomy and because they justify it they delimit its essential content. They embody the reasons of proximity, responsibility and controllability that provide for self-organization.

The incompressible space of autonomy is, therefore, that of matters specific to the local sphere, and 'matters specific to the local sphere are only those tasks that have their root in the local community or that have a specific relationship with the local community and that this local community can deal with autonomously and with its own responsibility (…and von dieser örtlichen Gemeinschaft eigenverantwortlich und selbständig bewältigt werden können)' (Judgment of the German Federal Constitutional Court no. 15, of 30 July 1958, in Decisions of the Federal Constitutional Court, 8th volume, p. 134; cf., in the same sense, Opinion no. 3/82 of the Constitutional Commission in Opinions of the Constitutional Commission, 18th volume, p. 151).

1.3 - This does not imply that local authorities cannot or should not be called upon to act concurrently with the State in the performance of those tasks. The 'social paradigm of Law' (Habermas) even points to a policy of cooperation and intervention of all bodies with immediate ability to fulfill the constitutional impositions."

10 - The pursuit of local population's specific interests by local authorities must be combined with the pursuit of the national interest by the State. In fact, as the Constitutional Court has already affirmed, 'since local authorities are part of autonomous administration, there exists between them and the State a pure relationship of superordination-infraordination, directed to the coordination of distinct interests (national interests, on the one hand, and local interests, on the other), and not a relationship of supremacy-subordination that would be directed to the realization of a single and same interest - the national interest, which would thus be superimposed on local interests' (Judgment no. 379/96, no. 5.3.). As André Folque notes, when 'municipal autonomy postulates own interests and when one speaks of the concurrence of the national dimension with the local dimension, this does not correspond to a superposition of attributions. Otherwise, the sphere of specific interests would be disregarded (article 235, no. 2)' (The administrative guardianship in relations between the State and Municipalities, Coimbra Editor, 2004, pp. 130-131).

Being certain that 'the attributions and organization of local authorities, as well as the competence of their bodies, will be regulated by law' (article 237, no. 1, of the Constitution), it is in that context that the legislator must balance the pursuit of local interests and of national or supralocal interest, enjoying a vast margin of autonomy. However, in performing this task, 'the legislator cannot put in question the essential core of local autonomy; it must instead be guided by the principle of administrative decentralization and recognize to local authorities a set of specific attributions (and to their bodies a set of competencies) that allow them to satisfy the specific (private) interests of their respective local communities' (Judgment no. 379/96, no. 5.2., and Judgment no. 329/99, no. 5.4.).

Thus, in the synthesis made by Artur Maurício on the jurisprudence relating to the guarantee of local autonomy: 'local government autonomy has been essentially conceived as an organizational and competence guarantee, recognizing local authorities as a structure of democratic political power and with a sphere of specific interests that they must manage under their own responsibility' only may the 'legal restriction of such interests [...] be made with the purpose of pursuing a general interest, which it is the legislator's task to define, but in any case cannot be reached the essential core of the guarantee of autonomous administration'. 'In the areas that it considers open to the concurrence of the State and local authorities the Court continues to understand [...] that legal or regulatory measures causing local authority compression are constitutionally legitimate, while nevertheless submitting such measures to the test of adequacy and proportionality' (op. cit., pp. 656-657).

11 - The autonomy of local authorities, intrinsically related to the democratic management of the Republic, as constitutionally designed, presupposes a set of local authority powers that ensure relatively free and unconditioned action relative to central administration in the performance of their attributions, aimed at pursuing the interest of the local population. With the objective of assuring this freedom of action, the Constitution enshrines various dimensions or constitutive elements of local autonomy. There are included therein, namely, organizational autonomy (article 237, no. 1), budgetary autonomy (article 237, no. 2), patrimonial and financial autonomy (article 238, nos. 1 to 3), fiscal autonomy (article 238, no. 4, and article 254), referendary autonomy (article 240, no. 1), regulatory autonomy (article 241) and personnel autonomy (article 243). As António Cândido de Oliveira states, there exists a 'set of constitutionally guaranteed powers', such as 'the power to have democratically elected bodies; the power to have own patrimony and finances; the power to have own personnel; own regulatory power; that of exercising under own responsibility a set of tasks adequate to the satisfaction of the specific interests of their respective populations', which 'guarantees local administration a situation of non-submission relative to State administration', and constitutes 'what we could call the aspect of defense of local autonomy' (Law of Local Authorities, Coimbra Editor, 2013, pp. 92-93).

The conditioning or compression of local autonomy (namely of its elements) can only result from law, when a national or supralocal public interest justifies it, and always with the caveat of its incompressible core. Effectively, 'municipal autonomy cannot affect the integrity of State sovereignty. In fact, local powers are also, by nature, limited, since they cannot be exercised beyond the sphere of (necessarily local) interests that justify them, and cannot invade spaces of deliberation or action that must remain reserved to the sphere of the national community' (cf. M. Lúcia Amaral, The Form of the Republic, Coimbra Editor, 2012, p. 385).

