Stamp Tax Verba 28.1: VPT Per Unit vs Total Property Value in Non-Horizontal Regime

ARBITRAL DECISION

I. REPORT

IMOBILIÁRIA A..., S.A., a joint-stock company with registered office in ..., in Lisbon, with share capital of €1,000,000.00, registered at the Commercial Registration Office of Lisbon under the single registration and legal entity number ... (hereinafter referred to only as "Claimant"), submitted a request for the constitution of a single arbitral tribunal, pursuant to article 2(1)(a) and article 10, both of Decree-Law No. 10/2011, of 20 January (Legal Regime for Tax Arbitration, hereinafter referred to only as "LRTA"), with a view to:

a) Declaration of the illegality of the Stamp Tax assessment acts ("ST") issued by the Tax and Customs Authority ("TA" or "Respondent Entity"), in the total amount of €11,399.20, on the basis of item 28.1 of the General Table of Stamp Tax ("GTST"), dated 17 March 2014 and relating to the year 2013, contained in the collection documents attached to the arbitral opinion request and to the independent application to the same request, respectively, under documents Nos. 2 to 17, 19 to 34 and 1 to 16, and the consequent annulment of those acts;

b) Condemnation of the Respondent Entity to restitution of the tax paid and the amounts paid in the course of fiscal enforcement of the first tax instalment, plus the respective compensatory interest;

c) Condemnation of the Respondent Entity for payment of costs and other expenses of the present arbitral proceedings, in accordance with the provisions of the "LRTA" and the Regulation on Costs in Tax Arbitration Proceedings.

For this purpose, it alleges, in summary, that:

1. The Stamp Tax assessment acts suffer from the defect of violation of law, due to errors in their legal prerequisites, by:

i. The subjection to Stamp Tax contained in Item 28.1 of the GTST is determined by the combination of two factors: the residential use and Tax Property Value ("TPV") recorded in the urban property matrix should be equal to or greater than €1,000,000.00, provided that, in the case of urban properties not constituted in a regime of horizontal property ownership, composed of various floors or divisions with independent use and residential use, the subjection is determined by the TPV attributed to each of its floors or divisions and not by the total TPV of the property itself;

ii. The assessment of Stamp Tax must comply with the rules provided in the Municipal Property Tax Code ("MPTC"), by express reference of Item 281.1 of the GTST and article 67(2) of the Stamp Tax Code ("STC"), inasmuch as that incidence rule refers to properties whose definition results from article 2 of the Municipal Property Tax Code and the determination of TPV follows that provided in articles 38 et seq. of the same Code;

iii. None of the 16 fractions of the 20 fractions of the Claimant's urban property with residential use has a TPV equal to or greater than €1,000,000.00;

iv. The adoption of the criterion defended by the TA violates the principles of legality, tax equality, as well as that of the prevalence of material truth over legal-formal reality;

v. The legislator's intention in introducing such rule was to consider as a determining element of contributive capacity urban properties with luxury residential use, considering as such those having a TPV equal to or greater than €1,000,000.00, subjecting them to ST;

1. The ST assessments are further unconstitutional, by violation of the principle of equality, provided in article 103(2) of the Constitution of the Portuguese Republic ("CPR"), since, if the property in question had been constituted in a regime of horizontal property ownership, there would be no basis for ST taxation, given that the TPV attributed to each of its fractions/floors intended for housing does not exceed €1,000,000.00, the TA thus proceeding to an arbitrary and illegal discrimination.

The arbitral tribunal was constituted on 31-10-2014, in accordance with the provisions of article 11(1)(c) of the LRTA.

Notified for such purpose, the Respondent Entity submitted a response, in which it invokes, in summary:

i. The situation of the Claimant's property falls within item 28.1 of the GTST, being owners of a single property and not of autonomous fractions. The Claimant, in seeking to apply "almost by analogy" to its property the regime of horizontal property ownership, subverts the regime established in the MPTC and the STC;

ii. The TPV relevant for purposes of item 28 of the GTST is the total property value of the urban property and not the property value of each of the parts that compose it, even if capable of independent use, this interpretation not being negated by the fact that the assessment of Municipal Property Tax is calculated based on the tax property value of each of those parts;

iii. The unity of the urban property in vertical ownership composed of various floors or divisions is not affected by the fact that they are capable of independent economic use, not ceasing to be a single property, and thus its distinct parts may not be equated to the autonomous fractions of a property constituted in horizontal ownership;

iv. Any other interpretation would violate the principle of legality provided in article 103 of the CPR;

v. The taxation in question did not violate the principle of equality, since vertical ownership and horizontal ownership are differentiated legal institutions, the latter implying a mere legal alteration, not giving rise to a new assessment, and the legislator may subject properties in regimes of horizontal and vertical ownership to a distinct and discriminatory legal tax framework, "without such discrimination being considered necessarily arbitrary";

Concluded for the legality and maintenance of the ST assessment acts.

