Summary
Full Decision
ARBITRAL DECISION
1. Report
1.1 "Closed Real Estate Investment Fund A…", hereinafter referred to as the "Claimant", taxpayer no…, represented by the management company "B…, SA", taxpayer no…, with headquarters at Avenida…, …, no…, in Lisbon, requested the constitution of a single arbitral tribunal, under the combined provisions of article 2, no. 1, paragraph a) and article 10, both of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as "RJAT") and articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, in which the Tax and Customs Authority (AT) is the respondent.
1.2 The petition for arbitral pronouncement, filed on 13 September 2016, concerns the decision dismissing the petition filed by the Deputy Director of Finance of the Finance Directorate of…, in substitute capacity, of 13-06-2016, rendered in the administrative complaint case no. …2016… and the consequent annulment of the Stamp Tax (IS) assessments nos. 2012… and 2013…, effected on 07-11-2012 and 21-03-2013, respectively, in the total amount of 24,010.30 €, relating to the application of item 28.1 of the General Table of Stamp Tax (TGIS) on the urban property (construction land) located at… (lot…), place…, parish of…, municipality of…, registered in the respective property registry under article….
1.3 The Claimant chose not to designate an arbitrator.
1.4 The request for constitution of the arbitral tribunal was accepted by the President of CAAD and notified to AT on 26 September 2016.
1.5 The undersigned was designated by the President of CAAD's Ethics Council as arbitrator of the single arbitral tribunal, pursuant to article 6 of the RJAT, and acceptance of the assignment was communicated within the applicable period.
1.6 On 10 November 2016, the parties were notified of this designation and did not object thereto, in accordance with the combined provisions of article 11, no. 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of CAAD's Ethics Code.
1.7 Thus, in compliance with the provision of paragraph c) of no. 1 of article 11 of the RJAT, the single arbitral tribunal was constituted on 25 November 2016.
1.8 The respondent was notified, by arbitral order of 25 July 2016, to, pursuant to article 17, no. 1 of the RJAT and within a period of 30 days, file its response and, if desired, request the production of additional evidence.
1.9 It was further notified to, within the same period, submit the administrative file (PA) referred to in article 111 of the Code of Tax Procedure and Process (CPPT).
1.10 On 13 January 2017, the respondent filed its Response, defending itself by objection, seeking the dismissal of the petition for arbitral pronouncement, and on the same date attached the respective PA to the case file.
1.11 Considering that the parties did not request the production of any evidence beyond the documentary evidence that the Claimant attached to the petition for pronouncement, the Arbitral Tribunal, given the principles of autonomy in case management, expedition, simplification and procedural informality, inherent in no. 2 of articles 19 and 29 of the RJAT, by order of 16 January 2017, waived the holding of the meeting provided for in article 18 of the same act, and further decided that the proceedings should continue with optional written arguments, for a period of 10 days, in succession for the respondent.
1.12 On the same date the parties were notified of this order, and the Claimant, on 27 January 2017, filed its arguments and formulated conclusions.
1.13 The respondent did so on 09 February 2017, maintaining the position assumed in its response to the petition for arbitral pronouncement.
1.14 The date of 27 February 2016 was set for the rendering of the respective final arbitral decision.
2. Preliminary Examination
2.1 The parties have capacity and standing before the courts, show themselves to be entitled to proceed, and are duly represented (articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).
2.2 The proceedings do not suffer from any nullities.
2.3 The Arbitral Tribunal is duly constituted and is materially competent to know and decide the petition, see article 2, no. 1, paragraph a) of the RJAT.
2.4 There are no other circumstances that prevent consideration of the merits of the case.
3. Position of the Parties
3.1 Of the Claimant
It supports its petition for arbitral pronouncement, summarized as follows:
That the administrative act (IS assessment no. 2012…) is affected by the defect of lack of proper reasoning, since it is unclear as to the temporal period to which the tax assessed therein relates.
Thus, if it refers to the year 2011, it is retroactive and, consequently, unconstitutional, and should be annulled.
If it is concluded that it relates to the year 2012, then the IS assessment act no. 2013… is illegal, due to the defect of duplicate collection, as it relates to the same year 2012, and should be annulled.
That this assessment violates the provisions of article 6 of Law no. 55-A/2012, of 29 October, in particular with regard to the time limit that the respondent had to make the IS assessment, the tax rate applied, and the manner in which this tax should have been paid by the Claimant.
Furthermore, the aforementioned law did not provide, in the original wording given to item no. 28 of the TGIS, for the inclusion of construction land within the scope of the objective incidence of the tax.
This results from various elements of legal hermeneutics, such as the literal, teleological, historical, and systematic methods, as well as from successive arbitral and judicial decisions.
If there were any doubts, they were dispelled by the amendments that the Budget Law for 2014 introduced to the aforementioned item 28 of the TGIS, which had an innovative character.
3.2 Of the Respondent
Defending itself by objection, it invokes the following arguments:
That the administrative act (IS assessment no. 2012…) is properly reasoned because it is capable of revealing to a normal recipient the factual and legal reasons that determined the decision, enabling it to react effectively through legal channels against the respective injury, as is demonstrated by the fact that the Claimant understood perfectly the meaning and scope of the act.
That the assessment does not suffer from the defect of duplicate collection, because there is no repeated application of the same rule of incidence to the same period of time.
In fact, assessment no. 2012…, of 07-11-2012, was effected according to the transitional provisions provided for in no. 1 of article 6 of the aforementioned law, the tax event occurring on 31 October 2012, the tax being assessed on the taxable patrimonial value determined according to the CIMI rules by reference to the year 2011, the tax to be paid in a single installment by 20-12-2012.
Whereas assessment no. 2013…, of 21-03-2013, was effected pursuant to no. 2 of article 6 of the same legal act, the tax event of which occurred on 31 December 2012, the tax being assessed on the taxable patrimonial value contained in the property registry on 31-12-2012.
That the property, on which the disputed assessments fall, has the legal nature of a property with residential purpose, since, for purposes of determining the taxable patrimonial value of construction land, the application of the purpose coefficient in the valuation is clear, so its consideration for purposes of applying item 28 of the TGIS cannot be ignored.
