Stamp Tax on Vertical Property: CAAD Ruling on Clause 28.1 TGIS for Independent Units (573/2015-T)

ARBITRAL DECISION

I. REPORT

1. On 1 September 2015, A…, taxpayer no.…, resident in…, …, …, …-… Matosinhos, B…, taxpayer no.…, resident in Rua…, …-…, …-… Porto, C…, taxpayer no.…, resident in Rua…, …, ..., …-… Porto, D…, taxpayer no.…, resident in Rua…, …, …-… Porto, in the capacity of head of the estate opened by the death of E…, F…, taxpayer no.…, resident in Rua…, …, …-… Porto, G…, taxpayer no.…, resident in Rua…, …, …-… Porto, H…, taxpayer no.…, resident in Rua de…, …, …-…. Porto, in the capacity of head of the estate opened by the death of I…, NIF…, J…, taxpayer no.…, resident in Rua…, …., …-… Porto, in the capacity of head of the estate opened by the death of K…, NIF…, L…, taxpayer no.…, resident in Largo…, … , …, ..., …-… Lisboa and M…, taxpayer no.…, resident in Rua de…, …-…., …-… Porto, in the capacity of head of the estate opened by the death of N…, NIF…, hereinafter referred to as Claimants, requested the constitution of an arbitral tribunal and made an application for arbitral pronouncement, in accordance with paragraph a) of no. 1 of article 2 and paragraph a) of no. 1 of article 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as LRAT), against the Tax and Customs Authority (hereinafter referred to as TCA).

2. The Claimants are represented in the present proceedings by their representative, Dr. O…, and the Respondent is represented by the legal professionals, Dr. P… and Dr. Q….

3. The request for constitution of the arbitral tribunal was accepted by the Esteemed President of CAAD and notified to the Respondent on 21 September 2015.

4. By means of the request for constitution of the arbitral tribunal and arbitral pronouncement, the Claimants seek the annulment of the acts of assessment of Stamp Tax, effected under item 28.1 of the General Stamp Tax Table (GSTT), relating to the year 2014, affecting the units or divisions with independent use which comprise the property registered in the urban property register under article…, of the Union of Parishes of…, …. and …, of the Municipality of Porto, in the total amount of € 14,065.47 (fourteen thousand and sixty-five euros and forty-seven cents), and the consequent reimbursement of the sums paid on this account, together with indemnity interest.

5. The Claimants, in the request for constitution which they presented, request the cumulation of claims and the joinder of claimants, alleging the existence of identity of circumstances of fact and the application of the same principles or rules of law, which being admissible, in accordance with article 104 of the Code of Tax Procedure and Process and article 3 of the LRAT, are hereby admitted.

6. Having verified the formal regularity of the request presented, in accordance with the provisions of paragraph a) of no. 2 of article 6 of the LRAT and the Claimants having not proceeded to appoint an arbitrator, the undersigned was designated by the President of the Ethics Board of CAAD.

7. The Arbitrator accepted the appointment made, the arbitral tribunal being constituted on 17 November 2015, at the headquarters of CAAD, located at Avenida Duque de Loulé, no. 72-A, in Lisboa, as evidenced by the minutes of constitution of the arbitral tribunal which were drawn up and which are attached to the present case file.

8. The Respondent, notified on 18 November 2015 to present its reply, attach the administrative file, and, if it so wished, request the production of additional evidence, in accordance with and for the purposes of article 17 of the LRAT, presented on 17 December 2015 its reply, on which date it also presented a request that it be dispensed from the holding of the meeting referred to in article 18 of the LRAT, suggesting that the Tribunal proceed to determine the claim immediately.

9. Now, considering that no exceptions were invoked in the reply presented by the Respondent, there is no necessity for the production of additional evidence, beyond that which is documentarily contained in the case file and the necessity for the parties to correct their procedural pleadings is not apparent, with the process containing all the necessary elements for the rendering of a decision, as requested by the Respondent, in light of the principle of contradiction and cooperation, on 13 January 2016, the Tribunal notified the Claimants, by order, to come before the court to pronounce themselves on the Respondent's request.

10. In response to the order referred to immediately above, the Claimants, on 14 January 2016, by means of a request, stated their non-opposition to the respondent's request for dispensation from the meeting referred to in article 18 of the LRAT, and likewise to the presentation of arguments, which the Tribunal approved.