By subsequent motion, the Claimant was permitted to attach the collection documents relating to the third instalment of Stamp Tax assessed on 17.03.2014, as they had been received after the submission of the present arbitral opinion request.

Being a matter strictly of law, the Arbitral Tribunal decided to dispense with the holding of the meeting provided for in article 18 of the LRTA, as well as to forgo the submission of pleadings, at the proposal of the Respondent Entity and with the consent of the Claimant, as it did not object thereto.

The Arbitral Tribunal was regularly constituted and is materially competent, in accordance with the provisions of article 2(1)(a) of the LRTA.

The parties are endowed with legal personality and capacity, are legitimate and are regularly represented, as provided in articles 4 and 10(2) of the LRTA and article 1 of Ordinance No. 112-A/2011, of 22 March.

The proceedings do not suffer from nullities and there are no exceptions that need to be addressed or that prevent knowledge of the merits of the case.

II. LEGAL REASONING

2.1. Facts

Based on the elements contained in the file and of interest for the decision, the following facts are established as proven:

1. The Claimant is the owner of the urban property in a regime of full ownership (not constituted in a regime of horizontal property ownership) located at Rua ..., parish of ..., municipality of Lisbon, entered in the respective urban property matrix under article ... (previous article ... of the parish of ...), with a total tax property value of €1,427,180.00.

(see Document No. 1 attached to the arbitral opinion request, whose contents are deemed reproduced);

1. The identified property in full ownership is composed of 20 floors or divisions with independent use (shops and floors), arranged on 5 storeys.

(see Document No. 1 attached to the arbitral opinion request, whose contents are deemed reproduced);

1. Of the 20 floors or divisions with independent use of the above-identified urban property, 4 are used for commerce, whose TPV totals €287,260.00.

(see Document No. 1 attached to the arbitral opinion request, whose contents are deemed reproduced);

1. And the remaining 16 floors or divisions with independent use are used for housing, whose TPV totals €1,139,920.00.

(see Documents Nos. 1 to 17 attached to the arbitral opinion request and documents Nos. 1 to 16 attached to the subsequent motion to that arbitral request, whose contents are deemed reproduced);

1. The TPV attributed to each of the 16 floors or divisions with independent use intended for housing of the above-identified urban property is less than €1,000,000.00, ranging between €67,010.00 and €75,480.00.

(see Documents Nos. 1 to 17, 19 to 34 attached to the arbitral opinion request and documents Nos. 1 to 16 attached to the subsequent motion to that arbitral request, whose contents are deemed reproduced);

1. The Claimant was notified of the Stamp Tax assessment acts for the year 2013, with assessment date of 2014-03-17, contained in the collection documents for payment of the first instalment of the tax assessed for each floor or division with independent use used for housing, at the rate of 1%, with the payment deadline in April 2014, as follows detailed:

(see documents Nos. 2 to 17 attached to the arbitral opinion request, whose contents are deemed reproduced);

1. The Claimant was notified of the Stamp Tax assessment acts for the year 2013, with assessment date of 2014-03-17, contained in the collection documents for payment of the second instalment of the tax assessed for each floor or division with independent use used for housing, at the rate of 1%, with the payment deadline in July 2014, as follows detailed:

(see documents Nos. 19 to 34 attached to the arbitral opinion request, whose contents are deemed reproduced);

1. On 25 July 2014, the Claimant proceeded to payment, already in the course of the fiscal enforcement proceedings instituted for collection, of the first instalment of the Stamp Tax assessed, in the amount of €3,799.84, plus interest on arrears and costs, in the amount of €95.90.

(see Document No. 18 attached to the arbitral opinion request, whose contents are deemed reproduced);

1. On the same date, the Claimant proceeded to payment of the second instalment of the Stamp Tax assessed, in the amount of €3,799.68.

