Summary
Full Decision
Process No. 579/2014-T
The arbitrators Dr. Jorge Manuel Lopes de Sousa (arbitrator-president), Dr.ª Maria Manuela Roseiro and Dr. Sérgio de Matos, appointed by the Deontological Council of the Center for Administrative Arbitration to form the Arbitral Tribunal, constituted on 02-10-2014, agree as follows:
- Report
A… CLOSED REAL ESTATE INVESTMENT FUND, Tax ID No. …, managed and represented by B… - Real Estate Investment Fund Management Company, S.A., Tax ID No. …, with registered office in Lisbon, at Avenue … Lisbon (hereinafter referred to as the "Claimant") came, under the terms of articles 2, no. 1, paragraph a), and 3 of Decree-Law No. 10/2011, of 20 January (hereinafter "RJAT"), to request the constitution of a collective arbitral tribunal, with a view to declaring the illegality of the following acts of Stamp Duty tax assessments, each relating to an urban property owned by the Fund, which constitute building land parcels situated in the municipality of ..., Civil Parish union of civil parishes of ..., ..., and ..., namely:
No. 2014 ..., in the amount of €49,231.40;
No. 2014 ..., in the amount of €41,906.90;
No. 2014 ..., in the amount of €18,121.95;
No. 2014 ..., in the amount of €57,686.40;
No. 2014 ..., in the amount of €31,699.70;
No. 2014 ..., in the amount of €42,449.30;
No. 2014 ..., in the amount of €14,179.20;
No. 2014 ..., in the amount of €13,594.60; and
No. 2014 ..., in the amount of €10,345.10.
The Claimant further requests payment of compensatory interest on the amounts it may pay, relating to the aforementioned assessments, and requests the condemnation of the Tax and Customs Authority to pay it compensation for bad faith litigation.
The request for constitution of the arbitral tribunal was accepted by the President of the CAAD on 30-07-2014 and notified to the TAX AND CUSTOMS AUTHORITY on 01-08-2014.
Under the terms 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 Deontological Council appointed as arbitrators the signatories, who communicated acceptance of the assignment within the applicable period.
On 17-09-2014, the Parties were notified of this appointment and did not manifest any will to refuse the appointment of the arbitrators, under the combined terms of article 11, no. 1 paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.
Thus, in accordance 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 collective arbitral tribunal was constituted on 02-10-2014.
The Tax and Customs Authority (ATA) responded, raising the issue of subsequent futility of the dispute, as the collection notices with nos. 2014..., 2014..., 2014..., 2014..., 2014..., 2014..., 2014... and 20014... relating to the cadastral entries nos. 2..., 3..., 4..., 5..., 6..., 7..., 8... and 9... all of the union of civil parishes of ..., ... and … with reference to the year 2013, have been annulled, with said entries being removed from the matrix.
Consequently, the Tax and Customs Authority argued that the process should have as its object only the assessment relating to entry 1..., of the Union of civil parishes of ..., ..., and ..., to which collection notice No. 2014 ... corresponds.
Regarding this assessment, the Tax and Customs Authority maintains that the request for arbitral pronouncement should be judged unfounded, with its absolution from the claims.
The Claimant pronounced itself on the issue of subsequent futility of the dispute, stating that "it has nothing, therefore, to oppose the reduction of the subject matter of the litigation, arising from the partial futility of the dispute, by revocation of the challenged acts subsequent to the end of voluntary payment thereof and subsequent to the beginning of the dispute, for reasons exclusively attributable to the Respondent AT, who shall bear all costs and responsibilities arising from this fact".
By order of 23-11-2014, the meeting provided for in article 18 of the RJAT was dispensed with and it was decided that the process would proceed with optional written submissions.
The Parties did not submit any submissions.
The arbitral tribunal was duly constituted and is materially competent, in light of the provisions of articles 2, no. 1, paragraph a), and 30, no. 1, of the RJAT.
The parties have legal personality and capacity, are legitimate (articles 4 and 10, no. 2, of the same instrument and article 1 of Ordinance No. 112-A/2011, of 22 March) and are duly represented.
The process is free from nullities.