11. On 24 February 2016, in compliance with the provisions of no. 2 of article 18 of the LRAT, the Tribunal, by order, on the one hand, designated 17 May 2016 for the purpose of rendering the arbitral decision, and on the other hand, cautioned the Claimants that they should proceed with the payment of the subsequent arbitral fee, in accordance with no. 3 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings, and communicate such payment to CAAD.

II. The Claimants contend for their claim, in summary, in the following manner:

The Claimants support the request for annulment of the act of assessment of stamp tax to which they were subjected, relating to the floors or parts susceptible of independent use, assigned to housing, of the property registered under article … in the respective register, with entries by nos. …/… of Rua … and Rua do…, no. …/…, located in the Union of Parishes of …, … and…, in the Municipality of Porto, which is in a state of vertical ownership, on the grounds of illegality, by reason of the following defects:

A. Error regarding the conditions of application of item 28.1 of the GSTT

a) The Claimants contend that "The 'taxable patrimonial value of the taxpayer contained in the register, in accordance with the Municipal Property Tax Code (MPTC)' to which item no. 28 of the GSTT refers, is not the global value of the property equivalent to the sum of all the TPVs which compose it, as the Tax Authority erroneously considered, but the value of the TPV attributed to each part susceptible of independent use. Therefore, stamp tax should not have been assessed or collected from any of the claimants in relation to any of the parts susceptible of independent use of the urban property registered in the register under art … of the … (currently art. …) identified above, given that as referred to above, none of the parts susceptible of independent use in the property in question has a TPV exceeding € 1,000,000.00."

b) The Claimants further contend, in support of their position, that, given the circumscribed reality of the combination of no. 2 of article 67 of the Stamp Tax Code (STC), of the wording of item 28 of the General Stamp Tax Table (GSTT) in force, of the provisions of articles 2, 4, 6, 12, no. 3 and 38 et seq. of the Municipal Property Tax Code (MPTC) "nothing in the Stamp Tax Code, nor in the Municipal Property Tax Code permits or authorizes different treatment between parts of properties susceptible of independent use, whether they relate to properties constituted in horizontal property, or otherwise." Furthermore, referring to the fact that "Revealing for purposes of taxation the material truth underlying the situation of the property (…) and its use, (…) it is irrelevant its legal situation, all in respect of the principle of the prevalence of material truth over legal-formal reality."

B. Defect of violation of constitutional law, namely of the principle of equality (article 13 of the Constitution), and of equality in the taxation of property (article 104, no. 3 of the Constitution)

a) The Claimants contend and sustain this defect, alleged in the act of assessment being challenged, on the fact that "The interpretation of the provisions of Item no. 28.1 of the GSTT which considers that the taxable patrimonial value contained in the register, in accordance with the Municipal Property Tax Code (MPTC), for purposes of subjection to stamp tax, is the sum of the TPVs of all the parts susceptible of independent use forming part of a property not constituted in horizontal property is unconstitutional, by reason of violation of the principle of equality (art. 13 of the Constitution), as well as of the provisions of art. 104, no. 3, of the Constitution, given that such interpretation would permit the taxation in a differentiated manner of facts with the same fiscal relevance and which would demonstrate the same contributory capacity."

b) They further state, regarding this matter, that "The assessments made by the Tax Authority which are based on the interpretation of the provisions of Item no. 28.1 of the GSTT which considers that the taxable patrimonial value contained in the register, in accordance with the Municipal Property Tax Code (MPTC), for purposes of subjection to stamp tax, is the sum of the TPVs of all the parts susceptible of independent use forming part of a property not constituted in horizontal property is also unconstitutional, by reason of violation of the provisions of art. 103, no. 2 of the Constitution, given the circumstance that a legal fact is being taxed by a tax which was not created by law."

c) Concluding, thus, that by reason of the illegality of the assessments of stamp tax being challenged.