It concludes, seeking the complete dismissal of the petition for arbitral pronouncement and absolution of the respondent, since the disputed assessments embody a correct interpretation and application of law to the facts, not suffering from the defect of violation of law.
4. Reasoning
4.1 Established Facts
With relevance to the assessment and decision of the merits issue raised, the following facts are established and proven:
4.1.1 The Claimant is the owner of the property located at… (lot…), place…, parish of…, municipality of…, registered in the respective property registry under article… and registered in the competent registry office under no…, see doc. 1 attached to the petition, the contents of which are hereby fully incorporated herein.
4.1.2 According to the same document, the property falls within the category of "construction land", provided for in paragraph c), no. 1 of article 6 of the Real Estate Tax Code (CIMI), having an area of 637.50 m².
4.1.3 On 31-10-2012 and 31-12-2012, the taxable patrimonial value (VPT), determined pursuant to article 45 of the CIMI, was 1,600,686.60 €, see p. 13 of the administrative file (PA-6).
4.1.4 On 07-11-2012, AT made assessment no. 2012… of the stamp tax provided for in item 28.1 of the TGIS, in the amount of 8,003.43 €, with reference to the aforementioned property, issuing on 23-11-2012 the respective collection notice for payment by 20-12-2012, see p. 6 of PA.
4.1.5 From the respective single collection document (DUC), duly sent by AT (doc. 2 attached to petition), the following is stated, among others:
Tax Identification: …
Tax Year: Law 55A/2012
Document Identification: 2012…
Assessment Date: 2012-11-07
Property Description—Municipality/Parish/Article: … …–U-…
Law 55A/2012: Art. 6/1/f/i
Taxable Patrimonial Value (1);(€): 1,600,686.60
Share Quota (2);(€): 1/1
Tax-Exempt Value (3);(€): 0.00
Rate (4);(%): 0.50
Tax Collected [(1*2-3)*4];(€): 8,003.43
SINGLE INSTALLMENT
FINAL PAYMENT DATE: 2012-12-20
TOTAL AMOUNT DUE: € 8,003.43
The assessment made complies with the provisions of paragraphs a) to f) of no. 1 of article 6 of Law no. 55A/2012, of 29 October
4.1.6 In article 6 of the petition, the Claimant protested to attach proof of payment of the assessed tax, which would constitute document no. 4, without, however, succeeding in doing so.
4.1.7 On 12-10-2016 (date of printing of the "Consult Collection Notices – Compensation Demonstration" on p. 6 of PA), said payment had not been made.
4.1.8 On 21-03-2013, AT made assessment no. 2013… of the stamp tax provided for in item 28.1 of the TGIS, in the amount of 16,006.87 €, with reference to the aforementioned property, see p. 1 of PA-6.
4.1.9 On 26-03-2013, AT issued the collection notice for the first installment, in the amount of 5,335.63 €, for payment by 30-04-2013, see p. 7 of PA.
4.1.10 As stated on p. 8 of PA, payment occurred on 24-04-2013.
4.1.11 On 29-06-2013, AT issued the collection notice for the second installment, in the amount of 5,335.62 €, for payment by 01-08-2013, see p. 9 of PA.
4.1.12 As stated on p. 10 of PA, payment occurred on 25-07-2013.
4.1.13 On 26-03-2013, AT issued the collection notice for the third installment, in the amount of 5,335.62 €, for payment by 30-11-2013, see p. 11 of PA.
4.1.14 As stated on p. 11 of PA, payment occurred on 28-11-2013.
4.1.15 From the respective single collection document (DUC), duly sent by AT (doc. 3 attached to petition, as to 1st installment), the following is stated, among others:
Tax Identification: …
Tax Year: 2012
Document Identification: 2013…
Assessment Date: 21-03-2013
Property Description—Municipality/Parish/Article: … …–U-…
Item of TGIS: 28.1
Taxable Patrimonial Value (€1);(1): 1,600,686.60
Share Quota (€);(2): 1/1
Tax-Exempt Value (€);(3): 0.00
Rate (%);(4): 1.00
Tax Collected(€): [(1x2-3)x4]= 16,006.87
1st INSTALLMENT
PAYMENT MONTH: APRIL/2013
AMOUNT DUE: € 5,335.63
4.1.16 Identical DUCs were sent to the Claimant regarding the remaining two installments, for payment in the months of July and November 2013, in the amount of 5,335.62 € each.
4.1.17 The assessments were subject to administrative complaint, as shown in the administrative complaint case no. …2016…, dismissed on the merits, by order of the Deputy Director of Finance of the Finance Directorate of…, in substitute capacity, of 13-06-2016, notified to the Claimant by letter no…, of 14-06-2016, received on 15-06-2016 (see doc. 6, attached to petition; pp. 1/5 of PA-1; and pp. 9/11 of PA-7).
4.2 Unproven Facts
No proof was made of payment of the stamp tax relating to assessment no. 2012…, in the amount of 8,003.43 €, the proof of which the Claimant had protested to attach, see article 6 of the petition.
There are no other material facts relevant to the decision of the case that have not been proven.
4.3 Motivation
Regarding matters of fact, the Tribunal does not have a duty to pronounce on all matters alleged, having instead the duty to select those that matter for the decision, taking into account the cause (or causes) of action that grounds the petition filed by the claimant (see articles 596, no. 1 and 607, nos. 2 to 4 of the CPC, applicable by virtue of article 29, no. 1, paragraphs a) and e) of the RJAT) and to state whether it considers them proven or unproven (see article 123, no. 2 of the CPPT).
According to the principle of free assessment of evidence, the Tribunal bases its decision, regarding the evidence produced, on its intimate conviction, formed from the examination and evaluation it makes of the means of evidence brought to the case and in accordance with its life experience and knowledge of people (see article 607, no. 5 of the CPC). Only when the probative force of certain means is pre-established by law (e.g., full probative force of authentic documents, see article 371 of the Civil Code) does not the principle of free assessment of evidence dominate in the assessment of the produced evidence.
