Stamp Tax on Construction Land Under Verba 28.1 TGIS – CAAD Arbitration 557/2014-T

ARBITRATION AWARD

The arbitrators Manuel Luís Macaísta Malheiros (arbitrator-president), arbitrator Paulo Ferreira Alves and arbitrator Maria Graça Martins (arbitrators-members), appointed by the Deontological Council of the Administrative Arbitration Centre (CAAD) to form the Arbitral Tribunal, constituted on 28 July 2014, agree as follows:

I – REPORT

A – PARTIES

On 28 July 2014 the company A..., S.A., with the Tax Identification Number ..., with registered office at ..., Lisbon, hereinafter referred to as the Claimant or taxpayer, requested, in accordance with and for the purposes set out in Articles 2 and 10, both of Decree-Law no. 10/2011, of 20 January, the constitution of a Collective Arbitral Tribunal.

The Tax and Customs Authority (AT) (which succeeded the General Directorate of Taxes, by means of Decree-Law no. 118/2011, of 15 December) is the respondent, hereinafter referred to as the Respondent or AT.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD, and the Arbitral Tribunal was duly constituted on 29 July 2014, to examine and decide the subject matter of the present proceedings, and was automatically notified to the Tax and Customs Authority on 30 July 2014, as recorded in the respective minutes.

The Claimant did not appoint an arbitrator, whereby, pursuant to Article 6, paragraph 1 and Article 11, paragraph 1, letter b) of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed the Hon. Judge Manuel Luís Macaísta Malheiros (President), Dr. Paulo Ferreira Alves and the Hon. Dr. Maria Graça Martins, with the appointment being accepted in accordance with the legal provisions.

On 12 September 2014 the parties were duly notified of this appointment and did not express a desire to refuse the appointment of the arbitrators, in accordance with Article 11, paragraph 1, letters a) and b), of the Rules of Arbitral Procedure and Articles 6 and 7 of the Deontological Code.

In accordance with Article 11, paragraph 1, letter c) of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal is duly constituted on 16 July 2014.

The arbitral tribunal is duly constituted. It is materially competent, in accordance with Articles 2, paragraph 1, letter a), and 30, paragraph 1, of Decree-Law no. 10/2011, of 20 January.

Both parties agreed to dispense with the meeting provided for in Article 18 of the Rules of Arbitral Procedure.

The parties have legal personality and capacity, are legitimate and are legally represented (Articles 4 and 10, paragraph 2, of the same instrument and Article 1 of Order no. 112-A/2011, of 22 March).

The proceedings do not suffer from defects that would invalidate them.

B – CLAIM

1. The present Claimant seeks a declaration of illegality of the tax assessment act for additional Stamp Tax no. 2014 ..., no. 2014 ... and no. 2014 ..., which set a total tax payable of €99,230.45 (ninety-nine thousand two hundred and thirty euros and forty-five cents).

C – CAUSE OF ACTION

1. To support its request for arbitral ruling, the Claimant alleged, with a view to declaring the illegality of the tax assessment act for additional Stamp Tax no. 2014 ..., no. 2014 ... and no. 2014 ..., in summary, the following:

2. It is the owner of three immovable properties, specifically three building plots, registered in the urban property register under:

a) property number U-Y..., located at ..., with a taxable asset value of €1,799,188.44.

b) property number U-X..., located at ..., with a taxable asset value of €5,698,704.89.

c) property number U-Z..., located at ..., with a taxable asset value of €2,425,151.50.

1. The Claimant maintains that the contested assessments concern exclusively building plots.

2. The Claimant reiterates that the building plot with property number U-Y..., located at ..., was not subject to any subdivision or building permit, but was merely the subject of approval of an architectural project for the construction of a building intended for residential and commercial use and not intended exclusively for residential use.

3. As for the building plot with property number U-X..., located at ..., it was subject to a subdivision operation, intended exclusively for offices, not intended exclusively for residential use.

4. The Claimant contends that the assessments issued pursuant to entry 28.1 of the General Stamp Tax Table (TGIS), are illegal, on the grounds that:

5. It is illegal the understanding according to which building plots fall within the concept of "property with residential use", provided for in entry 28.1 of the TGIS. It further states that, in the case of building plots whose planned or authorized construction is not even intended exclusively for residential use, such illegality is all the more evident.