(…)

17 - As has already been noted, local autonomy, constitutionally guaranteed, aims at 'the pursuit of interests specific to their respective populations' (article 235, no. 2, of the Constitution). It is in this context that law defines the attributions of local authorities (article 237, no. 1), in determined domains, areas or matters, such as land planning, environment, culture, social action, civil protection or education (cf. articles 7 and 23 of the Legal Regime of Local Authorities, approved as appendix to Law no. 75/2013, of 12 September). In parallel, the Constitution enshrines dimensions or constitutive elements of autonomy, resulting from the principle of local autonomy, that guarantee that the performance by local authorities, as local democratic entities, of their attributions is not unduly conditioned by the Government (budgetary autonomy, regulatory autonomy, or personnel autonomy). The existence of local authority bodies with direct democratic legitimacy - which are elected by the local population and accountable to it - would be incompatible with the subjection of their organization or operation to any hierarchical relationship or merit supervision by State administration. Otherwise, the holders of local power could be politically held accountable for choices not freely made by them.

Finding local autonomy, as enshrined in the Constitution, functionally linked to the pursuit of the specific interests of populations (article 235, no. 2), also the elements of such autonomy, where is inserted autonomy in personnel matters, are instrumental relative to the attributions of local authorities and essential for their pursuit. One of these elements, the financial autonomy of local authorities, has already been 'peacefully recognized as a prerequisite of local autonomy', without which 'there are no conditions for effective autonomy', by the Constitutional Court (Judgment no. 631/99, no. 5). As is stated in Judgment no. 398/2013, no. 3, still regarding the constitutional protection of the financial autonomy of local authorities:

'The constitutional enshrinement of local autonomy translates [...] the recognition of the existence of a set of specific and distinctive public interests of local populations, which justifies the attribution to the residents of these territorial circumscriptions of the right of decision regarding the regulation and management, under their responsibility and in the interest of these populations, of a significant part of public affairs. This recognition presupposes the idea that local authorities must have own patrimony and revenues that allow them to confer operationality and make practicable the pursuit of the public interest, concretely, the specific and own interests of their respective populations. Thus, in order to be able to carry out the set of tasks that are included in their attributions and competencies, a set of legal and operational mechanisms capable of making them feasible are placed at the disposal of local authorities, namely the possibility of having own patrimony and revenues, thus enjoying financial autonomy.'"

1. Translating these judicious considerations to the legal-tax regime of AIMI, we are unable to perceive any affront to the principle of local autonomy by the taxation in AIMI, wherefore neither is this alleged unconstitutionality verified.

2. In another order of considerations, the Claimant further alleges that since it covers all its assets, the taxation in AIMI constitutes double taxation, since that same assets have already been taxed under property transfer tax (IMI).

As Casalta Nabais states (op. cit., p. 227), "double taxation configures a situation of concurrence of norms, that is, a situation in which the same tax fact integrates the hypothesis of incidence of two different tax norms, which implies, on one hand, the identity of the tax fact and, on the other, the plurality of tax norms. As a requisite of the identity of the tax fact, one usually requires the rule of four identities, that is, the identity of the object, the identity of the subject, the identity of the taxation period and the identity of the tax."

AIMI applies to the global tax asset value of urban properties for housing and building land, of legal persons, as well as natural persons when, in the latter case, that value exceeds € 600,000.00. AIMI applies based on the elements appearing in the property registers, being an annual tax and producing the fact generating the respective tax obligation on 1 January of each year.

Casalta Nabais (For a Supportable Fiscal State, Tax Law Studies, Volume V, Coimbra, Almedina, 2018, p. 345) alerts to the circumstance that, "from the point of view of tax technique, we are not, properly speaking, faced with a true additional to IMI, since it does not apply to the collection thereof, but rather faced with an additionement, since it applies to the tax asset value of IMI, which is, however, the object of an important deduction regarding natural persons."

AIMI does not share the essential characteristics of IMI, particularly because it is not a real tax, but a personal tax; in fact, AIMI applies to persons, and its taxable value is determined by the sum of the tax asset value of the properties of which a certain person is owner, usufructuary or superficiary holder. Therefore, AIMI distinguishes itself from IMI because the latter is a tax on properties and not on persons, since what determines subjection and assessment of the tax is, fundamentally, the situation of each property and not the personal or family situation of the respective owner. On the other hand, the scope of real, personal and temporal incidence are different relative to IMI. Moreover, AIMI has specific exemptions, the payment periods and the procedures for assessment are also distinct and autonomous. Thus, these structural differences relative to IMI make AIMI truly a tax of a different nature than IMI; and, as José Maria Fernandes Pires advocates (op. cit., p. 42), "AIMI applying to legal persons approximates more to a general tax on real estate assets. We can therefore say that it is a tax on real estate wealth, although partial, regarding natural persons, and a general tax, but partial, on real estate wealth, regarding legal persons."

1. In this conformity, contrary to what is alleged by the Claimant, the taxation in AIMI does not constitute a situation of double taxation, by virtue of its real estate assets being likewise subject to taxation in IMI.

2. It should always be said that, if the invoked double taxation were verified, as Casalta Nabais tells us (The Fundamental Duty of Paying Taxes, Contribution to the constitutional understanding of the contemporary fiscal state, 4th reprint, Coimbra, Almedina, 2015, pp. 511 and 512), "the tax legislator is not constitutionally prevented (…) from establishing situations of double taxation (…) since he cannot cease to enjoy ample freedom regarding the concrete configuration of the tax system. (…) Now, in any of the situations of cumulation of taxes, the legislator enjoys ample freedom, being only prevented, on one hand, that such cumulation results in excessive taxation or with a confiscatory character and, on the other hand, from establishing double taxations that prove arbitrary regarding the scope of subjects covered, by subjecting to tax overload certain taxpayers and not others with identical situation in terms of contributory capacity."

In this same sense, we find, among others and beyond those cited by the Respondent in its Answer, Constitutional Court judgment no. 520/2018, of 17.10.2