Summary
Full Decision
ARBITRAL DECISION
The arbitrator Dr. José Joaquim Monteiro Sampaio e Nora designated by the Ethics Council of the Centre for Administrative Arbitration as sole arbitrator on 11 January 2018, hereby renders the following arbitral decision:
I. Report:
A…, S.A., taxpayer no. …, with registered office at …, …, …-… …, comes, pursuant to article 2, no. 1, paragraph a), and article 10, nos. 1 and 2, both of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters or "RJAT") and articles 1 and 2 of Order no. 112-A/2011, of 22 March, to request the CONSTITUTION OF AN ARBITRAL TRIBUNAL for the purpose of obtaining a declaration of illegality of the acts of stamp tax assessment for the year 2015, based on item 28.1 of the TGIS, as amended by Law no. 55-A/2012, of 29 October, in the total amount of € 27,302.70, relating to the property, classified as land for construction, and contained in the urban property register of the Union of Parishes of … and …, municipality of … and district of Lisbon, under number … (formerly …).
In fact, the Applicant seeks the declaration of nullity of the stamp tax assessments impugned, for which it previously filed the administrative complaint no. …2016…, which was entirely rejected.
The Applicant invokes that the urban property in question corresponds to lot 2 of the subdivision permit no. …/88, issued by the Municipal Chamber of … constitutes an unbuilt part, intended for the installation of an equestrian centre, therefore there is no legal provision for applying stamp tax to this property, requesting, consequently, the declaration of illegality and consequent annulment of the stamp tax assessment act impugned.
The Respondent is the TAX AND CUSTOMS AUTHORITY.
The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 30-10-2017.
Pursuant to the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the Ethics Council designated as sole arbitrator the signatory, who communicated acceptance of the appointment within the applicable period.
On 21/12/2017 the parties were duly notified of this designation, and did not manifest any intention to refuse the appointment of the arbitrator, in accordance with article 11, no. 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Ethics Code.
Thus, in conformity with the provisions of paragraph c) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the sole arbitral tribunal was constituted on 11-1-2018.
The Tax and Customs Authority filed a response in which it contended that the request should be judged inadmissible and raised an exception of absolute incompetence of the arbitral tribunal, on grounds of subject matter.
By arbitral order of 16-2-2018, pursuant to the principle of contradiction laid down in article 16, paragraph a) of the RJAT, the parties were afforded a period of 10 days to make submissions, if they so wished, on the alleged exception of absolute incompetence of the arbitral tribunal, only the applicant having made use of this facility.
Upon expiry of the period afforded for that purpose and no request having been made for the production of additional evidence beyond the documentary evidence already incorporated in the proceedings, the holding of the meeting referred to in article 18 of the RJAT was dispensed with and the parties were enabled, if they so wished, to submit written submissions within successive periods of 10 days, commencing with the applicant.
The applicant submitted submissions outside the period afforded to it for that purpose, wherefore their removal from the file was ordered, the respondent having submitted submissions which, essentially, defended what was already stated in its response.
The arbitral tribunal was duly constituted, in accordance with the provisions of articles 2, no. 1, paragraph a), and 10, no. 1, of Decree-Law no. 10/2011, of 20 January, and must first address the question of competence raised by respondent TA.
II. On the Competence of the Arbitral Tribunal:
From the perspective of TA, the applicant company requests the constitution of the Arbitral Tribunal with a view to obtaining a declaration of illegality of the stamp tax assessment - item 28, based on the erroneous classification of the property, registered in the property register under article …, of the Union of Parishes of … and….
It takes the view that, both from the initial application and from the documents attached by the applicant to that petition, it is to be concluded that the request formulated is ultimately a request for an arbitral decision determining that the urban property identified in that petition does not have a residential allocation and should have the consequent tax treatment.
Now, pursuant to article 2 of the RJAT, the competence of the arbitral tribunals is restricted to either "declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account" (paragraph a) or "declaration of illegality of acts of determination of the taxable base when they do not give rise to the assessment of any tax, acts of determination of the collectible base and acts of determination of property values" (paragraph b), such that the alleged breach of the rules of competence as to subject matter and hierarchy determine the absolute incompetence of the tribunal.