- Factual Matters
2.1. Facts Considered Proven
a) In 2013, the Claimant was owner of the urban properties with cadastral entries nos. 2..., 3..., 4..., 5..., 6..., 7..., 8... and 9... all situated in the Union of civil parishes of ..., ... and …;
b) In the year 2013, the Claimant was also owner of the urban property with cadastral entry no. 1..., of the Union of civil parishes of ..., ..., and ...;
c) On 18-03-2014, the Tax and Customs Authority made the following Stamp Duty tax assessments on the basis of item 28.1 of the General Schedule of Stamp Duty, relating to the aforementioned properties, all for the year 2013:
– No. 2014 ..., in the amount of €49,231.40, relating to the property with cadastral entry 2...;
– No. 2014 ..., in the amount of €41,906.90, relating to the property with cadastral entry 3...;
– No. 2014 ..., in the amount of €18,121.95, relating to the property with cadastral entry 4...;
– No. 2014 ..., in the amount of €57,686.40, relating to the property with cadastral entry 5...;
– No. 2014 ..., in the amount of €31,699.70, relating to the property with cadastral entry 6...;
– No. 2014 ..., in the amount of €42,449.30, relating to the property with cadastral entry 7...;
– No. 2014 ..., in the amount of €14,179.20, relating to the property with cadastral entry 8...;
– No. 2014 ..., in the amount of €13,594.60, relating to the property with cadastral entry 9...; and
– No. 2014 ..., in the amount of €10,345.10, relating to the property with cadastral entry 1...; (documents nos. 1 to 9, attached with the request for arbitral pronouncement, whose contents are given as reproduced);
d) The aforementioned assessments were notified to the Claimant with a voluntary payment date for the 1st installment up to the month of April 2014 (documents nos. 1 to 9);
e) On 29-07-2014, the Claimant filed the request for arbitral pronouncement that gave rise to the present process;
f) On 30-10-2014, the Tax and Customs Authority annulled the following assessments:
– No. 2014 ..., in the amount of €49,231.40, relating to the property with cadastral entry 2...;
– No. 2014 ..., in the amount of €41,906.90, relating to the property with cadastral entry 3...;
– No. 2014 ..., in the amount of €18,121.95, relating to the property with cadastral entry 4...;
– No. 2014 ..., in the amount of €57,686.40, relating to the property with cadastral entry 5...;
– No. 2014 ..., in the amount of €31,699.70, relating to the property with cadastral entry 6...;
– No. 2014 ..., in the amount of €42,449.30, relating to the property with cadastral entry 7...;
– No. 2014 ..., in the amount of €14,179.20, relating to the property with cadastral entry 8...;
– No. 2014 ..., in the amount of €13,594.60, relating to the property with cadastral entry 9... (documents attached by the Claimant on 18-11-2014, whose contents are given as reproduced);
g) The property with cadastral entry no. 1... was building land (document no. 18 attached with the request for arbitral pronouncement, whose contents are given as reproduced);
h) On 29-07-2014, the Claimants filed the request for constitution of the arbitral tribunal (CAAD computer system).
2.2. Facts Not Proven
It was not proven that the Claimant had paid the assessed amounts.
2.3. Reasoning of the Proven Facts
The proven facts are based on the documents indicated for each of the points, whose authenticity and correspondence to reality were not questioned.
- Legal Matters
3.1 Issue of Subsequent Futility of the Dispute as to the Annulled Assessments
As emerges from the factual matters established, the assessments with nos. 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ... and 20014 ... relating to cadastral entries nos. 2..., 3..., 4..., 5..., 6..., 7..., 8... and 9..., were annulled by the Tax and Customs Authority after the institution of the present arbitral process.
Being so, the continuation of the process is futile in relation to the aforementioned assessments, and therefore the instance is declared extinct in the respective part, with the Tax and Customs Authority absolved from the instance.
Given that the annulment occurred after the constitution of the Arbitral Tribunal, the subsequent futility of the dispute is attributable to the Tax and Customs Authority, which is therefore responsible for the respective costs, under the terms of article 536, no. 3, of the CPC, applicable by virtue of the provisions of article 6, paragraph b), of the Regulation of Costs in Tax Arbitration Proceedings.