III. In its Reply, the Respondent invoked, in summary, the following:

For its part, the TCA, in its reply, defends itself by objection, contradicting the position assumed by the Claimants, which it does in the following manner:

a) With respect to the alleged error regarding the conditions of the assessments in question, the Respondent understands that: "The Claimant is, therefore, the owner of a property under a regime of complete or vertical ownership, so that there are no autonomous units to which tax law can attribute the qualification of property. This follows from the definition of property in article 2 of the MPTC, in accordance with which only the autonomous units of property under a regime of horizontal property are deemed to be property – no. 4 of the cited article 2 of the MPTC. Thus, the present Claimant, for purposes of both Municipal Property Tax and stamp tax, by virtue of the wording of the said item, is not the owner of 13 autonomous units, but of a single property."

b) It further adds that "horizontal property is a specific legal regime of property provided for in article 1414 et seq. of the Civil Code (…). Now, to seek to have the interpreter and applicator of tax law apply, by analogy, to the regime of complete ownership the regime of horizontal property is what is abusive and illegal", since, on the one hand, "these two regimes of property are regimes of civil law, which were imported into tax law, namely in accordance with the terms referred to by article 2 of the MPTC. The interpreter of tax law cannot equate these two regimes, in accordance with the rule according to which the concepts of other branches of law have the meaning in tax law that is given to them in those branches of law, or as referred to in article 11, no. 2 of the General Tax Law (…)."

c) …on the other hand, "in determining the meaning of tax norms and in qualifying the facts to which they apply are observed the rules and general principles of interpretation and application of laws, as provided in article 11, no. 1 of the General Tax Law which refers to the Civil Code which, in article 10 regarding the application of analogy, determines that this shall only be applicable in case of gaps in the Law. Now, tax law contains no gap whatsoever. The MPTC determines, to which item 28.1 of the GSTT refers, that, in the regime of horizontal property, the units constitute properties. The property not being subject to this regime, legally the units are parts susceptible of independent use, without there being common parts."

d) Stating, in consequence that "being the property subject to the regime of complete ownership, but being physically constituted by parts susceptible of independent use, tax law attributed relevance to this materiality, evaluating individually, in accordance with art. 12, no. 3 of the M.P.T.C., each floor or part of property susceptible of independent use - considered separately in the property register entry, but forming part of the same register-, proceeding to the assessment of Municipal Property Tax taking into account the taxable patrimonial value of each part."

e) It further submits that "The unity of the urban property in vertical ownership composed of various floors or divisions is not, however, affected by the fact that all or part of those floors or divisions are susceptible of independent economic use."

f) And, finally adds that: "The fact that Municipal Property Tax has been calculated on the basis of the taxable patrimonial value of each part of property with independent economic use does not likewise affect the application of item 28, no. 1, of the General Table."

g) Concluding to the effect that "this results from the determining fact in the application of that item of the General Table being the total taxable patrimonial value of the property and not separately that of each of its portions. Any other interpretation would violate, that is, the letter and spirit of item 28.1 of the General Table and the principle of legality of the essential elements of the tax provided for in article 103, no. 2 of the Constitution of the Portuguese Republic (CRP)."

h) Regarding the matter of unconstitutionality, the Respondent defends that "it is the responsibility of the law – Law of the Assembly of the Republic and Decree-Law duly authorized – to establish the essential elements of the incidence of taxes. A type of incidence according to which the taxable patrimonial value of urban properties on which the application of item 28.1 of the General Table depends is the taxable patrimonial value of each floor or division susceptible of independent use and not the global taxable patrimonial value of the urban property with housing use has certainly no expression whatsoever in the law."

i) Furthermore continuing its reasoning to the effect that "it is, therefore, unconstitutional, by reason of offending the principle of tax legality, the interpretation of item 28.1 of the General Table, to the effect that the taxable patrimonial value on which its incidence depends is ascertained floor by floor or division by division, and not globally", since "horizontal property and vertical property are differentiated legal institutes. The constitution of horizontal property does indeed imply a mere legal alteration of the property, there being no new evaluation (…). The legislator may, however, subject to a different tax legal framework, hence, discriminatory, properties under a regime of horizontal property and vertical property, in particular, benefiting the legally more developed institute of horizontal property, without such discrimination being necessarily considered arbitrary. Such discrimination may also be imposed by the need to impose coherence on the tax system."

j) It further states, regarding this aspect, and in opposition to what was alleged by the Claimants that "the property register entry of each part susceptible of independent use is not autonomous, by register, but is contained in a description in the register of the property in its entirety – see the property ledger card of this property which represents the owner's document containing the property register elements of the property. What is sought to be concluded is that these procedural norms for evaluation, property registration and assessment of the parts susceptible of independent use do not permit one to state that there is an equation of the property under a regime of complete ownership to the regime of vertical property, this because, and as already referred, they are different legal-civil regimes and thus tax law considers them."

k) And, concludes to the effect that "the taxable patrimonial value relevant for purposes of the incidence of the tax is, therefore, the total taxable patrimonial value of the urban property and not the taxable patrimonial value of each of the parts which compose it, even when susceptible of independent use", whereby, "the assessment being challenged, in terms of substance, did not violate any legal or constitutional provision, and should be maintained in the legal order."