For its part, the applicant, pronouncing on that exception, refers to the arbitral decision of 14-6-2016 (Ana Pedrosa Augusto) rendered in case 116/2016-T, which heard the request for impugnation of stamp tax assessment of Lot 1 of the Subdivision Permit no. …/88, intended for agro-pastoral exploitation, and to the arbitral decision of 30-9-2016, rendered in case 117/2016-T (Álvaro Caneira), which heard the request for impugnation of stamp tax assessment of Lot 3 of the Subdivision Permit no. …/88, intended for tourist village.
In those decisions, the same exception was also raised, which was judged inadmissible, such that the applicant invokes in its favour and so that it be judged in the same manner, the arguments contained in those decisions.
It is necessary to decide.
With relevance to that decision, it is necessary to transcribe the request formulated by the applicant, since it is the request that determines the competence of the deciding body, given that competence is a procedural prerequisite that results from the tribunal only being able to pronounce on the merits or substance of the case when it is legally recognized to have the jurisdiction to do so.
Now, the applicant requests that "the request for declaration of illegality of the act of 27jul2017, of rejection of the complaint of the stamp tax assessment act of 2015, made on 5abr2016, in the amount of 27,302.70€, and of the assessment act itself, be judged admissible, pursuant to item 28.1 of the General Table of the Stamp Tax Code ("TGIS") with reference to the urban property, corresponding to a land for construction registered in the property register of the Union of Parishes of … and …, municipality of …, district of Lisbon under matriculation article … (former article … of the parish of …)".
It is evident from the request formulated that the applicant does not contest any of the elements of the property registration to which it merely refers incidentally as a means of identifying the tax reality that has to do with the stamp tax assessment that it impugns.
Therefore, contrary to what the Respondent alleges, the present request for arbitral pronouncement does not have as its object the assessment by the Arbitral Tribunal of the valuation made of the property in question, in any of its dimensions, a matter that is manifestly excluded from its material competence, rather, contrary to what is argued as the basis for the invoked exception, what the Applicant seeks is that the illegality of the act of assessment of stamp tax relating to land for construction and the year 2015 be declared, a request that is formulated in a clear, express and unequivocal manner, in the request for arbitral pronouncement presented by it.
Given the foregoing, the request formulated by the applicant for a declaration of illegality and consequent annulment of a tax act constitutes a matter that, without any margin for doubt, falls within the scope of the material competence of arbitral tribunals, as follows from article 2, no. 1, paragraph a), of the RJAT and article 2 of Order no. 112-A/2011, of 22/03. Moreover, the decision to be rendered will be limited to an assessment of the legality of the impugned stamp tax assessment, without any repercussions on the property registration of the property in question, in particular as regards its allocation and tax property value, which shall remain intact as they currently stand.
In these terms, the exception of incompetence of the Arbitral Tribunal raised by the Respondent (TA) is therefore judged inadmissible.
III. Clarificatory Order:
The Arbitral Tribunal is competent, even as to subject matter, the parties have legal personality and capacity and have standing (articles 4 and 10, no. 2, of the same law and article 1 of Order no. 112-A/2011, of 22 March) and are duly represented, with no other exceptions or nullities requiring ex officio examination.
IV. Proven Facts:
In light of the documents filed by the applicant and the administrative file attached by the respondent, the following facts are considered proven:
a) The Applicant is the owner and legitimate possessor of the urban property located at …, in …, called lot 2 of the subdivision permit no. …/88, issued by the Municipal Chamber of … on 8-11-1988, described in the … Conservatory of the Land Register of … under file no. … and there definitively registered in favour of the applicant company and registered in the property register of the parish of … under articles …, …, …, …. - proven by the certificate at pages 8 and 9 of the administrative file.
b) Article … of the defunct parish of … gave rise to article … of the Union of Parishes of … and …, - proven by the property notebook at pages 10 and 11 of the administrative file.
c) On 11 April 2016 the Applicant was notified to pay, during the month of April 2016, the 1st. instalment, in the amount of € 9,100.90 of stamp tax. - proven by doc. 1 attached with the initial petition and which was not impugned.
d) As stated in that notification, the respective assessment was dated 2016-04-05 and was an assessment made on the basis of Item no. 28.1 of the TGIS, relating to the year 2015, concerning the urban article no. … of the Union of Parishes of … and …, in the total amount of € 27,302.70 - proven by doc. 1 attached with the initial petition and which was not impugned.
e) On 17-6-2016, the Applicant was notified to pay during the month of July 2016, the 2nd. instalment, in the amount of € 9,100.90 of stamp tax, relating to the same assessment. - proven by doc. II-A attached with the initial petition and which was not impugned
f) On 27-6-2016, the applicant filed an administrative complaint of the assessment indicated in d). - proven by doc. II attached with the initial petition and which was confirmed by the doc. at pages 13 of the administrative file.