3.2. Issue of Assessment No. 2014 ...
The issue which is the subject of the present action, regarding assessment No. 2014..., is whether building land, to which was assigned in an evaluation process the designation of "Residential" falls within the scope of item 28.1 of the General Schedule of Stamp Duty (GSSD), in its original wording.
3.2.1. Regime of Law No. 55-A/2012, of 29 October
Law No. 55-A/2012, of 29 October, made several amendments to the Stamp Duty Code and added item 28 to the GSSD, with the following wording:
28 – Ownership, usufruct or right of surface of urban properties whose tax patrimonial value listed in the matrix, under the terms of the Property Tax Code (CIMI), is equal to or greater than €1,000,000 – on the tax patrimonial value used for purposes of Property Tax:
28.1 – For properties with residential use – 1%;
28.2 – For properties, when the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance – 7.5%.
In the transitional provisions contained in article 6 of that Law No. 55-A/2012, the following rules were established relating to the assessment of the tax provided for in that item:
1 – In 2012, the following rules must be observed with reference to the assessment of stamp duty provided for in item no. 28 of the respective General Schedule:
a) The taxable event occurs on 31 October 2012;
b) The taxpayer in respect of the tax is the one mentioned in no. 4 of article 2 of the Stamp Duty Code on the date referred to in the preceding paragraph;
c) The tax patrimonial value to be used in the assessment of the tax corresponds to what results from the rules provided in the Property Tax Code with reference to the year 2011;
d) The assessment of the tax by the Tax and Customs Authority must be carried out by the end of November 2012;
e) The tax shall be paid in a single installment by the taxpayers by 20 December 2012;
f) The applicable rates are as follows:
i) Properties with residential use assessed under the terms of the Property Tax Code: 0.5%;
ii) Properties with residential use not yet assessed under the terms of the Property Tax Code: 0.8%;
iii) Urban properties when the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance: 7.5%.
2 – In 2013, the assessment of stamp duty provided for in item no. 28 of the respective General Schedule must be based on the same tax patrimonial value used for purposes of assessment of property tax to be carried out in that year.
3 – Failure to deliver, in whole or in part, within the indicated period, the amounts assessed as stamp duty constitutes a tax infraction, punished in accordance with law.
The term "residential use" was used in item 28.1 and in sub-paragraphs i) and ii) of paragraph f) of no. 1 of article 6 of Law No. 55-A/2012, a concept that is not used in any other tax legislation, in these precise terms, which is that of "property with residential use".
Namely in the CIMI, which in several norms of the Stamp Duty Code introduced by that Law indicates itself as a subsidiary application instrument with respect to the tax provided for in the aforementioned item no. 28 [articles 2, no. 4, 3, no. 3, paragraph u), 5, paragraph u), 23, no. 7, and 46 and 67 of the CIS], a concept with that designation is not used.
Law No. 83-C/2013, of 31 December, amended that item no. 28.1, giving it the following wording:
28.1 - For residential property or for building land whose construction, authorized or planned, is for residential purposes, in accordance with the provisions of the Property Tax Code – 1%
3.2.2. Concepts of Properties Used in the CIMI
In the Property Tax, the species of properties are enumerated in its articles 3 to 6 as follows:
Article 2
Concept of Property
1 – For purposes of this Code, a property is any fraction of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or situated thereon, with a character of permanence, provided it forms part of the patrimony of a natural or legal person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are situated, although located in a fraction of territory that constitutes an integral part of a different patrimony or does not have a patrimonial nature.
2 – Buildings or constructions, even if movable by nature, are deemed to have a character of permanence when dedicated to non-transitory purposes.
3 – The character of permanence is presumed when the buildings or constructions are situated on the same site for a period exceeding one year.
4 – For purposes of this tax, each autonomous fraction, under the horizontal property regime, is deemed to constitute a property.
Article 3
Rural Properties
1 – Rural properties are lands situated outside an urban settlement that should not be classified as building land, under the terms of no. 3 of article 6, provided that:
a) They are dedicated, or in the absence of concrete dedication, are intended for normal use for the generation of agricultural income, such as are considered for purposes of the personal income tax (IRS);
b) Not having the dedication indicated in the preceding paragraph, they are not constructed or have only buildings or constructions of an accessory nature, without economic autonomy and of reduced value.