IV. Case Management

The Tribunal is competent and is regularly constituted, in accordance with paragraph a) of no. 1 of article 2 and articles 5 and 6, all of the LRAT.

The parties have legal personality and capacity, are demonstrated to be parties, are regularly represented and the process does not suffer from nullities.

V. Matters of Fact

Of relevance to the decision, the following facts are established as proven:

A. The Claimants are co-owners, in the proportion, each, of 10/2160 of the urban property with entries by nos. …/… of Rua … and Rua…, nos. …/…, located in the Union of Parishes of…, … and…, in the Municipality of Porto, registered in the respective property register under article…. (cf. Doc. no. 81 attached to the initial petition);

B. The property comprises a total of 5 (five) floors designated for commerce and housing, 6 (six) levels and 10 (ten) divisions with independent use, of which only 8 (eight) are assigned to housing, whose taxable patrimonial value (TPV), determined in accordance with the Municipal Property Tax Code (MPTC), varies between € 149,398.63 and € 207,257.05. (cf. Doc. no. 81 attached to the initial petition);

C. The property in question is under a regime of vertical or complete ownership. (Doc. no. 81 attached to the initial petition);

D. The sum of the TPVs of the aforementioned autonomous units assigned to housing amounts to € 1,545,341.75 (one million, five hundred and forty-five thousand, three hundred and forty-one euros and seventy-five cents), each of them individually having a TPV of less than € 1,000,000.00 (one million euros) (Doc. no. 81 attached to the initial petition);

E. The property register entry no. … identifies separately each of the autonomous units of independent use, being also itemized the respective TPV resulting from the general evaluation (cf. Doc. No. 81 attached to the initial petition);

F. The Claimants were notified of the acts of assessment of Stamp Tax relating to the year 2014, effected under item no. 28.1 of the General Stamp Tax Table, on the floors and divisions with independent use assigned to housing, in the total amount of € 14,065.47 (fourteen thousand, sixty-five euros forty-seven cents) (cf. Docs. no. 1 to 80 attached to the initial petition);

G. On 28 April 2015, the Claimants proceeded with the payment of the act of assessment of Stamp Tax, relating to the single installment, for which they were notified (cf. Docs. No. 1 to 80 attached to the initial petition).

VI. Grounds for the Matters of Fact

For the conviction of the Arbitral Tribunal, regarding the proven facts, the documents attached to the case file were analyzed and weighed in conjunction with the pleadings, from which agreement results regarding the factuality presented by the Claimants in the application for arbitral pronouncement.

VII. Facts Established as Not Proven

There are no facts established as not proven, because all facts relevant to the examination of the claim were established as proven.

VIII. Grounds of Law

In the present case, there are two matters of law that are in dispute:

1. whether subjection to stamp tax, in accordance with what is provided in item no. 28 of the GSTT, relating to the year 2014, is determined by the TPV corresponding to each of the parts of the property with housing use, or whether, on the other hand, it is determined by the global TPV of the property, which would correspond to the sum of all the TPVs of the floors which compose it - Incidence of item 28.1 of the GSTT;

2. whether the provisions of item no. 28 of the GSTT are unconstitutional by reason of violation of the principle of equality, provided for in article 13 of the Constitution, as well as of the principle of contributory equality in the taxation of property, provided for in article 104, no. 3, of the Constitution.

In consequence, it is important to determine whether the Claimants, should the above-mentioned questions be answered in their favor, have the right to reimbursement of the amount paid on account of the Stamp Tax being challenged, and of indemnity interest.

Let us see,

I – On the incidence of item 28.1 of the GSTT

1. Law no. 55-A/2012, of 19 October (which we shall hereinafter refer to as Law no. 55-A/2012 or simply Law), made alterations, among others, to various articles of the Stamp Tax Code, more precisely 12 of its articles.