g) In that administrative complaint, the Applicant requests "the immediate revocation of the act of assessment of stamp tax for the year 2015, of 05.04.2016, in the amount of 27,302.70€, having as its object the property called lot 2 of the subdivision permit no. …/88, registered under article … of the Union of Parishes of … and … (former article …), as well as the assessments for instalment payment of the same". - proven by doc. II attached with the initial petition, which was not impugned.
h) Article … in particular constitutes the unbuilt part of the identified lot 2 of the subdivision permit no. …/88. – proven by agreement of the parties.
i) Lot 2 is intended for an Equestrian Centre, as stated in the subdivision permit no. …/88, issued by the Municipal Chamber of … on 8-11-1988 – Proven by the document attached at pages 37 et seq., in particular pages 38 and 40 of the administrative file and annex II attached with the initial petition, which was not impugned.
j) In the property description referred to in paragraph a) of these proven facts, the following composition is stated:
MIXED consisting of: a) – Rustic property - 191 247,60 m2 – article …; b) Urban – House 41 – one floor and car shelter – covered and total area – 125m2 – article:…; c) Urban – horse racing track, with grandstands and boxes storage, central arena intended for beekeeping – area of the track: 10.500m2; area of the grandstands: 415,80m2; area of the boxes: 579,60m2 – Article….
Part of the property referred to in paragraph a) was built with a building consisting of a covered riding arena, bar and storage, with a covered area of – 1.588 m2 - and outdoor space – 1.485 m2 – article:…, the rustic property being reduced to an area of 188.174,60 m2.
A plot of 2.813,33 m2 is detached, which will be described under no.... – proven by the document at pages 8 and 9 of the administrative file.
k) In the property registration of article … of the Union of Parishes of … and …, it is described as URBAN PROPERTY CONSISTING OF PLOT OF LAND INTENDED FOR CONSTRUCTION - proven by the property notebook at pages 10 and 11 of the administrative file.
l) In the fiscal evaluation for IMI purposes, the allocation coefficient is 1, corresponding to housing and the tax property value obtained was € 2 730 270,00. – fact proven by the property notebook at pages 10 and 11 of the administrative file.
m) By communication of 28-07-2017, received on 2-8-2017, sent to the applicant through its appointed representative it was notified of the rejection of the administrative complaint referred to in paragraph g), with the grounds that accompanied that notification, which are summarized as "failure to identify reasons that affect, in concreto, the legality of the disputed assessment". - fact proven by the documents at pages 97 and 98 of the administrative file.
n) The petition in the present case was filed on 30-10-2017.
IV. Questions to be Decided
Considering the proven facts and the legal matter contained in the request for arbitral pronouncement presented by the Applicant and the response of the Respondent, the disputed questions to be decided by the Arbitral Tribunal are:
- whether the stamp tax assessment in question was or was not issued in conformity with the law;
- whether the decision rejecting the administrative complaint conforms to the applicable legal rules.
For reasons of logical precedence, the question of the competence of the Arbitral Tribunal has already been decided, the tribunal being found to be competent.
On the Decision of the Administrative Complaint:
We shall begin for the same reasons of logical precedence by analyzing the decision rejecting the administrative complaint.
As clearly results from the administrative complaint, in particular from its articles 18 to 23, the grounds of illegality of the stamp tax assessment act complained of relate to the fact that TA considered in the determination of the Tax Property Value that the land lot corresponding to the former article … of the defunct parish of … and now to article … of the Union of Parishes of … and … is subsequently intended for construction, but for residential purposes.
Now, it is precisely against this reason that determines the assessed stamp tax assessment that the now applicant and then claimant manifests.
The fact that it did not frame that invocation in any of the grounds provided for in article 99 of the CPPT (applicable to the administrative complaint, by virtue of article 70, no. 1 of the CPPT), does not render that complaint lacking in grounds, since the law is of official cognizance, both for whoever judges and for whoever decides, even in the administrative complaint proceeding.
Therefore, the decision rejecting the administrative complaint on the ground that it occurred in the face of "failure to identify reasons that affect, in concreto, the legality of the disputed assessment" has no legal or factual basis whatsoever, and therefore cannot subsist, that decision being annulled as illegal.
