Summary
Full Decision
ARBITRAL DECISION
1. Report
A..., hereinafter designated as "Applicant," "Taxpayer" or simply "TP," married, taxpayer number..., resident at Rua..., no...,...-..., Porto, parish of... (extinct), currently Union of parishes of..., ..., ..., ..., ... and..., municipality of Porto, came, pursuant to articles 2, paragraph 1, letter a) and 10, paragraph 1, letter a) of the Legal Framework for Tax Arbitration (Decree-Law no. 10/2011, of 20 January, hereinafter "LFTA") and, as stated, articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March (hereinafter "Binding Ordinance"), to submit to CAAD a request for consideration of his claim for a declaration of illegality of acts of assessment of taxes and, thus, a request for constitution of the Arbitral Tribunal.
He thus petitions for a declaration of illegality of acts of assessment of taxes, more specifically of assessment of Special Contribution effected pursuant to Decree-Law no. 43/98, of 3 March (hereinafter "D.L. no. 43/98," "DL" or "the Statute") - Statute that created the tax in question (hereinafter "Special Contribution" or "SC") justified by the appreciation caused by public investments in road infrastructure (including CRIL, CREL, CRIP, CREP and their respective accesses) and approved the respective Regulation ("Regulation of Special Contribution," annex to D.L. no. 43/98 and hereinafter also "Regulation" or "RSC"). And, likewise, petitioning for a declaration of illegality of the assessment of compensatory interest.[1]
The Assessment in question corresponds to the payment slip attached by the TP to the Request for Arbitral Decision, a document identified with number 2018..., with a total amount payable (tax plus compensatory interest) of € 2,442.52 (see document no. 4 attached by the TP).
The Assessment was effected by the Tax and Customs Authority (hereinafter "TA" or "Respondent") following the issuance by the Porto Municipal Chamber (hereinafter also "PMC"), on 17.12.2014, of Building Permit no. ALV/.../.../.../... in the name of the Applicant. Proceeding in this manner (to Assessment) by application of D.L. no. 43/98, more specifically of the Regulation. Starting from its articles 1 and 3, both articles forming part of the respective Chapter I - "Scope of Application."
The Applicant does not accept the Assessment effected by the TA, which he places in question here, because he understands, among other things, that the situation in question in the proceedings does not fall within the scope of application of the tax as delimited by D.L. no. 43/98.
Furthermore, he states, in support of his position in the proceedings, that the TA did not carry out the inspection that D.L. no. 43/98 provides for prior to the appraisal for purposes of determining the taxable matter.
He thus invokes omission of legal formalities. He further invokes the defect of lack of grounds, due to insufficiency thereof, in the terms he expounds. And also violation of the principle of legality, because, according to his understanding, the Respondent based itself, to proceed to Assessment, on an internal legal opinion of its own. All with the consequent voidability of the Assessment, by violation of law.
Finally, the Applicant further invokes unconstitutionality, organic, formal and material, of D.L. no. 43/98. By violation, among other things, of the principle of proportionality and of capacity to contribute. With the consequent illegality, also in this respect, of the Assessment in question.
The positions of the Parties are thus divergent, first and foremost, as to the applicability to the case of the scope of application norm, contained in article 1, in conjunction with article 3, of the Regulation of Special Contribution, annex to D.L. no. 43/98.
Notwithstanding not accepting the Assessment, the Applicant proceeded to payment. Whereby he now petitions: (i) the annulment of the Assessment and the reimbursement of the amounts paid, (ii) indemnificatory interest, and (iii) the condemnation of the Respondent in the costs of the proceedings.
The Respondent is the Tax and Customs Authority (hereinafter "TA" or "Respondent").
The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and notified to the TA on 30.11.2018.
Pursuant to the provision in letter b) of paragraph 1 of article 11 of the LFTA, the Ethics Council appointed as arbitrator of the singular Arbitral Tribunal the undersigned, who duly accepted the charge.
On 22.01.2019 the Parties were notified of the appointment of arbitrator and did not manifest intention to refuse it, see article 11, paragraph 1, letters a) and b) of the LFTA and articles 6 and 7 of the Ethics Code.
Pursuant to the provision in letter c) of paragraph 1 of article 11 of the LFTA, the singular Arbitral Tribunal was constituted on 11.02.2019.
Notified for this purpose, the TA filed a Response, arguing for the total dismissal of the Request for Arbitral Decision (hereinafter "RAD"), and for the consequent maintenance of the Assessment in question in the Legal Order.
The Respondent understands, in summary, that the Assessment does not suffer from any defect. It defends that the situation dealt with in the proceedings falls within the scope of application of the tax in question, more specifically in article 1, paragraph 2 of the Regulation, in conjunction with article 3 thereof.