Thus, the Tribunal's conviction was based on the documentary evidence attached to the case file as well as on the positions assumed by the parties.
5. Legal Matters (Reasoning)
The following are the issues that constitute the thema decidendum:
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Lack of proper reasoning for the IS assessment no. 2012…;
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Duplicate collection;
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Illegality of the IS assessment no. 2013… by violation of article 6 of Law no. 55-A/2012, of 29-10;
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Illegality of the assessments due to error as to the legal presuppositions; and
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Request for payment of compensatory interest.
Lack of Proper Reasoning for the IS assessment no. 2012…
Article 77, no. 1 of the General Tax Law (LGT) states that "A procedural decision is always properly reasoned by means of a concise statement of the factual and legal reasons that motivated it, and the reasoning may consist of mere declaration of agreement with the grounds of previous opinions, information or proposals, including those contained in the tax audit report".
Article 77, no. 2 of the same legal provision also states that "The reasoning for tax acts may be done in summary form, and must always contain the applicable legal provisions, the qualification and quantification of the tax facts and the operations for determining the taxable matter and the tax".
This duty to provide proper reasoning for administrative acts is a corollary of article 268, no. 3 of the Constitution of the Portuguese Republic (CRP), which prescribes: "Administrative acts are subject to notification to those interested, in the form provided by law, and require express and accessible reasoning when they affect rights or legally protected interests".
Thus, to provide proper reasoning for an administrative act "consists in indicating, concretely, the legal and factual reasons for which the decision was made in a particular direction".
However, "the requirements for reasoning of the tax act are not rigid, varying according to the type of act and the concrete circumstances in which it was issued, such as the participation of the interested party in the procedure and the extent of such participation – not having, in principle, to report all facts considered, all reflections made or all vicissitudes occurring during such deliberation".
According to Diogo Freitas do Amaral, "The reasoning of an administrative act consists of the explicit statement of the reasons that led its author to practice that act or to give it certain content".
For José Carlos Vieira de Andrade "(…) the duty of express reasoning obligates the administrative body to indicate the factual and legal reasons that determined it to practice that act, externalizing, in its decisive aspects, the internal procedure of formation of the decision-making will".
As Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa state "Regarding reasoning, the CRP guarantees citizens the right to express and accessible reasoning of all administrative acts (a concept that includes tax acts, in light of the provision in art. 120 of the CPA) that affect rights or legally protected interests (art. 268, no. 3) (…).
In tax matters, the duty to provide reasoning for the decisive acts of tax procedures and tax acts is specified in art. 77 of the LGT.
As the Supreme Administrative Court (STA) has understood, the legal and constitutional requirement of reasoning aims, primarily, to allow those interested to know the reasons that led the administrative authority to act, so as to enable them to make a conscious choice between accepting the legality of the act and seeking contentious review.
For this objective to be achieved, the reasoning must provide the addressee of the act the reconstitution of the cognitive and evaluative path followed by the authority that practiced the act, so that it can be clearly known the reasons why it decided in the way it decided and not in a different way (…).
The reasoning must consist, at a minimum, of a concise statement of the factual and legal grounds that motivated the decision, or a declaration of agreement with the grounds of previous opinions, information or proposals, including those contained in the tax audit report".
In the same sense, the following STA judgments can be seen, among many others:
Judgment of 06-05-2015 (Process no. 0291/13): "In cases where the law does not impose special requirements for reasoning (as required in cases of "special relationships" – art. 77, no. 3 of the LGT, taxation by "indirect methods" – art. 77, nos. 4 and 5 of the LGT, "administrative lifting of banking secrecy" – art. 63-B no. 4 of the LGT or "reversal against subsidiary liable parties" – art. 23, no. 4 of the LGT), compliance with the duty to provide reasoning on the part of the Tax Authority is measured against the provisions of nos. 1 and 2 of art. 77 of the LGT and considering the purposes sought by the duty of reasoning".
Judgment of 09-09-2015 (Process no. 01173/14): "The AT has the legal duty to reason the assessment acts (see art. 268 of the CRP, as well as arts. 21 of the CPT, 125 of the CPA and 77 of the LGT). The reasoning, even if made by reference or in summary form, cannot fail to be clear, coherent and to contemplate the aspects, of fact and law, that allow knowing the cognitive and evaluative path pursued by the Administration for the determination of the act".
For the Claimant, the administrative act under analysis (IS assessment no. 2012…) is affected by illegality due to the defect of lack of reasoning, since in the respective single collection document one can read the reference "Law 55A/2012" in the field concerning "TAX YEAR", see document no. 2, whereas in the following IS assessment, with no. 2013…, whose first installment was notified on 02-04-2013, AT adopted a different posture, having entered in the field intended for "TAX YEAR" the reference "2012", see document no. 3.
Thus, given the differences in behavior adopted by AT, the Claimant questions what will be the tax year relating to said assessment.
Thus, it becomes necessary to determine the year in question, or better, the date of the tax event and whether the elements shown in the document sent to the Claimant are sufficiently clear.
Let us begin with the text of articles 4 and 6 of Law no. 55-A/2012, of 29 October:
"Article 4
Amendment to the General Table of Stamp Tax
Item no. 28 is added to the General Table of Stamp Tax, attached to the Stamp Tax Code, approved by Law no. 150/99, of 11 September, with the following wording:
"28 — Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value contained in the registry, pursuant to the Real Estate Tax Code (CIMI), is equal to or greater than € 1,000,000 — on the taxable patrimonial value used for purposes of IMI:
28.1 — For property with residential purpose — 1%;
28.2 —……………………………………………."
"Article 6
Transitional Provisions
1 — In 2012, the following rules must be observed by reference to the assessment of the stamp tax provided for in item no. 28 of the respective General Table:
a) The tax event occurs on 31 October 2012;
b) The liable party for the tax is the one mentioned in no. 4 of article 2 of the Stamp Tax Code on the date referred to in the preceding paragraph;
c) The taxable patrimonial value to be used in the assessment of the tax corresponds to that resulting from the rules provided for in the Real Estate Tax Code by reference to the year 2011;
d) The assessment of the tax by the Tax and Customs Authority must be made by the end of November 2012;
e) The tax shall be paid, in a single installment, by liable parties by 20 December 2012;
f) The applicable rates are the following:
i) Properties with residential purpose assessed pursuant to the Real Estate Tax Code: 0.5%;
ii) Properties with residential purpose not yet assessed pursuant to the Real Estate Tax Code: 0.8%;
iii) Urban properties when the liable parties who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance: 7.5%.