On the Illegality of the Stamp Tax Assessment Act:
The issue of the illegality of the Stamp Tax assessment, object of the present impugnation, is not connected with the interpretation of any legal or procedural rules, in which the parties are in total agreement, but rather in the circumstance that, for the purpose of determining the tax property value of land for construction owned by the applicant, including the land covered by the then article … of the defunct parish of …, it is evident that it was made with the application of the allocation coefficient for housing in the course of the valuation, a valuation that the applicant has never challenged, a fact that was moreover considered proven in paragraph l) of the proven facts.
Faced with this situation of a case decided at the level of determination of tax property value, the respondent takes the view that that decision binds the now applicant not only for the purposes of IMI, but also for the purposes of Stamp Tax, as is the case here.
Now, this argument of the respondent has already been wielded by it in Case no. 116/2016-T, relating to lot 1 Subdivision Permit no. …/88, intended for agro-pastoral exploitation, where the respondent, in its response, alleged that "the allocation of the land was stipulated at the time of the re-evaluation of the property and the Applicant never complained about it, therefore it is that which applies for the purposes of subsumption to the rule of item 28.1, such that "there thus exists no support for the alleged illegality that the Applicant seeks to attribute to the assessment and that, therefore, "the assessments in question constitute a correct interpretation and application of the law to the facts, not suffering from any defect of breach of law", as results from points 50 to 52 of the decision rendered in that case.
In that case it was decided that that evaluation was not relevant for the purpose of determining the future possibility of construction and allocation for the purposes of taxation within item 28.1 of the TGIS, such that the judicial impugnation forming the object of those proceedings was judged admissible.
We see no reason to alter the direction of the decision then rendered, especially since the subdivision permit in question – permit no. …/88 – is the same one to which the lot forming the object of the present proceedings relates – cfr. paragraphs h) and i) of the proven facts.
In fact, the valuation made in the course of determining the tax property value serves exclusively for that purpose, such that the value obtained cannot be challenged for any other purpose. And nothing more.
In any case, what has been stated does not conflict with the respondent's allegation, invoked in the course of raising the exception, that the property value of the property was fixed at an earlier date. In truth, the applicant does not even rebel against the tax property value of the property defined as a result of its valuation. However, the residential allocation contained in that valuation is one of the elements that may have contributed to the tax property value found - and from that value, as the respondent correctly notes, the applicant could have complained, on the terms that the CIMI affords it for that purpose. But it did not. Nor does it do so in the present proceedings either.
In this regard, it should be noted that complaint of the evaluation shall always concern the result thereof, a result that is expressed in the tax property value (articles 14, 45 and 76 of the CIMI).
However, the expert elements considered for the purpose of property valuation are not binding for other purposes, in particular to conclude for the application of other taxes on real properties, whose applicability depends on the determination of the possibility of allocation of such properties to residential or other different purposes.
For, as is determined in item no. 28 of the General Table of Stamp Tax, a taxable event only exists if there occurs:
"28. Ownership, usufruct or surface right of urban properties whose tax property value contained in the register, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than (euro) 1 000 000, on the tax property value used for the purpose of IMI:
28.1. For a property with residential allocation or for land for construction the building of which, authorized or foreseen, is for residential purposes, pursuant to the provisions of the Code of the IMI – 1%"
For the rule to be applied to the property, three requirements must be cumulatively verified, the initial prerequisite for the application of item 28 being the existence of one of the real rights referred to therein:
a) the tax property value contained in the register, pursuant to the CIMI, is equal to or greater than €1,000,000.00;
b) it is a plot of land for construction; and
c) the building authorized and foreseen for it is for residential purposes, pursuant to the CIMI.
As to the first requirement: the applicant, as we have seen, does not contest (nor has contested), at any time, the tax property value of the property. Therefore, the requirement is met: the property has a tax property value in excess of €1,000,000.00 and the result of the valuation invoked by the respondent has full application here.
As to the second requirement, the applicant does not contest the classification of the property as land for construction nor its fit within the definition contained in article 6, no. 3 of the CIMI: "Land for construction shall be deemed to be plots of land located within or outside an urban agglomeration for which a licence or authorization has been granted, prior notification admitted, or favourable prior information issued for a subdivision or construction operation". It is thus verified.
It remains to analyze the third requirement: that the building, authorized and foreseen, be for residential purposes, pursuant to the provisions of the IMI Code.
The wording of item 28.1 of the TGIS now under review, as given by article 194 of Law no. 83-C/2013, of 31 December, innovatively broadened the scope of objective incidence of the rule, by explicitly including land for construction for which building authorization or foreseen building for residential purposes has been granted.