To corroborate its understanding, it invokes, among other things, that partial demolition occurred - in the work in question - and that it carried out "movement near the property for [the experts] to carry out the on-site appraisal." It further argues that there is no lack of grounds, but rather disagreement on the part of the Applicant regarding the grounds provided. And, further, that - by now placing in question the Assessment - the Applicant is acting in venire contra factum proprium, for the reasons it expounds (and which are briefly summarized by the fact that the Applicant, having acted as an expert in its own representation in the Appraisal Commission, despite having written a dissenting vote, did not expressly state in its vote disagreement regarding the grounds contained in the appraisal report).
It states, finally, that the internal legal opinion identified by the Applicant was used by it, TA, only as an aid in the interpretation of the norms in question. And that the same did not create any obligation for the Applicant, but rather for itself, TA, which gave it effect (see paragraph 46 of the Response).
Furthermore, that D.L. no. 43/98 does not suffer from any unconstitutionality.
By order of 08.04.2019 this Tribunal decided to notify the Parties for the meeting provided for in article 18 of the LFTA, considering the Applicant's request for production of evidence by party statements and testimonial evidence.
The meeting took place on 08.05.2019, with the Parties then being notified to present optional, successive written submissions, in the period of 10 days each, with the count of the period starting on the Applicant's side following the attachment of a document to be made by the Respondent (as then requested by the Tribunal, with a 10-day period), the exercise of the right to be heard - by the Applicant regarding the same document, and by the Respondent regarding the documentation attached at the Tribunal meeting by the Applicant - to take place in the context of submissions.
The Respondent came, within the period fixed by the Tribunal, to attach to the proceedings its Opinion No. 84/2005, of 07.04.2005.
The Applicant presented, then, his submissions, reiterating what was already stated in the RAD. He corroborates his understanding, to the effect that the situation does not fall within the scope of application of the norms in question, based on the factual situation alleged by him, which he considers to have been proven, whether through documentary evidence, including documentation attached at the Tribunal meeting, or through party statements and witness testimony at that meeting.
He adds that the internal Opinion subsequently attached by the Respondent at the request of the Tribunal comes to confirm the position for which (he, the Applicant) argues, and binds the Respondent.
Having been notified of the Applicant's submissions, the Respondent came to present its own. In this connection the Respondent invokes the exception of material incompetence of the Arbitral Tribunal. It further states that (i) there was an increase in construction area and that, to that extent, the contribution is due, (ii) reiterate what was stated in the Response and (iii) state that the fact that a property is attributed an honorable mention does not imply exemption from the Special Contribution.
Notified by this Tribunal for exercise of its right to be heard regarding the exception invoked by the Respondent, the Applicant came to express itself as - briefly - follows: (i) the raising of the exception is untimely by virtue of article 97, paragraph 2 of the CPC and, without prejudice, (ii) the Tribunal is competent ratione materiae, with Arbitral Tax Decisions already existing to that effect in proceedings of "analogous subject matter,"[2] the contribution in these proceedings being, as in those, administered, assessed and collected by the TA and, further, considering article 4, paragraph 3 of the GTL. Whereby, it argues, the exception should be dismissed.
The Arbitral Tribunal was duly constituted and the Parties have legal personality and capacity, are properly entitled and are duly represented, see articles 4 and 10, paragraph 2 of the LFTA and article 1 of Ordinance no. 112-A/2011, of 22 March.
The Proceedings do not suffer from nullities.
In order to ascertain whether anything prevents examination of the merits of the case, it shall be necessary to begin by examining the matter of exception, namely the competence of the Tribunal ratione materiae, see article 13 of the ATCP and articles 96, letter a) and 97, paragraph 1 of the CPC.[3]
This shall be done immediately after treatment of the factual matter.
2. Factual Matter
2.1. Established Facts
The following facts are considered established:
a) The Applicant is the owner of the property entered under article no.... in the urban property register of the Union of Parishes of..., ..., ..., ..., ... and..., district and municipality of Porto, article which corresponds to (and has its origin in) the former urban property article no...., of the extinct Parish of..., and whose year of entry in the urban register is..., with "S.C.: 80 m2" / "area of implantation of the building: 80.0000 m2" (see Property Booklets, of 22.08.2013 / 29.11.2016 and 29.11.2018 - doc. 7 attached with the RAD).
b) The urban property, in a) above, is the property described in the Property Registry Office of Porto under no...., contained in Book no.... under no...., Section 1, located at Rua..., no.... and..., with basement, three floors and yard, covered area 80 m2 and uncovered area 67 m2, acquired by the Applicant and his wife, as per Acquisition Deed... of 2013/04/19 contained in the respective Permanent Certificate of Property Registry of 30.11.2018 (see Document 7 attached with the RAD).