2 — In 2013, the assessment of the stamp tax provided for in item no. 28 of the respective General Table must be assessed on the same taxable patrimonial value used for purposes of assessing real estate tax to be effected in that year.
3 — Failure to deliver, in whole or in part, within the indicated period, the amounts assessed as stamp tax constitutes a tax offense, punished in accordance with law".
For José Maria Fernandes Pires, cited in article 77 of the petition, the assessment we have been examining, respecting a transitional regime provided for in article 6 of the aforementioned law, refers to an extraordinary tax incidental upon the year 2012.
Given its relevance to the proper decision of this Tribunal, we proceed to transcribe points 5.4 and 5.5, IV, of Part III, of the aforementioned work:
"5.4. The 2012 Transitional Regime
The Stamp Tax on high-value properties was established, as we previously saw, by Law no. 55-A/2012, of 29 October, which established measures intended to increase tax revenues.
It is an annual tax, as we also saw, whose generating event occurs on 31 December, applying the rules of the Real Estate Tax Code, in particular those of assessment and payment. Thus, under normal conditions, the Law having entered into force on the day following its approval, as its article 7 establishes, the first assessment of this tax should have been made in the months of February and March 2013, payment being, when exceeding 500 euros, able to be made in three equal installments, in the months of April, July and December 2013.
Perhaps due to the need to realize tax revenues still in 2012, a transitional regime was established in article 6 of the Law that approved it, which we shall analyze below.
This transitional regime established that liable parties would have to pay, still in 2012, and in a single installment in December, this tax for the first time. The Law considered, in paragraph a) of no. 1 of article 6, for this purpose, that the generating event occurs on 31 October 2012, establishing that the tax authority would have to make the assessment during the month of November of that year. Given that the Law was in force for only two months in the year 2012, it established that the tax to be paid in the year 2012 would be lower.
The taxable patrimonial value on which this transitional tax was assessed was that contained in the property registries, not on the day the generating event occurred, but on 31 December 2011 (paragraph c) of no. 1 of article 6).
We thus have to make a clear separation in the application of this transitional tax, between the date of occurrence of the tax event, which occurred on 31 October 2012, and the date of reference for determining the taxable value, which in this case does not coincide with that of the tax event. For this purpose, the Law directs that the taxable patrimonial value of each property, registered in the property registry on 31 December 2011, be considered.
Thus, for all purposes of the assessment, the legal situation of the property on the date of occurrence of the tax event (31 October 2012) is relevant, but the taxable value, and only that, is what was registered in the registry, relating to each property, on 31 December 2011.
Given that on this last date the general valuation of urban properties was taking place and not all had yet been assessed pursuant to the Real Estate Tax Code, the Law established a system of rates adjusted to this circumstance. These rates were the following:
i) 0.5% for properties with residential purpose that on that date were already assessed pursuant to the CIMI;
ii) 0.8% for properties with residential purpose that on 31 December 2011 were not yet assessed pursuant to the CIMI;
iii) 7.5% for properties of which the liable parties are not natural persons, resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance.
The Law does not establish it expressly, but to this transitional tax must be subsidiarily applied the rules governing the assessment of Real Estate Tax, with appropriate adaptations.
5.5. Conclusion
The establishment of this transitional tax raises some questions that are not easy to answer, in particular the fact that the temporal point relevant for determining the taxable patrimonial value is not the same as that relevant for determining the taxable value to which the rates apply.
Thus, in cases where a property has been acquired, for example in May 2012 and whose taxable patrimonial value was definitively fixed in September following, the taxable patrimonial value that served as the basis for the assessment of the tax was what was registered in the registry on 31 December 2011, but the liable party for the tax was already the acquirer, because he was its holder on the date of occurrence of the tax event, on 31 October 2012.
Another relevant question is to determine to what tax period this transitional tax relates. As we previously saw, this is a periodic tax, with annual periodicity, as established by no. 7 of article 23 and paragraph u) of article 5, both of the Stamp Tax Code. Thus, we must determine to what tax period the tax established under the transitional regime we have just analyzed relates.
The law does not reveal it expressly, but the answers are not easy. In fact, if the answer is to the effect that this transitional tax paid in 2012 relates to the period corresponding to the year 2011, we are speaking of a retroactive tax, with the aggravation of taxing, in cases where transfers occurred between January and 31 October 2012, liable parties who were not holders of the properties on that date, which would raise problems of constitutional compliance.
But the answer is no less problematic if it is to the effect that it is a tax that incides upon the year 2012, given that in that case we would be in a situation where the wealth held by the same holder is taxed twice by the same tax.
The less problematic answer would perhaps be that this transitional regime tax is, in fact, an extraordinary tax incidental upon the year 2012. Although the Law does not say so expressly, it is in that sense that it points, due to the fact that the applicable rates are lower, corresponding to half for properties that in 2011 already had a taxable patrimonial value determined pursuant to the Real Estate Tax Code" (underlining ours).
The Constitutional Court also seems to point in the same direction, when on p. 11 of its judgment no. 590/2015, it states: "Seeking to immediately raise additional tax revenue in order to meet the pressing fiscal targets established under the Economic and Financial Assistance Plan (PAEF) and set in the Memorandum of Economic and Financial Policies in the current year, the legislator established in the aforementioned Law no. 55-A/2012, on one hand, its entry into force on the day following its publication (article 7, no. 1) and, on the other hand, a transitional regime for the year 2012 (article 6). In accordance with the aforementioned transitional regime, established in article 6 of the same Law no. 55-A/2012, the tax event was anticipated to 31 October 2012, liable parties having to satisfy the respective payment by 20 December 2012, in a single installment.