6. The Claimant further maintains that the contested assessments violate the principle of equality, provided for in Articles 13 and 104, paragraph 3 of the Constitution of the Portuguese Republic.

7. The Claimant concludes by alleging the voidability of the tax assessment act for Municipal Property Tax on the grounds of violation of law in the characterization of the taxable fact, with entry 28.1 of the General Stamp Tax Table being erroneously applied, as in force in 2013, which constitutes grounds for judicial challenge and annulment of the impugned acts (Article 99 of the Code of Administrative Tax Procedure - pursuant to Article 10, paragraph 2, letter c) of the Rules of Arbitral Procedure).

D – RESPONDENT'S REPLY

1. The Respondent, duly notified for this purpose, timely filed its reply in which, in brief summary, alleged the following:

2. Law no. 55-A/2012, of 29 October 2012 amended Article 1 of the Stamp Tax Code and added entry 28 to the TGIS, with this legislative amendment, Stamp Tax would also apply to the ownership, usufruct or right of superficies of urban properties whose taxable asset value registered in the property register, in accordance with the Code of Municipal Property Tax (CIMI) is equal to or greater than €1,000,000.00.

3. Stamp Tax would thus apply to all acts, contracts, documents, deeds, papers and other facts or legal situations provided for in the general table, including gratuitous transfers of assets.

4. In the absence of any definition of the concepts of urban property, building plot and residential use, under Stamp Tax law, recourse must be had to the CIMI, in search of a definition that permits assessment of possible Stamp Tax liability, in accordance with Article 67, paragraph 2 of the Stamp Tax Code as amended by Law no. 55-A/2012, of 29 October.

5. The Respondent contends, in accordance with the said legal provision, that to matters not regulated in the Code, relating to entry no. 28 of the TGIS, the provisions of the CIMI apply subsidiarily.

6. The notion of use of the urban property is found in the section relating to the valuation of properties, which is well understood given that the valuation of the property (purpose) incorporates value to the property, constituting a fact of distinction that is determinative (coefficient) for purposes of valuation.

7. Thus, for purposes of determining the taxable asset value of building plots, the application of the use coefficient in the context of valuation is clear, whereby its consideration for purposes of applying entry 28 of the TGIS cannot be ignored.

8. The AT understands that the provision of entry 28 of the TGIS does not constitute a violation of any constitutional requirement.

9. Entry 28 of the TGIS applies to the ownership, usufruct or right of superficies of urban properties with residential use, whose taxable asset value registered in the property register, in accordance with the CIMI, is equal to or greater than €1,000,000.00, that is, it applies to the value of the property.

10. The Respondent concludes by supporting its position in the sense that the assessment in question constitutes a correct interpretation and application of law to the facts, and does not suffer from a defect of violation of law, whether of the Constitution or of the Stamp Tax Code, and consequently the Claimant's claim should be dismissed and the Respondent Entity absolved from the request.

E – FACTUAL FINDINGS

1. Before addressing these issues, it is necessary to present the factual matter relevant for its understanding and decision, which was done on the basis of documentary evidence and taking into account the alleged facts.

2. As to the factual matter relevant, this tribunal finds the following facts to be established:

3. The claimant is the owner of urban properties consisting of "building plots", respectively as to the properties with property number U-Y..., located at ... with a taxable asset value of €1,799,188.44, the property with property number U-X..., located at ..., with a taxable asset value of €5,698,704.89 and the property with property number U-Z..., located at ... with a taxable asset value of €2,425,151.50.

4. The claimant was notified of the Stamp Tax assessment acts, which set a total tax (amount) payable of €99,230.45 (ninety-nine thousand two hundred and thirty euros and forty-five cents), respectively:

a. Stamp Tax Assessment Act No. 2014 ..., relating to the property registered with property number U-Y..., with a tax to be assessed of 5,997.30 (relating to 1st instalment) and a total of €17,991.88.

b. Stamp Tax Assessment Act No. 2014 ..., relating to the property registered with property number U-X... with a tax to be assessed of 18,995.69 (relating to 1st instalment) and a total of €56,987.05.

c. Stamp Tax Assessment Act No. 2014 ..., relating to the property registered with property number U-Z... with a tax to be assessed of €8,083.84 (relating to 1st instalment) and a total of €24,251.52.