2. The fundamental alteration, which conditions all others, consists of article 4 of Law no. 55-A/2012, which adds to the General Stamp Tax Table (GSTT), appended to the Stamp Tax Code (STC), a new item, no. 28, with the following wording:

"28. Ownership, usufruct or right of surface of urban properties whose taxable patrimonial value contained in the register, in accordance with the Municipal Property Tax Code (MPTC), is equal to or higher than € 1,000,000 - on the taxable patrimonial value used for purposes of Municipal Property Tax:

28.1 Per property with housing use ---------------------------------------- 1%[1]

28.2 Per property, when the passive subjects who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in a list approved by order of the Minister of Finance -------------------------- 7.5%"

1. Thus, in accordance with the said item, and in what is relevant to us here, only the following are subject to Stamp Tax ownership, usufruct, right of surface of:

a) "urban properties,

b) with housing use,

c) and whose taxable patrimonial value contained in the register, in accordance with the Municipal Property Tax Code (MPTC), is equal to or higher than € 1,000,000;" (emphasis in original)

1. The logic of the taxation of wealth and fortune prevails, with greater or lesser intensity, within the framework of this statute, a conclusion which results from the generalized increase in the tax burden, from the financial logic, exclusively directed to tax situations that would produce immediate revenue.

2. The taxation of capital income is increased, the list of manifestations of wealth is expanded, the taxation of income obtained in Portugal by entities domiciled in tax havens is increased, and finally, to all this is added the taxation of properties for housing, of value exceeding € 1,000,000.00.

3. And if the legislator includes in this statute properties for housing, fixing a value above which they would begin to be taxed by another tax, this could only mean that the legislator considered that whoever was the owner of a property of such value would thereby be expressing an element indicating additional means of wealth, which could be required to participate in the collective effort of supplementary collection of tax revenue.

4. In truth, the legislator, in introducing this legislative innovation, considered as the determining element of contributory capacity urban properties, with housing use, of high value (luxury), more precisely, of value equal to or exceeding € 1,000,000.00, on which a special rate of stamp tax began to apply, intending to introduce a principle of taxation on wealth demonstrated in the ownership, usufruct or right of surface of urban properties of luxury with housing use. For this reason, the criterion was the application of the new rate to urban properties with housing use, whose TPV was equal to or exceeding € 1,000,000.00.

5. This same conclusion is drawn from the analysis of the discussion of legislative proposal no. 96/XII in the Assembly of the Republic, available for consultation in the Diário da Assembleia da República, I series, no. 9/XII/2, of 11 October 2012.

6. The justification for the measure designated as "special tax on the highest value urban residential properties" rests on the invocation of the principles of social equity and tax justice, calling upon to contribute in a more intense manner the holders of property of high value designated for housing, applying the new special tax to the "houses of value equal to or exceeding 1 million euros."

7. With effect, the legislator clearly considered that this value, when attributed to a dwelling (house or autonomous unit) would translate into a contributory capacity above the average and, as such, was susceptible of determining a special contribution to ensure the just apportionment of the tax burden.

8. Also following these considerations inspiring the legislative innovation under examination, one must conclude that the existence of a property in vertical or horizontal ownership cannot be, by itself, an indicator of contributory capacity.

9. On the contrary, it follows from the law that both shall receive the same tax treatment, in obedience to the principles of justice, tax equality and material truth.

10. With effect, the existence in each property of independent dwellings, under a regime of horizontal or vertical ownership, may be susceptible of triggering the incidence of the new tax, but only if the TPV of each one of the parts or units is equal to or exceeding the limit defined by law: € 1,000,000.00.

11. It does not seem sensible that one could fit within the normative provision, urban properties as a whole, i.e., constituted by independent units, with separate TPV evaluations.

12. As referred to, the introduction of Law no. 55-A/2012, of 19 October, was intended to tax in fact, wealth.

13. Now, the property in question belongs to the Claimants, and is composed of 6 (six) floors and 10 (ten) divisions with independent use, of which only 8 (eight) are assigned to housing, whose taxable patrimonial value (TPV), determined in accordance with the Municipal Property Tax Code (MPTC), varies between € 149,398.63 and € 207,257.05.

14. It is the understanding of the TCA that the sum of the TPVs relating to those 8 divisions with independent use which have housing use, totaling a global TPV of 1,545,341.75 (one million, five hundred and forty-five thousand, three hundred and forty-one euros and seventy-five cents) in the year 2014, gives rise to the incidence of stamp tax, for which reason, it understood to proceed with the assessment of the Stamp Tax being challenged in the present proceedings, by reason of being the same considered illegal by the Claimants.