(see documents Nos. 19 to 34 attached to the arbitral opinion request, whose contents are deemed reproduced);

1. The Claimant was notified of the Stamp Tax assessment acts for the year 2013, with assessment date of 2014-03-17, contained in the collection documents for payment of the third instalment of the tax assessed for each floor or division with independent use used for housing, at the rate of 1%, with the payment deadline in November 2014, as follows detailed:

(see Documents Nos. 1 to 16 attached to the subsequent motion to the arbitral opinion request, whose contents are deemed reproduced);

1. On 18 November 2014, the Claimant proceeded to payment of the third instalment of the Stamp Tax assessed, in the amount of €3,799.68.

(see Documents Nos. 1 to 16 attached to the subsequent motion to the arbitral opinion request, whose contents are deemed reproduced);

1. In the notification documents for payment of Stamp Tax for the year 2013, the Tax Property Value of the Property - total subject to Tax is listed as: €1,139,920.00.

(see Documents Nos. 1 to 17, 19 to 34 attached to the arbitral opinion request and documents Nos. 1 to 16 attached to the subsequent motion to that arbitral request, whose contents are deemed reproduced);

1. The Stamp Tax assessments above identified were made by reference to item 28.1 of the GTST.

(see Documents Nos. 1 to 17, 19 to 34 attached to the arbitral opinion request and documents Nos. 1 to 16 attached to the subsequent motion to that arbitral request, whose contents are deemed reproduced);

1. From the assessment acts contained in the identified collection documents resulted a total tax of €11,399.20.

(see Documents Nos. 1 to 17, 19 to 34 attached to the arbitral opinion request and documents Nos. 1 to 16 attached to the subsequent motion to that arbitral request, whose contents are deemed reproduced).

In view of the positions assumed by the parties and given that the question to be resolved by this arbitral tribunal is strictly legal (identified below), the proven facts were based on the documents attached to the file and noted in each of the points of the factual matter, which were not contested.

There are no other facts not proven of interest for the decision of the case.

2.2 Law

The question to be decided in the present arbitral proceedings consists of determining whether the tax assessment acts for Stamp Tax are illegal, due to erroneous interpretation and application of item No. 28.1 of the GTST, amended by Law No. 55-A/2012, of 29 October, when it is considered that the tax property value ("TPV") of an urban property in full ownership (not constituted in a regime of horizontal property ownership), with floors or divisions of independent use used for housing that is relevant for purposes of the incidence of that item, is constituted by the value resulting from the sum of the TPV attributed to each of those floors or divisions. Whether the Stamp Tax assessments further suffer from the defect of unconstitutionality, by violation of the principle of equality.

This Tribunal has previously addressed the question that is the subject of the present proceedings, namely in decisions handed down in cases Nos. 50/2013-T; 132/2013-T and 194/2014-T, whose arbitral jurisprudence we follow.

As results from the established facts, the TA services assessed Stamp Tax on the Claimant, at the rate of 1%, by considering that the TPV of the urban property constituted in a regime of full ownership, of which it is the owner, is greater than €1,000,000.00, taking into account the sum of the TPV of each of the 16 floors or divisions with independent use used for housing that compose that property.

The Claimant alleges that the TA wrongly assessed Stamp Tax because the prerequisites on which the application of item No. 28.1 of the GTST depends are not met, since the TA cannot consider the total TPV of 16 of the 20 floors or divisions with independent use of the urban property in question, when the legislator itself determined different rules in the context of the Municipal Property Tax Code and it is this Code that is applicable to matters not regulated with respect to the item in question. Furthermore, the aforementioned item of the GTST would in any event be inapplicable, since part of the floors or divisions with independent use are used for commerce.

For its part, the Respondent contends, in summary, that the TPV relevant for purposes of the incidence of item 28.1 of the GTST is the total TPV of the urban property and not the TPV of each of the parts that compose the property in vertical ownership, even if capable of independent use.

Let us examine this.

Article 4 of Law No. 55-A/2012, of 29 October, added item No. 28 to the GTST, with the following wording (in its original version):

"28 — Ownership, usufruct or right of superficies of urban properties whose tax property value recorded in the matrix, in accordance with the Municipal Property Tax Code (MPTC), is equal to or greater than €1,000,000 — on the tax property value used for Municipal Property Tax purposes:

28.1 — For property with residential use — 1%;

28.2 — For property, when taxpayers that are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, as listed in a regulation approved by the Minister of Finance — 7.5%."