1. In order to prevent the initiation of any tax enforcement proceedings arising from non-payment, the claimant proceeded to pay in full the first and second instalments of the assessments, notwithstanding that it deemed them illegal.

F – UNPROVEN FACTS

1. Of the facts with interest for the decision of the case, contained in the challenge, all subject to specific analysis, those not included in the factual matter described above were not proven.

G – ISSUES TO BE DECIDED

1. Considering the positions of the parties assumed in the arguments presented, the central issue to be resolved is the following, which must therefore be examined and decided:

i. The allegation by the Claimant of illegality of the tax assessment acts for additional Stamp Tax no. 2014 ..., no. 2014 ... and no. 2014 ....

H – LEGAL MATTERS

1. Considering the positions of the parties assumed in the pleadings filed, the central issue to be decided by this arbitral tribunal consists of deciding whether the Stamp Tax assessment acts, in the amount of 33,076.83 relating to urban properties consisting of "building plots", registered with property number U-Y..., located at ... with a taxable asset value of €1,799,188.44, property number U-X..., located at ..., with a taxable asset value of €5,698,704.89 and property number U-Z..., located at ... with a taxable asset value of €2,425,151.50, suffer from formal defects, specifically those raised by the respondent regarding lack of statement of reasons, and violation of law, through the erroneous interpretation and application of entry 28.1 of the TGIS and Article 6, paragraph 1, letter f), i) of the said Law no. 55-A/2012, of 29 October.

2. The factual matter is fixed and proven, which is why we now determine the law applicable to the disputed facts, since we are faced with established factual matter, three building plots without any structure erected or constructed, the same regime and the same legal matter is thus applied to all.

3. The legal defects due to error regarding the presuppositions of the right of assessment, regarding the question of the classification of building plots within the scope of entry 28, paragraph 1 of the TGIS, introduced by the Regime of Law no. 55-A/2012, of 29 October.

4. The amendment of the regime regarding the liability to Stamp Tax of properties with residential use, by the addition of entry 28 of the General Stamp Tax Table, effected by Article 4 of Law 55-A/2012, of 29 October, now typified the following taxable facts, through the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable asset value registered in the property register, in accordance with the Code of Municipal Property Tax (CIMI), is equal to or greater than €1,000,000 – on the taxable asset value used for purposes of Municipal Property Tax:

28.1 – For property with residential use – 1%;

28.2 – For property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the order approved by the Minister of Finance – 7.5%."

1. Article 6 of Law no. 55-A/2012 contains the transitional provisions which established the rules relating to assessment of the tax, provided for in that entry:

"1 – In 2012, the following rules must be observed with reference to the assessment of Stamp Tax provided for in entry no. 28 of the respective General Table:

The taxable event occurs on 31 October 2012;

The taxpayer of the tax is the one mentioned in paragraph 4 of Article 2 of the Stamp Tax Code on the date referred to in the preceding letter;

The taxable asset value to be used in the assessment of the tax corresponds to that resulting from the rules provided for in the Code of Municipal Property Tax with reference to the year 2011;

The assessment of the tax by the Tax and Customs Authority must be effected by the end of November 2012;

The tax must be paid, in a single instalment, by taxpayers by 20 December 2012;

The applicable rates are as follows:

Properties with residential use assessed in accordance with the Code of Municipal Property Tax: 0.5%;

ii) Properties with residential use not yet assessed in accordance with the Code of Municipal Property Tax: 0.8%;

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

2 – In 2013, the assessment of Stamp Tax provided for in entry no. 28 of the respective General Table must relate to the same taxable asset value used for purposes of assessment of Municipal Property Tax to be effected in that year.

3 – The failure to deliver, in whole or in part, within the prescribed period, the amounts assessed as Stamp Tax constitutes a tax offense, punished in accordance with law."

Regarding the interpretation of this statute, Arbitration Award 53/2013-T has already ruled, which states "The term used in entry 28.1 and in sub-letters i) and ii) of letter f) of paragraph 1 of Article 6 of Law 55-A/2012, is a concept not used in any other tax legislation in these precise terms, namely "property with residential use". Specifically in the CIMI, which in several provisions of the Stamp Tax Code introduced by that Law is indicated as the instrument of subsidiary application regarding the tax provided for in entry no. 28 [Articles 2, paragraph 4, 3, paragraph 3, letter u), 5, letter u), 23, paragraph 7, and 46 and 67 of the Stamp Tax Code], such a concept as defined in those terms is not used." On this matter, Arbitration Awards of the CAAD Arbitral Tribunal, no. 42/2013-T, 48/2013-T, 49/2013-T, 189/2013-T, 207/2013-T, 247/2013, 284/2013-T, 288/2013-T, 308/2013-T, 31/2014-T, 202/2014-T, 310/2014-T have already ruled.