What the applicant contests is the issuance of the stamp tax assessment on its property which, according to it, cannot have residential allocation, since this results from the subdivision permit, even if such is not the indication contained in the property notebook (made in consequence of the respective valuation of the property).
And the applicant is manifestly correct.
In fact, the future determination of the destination of the lot in question can only be decided on the basis of an administrative decision of the municipal authority, since only this authority can license the building of properties and the allocation of such buildings, pursuant to the Legal Framework for Urbanization and Building, approved by Decree-Law no. 555/99, of 16 December, already amended several times.
In fact, in this sense is also article 6, no. 3 of the CIMI already cited, which in the definition of land for construction only considers as such those for which a licence or authorization has been granted, prior notification admitted, or favourable prior information issued for a subdivision or construction operation, that is, it refers to the municipal administrative decisions that, in the exercise of legally fixed competences, have authorized either immediately (building licensing or prior notification) or subsequently (subdivision, prior information) the building, defining the purpose to which it is intended.
No other meaning can be given to the reference to the CIMI contained in item no. 28.1 of the TGIS, such that the "authorization or foreseen building for residential purposes", both in urban planning terms and in tax terms, must be that which results from the subdivision permit and only from it, which encompasses the property registration article in question and which permits conferring on the property the foresight of a building being constructed thereon.
Therefore, the fact that a residential purpose was mistakenly considered for the said lot, in the course of determining the tax property value of the same – no reasons for such option were brought to the present proceedings – does not confer, without more, on the owner, nor even the mere expectation of being able to build for residential purposes on the said lot 2, with the mentioned subdivision permit …/88 remaining in force.
Now, as results from the proven facts, paragraphs b), h) and i), article … of the urban register of the defunct Parish of … constitutes the unbuilt part of lot 2 of the subdivision permit no. …/88, that lot 2 being intended for an Equestrian Centre, as also stated in the mentioned subdivision permit no. …/88, issued by the Municipal Chamber of … on 8-11-1988, it must also be borne in mind that the cited article … of the defunct Parish of … gave rise to article…. of the Union of Parishes of … and….
Thus, the fact is that, in this case, the subdivision permit (whose contents, it is reiterated, were not contested by the respondent) is clear: the destination (if considered foreseen) of the land is exploitation as an equestrian centre and not for housing.
For, as stated by José Manuel Fernandes Pires (Lessons of Taxes on Patrimony and Stamp Tax, Coimbra, Almedina, 3rd ed., 2015, pages 110 to 112) "The right to build is not inherent in the right of property, but only arises ex novo in the patrimony of the owner when an administrative act of the competent public entity recognizes and authorizes the owner to build or subdivide".
Consequently, the applicant is correct when it alleges that the factual and legal requirements for the assessment act in question are not met, and the property in its ownership cannot be subsumed under the rule contained in item 28.1 of the TGIS. There is, therefore, illegality in the assessment of stamp tax made by the respondent and notified to the applicant in accordance with the facts considered proven in paragraphs c) and d).
In fact, in this sense is not only the arbitral and judicial jurisprudence cited by the applicant, but also, albeit incidentally, the Judgment of the STA of 29/9/2016, rendered in case no. 0560/16 and published at www.dgsi.pt.
VI - Decision
In these terms, and with the grounds set forth, the Arbitral Tribunal decides:
a) To judge inadmissible the exception invoked by the Respondent (TA) regarding the material incompetence of the Arbitral Tribunal;
b) To judge admissible the request for declaration of illegality of the act of 27jul2017, of rejection of the complaint of the stamp tax assessment act of 2015, made on 5abr2016.
c) To judge admissible the request for arbitral pronouncement, declaring the illegality of the assessment under item 28.1 of the General Table of the Stamp Tax Code ("TGIS") and with reference to the urban property, corresponding to land for construction registered in the property register of the Union of Parishes of … and …, municipality of …, district of Lisbon under the property registration article …. (former article …. of the parish of …), now impugned, determining its annulment, with all legal consequences.
Value of the case: € 27,302.70.
Costs: Pursuant to article 22, no. 4, of the RJAT, and in accordance with Table I attached to the Costs Regulation in Tax Arbitration Proceedings, I fix the amount of costs at € 1,530.00, to be borne by the Respondent (TA).
Lisbon, 7 May 2018,
The Arbitrator
José Joaquim Monteiro Sampaio e Nora
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