(italics ours)

Article 6 of the aforementioned Law further provides that, regarding the year 2013, "the assessment of stamp tax provided for in item No. 28 of the respective General Table shall be calculated on the same tax property value used for the purpose of assessing municipal property tax to be assessed in that year."

At the time of the facts, the prerequisites for the incidence of item 28.1 of the GTST are thus urban properties, with residential use, whose TPV recorded in the matrix, in accordance with the MPTC, is equal to or greater than €1,000,000.00.

Law No. 55-A/2012, of 29 October, by reference to item 28 of the GTST, further established several amendments to the STC, namely with respect to its assessment and payment, expressly referring to the rules provided in the MPTC (see articles 23(7), 44(5), 46(5), 49(3) of the STC) with the necessary adaptations, providing in article 67(2) of the STC that, "To matters not regulated in the present Code relating to item No. 28 of the General Table, the provisions of the MPTC shall apply, subsidiarily."

From the aforementioned rules, it is noted that the concept of "property with residential use" provided in the aforementioned item No. 28, No. 1 is not defined in the STC, nor in the cited Law, nor in the MPTC, whose rules are applicable subsidiarily, as provided in article 67(2) of the STC.

On this matter, this Tribunal has previously ruled in the decision handed down in case No. 53/2013-T, which we follow, understanding that "property with residential use" must be "a property that already has actual use for that purpose".

It is clear that a property in full ownership or in a regime of vertical ownership constitutes an urban property, within the terms provided in articles 2(1) and 4 of the MPTC, applicable subsidiarily by virtue of article 67 of the STC, and it is also certain that, both for purposes of the incidence of item 28.1 of the GTST and for purposes of classification of urban properties, within the terms of article 6 of the MPTC (also of subsidiary application), the legislator makes no distinction between properties constituted in vertical ownership and in a regime of horizontal ownership (as mentioned in the arbitral decisions handed down in cases Nos. 50/2013-T and 132/2013-T), and the tax prerequisite of item 28.1 is urban properties that are already actually used for housing, since what is relevant is the actual and current use of each of the properties.

What then will be the tax property value relevant in the case of properties in full ownership composed of floors or divisions capable of independent use with "residential use", for purposes of the incidence of item 28.1 of the GTST?

The tax property value of each property is determined in accordance with articles 38 et seq. of the MPTC. In the case of a property in a regime of full ownership or vertical ownership, each floor or division with independent use that comprises it is equally subject to assessment, being assigned a tax property value to each of those floors or divisions, in accordance with the provisions of articles 12 and 38 et seq. of that normative.

In fact, article 12(1) of the MPTC establishes that "property matrices are records containing, in particular, the characterization of properties, their location and tax property value, the identification of owners (...)", providing in its article 12(3) that, "Each floor or part of a property capable of independent use is considered separately in the matrix entry, which also itemizes the respective tax property value", and in accordance with the provisions of article 119(1) of the MPTC, it is on that property value separately considered that the Municipal Property Tax will be assessed and collected in relation to each floor or part with independent use that comprise an urban property in a regime of vertical or full ownership, in view of the autonomy of each of those units.

As Silvério Mateus and Freitas Corvelo write, in "Property and Real Estate Taxes and Stamp Tax, Commented and Annotated", 1st Edition, Engifisco, pp. 159 and 160, "Another aspect that should be emphasized in the matrix concerns the need to reflect the autonomy that, within the same property, can be attributed to each of its parts, functionally and economically independent. In such cases, the matrix entry should not only make reference to each of these parts but should make express reference to the property value corresponding to each of them.

An example that can illustrate this situation is the case of an urban property, not constituted in a regime of horizontal ownership and that is composed of various floors. (...) However, since each of these units may be subject to rental or other use by the respective holder, the matrix should show these units and property value should be assigned to each of them."

As evidenced in the arbitral decision handed down in case No. 194/2014-T, which we follow, "the Municipal Property Tax Code establishes, both as regards the matrix entry and itemization of the respective tax property value, and as regards the assessment of the tax, the autonomization of the parts of urban property capable of independent use and the segregation/individualization of the TPV relating to each floor or part of property capable of independent use.

Thus each property, in accordance with the concept defined by article 2 of the MPTC, corresponds to a single entry in the matrix (article 82(2) of the MPTC) but, according to article 12(3) of the same Code, relating to the concept of property matrix (...), "each floor or part of a property capable of independent use is considered separately in the matrix entry, which also itemizes the respective tax property value (...)."