1. As to the concept of "properties", it is necessary for this purpose to recourse to the concepts of "properties" used in the CIMI, in which the species of properties are enumerated in its Articles 2 to 6, which are transcribed as follows:

Article 2

Concept of property

1. For purposes of this Code, property is any fraction of land, comprising waters, plantations, buildings and constructions of any nature incorporated or situated therein, with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances mentioned above, endowed with economic autonomy in relation to the land where they are situated, although located in a fraction of land that constitutes an integral part of a patrimony other than the one which is being considered or does not have a patrimonial nature.

2. Buildings or constructions, although movable by nature, are deemed to have a character of permanence when assigned to non-transitory purposes.

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

4. For purposes of this tax, each autonomous fraction, under a horizontal property regime, is deemed to constitute a property.

Article 3

Rural properties

1 – Rural properties are lands situated outside an urban cluster that cannot be classified as building plots, in accordance with paragraph 3 of Article 6, provided that:

They are assigned or, in the absence of concrete assignment, have as their normal destination a use generating agricultural income, as they are considered for purposes of personal income tax (IRS);

Not having the assignment indicated in the preceding letter, they are not constructed or have only buildings or constructions of an accessory character, without economic autonomy and of reduced value.

2 – Also rural properties are lands situated within an urban cluster, provided that, by force of a legally approved provision, they cannot have use generating any income or can only have use generating agricultural income and are having, in fact, this assignment.

3 – Rural properties further include:

Buildings and constructions directly assigned to the production of agricultural income, when situated on the lands referred to in the preceding paragraphs;

Waters and plantations in the situations referred to in paragraph 1 of Article 2.

4 – For purposes of this Code, urban clusters are considered, in addition to those situated within legally fixed perimeters, the nuclei with a minimum of 10 dwellings served by roads of public use, with their perimeter delimited by points distanced 50 m from the axis of the roads, in the transverse sense, and 20 m from the last building, in the direction of the roads.

Article 4

Urban properties

Urban properties are all those that should not be classified as rural, without prejudice to the provisions of the following article.

Article 5

Mixed properties

1 – Whenever a property has rural and urban parts it is classified, in its entirety, in accordance with the main part.

2 – If neither of the parts can be classified as main, the property is deemed to be mixed.

Article 6

Species of urban properties

1 – Urban properties are divided into:

Residential;

Commercial, industrial or for services;

Building plots;

Others.

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

3 – Building plots are considered lands situated within or outside an urban cluster, for which a license or authorization for subdivision or construction has been granted, or regarding which prior communication was made or favorable prior information was issued, and also those thus declared in the acquisition title, except lands where the competent authorities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land-use plans, are assigned to spaces, infrastructure or public facilities. (As amended by Law no. 64-A/08, of 31 December)

4 – The provision of letter d) of paragraph 1 includes lands situated within an urban cluster that are neither building plots nor are covered by the provision of paragraph 2 of Article 3, and also buildings and constructions licensed or, in the absence of license, which have as their normal destination purposes other than those referred to in paragraph 2, and also those from the exception of paragraph 3.

1. Regarding the interpretation of tax provisions, for the case sub judice, Article 11 of the General Tax Law tells us, which establishes the essential rules for interpretation of tax laws, which it does in the following terms:

Article 11

Interpretation

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

Whenever tax provisions employ terms specific to other branches of law, they must be interpreted in the same sense as they have there, unless something different follows directly from the law.

Should doubt persist regarding the meaning of the provisions governing the scope of taxation to be applied, the economic substance of the taxable facts must be considered.

Gaps resulting from tax provisions covered by the reservation of law of the Assembly of the Republic are not susceptible of analogical integration.

1. To this provision, it is necessary equally to resort to the general principles of interpretation of laws, to which paragraph 1 of Article 11 of the General Tax Law refers, which are established in Article 9 of the Civil Code, which establishes the following:

Article 9

Interpretation of law

The interpretation must not be confined to the letter of the law, but must reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied.