However, with regard to Stamp Tax to be assessed in the year 2012, in accordance with the transitional regime that has just been mentioned, the rate fixed is lower than that stipulated for subsequent years (1%), being, as regards properties with residential purpose, 0.5% or 0.8%, depending on whether they have or have not been assessed pursuant to the Real Estate Tax Code, the taxable patrimonial value to be used for this purpose being that which results from the rules provided for in the Real Estate Tax Code by reference to the year 2011" (underlining ours).
Agreeing fully with what has just been said, for this Arbitral Tribunal the stamp tax to which the assessment no. 2012… referred to, effected on 07-11-2012, corresponds to an extraordinary tax incidental upon the year 2012, respecting the transitional regime provided for in article 6 of the aforementioned Law no. 55-A/2012, of 29-10.
Examining the single collection document (document no. 2 attached to petition), it is verified that it contains the expression "Law 55A/2012: Art. 6/1/f/i", thereby meaning that transitional provisions of the aforementioned law, referring to the year 2012, are at issue, with a 0.5% rate applicable to properties with residential purpose assessed pursuant to the Real Estate Tax Code.
It also contains the following expression: "The assessment made complies with the provisions of paragraphs a) to f) of no. 1 of article 6 of Law no. 55A/2012, of 29 October", which has the following literal translation: that the tax event occurred on 31 October 2012 (paragraph a)); The liable party for the tax is the one mentioned in no. 4 of article 2 of the Stamp Tax Code on the date referred to above (paragraph b)); The taxable patrimonial value used in the assessment of the tax corresponds to that resulting from the rules provided for in the CIMI by reference to the year 2011 (paragraph c)); The assessment of the tax by the Tax and Customs Authority should have been made by the end of November 2012 (paragraph d)); The tax should be paid, in a single installment, by liable parties by 20 December 2012 (paragraph e)); and the applicable rate was 0.5% by virtue of the provision in sub-paragraph i), paragraph f).
It should be noted that these expressions, in bold, do not appear in the single collection document (document no. 3 attached to petition) relating to assessment no. 2013…, because it relates to the year 2012 and not to any transitional regime of the same year.
Thus, for this Arbitral Tribunal, the elements contained in said document are sufficient for the Claimant, even if placed in the position of a normal addressee, as it should be seen, to have been properly clarified regarding the IS assessment act no. 2012….
Thus, the formal defects of lack of reasoning alleged by the Claimant do not occur, since the administrative body indicated the factual and legal reasons that determined it to practice the act, externalizing, in its decisive aspects, the internal procedure of formation of the decision-making will.
Duplicate Collection
Pursuant to no. 1 of article 205 of the CPPT, there shall be duplicate collection when, a tax being fully paid, another of equal nature is required from the same or a different person, referring to the same tax event and the same period of time.
The requirements for duplicate collection are, cumulatively, the following:
a) Uniqueness of the tax events;
b) Identity of nature between the tax paid and the newly required one;
c) Temporal coincidence of the tax paid and the one now sought to be collected.
The differences between the disputed assessments are all too evident. Thus:
Assessment no. 2012… relates to the transitional regime provided for in article 6 of the aforementioned Law no. 55-A/2012, of 29 October, and corresponds to an extraordinary tax for the year 2012, assessed on the taxable patrimonial value contained in the registry on 31 December 2011, effected by the end of November 2012, the tax being paid in a single installment by 20 December 2012, and the respective tax event having occurred on 31 October 2012.
Whereas assessment no. 2013… was made on 21-03-2013, the tax being paid in three installments (months of April, July and November 2013), see nos. 2 and 3 of article 113 of the CIMI, applicable by express reference in no. 7 of article 23 and no. 5 of article 44, both of the CIS, respectively, having been assessed on the taxable patrimonial value contained in the registry on 31 December 2012, as provided for in no. 2 of article 6 of the same act and no. 1 of the aforementioned article 113 of the CIMI, the respective tax event having occurred on 31 December 2012.
Moreover, it has not been proven that the tax to which assessment no. 2012… relates was paid.
Duplicate collection does not thus occur.
Illegality of IS assessment no. 2013… by Violation of Article 6 of Law no. 55-A/2012, of 29 October
The Claimant states that the IS assessment act no. 2013… is illegal, due to violation of the provisions of article 6 of Law no. 55-A/2012, of 29 October, since the rules contained in the various paragraphs of no. 1 of article 6 of that legal act were not complied with, in particular paragraphs d), e) and f), sub-paragraph i).
The Claimant's claim cannot proceed, since the assessment under analysis falls under no. 2 of article 6 of the aforementioned law and nos. 1, 2 and 3 of article 113 of the CIMI, applicable by express reference in no. 7 of article 23 and no. 5 of article 44, both of the CIS, respectively, as mentioned above, as well as in item 28.1 of the TGIS, as to its rate "For property with residential purpose – 1%", and not in the various paragraphs and sub-paragraphs of no. 1 of the same article 6 of the aforementioned law, which applies to assessment no. 2012… (transitional regime).
Illegality of the Disputed Assessments due to Error as to Legal Presuppositions
Article 4 of Law no. 55-A/2012, of 29 October, added item 28 to the General Table of Stamp Tax, with the following wording (note that the wording of no. 1 of this item was subsequently changed by Law no. 83-C/2013, of 31/12):
"28 — Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value contained in the registry, pursuant to the Real Estate Tax Code (CIMI), is equal to or greater than € 1,000,000 — on the taxable patrimonial value used for purposes of IMI:
28.1 — For property with residential purpose — 1%;
28.2- …………………………………………."
The property that is the origin of the disputed assessments is registered in the respective registry as "construction land" with an area of 637.50 m², and on 31-10-2012 and 31-12-2012 the taxable patrimonial value (VPT), determined pursuant to article 45 of the CIMI, was 1,600,686.60 €.
For the respondent, construction land has the legal nature of a property with residential purpose, so the assessment act should be maintained, as it embodies a correct interpretation of Item 28 of the General Table, added by the aforementioned act.
The main issue that arises in the present case is whether item 28.1 of the TGIS, in the wording given by Law no. 55-A/2012, of 29 October, which provides for the taxation of properties worth equal to or exceeding 1,000,000 € encompasses or does not encompass construction land.