In other words, the rule is the autonomization, characterization as "property" of each part of a building, provided it is functionally and economically independent, capable of independent use, in accordance with the concept of property defined in article 2(1) of the MPTC: property is any fraction (of land, encompassing water, plantations, buildings and constructions of any nature incorporated or based therein, with permanent character) provided it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as water, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy."

Thus, when article 2(4) provides that "For purposes of this tax, each autonomous fraction, in a regime of horizontal ownership, is considered as constituting a property", it does not establish proper an exceptional or special regime for properties in horizontal ownership.

In fact, each building in horizontal ownership (article 92 of the MPTC) has only a single matrix entry (article 92(1)), describing the building generically and noting the fact that it is in a regime of horizontal ownership (article 92(2)), and the autonomy in the matrix is realized in the attribution to each of the autonomous fractions, described in detail and individualized, of a capital letter, in alphabetical order (article 92(3)). This seems to be the specificity of buildings in horizontal ownership; in other cases, of properties in vertical or full ownership, the divisions or floors with autonomy but without the status of horizontal ownership, the matrix also establishes autonomy but evidencing the units with indication of the type of floor/story.

Indeed, when an urban property constituted in full ownership transfers to a regime of horizontal ownership, it retains the same matrix entry number, and likewise retains the tax property value that was attributed to each of its autonomous parts or floors, those fractions then being identified by letters of the alphabet, since there is no new assessment, with only a merely legal alteration of the property regime being verified. It is thus evident that, in the context of Municipal Property Tax, the rules and principles are the same, both for properties constituted in horizontal ownership and for properties constituted in full or vertical ownership, namely as regards the provisions on assessment and determination of TPV, entry in the matrix and assessment of Municipal Property Tax.

Considering that under the MPTC, the floors or divisions with independent use that compose an urban property in a regime of full or vertical ownership are taxed autonomously, since the Municipal Property Tax is assessed individually on the TPV attributed to each of those floors or divisions with independent use, in view of the relevance of its autonomy, necessarily, the principles and rules must be the same in the context of Stamp Tax (particularly, as regards the provisions on assessment and determination of TPV, entry in the matrix and assessment of Municipal Property Tax), both because item 28.1 of the GTST requires it at the end, and by subsidiary application, by virtue of article 67(2) of the Stamp Tax Code.

In accordance, and, presupposing that the legislator in question "established the most correct solutions and knew how to express his intention in adequate terms" (in accordance with article 9(3) CCv, by reference to article 11 of the General Tax Law), only those floors, parts or divisions with independent use with residential use whose TPV recorded in the matrix is equal to or greater than €1,000,000.00 are covered by the rule of incidence of item 28.1 of the GTST.

As emphasized in the arbitral decision handed down in case No. 132/2013-T, "The uniform criterion that is required is, thus, the one that determines that the incidence of the rule in question only takes place when any of the parts, floors or divisions with independent use of a property in horizontal or full ownership with residential use, possesses a TPV greater than €1,000,000.00" (italics ours) and not when this value results from the sum of the TPV attributed to each floor or division with independent use.

As also mentioned in the arbitral decision handed down in case No. 50/2013-T: "The criterion intended by the TA, of considering the value of the sum of the TPVs attributed to the parts, floors or divisions with independent use, on the argument that the property is not constituted in a regime of horizontal ownership, finds no legal support and is contrary to the criterion that applies in the context of the MPTC and, by reference, in the context of ST.

To which must be added the fact that the law itself expressly establishes, in the final part of item 28 of the GTST, that the ST to be applied to urban properties of value equal to or greater than €1,000,000.00 – "shall apply to the tax property value used for Municipal Property Tax purposes."

In the light of the foregoing, one cannot agree with the TA when it states that the Claimant seeks to apply "almost by analogy" to its property the regime of horizontal ownership, since resort to analogy would imply that a gap existed in the law, which is not even the case here.

For it is the rule itself contained in item 28.1 of the GTST at the end that determines that Stamp Tax applies "to the tax property value used for Municipal Property Tax purposes", and therefore, what is relevant for purposes of tax incidence is the tax property value individualized for each of the parts, floors or divisions with independent use on which Municipal Property Tax is assessed annually, that is, the assessment of Stamp Tax follows the rules provided in the MPTC, by express reference of the aforementioned item 28 and article 67(2) of the Stamp Tax Code.