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

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

1. Based on the legal grounds already set out, and considering the articles transcribed and stated, the following interpretive hypotheses arise regarding the concept of "property with residential use", as either referring to residential properties, and as to the concept of "property with residential use" as a concept distinct from "residential properties".

2. Articles 2 to 6 of the CIMI transcribed above are not used by the legislator, in the classification of properties, the concept of "property with residential use". Equally this concept, with this terminology, is not found in any other statute.

3. The lack of exact terminological correspondence of the concept of "property with residential use" with any other used in other statutes may generate several interpretive hypotheses.

4. The text of the law, being the starting point for the interpretation of the expression "properties with residential use", being on the basis of it that the "legislative intent" must be reconstructed, as imposed by paragraph 1 of Article 9 of the Civil Code, applicable by virtue of Article 11, paragraph 1, of the General Tax Law, already transcribed.

5. Regarding the interpretation of the concept of "property with residential use", it is important to cite Arbitration Award 53/2013-T which has already ruled on this matter. That Award likewise sustains two interpretive hypotheses of the concept of "property with residential use", respectively in the same sense of the present decision, as to the concept of "property with residential use" as referring to residential properties, and as to the concept of "property with residential use" as a concept distinct from "residential properties".

6. Arbitration Award 53/2013-T writes, regarding the concept of "property with residential use" as referring to residential properties:

"The concept closest to the literal sense of this expression used is manifestly that of "residential properties", defined in paragraph 2 of Article 6 of the CIMI as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of license, which have as their normal destination residential purposes.

To understand that the expression "property with residential use" coincides with that of "residential properties", it is manifest that the assessments would suffer from error regarding the factual and legal presuppositions, since all properties for which Stamp Tax was assessed pursuant to entry no. 28.1 are building plots, without any building or construction, required to meet that concept of "residential properties".

For this reason, if the interpretation is adopted that "property with residential use" means "residential property", the assessments whose declaration of illegality is sought will be illegal, because there is no building or construction in any of the lands.

However, the non-coincidence of the terms of the expression used in entry no. 28.1 of the TGIS with that drawn from paragraph 2 of Article 6 of the CIMI, points in the direction of not having intended to use the same concept."

1. Regarding the interpretation of the second hypothesis: Concept of "property with residential use" as a concept distinct from "residential properties", Arbitration Award 53/2013-T is cited again, in which it writes:

"The word 'use', in this context of the use of a property, has the meaning of 'the action of assigning something to a particular use'. ( [1] )

'When, as is usually the case, the provisions (legislative formulas) admit of more than one meaning, the positive function of the text is translated into giving stronger support to or more strongly suggesting one of the possible meanings. This is because, among the possible meanings, some will correspond to the most natural and direct meaning of the expressions used, while others can only fit within the verbal framework of the provision in a forced, contrived manner. Now, in the absence of other elements that would suggest choosing the less immediate sense of the text, the interpreter should opt in principle for that meaning which best and most immediately corresponds to the natural meaning of the verbal expressions used, and namely to their legal-technical meaning, in the assumption (not always correct) that the legislator knew how to express correctly its intent'. ( [2] )

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

The recognized lack of coherence of Stamp Tax is particularly evident in the case of this entry no. 28.1, hastily included outside the General State Budget, by a tax legislator without perceptible overall fiscal orientation, who is successively implementing provisions increasing the fiscal burden as budget execution setbacks, impositions of international institutional creditors (represented by the "troika") and oversight of the Constitutional Court require.

In fact, although in the "Statement of Reasons" of the Bill no. 96/XII/2nd ( [3] ), on which Law no. 55-A/2012 was based, reference is made to the praiseworthy concern of the Government to "strengthen the principle of social equity in austerity, ensuring an effective distribution of the necessary sacrifices for fulfillment of the adjustment program" and to its commitment "to ensure that the distribution of these sacrifices will be made by all and not only by those who live from the income of their work", it is manifest, on the one hand, that these reasons of equity, certainly existing, did not begin to apply in mid-2012, already existing at the beginning of the year, when the General State Budget entered into force, and on the other hand, that the scope of entry no. 28.1, by taxing with additional burden properties with residential use and not also properties that do not have it, allows to perceive that the concerns of social equity and the proclaimed intention of distribution of sacrifices by all affects far more some than properly all.