2 – Lands situated within an urban settlement are also rural properties, provided that, by virtue of a legally approved provision, they cannot have use for the generation of any income or can only have use for the generation of agricultural income and are in fact having this dedication.
3 – The following are also rural properties:
a) Buildings and constructions directly dedicated to the generation of agricultural income, when situated on the lands referred to in the preceding paragraphs;
b) Waters and plantations in the situations referred to in no. 1 of article 2.
4 – For purposes of this Code, urban settlements are deemed to include, in addition to those situated within legally established perimeters, settlements with a minimum of 10 dwellings served by roads for public use, with their perimeter delimited by points spaced 50 m from the axis of the roads, in the transverse sense, and 20 m from the last building, in the sense of the roads.
Article 4
Urban Properties
Urban properties are all those that should not be classified as rural, without prejudice to the provisions of the following article.
Article 5
Mixed Properties
1 – Whenever a property has rural and urban parts it is classified, in its entirety, according to the main part.
2 – If neither of the parts can be classified as main, the property is deemed to be mixed.
Article 6
Species of Urban Properties
1 – Urban properties are divided into:
a) Residential;
b) Commercial, industrial or for services;
c) Building land;
d) Other.
2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, which are intended for normal use for each of these purposes.
3 – Building land is deemed to be land situated within or outside an urban settlement for which a license or authorization has been granted, admitted prior notice or issued a favorable prior information opinion on a subdivision or construction operation, and also that which has been so declared in the acquisition title, except for lands in which the competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal territorial planning plans, are dedicated to spaces, infrastructure or public facilities. (Wording of Law No. 64-A/08, of 31-12)
4 – The provision of paragraph d) of no. 1 includes lands situated within an urban settlement that are not building land nor are covered by the provision of no. 2 of article 3 and also buildings and constructions licensed or, in the absence of a license, which are intended for normal use for purposes other than those referred to in no. 2 and also those of the exception in no. 3.
3.2.3. Rules on Interpretation of Laws
Article 11 of the General Tax Law establishes the essential rules for interpretation of tax laws as follows:
Article 11
Interpretation
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In determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.
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Whenever terms specific to other branches of law are used in tax norms, they must be interpreted in the same sense as they have therein, unless otherwise directly emerges from the law.
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If doubt persists about the meaning of the applicable tax norms, attention should be paid to the economic substance of the tax facts.
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The gaps resulting from tax norms covered by the reserve of law of the Assembly of the Republic are not susceptible to analogical integration.
The general principles of interpretation of laws, to which no. 1 of article 11 of the General Tax Law refers, are established in article 9 of the Civil Code, which establishes the following:
Article 9
Interpretation of Law
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The interpretation should not limit itself to the letter of the law, but should reconstruct from the texts the legislative thought, having especially in account the unity of the legal system, the circumstances in which the law was prepared and the specific conditions of the time in which it is applied.
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The interpreter cannot, however, consider the legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.
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In fixing the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and knew how to express his thought in adequate terms.
3.2.4. Hypotheses of Interpretation of the Concept of "Property with Residential Use"
As can be seen from the norms of the CIMI transcribed, the concept of "property with residential use" is not used in the classification of properties.
Neither is this concept, with this terminology, found in any other statute.
Thus, in the absence of exact terminological correspondence of the concept of "property with residential use" with any other used in other statutes, several interpretative hypotheses can be advanced.
The starting point for the interpretation of that expression "properties with residential use" is, naturally, the text of the law, and it is on the basis of this that the "legislative thought" must be reconstituted, as required by no. 1 of article 9 of the Civil Code, applicable by virtue of the provisions of article 11, no. 1, of the General Tax Law.
3.2.5. Concept of "Property with Residential Use" as Referring to Residential Properties
The concept most closely corresponding to the literal tenor of this expression used is manifestly that of "residential properties", defined in no. 2 of article 6 of the CIMI as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of a license, which are intended for normal residential purposes.