And, contrary to what is alleged by the Respondent Entity, it is the TA's interpretation that violates the principle of tax legality, undermining the principle of legal certainty and protection of confidence.

So much so that, the TA, to assess item 28.1 of the GTST, here in question, starts from each of those floors or divisions with independent use, applying the 1% rate to the tax property value attributed to each of those divisions with residential use, in accordance with the rules of the MPTC, only to then sum that tax property value, disregarding that the property in question is composed of more divisions with independent use used for other purposes, namely commercial.

Furthermore and contrary to what is provided in the law, the TA cannot arbitrarily sum only the TPV of the floors or divisions with independent residential use to achieve a tax property value equal to or greater than €1,000,000.00, when the property in question is composed of other floors or divisions with independent uses used for other purposes.

For, following the TA's reasoning, in defending that it is a prerequisite for the incidence of item 28.1 of the GTST the overall property value and not that of each of its parts, then it cannot proceed to assess the tax, since the property of which the Claimant is the owner is composed of floors or divisions with independent use that are used for housing and commerce, totalling a tax property value of €1,427,180.00 (and not €1,139,920.00), not thus fulfilling the factual and legal prerequisites for the incidence of item 28.1 of the GTST, since its floors are not solely used for housing.

The interpretation to the effect that what is relevant in the rule of incidence of item 28.1 of the GTST is the TPV attributed to each of the autonomous parts, floors or divisions with independent use with residential use and not the value resulting from the sum of those tax property values is also that which results from its ratio legis, as required by article 9(1) CCv, applicable by virtue of article 11 of the General Tax Law.

In fact, in the presentation and discussion of Bill No. 96/XII/2ª (which can be consulted in the Records of the Portuguese Parliament, I Series No. 9/XII/2012, of 11-10-2012) in the Assembly of the Republic, the Secretary of State for Tax Affairs declared at one point the following:

"For the first time in Portugal, special taxation is being created on properties of high value intended for housing. This rate will be 0.5% to 0.8% in 2012, and 1% in 2013, and will apply to houses valued at €1 million or more. With the creation of this additional rate, the fiscal burden required of these owners will be significantly increased in 2012 and 2013".

In this regard, we follow the arbitral decision handed down in case No. 50/2013-T in referring to the fact that "The legislator, in introducing this legislative innovation, considered as a determining element of contributive capacity urban properties, with residential use, of high value (luxury), more rigorously, of value equal to or greater than €1,000,000.00, on which a special rate of stamp tax began to apply, seeking to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of superficies of urban properties of luxury with residential use. Therefore, the criterion was the application of the new rate to urban properties with residential use, whose TPV is equal to or greater than €1,000,000.00.

This is evident from the analysis of the discussion of Bill No. 96/XII in the Assembly of the Republic, available for consultation in the Records of the Portuguese Parliament, I series, No. 9/XII/2, of 11 October 2012.

The rationale for the measure designated as "special rate on urban residential properties of higher value" is based on the invocation of the principles of social equity and tax justice, calling on the holders of properties of high value intended for housing to contribute in a more intensive manner, applying the new special rate to "houses valued at €1 million or more."

Clearly, the legislator understood that this value, when attributed to a residence (house, autonomous fraction or floor with independent use), reflects an above-average contributive capacity and, as such, likely to determine a special contribution to ensure fair allocation of the tax burden."

According to the established facts, the TPV of each of the 16 floors or divisions with independent use used for housing, which comprise the property constituted in full ownership of which the Claimant is the owner, and, which was determined according to the rules of the MPTC, is less than €1,000,000.00, and therefore, the prerequisites for taxation under item 28.1 of the GTST are not met.

Therefore, the acts of assessment of ST, which are the subject of the present arbitral opinion proceedings, in the total amount of €11,399.20, suffer from the defect of violation of item 28.1 of the GTST and article 67(2) of the Stamp Tax Code, due to error in their legal prerequisites, declaring thus the illegality of those assessment acts, with the consequent annulment thereof (article 135 of the Administrative Procedure Code, applicable subsidiarily by virtue of articles 29(1)(a) and (d) of the LRTA).

The examination of the other issues raised by the Claimant is thus moot, in particular the alleged defect of unconstitutionality, as illegality of the above-identified assessments has been declared, due to a substantive defect that prevents renewal of the acts, effectively assuring protection of the rights of the Claimant, in accordance with article 124 of the Code of Tax Procedure and Procedure, subsidiarily applicable by virtue of articles 29(1)(a) of the LRTA.