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

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

In light of the literal content of entry no. 28.1, it is to be excluded from the scope of Stamp Tax provided there properties that have not yet defined any type of use, since they are not yet applied or destined to residential purposes. That is, building plots that do not have defined use cannot be considered properties with residential use, since they do not yet have any use nor other destination than construction of unknown type. An interpretation in the sense that entry no. 28.1 refers to properties whose use is unknown would not have the minimum of verbal correspondence in the letter of that provision, whereby a hypothetical legislative intent of that type cannot be considered by the interpreter of the law, in light of the prohibition contained in paragraph 2 of Article 9 of the Civil Code.

However, this is not sufficient to clarify the situation of those building plots that, although not yet applied to residential purposes, already have a determined destination, namely, in the subdivision license, which is the case of the properties referred to in letters z) to dd) of the established factual matter.

For this reason, it will be necessary to clarify when it can be understood that a property is assigned to residential purpose, namely if it is when that destination is fixed for it in a licensing act or similar, or only when the effective assignment of that destination is concretized.

From the outset, the comparison of entry no. 28.1 of the TGIS with paragraph 2 of Article 6 of the CIMI, which defines the concept of residential properties, manifestly points in the direction that an effective assignment is necessary.

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

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

Consequently, it must be presumed that the use of a different expression has in view a distinct reality, whereby, in proper hermeneutics, "property with residential use", cannot be a property merely licensed for residential use or destined to that purpose (that is, it will not be sufficient that it be a "residential property"), having to be a property which already has effective assignment to that purpose.

That this is the sense of the expression "use", in the same context of classification of properties as the CIMI does, is confirmed by Article 3, in which, with respect to rural properties, reference is made to those "that are assigned or, in the absence of concrete assignment, have as their normal destination a use generating agricultural income", which shows that the assignment is concrete, effective. In fact, as seen from the final part of this text, a property may have as its destination a particular use and be or not be assigned to it, which shows that assignment is, at the level of linking a property to a particular use, something more intense than mere destination and which may or may not occur, downstream of this and not upstream of it. ( [4] )

Furthermore, the text of the law in adopting the formula "property with residential use", instead of "urban properties with residential use", which appears in the referred "Statement of Reasons", points strongly in the direction that it is required that the residential use already be concretized, since only then will the property be with that use.

As concerns Article 45 of the CIMI, it has no relation to the classification of properties, only indicating the factors to be considered in the valuation of building plots. What is considered there, in making reference to the "building to be constructed" is the consideration of the destination of the land, which, as has been seen, is something that, in the context of the CIMI, does not imply assignment and occurs before it.

The correctness of this interpretation in the sense that only properties that are effectively assigned to residential use are included within the scope of entry no. 28.1 of the TGIS is also confirmed by the discernible ratio legis of the restriction of the field of application of the provision to properties with residential use, in the context of "the circumstances in which the law was drafted and the specific conditions of the time in which it is applied", which Article 9, paragraph 1, of the Civil Code also establishes as interpretive elements. ( [5] ).

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

Bearing in mind this situation and being well-known and public that the revival of economic activity and the increase of exports are the doors of exit from the crisis, it is understood that legislative measures were not taken that would make economic activity difficult, namely the increase of the fiscal burden which makes it difficult and affects competitiveness in international terms.

For this reason, it is to be concluded that the interpretive elements available, including the "circumstances in which the law was drafted and the specific conditions of the time in which it is applied", clearly point in the direction of it not being intended to encompass within the scope of entry no. 28.1 situations of properties that are not yet assigned to residential use, namely building plots held by companies." ( [6] )

1. It follows from the foregoing that the application of the regime to the situation of the Claimant, as to the urban property corresponding to a "building plot", which does not occur in the present case, before a property with current residential use, whereby these properties are not subject to Stamp Tax provided for in entry 28.1 of the TGIS.

2. In this way, the assessment sub judice, whose declaration of illegality is sought suffers from the defect of violation of entry no. 28.1, through error regarding the legal presuppositions, which justifies the declaration of its illegality and annulment (Article 135 of the Code of Administrative Procedure).