To understand that the expression "property with residential use" coincides with that of "residential properties" makes it manifest that the assessments would be affected by error as to the assumptions of fact and law, because all the properties in relation to which the Stamp Duty was assessed under the aforementioned item no. 28.1 are building land, without any building or construction, required by that no. 2 of article 6 for fulfilling that concept of "residential properties".
Therefore, if the interpretation is adopted that "property with residential use" means "residential property", the assessments whose declaration of illegality is requested will be illegal, as there is no building or construction on any of the land parcels.
However, the non-correspondence of the terms of the expression used in item no. 28.1 of the GSSD with that which is extracted from no. 2 of article 6 of the CIMI points to the fact that the same concept was not intended to be used.
3.2.6. Concept of "Property with Residential Use" as a Concept Distinct from "Residential Properties"
The word "use," in this context of the use of a property, has the meaning of "action of dedicating something to a particular use".
"When, as is usually the case, norms (legislative formulas) have more than one meaning, then the positive function of the text is expressed in giving stronger support to or more strongly suggesting one of the possible meanings. For among the possible meanings, some will correspond to the most natural and direct meaning of the expressions used, whereas others will only fit within the verbal framework of the norm in a forced, artificial manner. Now, in the absence of other elements that induce the choice of the less immediate sense of the text, the interpreter must opt in principle for that meaning which best and most immediately corresponds to the natural meaning of the verbal expressions used, and in particular its technical-legal meaning, in the assumption (not always accurate) that the legislator knew how to express his thought correctly".
The relevance of the text of the law is especially emphasized in the matter of interpretation of norms of incidence of Stamp Duty, which are reduced to an amalgam, under a common denomination, of an incongruous set of duties of completely distinct natures (on income, on expenditure, on patrimony, on acts, etc.), which leaves no appreciable margin for application of the principal interpretive criterion, which is the unity of the legal system, which demands its overall coherence.
The recognized lack of coherence of Stamp Duty is particularly exuberant in the case of this item no. 28.1, hastily included in the margin of the General State Budget, by a fiscal legislator without perceptible overall fiscal orientation, who is successively implementing norms of fiscal aggravation in line with the vicissitudes of budgetary execution, the impositions of international institutional creditors (represented by the "troika") and the oversight of the Constitutional Court.
In fact, although in the "Explanatory Statement" of Bill No. 96/XII/2nd (of which Law No. 55-A/2012 was based), reference is made to the laudable concern of the Government to "reinforce the principle of social equity in austerity, guaranteeing an effective distribution of the necessary sacrifices to comply with the adjustment program" and its commitment "to ensure that the distribution of these sacrifices will be made by all and not just by those who live on their work income", it is manifest, on the one hand, that these equity reasons, certainly existing, did not begin to apply in mid-2012, already existing at the beginning of the year, when the General State Budget came into force, and on the other hand, that the scope of item no. 28.1, by taxing additionally properties with residential use and not also properties that do not have it, gives an indication that the concerns for social equity and the proclaimed intention of distributing the sacrifices among all reaches much more some than properly all.
In this context, with no sure interpretive elements allowing the detection of legislative coherence in the solution adopted in the aforementioned item no. 28.1 or the correctness or incorrectness of the adopted solution (relevant for interpretive purposes in light of no. 3 of article 9 of the Civil Code), the tenor of the legal text must be the primary element of interpretation, in accordance with the presumption, imposed by the same no. 3 of article 9, that the legislator knew how to express his thought in adequate terms.
In light of those meanings of the words "use" and "to use," which are "to give destination" or "to apply," the formula used in that item no. 28.1 of the GSSD manifestly encompasses properties which have already been given destination for residential purposes, properties which are already applied to residential purposes, so it is important to inquire whether it will also encompass properties which, despite not yet being applied to residential purposes, are destined for such.
To that end, it will be necessary to clarify when it can be understood that a property is dedicated to residential purposes, namely whether it is when that destination is set for it in a subdivision authorization or licensing act or similar, or only when the actual assignment of that destination is concretized.
From the outset, the comparison of item no. 28.1 of the GSSD with no. 2 of article 6 of the CIMI, which defines the concept of residential properties, points to the need for actual dedication.