Law no. 55-A/2012, which entered into force on 30/10/2012, did not proceed to qualify the concepts contained in the aforementioned item no. 28, in particular the concept of "property with residential purpose". However, observing what article 67, no. 2, of the Stamp Tax Code (CIS), also added by the aforementioned Law no. 55-A/2012, provides, it is verified that "to matters not regulated in this code relating to item 28 of the General Table, the CIMI shall apply subsidiarily." In case of doubt as to the scope of said item, it is therefore justified to observe what the CIMI says.
From reading the CIMI, it appears that the concept of "property with residential purpose" seems to refer to the concept of "urban property" (see article 2 and, particularly, article 4).
Now, among the types of "urban properties" (article 6), mention is expressly made of "residential urban properties" [see no. 1, par. a)] and "construction land" [see no. 1, par. c)]. Nos. 2 and 3 of the aforementioned article of the CIMI specify that the first "are buildings or constructions licensed for such or, in the absence of a license, that have as their normal purpose each of these uses", and that the second are "lands located within or outside an urban settlement, for which building license or authorization has been granted, prior notice admitted or favorable prior information issued for subdivision or construction operation, and also those that have been thus declared in the acquisition title, excepting lands where competent entities prevent any such operations, in particular those located in green areas, protected areas or that, in accordance with municipal land use plans, are allocated to spaces, public infrastructures or facilities."
However, from reading the rules of the CIMI (see articles 2, 4 and 6), the (specific) concept of "property with residential purpose" is not discernible in the classification of "properties". Thus, in the absence of exact terminological correspondence of the concept of "property with residential purpose" with another used in this and other acts, only interpretive hypotheses can be ventured, in light of what article 9, no. 1, of the Civil Code provides.
This is what was done, for example, in Arbitral Decision no. 231/2013-T, of 3/2/2014: "The starting point of the interpretation of that expression 'properties with residential purpose' is, naturally, the text of the law, and it is on the basis of it that one must reconstruct the 'legislative thought', as required by no. 1 of article 9 of the Civil Code, applicable by virtue of what article 11, no. 1, of the LGT provides".
In this context, the two possible interpretations were tested: 1) that the concept in question ('properties with residential purpose') refers to "residential properties"; 2) that that concept refers to a concept distinct from that of "residential properties".
As to the first of these hypotheses, it is concluded here, as in the aforementioned Decision, with which agreement is expressed, that, "if it is understood that the expression 'property with residential purpose' coincides with [the concept of] 'residential properties', it is manifest that the assessments will suffer from error regarding the factual and legal presuppositions, since all properties relative to which Stamp Tax was assessed under the aforementioned item no. 28.1 are construction lands, without any building or construction, required by that no. 2 of article 6 to fulfill that concept of 'residential properties'. For this reason, if the interpretation that 'property with residential purpose' means 'residential property' is adopted, the assessments whose declaration of illegality is sought will be illegal, for there being no building or construction in any of the lands."
In summary, from this it results that: either the terms of the expression used in item no. 28.1 of the TGIS are coincident with that which is extracted from no. 2 of article 6 of the CIMI - and then the assessments made with that justification are illegal for the reasons already mentioned above -, or the said terms are not coincident. In the latter case, it will have to be concluded that it was intended to use a concept distinct from that of "residential properties".
But what would that concept be?
This is, thus, the investigation underlying the second hypothesis dealt with in the aforementioned Decision, which concluded that, non-existence of coherent sense in item no. 28.1, only the path of interpretation of the legal text remained, framed by article 9, no. 3, of the Civil Code: "The recognized lack of coherence of Stamp Tax is particularly exuberant in the case of this item no. 28.1, hastily included in the margins of the General State Budget, by a fiscal legislator without perceptible overall fiscal guidance, who is successively implementing fiscal aggravation rules as the reversals in budget execution occur, the impositions of international institutional creditors (represented by the 'troika') and the oversight of the Constitutional Court. [...] In this context, not existing secure interpretive elements that allow detecting legislative coherence in the solution adopted in the aforementioned item no. 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretive purposes in light of no. 3 of article 9 of the Civil Code), the tenor of the legal text must be the primary element of interpretation, in accordance with the presumption, imposed by the same no. 3 of article 9, that the legislator knew how to express its thought in adequate terms."
Now, as the aforementioned Decision proceeds well, "in light of those meanings of the words 'purpose' and 'to purpose', which are 'to give destination' or 'to apply', the formula used in that item no. 28.1 of the TGIS, clearly encompasses, the properties to which destination for housing has already been given, the properties that are already applied to residential purposes, so it matters to inquire whether it will also encompass the properties that, although not yet applied to residential purposes, are destined for these, in particular in subdivision permit. For this, there will have to be clarification as to when it can be understood that a property is for a residential purpose, in particular if it is when it is fixed that destination in a subdivision permit or licensing act or similar, or only when the effective attribution of that destination is concretized. [...]. The text of the law, by adopting the formula 'property with residential purpose', instead of 'urban properties of residential purpose', which appears in the [...] "Statement of Reasons", points strongly in the sense that the residential purpose already be concretized, since only in this way will the property have such purpose."
The certainty is that, in the present case - as also happened in the case underlying the Decision that has been frequently cited -, "we are faced with a reality still more distant from residential purpose, which is that there exists not even any building or construction and, therefore, one cannot consider existing a purpose that presupposes its existence. On the other hand, as the Claimant well notes [and the now claimant, in the exact same terms], the legislative intention not to extend the scope of incidence to construction land was expressly mentioned by the Government when presenting to the Plenary of the Republic Assembly the Proposal for Law 96-XII by saying, through the State Secretary for Tax Affairs: 'First, the Government proposes the creation of a special rate to tax high-value residential urban properties. This is the first time in Portugal that special taxation is created on high-value properties intended for housing. This rate will be 0.5% to 0.8%, in 2012, and 1%, in 2013, and will apply to homes worth equal to or exceeding 1 million euros. With the creation of this additional rate, the tax effort required of these owners will be significantly increased in 2012 and 2013'. The express reference to 'homes' as the target of the incidence of the new tax leaves no room for doubt about legislative intention. On the other hand, no reference to 'construction land' is found in the discussion of the aforementioned Proposal for Law" (underlining and bolding ours)."