15. Thus, from the point of view of the TCA, for a property in vertical ownership (or not constituted under a regime of horizontal property) the criterion for determining the incidence of stamp tax, is the global TPV of the floors and divisions even if with independent use, designated for housing.

Let us see, if the thesis of the TCA is convincing,

1. Law 55-A/2012, of 29 October came into force the day following its publication, that is, on 30 October 2012.

2. However, it says nothing regarding the qualification of the concepts in question, namely, regarding the concept of "property with housing use", which is of interest to us here.

3. However, article 67, no. 2 of the Stamp Tax Code, added by the said Law, provides that "to matters not regulated in the present code relating to item 28 of the General Table is subsidiarily applied the MPTC."

4. Thus, we have that the rule of incidence refers to urban properties, the concept of which is that which results from the provisions of article 2 of the MPTC, the determination of the TPV being subject to the terms provided in article 38 et seq. of the same code.

5. Consulting the MPTC, it is verified that article 6 thereof only indicates the different species of urban properties, among which it mentions residential ones (see paragraph a) of no. 1), clarifying in no. 2 of the same article that "residential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of a license, that have as their normal purpose each of these ends."

6. From this we can conclude that, in the perspective of the legislator, it is not a matter of the legal-formal rigor of the concrete situation of the property, but rather its normal use, the purpose to which the property is designated.

7. Moreover, we note that, for the legislator, the situation of the property in vertical or horizontal ownership was not relevant, as no reference or distinction is made between one and the other. What is relevant is the material truth underlying its existence as an urban property and its use.

8. With effect, subjection to the stamp tax contained in item no. 28.1 of the GSTT, is determined by the combination of three factors, to wit:

a) we are dealing with an urban property;

b) housing use and

c) the TPV contained in the register equal to or exceeding € 1,000,000.00.

1. Now, in the case of a property with the characteristics described above, subjection to stamp tax must be determined, not by the TPV of the property "as a whole", but by the TPV attributed to each of the floors or divisions with independent use, assigned to housing.

2. A position assumed in several judgments of the Arbitral Tribunal, on the subject "Stamp Tax – Item 28, vertical property", which we here indicate, by way of example, such as case nos. 428/2014-T, no. 206/2014-T, no. 30/2014-T, no. 181/2013-T, no. 132/2013-T, no. 50/2013-T, no. 248/2013-T, no. 849/2014-T, no. 179/2015-T of CAAD (among others), to whose legal reasoning, the present tribunal adheres in full, regarding the matter of the incidence of item 28.1 of the GSTT,...

3. …as well as in the recent Judgment of the Supreme Administrative Court, which we concur with, rendered in case no. 047/15, of 09.09.2015, according to which:

"I - With respect to properties in vertical ownership, for purposes of the incidence of Stamp Tax (Item 28.1 of the GSTT, in the wording of Law no. 55-A/2012, of 29 October), subjection is determined by the combination of two factors: housing use and the TPV contained in the register equal to or exceeding € 1,000,000.

II - In the case of a property constituted in vertical ownership, the incidence of Stamp Tax must be determined, not by the TPV resulting from the sum of the TPV of all the divisions or floors susceptible of independent use (individualized in the property register entry), but by the TPV attributed to each of those floors or divisions designated for housing."

1. Thus, the understanding of the TCA to the effect that the sum of the TPVs of the various units or divisions with independent use assigned to housing, resulting in a global TPV equal to or exceeding € 1,000,000, legitimizes the incidence of stamp tax, under item 28 of the GSTT, under the standard regime, is, manifestly, illegal!

2. Thus being, there not being, in this manner, a single unit or division with independent use, assigned to housing, with TPV equal to or exceeding € 1,000,000, the TCA could never have subjected the Claimants to stamp tax, under item 28 of the GSTT, for the year 2014, which is now being challenged, as the same is considered illegal by the Claimants.

3. With regard to the alleged defect of unconstitutionality by reason of violation of the principle of equality, in particular of equality in the taxation of property, provided for in articles 13 and no. 3 of article 104 both of the Constitution, the examination of such questions is precluded by the declaration of illegality of the assessments of Stamp Tax before us, by substantive defect which prevents their re-enactment or renewal.