In fact, a building or construction licensed for residential purposes or, even without a license, but which is intended for normal residential purposes, is, in light of no. 2 of that article 6, a residential property, since such classification is given to "buildings or constructions licensed for such purposes or, in the absence of a license, which are intended for normal use for each of these purposes".
Therefore, on the assumption that the legislator of Law No. 55-A/2012 knew how to express his thought in adequate terms (as required by article 9, no. 3, of the Civil Code which is presumed), if he intended to refer to those properties already licensed for residential purposes or which have residential purposes as their normal destination, he would certainly have used the concept of "residential properties," which would express perfectly and clearly his thought, in light of the definition given by that no. 2 of article 6 of the CIMI.
Consequently, it must be presumed that the use of a different expression is intended to address a different reality, so that, in good hermeneutics, "property with residential use" cannot be merely a property licensed for residential purposes or destined for that purpose (that is, it will not be enough that it be a "residential property"), having to be a property which already has actual dedication to that purpose.
That this is the meaning of the expression "use," in the same context of property classification that the CIMI makes, is confirmed by article 3, in which, regarding rural properties, reference is made to those "which are dedicated or, in the absence of concrete dedication, are intended for normal use for the generation of agricultural income," which shows that the dedication is concrete, actual. In fact, as can be seen from the final part of this text, a property may be intended for a particular use and be or not be dedicated to it, which shows that the dedication is, at the level of the connection of a property to a particular use, something more intense than mere intention and may or may not occur, downstream of this and not upstream of it.
Furthermore, the text of the law by adopting the formula "property with residential use" instead of "urban properties of residential use," which appears in the aforementioned "Explanatory Statement," points strongly to the fact that the residential use already needs to be concretized, for only then will the property have that use.
In the case at hand, there is a reality even more distant from residential use, which is the absence of any building or construction, and therefore one cannot consider existing a dedication that presupposes its existence.
On the other hand, the legislative intent not to extend the scope of incidence to building land was expressly stated by the Government when presenting Bill 96-XII to the Plenary of the Assembly of the Republic, saying, through the voice of the Secretary of State for Tax Affairs:
"Firstly, the Government proposes the creation of a special rate to tax high-value residential urban properties. This is the first time that in Portugal a special taxation is created on high-value properties intended for residential purposes. This rate will be 0.5% to 0.8% in 2012, and 1% in 2013, and will apply to homes valued at equal to or greater than 1 million euros. With the creation of this additional rate, the fiscal burden required of these owners will be significantly increased in 2012 and 2013".
The express reference to "homes" as the target of the incidence of the new duty leaves no room for doubt about the legislative intent.
Furthermore, there is no reference in the discussion of the aforementioned Bill to "building land".
As for article 45 of the CIMI, it has no relation to the classification of properties, only indicating the factors to be considered in the assessment of building land. What is weighed there, when making reference to the "building to be constructed," is the weighing of the destination of the land, which, as was seen, is something which, in the context of the CIMI, does not imply dedication and occurs before it.
Law No. 83-C/2013, of 31 December, contrary to what the Tax and Customs Authority argues, was not intended to clarify the logical element underlying the initial wording of item no. 28.1, but rather came to confirm, indirectly, the interpretation that it did not encompass building land.
In fact, if the original wording of that item no. 28.1, when speaking of "property with residential use" already intended to encompass the buildings and constructions that constituted "residential properties" (under article 6, no. 2, of the CIMI), and building land for which residential construction was authorized or planned, it would be natural to attribute interpretive character to the new wording, similar to what the same Law No. 83-C/2013 does in other provisions [article 177, no. 7, regarding paragraphs a) and b) of no. 3 of article 17-A of the Personal Income Tax Code, and article 185, no. 1, regarding article 3-A of the Value Added Tax Code] and is customary to do in budget laws, when it is intended that the new wordings apply to situations potentially encompassed by the previous wordings.
Therefore, the fact that interpretive character was not attributed to the new wording points to the intent to alter the scope of incidence of the aforementioned item no. 28.1 of the GSSD and not to maintain it by clarifying it.
By the above, assessment No. 2014... challenged is affected by the defect of error as to the assumptions of fact and law, embodied in violation of item no. 28.1 of the GSSD, which justifies its annulment (article 135 of the Administrative Procedure Code).