In fact, as also argued, correctly, by the Claimant, it results "from the presentation of proposal for law no. 96-XII [that] what was proposed to the deputies and these approved was the creation of a taxation of high-value real estate property, which does not include construction land or, in the more clarifying words of the State Secretary for Tax Affairs, special taxation on high-value properties intended for housing and special taxation that will apply to homes worth equal to or exceeding 1 million euros, that is, taxation on the residential properties referred to in no. 2 of art. 6 of the CIMI."
Finally, note what Arbitral Decision no. 49/2013-T, of 18/9/2013 states, with clarity and accuracy: "Construction land - whatever the type and purpose of the building that will be, or may be, erected thereon - does not, on its own, satisfy any condition for being so licensed or for being defined as having housing as its normal purpose. Referring, thus, the rule of incidence of stamp tax to urban properties with 'residential purpose', without a specific concept being established for this purpose, cannot it be extracted therefrom that the same contains a future potentiality, inherent to a distinct property that might possibly be built on the land."
This interpretation has been consistently and peacefully defended by this Arbitral Tribunal's jurisprudence, as shown in decisions issued in numerous cases, in addition to those referred to in article 112 of the arbitral petition, as well as in many others.
As well as by the Supreme Administrative Court.
In the name of the principles of procedural economy and expedition and as a matter of procedural authenticity and trustworthiness, the arguments contained in the STA's judgment of 23/04/2014, issued in process no. 272/14, available at www.dgsi.pt, are herein transcribed:
"4.3 The issue that is the subject of the present appeal consists in knowing the scope of incidence of item 28.1 of the General Table of Stamp Tax in the wording given by Law no. 55-A/2012 of 29.10, namely to know whether construction lands should be included in that rule and, in particular, whether construction lands with taxable patrimonial value equal to or greater than €1,000,000 fall within, or not, the category of urban properties 'with residential purpose.'
The appealed judgment considered that in light of the literal tenor of item no. 28.1, it is to be excluded from the scope of incidence of the Stamp Tax provided for therein the construction lands that still have no defined use, since they are not yet applied nor destined for residential purposes.
Further considering that construction lands that have no defined use cannot be considered properties with residential purpose, since they do not yet have any purpose nor other destination than the construction of unknown type.
In this context, it concluded that the disputed assessment suffers from error regarding the factual and legal presuppositions, since the property relative to which Stamp Tax was assessed under the aforementioned item no. 28.1 is construction land, without any building or construction, required to fulfill that concept of 'residential properties'.
Against such decision, the Public Treasury appeals, arguing that the concept of 'properties with residential purpose' for purposes of what is provided in item no. 28 of the TGIS, comprises both built properties and construction lands, since the legislator does not refer to 'properties intended for housing' but has rather chosen the notion of 'residential purpose', expression that it considers different and broader, integrating other realities beyond those identified in art. 6 no. 1 par. a) of the CIMI.
Concluding that residential purpose, for purposes of applying item 28, does not necessarily imply the existence of buildings or constructions, applying, therefore, to construction lands with that purpose.
It shall be stated in advance that the appeal does not merit acceptance and that the judgment so decided should be confirmed.
In fact, the question, in these terms raised, is, even in the factual presuppositions, entirely identical to the question that was examined and decided in this Supreme Administrative Court at a recent date, by judgments of 09.04.2014, issued in the cases numbered 1870/13 and 48/14, in which the present relator had participation as assistant, in which it was decided that 'construction lands' cannot be considered, for purposes of the incidence of Stamp Tax provided for in Item 28.1 of the respective General Table (in the wording of Law no. 55-A/2012, of 29 October), as urban properties with residential purpose.
This is jurisprudence that is also accepted here, as we fully agree with its respective reasoning, for which reason we shall merely reproduce what was said on the question in the aforementioned Judgment 1870/13:
'The concept of 'property (urban) with residential purpose' has not been defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the Real Estate Tax Code, to which no. 2 of article 67 of the Stamp Tax Code (also introduced by that Law), refers as subsidiary. And it is a concept that, probably due to its imprecision – a fact all the more serious given that it is by reference to it that the objective scope of the new taxation is defined -, had a short life, since it was abandoned with the entry into force of the State Budget Law for 2014 (Law no. 83-C/2013, of 31 December), which gave new wording to that item no. 28 of the General Table, and which now defines its objective scope of incidence through the use of concepts that are legally defined in article 6 of the Real Estate Tax Code.
This change - to which the legislator did not give interpretive character, nor does it seem to us that he did –, merely makes it unequivocal for the future that construction lands whose construction, authorized or foreseen, is for housing are encompassed within the scope of item 28.1 of the General Table of Stamp Tax (provided that the respective taxable patrimonial value is of value equal to or greater than 1 million euros), explaining nothing, however, regarding past situations (assessments of 2012 and 2013), such as the one at issue in the present case.
Now, as to these, it does not seem possible to adopt the interpretation of the appealing party, since it does not result unequivocally either from the letter or the spirit of the law that the intention of this was, ab initio, to encompass in its objective scope of incidence the construction lands for which construction of residential buildings was authorized or foreseen, as it now results unequivocally from item 28.1 of the General Table of Stamp Tax.
From the letter of the law nothing unequivocal results, in fact, since it itself, by using a concept it did not define and which was also not defined in the act to which it referred as subsidiary, unnecessarily lent itself to ambiguities, in a matter – of tax incidence - in which certainty and legal security should also be paramount concerns of the legislator.