I – INDEMNITY INTEREST

1. The Claimant further petitions for payment of indemnity interest.

2. Considering the foregoing, the Stamp Tax assessment, in the part covered by the annulment, which will be decreed, results from errors of fact and law attributable exclusively to the Tax Administration, in that the Claimant fulfilled its duty of declaration and were committed by it and the Claimant could not be unaware of different understandings.

3. In fact, given that it is demonstrated that the claimant paid the contested tax in an amount higher than what is due, by force of Articles 61 of the Code of Tax Procedure and 43 of the General Tax Law, the Claimant has the right to the indemnity interest owed, such interest to be counted from the date of payment of the undue (annulled) tax until the date of issuance of the respective credit note, counting the period for such payment from the beginning of the period for voluntary compliance with the present decision (Article 61, paragraphs 2 to 5 of the Code of Tax Procedure), all at the rate ascertained in accordance with Article 43, paragraph 4 of the General Tax Law.

4. The Claimant's request is upheld.

J – DECISION

Accordingly, considering all the foregoing, this Arbitral Tribunal decides:

I. The request for declaration of illegality of the tax assessment acts for Municipal Property Tax in the form of Stamp Tax, no. 2014 ..., no. 2014 ... and no. 2014 ..., is upheld on the grounds of violation of law regarding the provision contained in entry 28, paragraph 1 of the TGIS, through error regarding the legal presuppositions, which justifies the declaration of its illegality and annulment.

II. The Respondent is condemned to refund to the Claimant the amount improperly assessed and paid, plus payment of indemnity interest already accrued relating to the period from 28 April 2014 on the tax assessed in the total amount of €33,076.83 (€5,997.30; €18,995.69; €8,083.84) all in accordance with paragraphs 2 to 5 of Article 61 of the Code of Tax Procedure and at the rate ascertained in accordance with paragraph 4 of Article 43 of the General Tax Law until full reimbursement.

III. The value of the case is set at €99,230.45 considering the economic value of the case as measured by the value of the tax assessments impugned, and accordingly the costs are set at €2,754.00 (two thousand seven hundred and fifty-four euros), to be charged to the Respondent in accordance with Article 12, paragraph 2 of the Rules of Tax Arbitration, Article 4 of the Rules of Civil Procedure of Tax Procedure and Table I attached to the latter. – paragraph 10 of Article 35, and paragraphs 1, 4 and 5 of Article 43 of the General Tax Law, Articles 5, paragraph 1, letter a) of the Rules of Tax Procedure, 97-A, paragraph 1, letter a) of the Code of Tax Procedure and 559 of the Code of Civil Procedure).

Notify.

Lisbon, 21 November 2014.

The Arbitrators

Manuel Luís Macaísta Malheiros

(arbitrator-president),

Paulo Ferreira Alves

(arbitrator-member)

Maria Graça Martins

(arbitrator-member)

[1] Dictionary of Contemporary Portuguese Language of the Academy of Sciences of Lisbon, Volume I, page 102.

[2] BAPTISTA MACHADO, Introduction to Law and Legitimizing Discourse, page 182.

[3] Bill no. 99/XII/2nd is available at http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=37245

[4] Other provisions of the CIMI make clear that the term "assignment" is used to reference situations already existing and not merely future, even if foreseeable, as "destination". This is the case of Article 9 of the CIMI, which, after establishing that "the tax is due starting" "from the 4th year following, inclusive, the year in which a building plot has come to be listed in the inventory of a company whose purpose is the construction of buildings for sale" or "from the 3rd year following, inclusive, the year in which a property has come to be listed in the inventory of a company whose purpose is its sale" [letters d) and e) of paragraph 1], determines that "for purposes of the provisions of letters d) and e) of paragraph 1, taxpayers must communicate to the tax office of the area where the properties are located, within 60 days from the occurrence of the fact determining its application, the assignment of the properties to those purposes". The "assignment of the properties to those purposes", in the context of this Article 9, amounts to the concrete assignment of properties to the purpose "for sale", materialized by their listing in inventory, it being insufficient that they were constructed or acquired with a view to their sale.

[5] This approach does not take into account the special cases provided for in entry no. 28.2, of ownership of properties by legal persons resident in a country, territory or region subject to a clearly more favorable tax regime, listed in an order by the Minister of Finance which, as in other provisions, is attributed strong tax penalty, as they are situations normally associated with tax evasion.

[6] Outside the special cases provided for in entry no. 28.2.