- Compensatory Interest
The Claimant requests compensatory interest, but it was not proven that it had paid any amount relating to the assessments whose declaration of illegality it requested.
Article 43, no. 1, of the General Tax Law establishes that "compensatory interest is due when it is determined, in administrative reclamation or judicial challenge, that there has been error attributable to the services from which results payment of the tax debt in an amount greater than that legally due".
As emerges from the express tenor of this norm, the right to compensatory interest depends on the payment of a tax debt in an undue amount.
Given that it was not proven that the Claimant had paid any amount relating to the assessments whose declaration of illegality it requested, the prerequisite for the right to compensatory interest, which is payment, is not thus verified, so the respective claim fails.
- Condemnation for Bad Faith Litigation
The Claimant requests the condemnation of the Tax and Customs Authority for bad faith litigation.
Article 104 of the General Tax Law establishes that "without prejudice to the exemption from costs, the tax administration may be condemned to a financial penalty to be quantified in accordance with the rules on bad faith litigation in case of acting in court against the tenor of binding information previously provided to interested parties or its conduct in the process diverges from that habitually adopted in identical situations" and that "the taxpayer may be condemned to a fine for bad faith litigation, in accordance with general law".
In article 542 of the Code of Civil Procedure the general regime of bad faith litigation is provided for, considering that this occurs when one party has deduced a claim or opposition whose lack of foundation should not ignore, has altered the truth of the facts or omitted facts relevant to the decision of the case, has practiced a grave omission of the duty of cooperation or has made use of the process or procedural means in a manifestly reprehensible manner, with the purpose of achieving an illegal objective, preventing the discovery of truth, hindering the action of justice or unduly protacting the passage of the decision to the status of finality.
In all cases, condemnation for bad faith litigation refers to conduct "in court" behaviors of the taxpayer or the Tax Administration occurring in the judicial process and not in the administrative phase that preceded it.
In the case at hand, the request for condemnation is formulated by the Claimant in the request for arbitral pronouncement, so it necessarily refers to the conduct of the Tax and Customs Authority prior to the arbitral process, for when it formulated it, the Tax and Customs Authority had not yet carried out any procedural conduct.
Thus, it is necessary to conclude that there is no case where the law admits condemnation for bad faith litigation, so the claim formulated must fail.
In any event, there was no express law that excluded building land from the scope of incidence of the Stamp Duty provided for in item no. 28.1 of the GSSD, in the wording in force in 2013, so the prerequisite on which the Claimant bases its request for condemnation of the Tax and Customs Authority for bad faith litigation is not verified.
- Decision
For these reasons, the Arbitral Tribunal agrees on:
a) To judge the instance extinct by subsequent futility of the dispute as to the requests for declaration of illegality of the assessments with nos. 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ... and 20014 ... and to absolve the Tax and Customs Authority from the instance, in the respective part;
b) To judge the request for arbitral pronouncement well-founded as to the request for declaration of illegality of assessment No. 2014 ..., in the amount of €10,345.10, relating to the property with cadastral entry... and to annul this assessment;
c) To judge unfounded the request for condemnation of the Tax and Customs Authority to pay compensatory interest:
d) To judge unfounded the request for condemnation of the Tax and Customs Authority for bad faith litigation.
- Value of the Proceeding
In accordance with the provisions of articles 299 and 306, no. 2, of the Code of Civil Procedure, 97-A, no. 1, paragraph a), of the Tax Court Procedure Code and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is fixed at €279,214.55.
- Costs
Under article 22, no. 4, of the RJAT, the amount of costs is fixed at €5,202.00, under Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority, given that it was defeated and is responsible for the partial subsequent futility of the dispute (articles 528, no. 1, and 536, no. 3, of the Code of Civil Procedure, applicable by virtue of the provisions of article 6, paragraph b), of the Regulation of Costs in Tax Arbitration Proceedings).
Lisbon, 06 January 2015
The Arbitrators
(Jorge Manuel Lopes de Sousa)
(Maria Manuela Roseiro)
(Sérgio de Matos)
Frequently Asked Questions
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