4. As referred to in the Commentary on the Code of Procedure in Administrative Courts, Almedina, 2005, by Mário Aroso de Almeida and Carlos Cadilha, in annotation to article 95 of that statute, p. 483 (applicable by reference of article 2 paragraph c) of the Code of Tax Procedure and Process and article 29, no. 1, paragraphs a) and c) of the LRAT) "If the court ruled the principal claim well-founded, the jurisdictional power is barred with respect to a subsidiary claim or one formulated in the alternative; and, in the same terms, if the pronouncement adopted regarding one question consumes or leaves prejudiced other aspects of the case which are correlated with it."

5. In these terms, given the material interpretation advocated the examination and appraisal of the other defects attributed to the assessments being challenged is precluded.

II. On Indemnity Interest

1. The Claimants further petition that recognition be given to the right to indemnity interest, on the grounds of error attributable to the administration.

2. Article 43, no. 1 of the General Tax Law and article 61 of the Code of Tax Procedure and Process provide that indemnity interest is due when it is determined in a gracious reclamation or judicial challenge, that there was error attributable to the tax administration that resulted in the payment of tax debt in an amount higher than that legally due.

3. Error attributable to the administration is considered to exist when the error is not attributable to the taxpayer and is based on erroneous assumptions of fact which are not the responsibility of the taxpayer.

4. Now, resulting from the tax acts being challenged the obligation to pay tax in excess of what would be due, indemnity interest is due in accordance with the legally provided terms, the legislator presuming, in these cases, in which the annulment of the assessment occurs, that a loss occurred in the sphere of the taxpayer by virtue of having been deprived of the patrimonial sum which was required to be delivered to the State by virtue of an illegal assessment. In consequence, the taxpayer has the right to this indemnification, regardless of any claim or proof of the loss suffered.

5. In the present case, it will be unquestionable that, following the establishment of the illegality of the acts of assessment, there will be place for reimbursement of the tax by force of the provisions of article 43, no. 1 of the General Tax Law, and article 100 of the General Tax Law passing, necessarily thereby the reestablishment of the "situation that would exist if the tax act which is the subject of the arbitral decision had not been performed".

6. In the same manner, it is understood that it will be free of doubt that the illegality of the act is attributable to the Tax Authority, which autonomously performed it in an illegal manner.

7. Regarding the concept of "error", it has been understood that only in cases of annulments founded on defects relating to the tax legal relationship will there be place for payment of indemnity interest, such right not being recognized in the case of annulments by procedural or formal defects.

8. Thus being, being faced with a defect of violation of substantive law, which is embodied in error in the legal assumptions, attributable to the Tax Authority, the Claimants have the right to indemnity interest, in accordance with articles 43, no. 1 of the General Tax Law, and 61 of the Code of Tax Procedure and Process, calculated on the amount of € 14,065.47, and counted from the payment of the tax until the complete reimbursement of the said amount.

IX. Decision

In accordance with what has been stated, it is decided:

1. To annul all acts of assessment of Stamp Tax being challenged by the Claimants relating to the year 2014;

2. To condemn the Tax and Customs Authority to reimburse the Claimants the amount which they paid, together with indemnity interest, calculated, at the legal rate, from the payment of the tax until the complete reimbursement.

X. Value of the Case

The value of the case is fixed at € 14,065.47 (fourteen thousand, sixty-five euros forty-seven cents) in accordance with art. 97-A, no. 1, a), of the Code of Tax Procedure and Process, applicable by force of paragraphs a) and b) of no. 1 of art. 29 of the LRAT and no. 2 of art. 3 of the Regulation of Costs in Tax Arbitration Proceedings.

XI. Costs

Costs charged to the Respondent in accordance with article 22, no. 2 of the LRAT, article 4 of the Regulation of Costs in Tax Arbitration Proceedings, and Table I attached thereto, which are fixed in the amount of € 918.00.

Notify.

Lisboa, 16 May 2016

The Arbitrator

(Jorge Carita)

[1] This wording was altered by Law no. 83-C/2013, of 31 December, without, however, having great relevance for the case at hand, in the following manner:

"28.1 Per residential property or for construction land the construction of which, authorized or planned, is for housing, in accordance with the provisions of the Municipal Property Tax Code ---------------------------------------------------------------------------------1%"