And from its 'spirit', apprehensible in the statement of reasons of the bill that is at the origin of Law no. 55-A/2012 (Proposal for Law no. 96/XII – 2nd, Diary of the Republic Assembly, series A, no. 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing more results than the concern to raise new tax revenues, on sources of wealth "more spared" in the past from the voracity of the Tax Authority than income from labor, in particular capital income, share gains and property, reasons that bring no relevant contribution to the clarification of the concept of 'properties (urban) with residential purpose', since they take it for granted, with no concern to clarify it. Such clarification will, however, have arisen - as reported in the Arbitral Decision issued on 12 December 2013, in case no. 144/2013-T, available in the CAAD database -, upon presentation and discussion in the Republic Assembly of that bill, in the words of the State Secretary for Tax Affairs, who will have expressly mentioned, as follows from the Diary of the Republic Assembly (DAR I Series no. 9/XII – 2, of 11 October, p. 32) that: 'The Government proposes the creation of a special rate on high-value residential urban properties. This is the first time in Portugal that special taxation on high-value properties intended for housing is created. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to homes worth equal to or exceeding 1 million euros" (underlinings ours), from which it is gathered that the reality to be taxed had in view is, after all, and despite the terminological imprecision of the law, "the properties (urban) residential', in current language "homes", and not other realities.
The fact that it can be considered that in determining the taxable patrimonial value of urban properties classified as construction lands one should take into account the purpose that the building authorized or foreseen for it will have for determining the respective value of the implantation area (see nos. 1 and 2 of article 45 of the CIMI), does not determine that construction lands can be classified as 'properties with residential purpose', since 'residential purpose' always appears in the Real Estate Tax Code referred to "buildings" or "constructions", existing, authorized or foreseen, since only these can be inhabited, which does not happen in the case of construction lands, which do not have, in themselves, conditions for this, not being susceptible to being used for housing unless and when building authorized and foreseen for them is erected thereon (but in that case they will no longer be 'construction lands' but another type of urban property – 'residential', 'commercial, industrial or for services' or 'others' – article 6 of the CIMI).
It would be strange, moreover, if the determination of the scope of the rule of incidence of item no. 28 of the General Table of Stamp Tax was found, after all, in the rules for determining the taxable patrimonial value of the Real Estate Tax Code, and the terminological imprecision of the legislator in drafting that rule was, after all, elucidated and finally clarified by way of an indirect and ambiguous reference to the purpose coefficient established by the legislator regarding built properties (article 41 of the Real Estate Tax Code).
Thus, given that construction land – whatever the type and purpose of the building that will be, or may be, erected thereon – does not, on its own, satisfy any condition for being so licensed or for its being defined as having housing as its normal purpose, and the rule of incidence of stamp tax referring to urban properties with 'residential purpose', without a specific concept being established for this purpose, cannot it be extracted therefrom that the same contains a future potentiality, inherent to a distinct property that might possibly be built on the land.
It is thus concluded, in accordance with what was decided in the appealed judgment that, resulting from article 6 of the Real Estate Tax Code a clear distinction between urban properties 'residential' and 'construction lands', the latter cannot be considered as 'properties with residential purpose' for purposes of what is provided in item no. 28.1 of the General Table of Stamp Tax, in its original wording, which was given by Law no. 55-A/2012, of 29 October'. (end of citation).
It is this jurisprudence that is accepted here and reiterated, taking into account the rule contained in no. 3 of art. 8 of the Civil Code – which imposes on the judge the duty to consider all cases that merit similar treatment, in order to obtain an interpretation and uniform application of law, the appealing party not adducing new reasoning that would undermine such jurisprudential orientation".
In light of the foregoing, the alleged defect of violation of law due to error regarding the legal presuppositions is considered verified, which determines the declaration of illegality and consequent annulment of the disputed assessments.
Request for Payment of Compensatory Interest
The Claimant further requests that it be paid compensatory interest, due to error on the part of the services, pursuant to no. 1 of article 43 of the General Tax Law (LGT), having proven payment of the amount assessed, relating to assessment no. 2013…, in the amount of 16,006.87 €.
This provision, applicable subsidiarily to tax arbitral proceedings, by virtue of what article 29, no. 1, paragraph a), of the RJAT provides, states "Compensatory interest is due when it is determined, in administrative complaint or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due."
The existence of error attributable to the services is considered verified, according to uniform jurisprudence of the STA, whenever they proceed to administrative complaint or judicial challenge of the assessment act (in the same sense, the decision in the arbitral case no. 218/2013-T).
As it has been demonstrated that there was erroneous application of the rule of objective incidence contained in item 28.1 of the TGIS, which justifies the annulment of the disputed assessment, the Claimant's right to compensatory interest is recognized, at the legal suppletive rate, pursuant to articles 43, nos. 1 and 4, and 35, no. 10, of the LGT, article 559 of the Civil Code and Ordinance no. 291/2003, of 8 April, from the date of actual payment of each of the installments into which the assessed amount was divided, until the date of processing of the respective credit note, as provided for in no. 5 of article 61 of the CPPT.
6. Decision
In light of the foregoing, it is decided:
a) To uphold the petition for annulment of the order of the Deputy Director of Finance of the Finance Directorate of…, in substitute capacity, of 13-06-2016, issued in the administrative complaint case no. …2016….
b) To uphold the petition for annulment of the Stamp Tax (IS) assessments nos. 2012… and 2013…, made on 07-11-2012 and 21-03-2013, respectively, in the total amount of 24,010.30 €, relating to the application of item 28.1 of the General Table of Stamp Tax (TGIS) on the urban property (construction land) located at… (lot…), place…, parish of…, municipality of…, registered in the respective registry under article….
c) To uphold the petition for the condemnation of the Tax and Customs Authority to reimburse the amounts unduly paid by the Claimant, plus interest, at the legal rate, from the date of the respective payments until the date of the issuance of the respective credit notes.
7. Case Value
In accordance with the provisions of articles 306, no. 2, of the CPC, 97-A, no. 1, paragraph a) of the CPPT and 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), the case is assigned a value of 24,010.30 €.
8. Costs
Pursuant to article 22, no. 4 of the RJAT, the amount of costs is set at 1,530.00 €, in accordance with Table I, attached to the RCPAT, borne by the Tax and Customs Authority.
Notify.
Lisbon, 22 February 2017.
The Arbitrator,
(Rui Ferreira Rodrigues)
Text prepared by computer, pursuant to the provisions of article 131, no. 5, of the CPC, applicable by reference in article 29, no. 1, par. e), of the RJAT.
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