III. Restitution of Tax Paid and Compensatory Interest

The Claimant further requests restitution of the tax already paid, plus the interest on arrears that it paid. It further requests payment of compensatory interest.

Let us examine this.

Article 24(1)(b) of the LRTA provides that the TA must "re-establish the situation that would have existed if the tax act that is the subject of the arbitral decision had not been carried out, adopting the acts and operations necessary for such purpose", in the exact terms of the success of the arbitral decision in favour of the taxpayer and until the end of the period established for spontaneous execution of sentences of the tax courts, in the event that no appeal has been filed or the arbitral decision that ruled on the merits of the claim has been challenged.

Indeed, article 100 of the General Tax Law - under the heading "effects of decision favourable to the taxpayer" - already provides that the "tax administration is obliged, in case of full or partial success of administrative complaints or appeals, or of judicial proceedings in favour of the taxpayer, to the immediate and full re-establishment of the situation that would have existed if the illegality had not been committed, including payment of compensatory interest, in the terms and conditions provided for by law".

Therefore, in view of article 100 of the General Tax Law and article 24(1)(b) of the LRTA, it is clear that in this case the Claimant is entitled to restitution of the tax paid, as a consequence of the declaration of illegality of the assessment acts, which are the subject of the arbitral opinion proceedings.

Let us examine the request for payment of compensatory interest.

Article 24(5) of the aforementioned LRTA further provides that "interest is due, regardless of its nature, in accordance with the terms and conditions provided for in the general tax law and in the Code of Tax Procedure and Procedure". It results from the aforementioned legal provision that in case of success of an arbitral decision in favour of the taxpayer, there shall be payment of compensatory interest, in accordance with articles 43(1) and (2) and article 100 of the General Tax Law.

Article 43(1) of the General Tax Law establishes that "compensatory interest is due when it is determined, in a claim for gracious settlement or judicial challenge, that there was an error attributable to the administration from which results payment of the tax debt in an amount greater than that legally due". Thus, as Jorge Lopes de Sousa tells us, in "Guide to Tax Arbitration", Almedina, March 2013, page 223, the entitlement to compensatory interest depends on the verification of the following requirements:

"- that there be an error in an assessment act of a tax;

• that it be attributable to the administration (directly or through general guidance);

• that the existence of that error is determined in a claim for gracious settlement or in a process of judicial challenge;

• that from that error results the payment of a tax debt in an amount greater than that legally due".

In the case at hand, there is no doubt that the tax assessment acts for ST, which is the subject of this arbitral decision, resulted from an error attributable to the administration, that is, from an error in the legal prerequisites, in view of the considerations described above, to which reference is made. From that error resulted payment of the tax, as established in the proven facts.

Therefore, finding that all the requirements are met, the Claimant shall be entitled to payment of compensatory interest, which shall be calculated and recorded in accordance with article 61 of the Code of Tax Procedure and Procedure, that is, from the date on which the Claimant made the tax payments, calculated based on the amounts paid until the date of full reimbursement of the amounts paid, at the legal rate.

IV. DECISION

In these terms and in the reasoning set forth above, this Arbitral Tribunal decides:

a) To find as well-founded the request for declaration of illegality of the Stamp Tax assessment acts, contained in the identified collection documents, in the total amount of €11,399.20, with the consequent annulment thereof;

b) To condemn the Tax and Customs Authority to reimburse the Claimant of the amounts that it paid;

c) To condemn the Tax and Customs Authority to pay the Claimant compensatory interest, at the legal rate, counted from the date on which it made the payments until the date of full reimbursement of those amounts.

The value of the case is fixed at €11,399.20, in accordance with the provisions of article 97-A(1)(a) of the Code of Tax Procedure and Procedure and article 3(2) of the Regulation on Costs in Tax Arbitration Proceedings, as well as article 306 of the Code of Civil Procedure.

Costs charged to the Respondent Entity, in the amount of €918.00, in accordance with the provisions of article 22(4) of the LRTA and article 4(4) of the Regulation on Costs in Tax Arbitration Proceedings and Table I attached to the same Regulation.

Let it be notified.

Lisbon, 31 March 2015.

The Arbitrator,

Conceição Pinto Rosa

[Text prepared by computer, in accordance with article 131(5) of the Code of Civil Procedure, applicable by reference to article 29(1)(e) of the LRTA]