c) The Applicant acquired the property (in a) and b) above) by Public Deed of Purchase and Sale of 19 April 2013, from whose content it appears, among other things: "(...) Property. - Nature: Urban, composed of basement house and three floors, with yard. - Area: Covered 80 m2 and uncovered 67 m2. - Use: Housing." (see doc. 5 attached with the RAD)
d) On 17.12.2014 a Building Work Permit was issued in the name of the Applicant by the Porto Municipal Chamber, with No. ALV/.../.../.../..., in File no..../......CMP, concerning the property (in a) to c) above).
e) From the content of the Permit (in d) above), it appears, among other things (see Document 9 attached with the RAD, and AP):
"(...) Pursuant to article 74 of Decree-Law no. 555/99, of 16 December, as amended by Decree-Law no. 26/2010, of 30 March, Legal Framework for Urbanization and Building (LFUB), the present building work permit is issued for extension/alteration works, in the name of A..., holder of ID no.... and taxpayer no...., which authorizes the approval of works that affect the property located at Rua..., no.... and..., oriented from east to west, of the parish of..., described in the Property Registry Office of Porto under no.... and entered in the urban property register under article no.... of the respective parish. (...)
Characteristics of the work:
Total construction area: 342 m2, of which 4 m2 related to extension and 324 m2 related to alteration and 14 m2 related to existing to be maintained;
Gross construction area: 324 m2
(...)
No. of floors below the sill level: 1; No. of floors above the sill level: 3;
Height: 9.9m
Total number of housing units: 1.
Building uses: The building is intended for housing, being composed of 1 housing unit.
The conditions for construction, whose compliance will determine the subsequent decision to authorize use of the building, are those mentioned in the sheet attached to this permit, as well as those indicated in the opinions and information from the entities and services presented below. (...)"
f) When instructing and submitting the application for building permit, it was the Applicant's intention to proceed with a façade alteration to introduce garage space within the housing, the application being made, and the Permit issued, accordingly.
g) From the Measurement Map, which constitutes Annex C to the execution project submitted to the PMC, it appears, among other things (see Document 11 attached with the RAD, and AP):
(...)
[Text in table format - contains measurement details]
(...)
h) After the Permit was issued - and before work began - the Applicant decided to dispense with proceeding to the façade alteration and inclusion of garage within the housing.
i) The work carried out did not involve façade alteration, nor alteration either of the use of the property, or of the number of floors, or of the implantation area, or of the height.
j) The work was intended for and resulted in the recovery and alteration of the existing house, having respected its original design, including constructive aspects, not destroying the genesis of the traditional constructive techniques of the existing building, which building was maintained, adapting it to current characteristics of thermal comfort, acoustic comfort and safety that were added.
k) The building permit application was submitted because it was then intended to proceed with façade alteration, which was not subsequently executed.
l) By Letter no...., of 02.02.2015, from the Respondent, the Applicant was notified to present a Statement of approved form for purposes of assessment of Special Contribution.
m) From the Letter in l) above appears, among other things (see Document 8 attached with the RAD and AP):
"(...) Pursuant to article 7 of the aforementioned Decree-Law, holders of permits or licenses shall present by the end of the month immediately following that in which the permit was issued by the competent Municipal Chamber the said statement mod. 1 (mod. 1350 exclusive of INCM) in triplicate.
Given that a Building Works Permit no. ALV/.../.../.... was issued in your name by the Municipal Chamber of Porto on 17/12/2014, without such provision having been complied with to date, you are hereby notified to present, within the period of 15 days from notification, the said statement, and you may benefit from reduction of the fine, pursuant to article 29 of the General Framework for Tax Violations.
After expiry of the period, should it not be satisfied, a notice record shall be drawn up and the respective contraventional procedure shall be initiated. (...)"
n) On 30.07.2015 the Applicant presented the Statement for purposes of Special Contribution and paid the fine avoiding further costs, and indicated therein his name as "Representative of holders of construction rights in the appraisal commission" (see document 6 attached with the RAD, and AP).
o) By Letter no...., of 15.12.2015, the Applicant was notified to appear at the Tax Services on 04.02.2016 for purposes of the appraisal commission meeting. The Letter states, among other things (see AP3, underlined as in the document itself):
"(...) and should bring with him all elements he deems necessary for a correct appraisal, namely building permit and approved project."
p) The Applicant attended the meeting in n) above, bringing with him all documentation concerning the Project.
q) The documentation concerning the Project was not consulted by the Experts present at the meeting in o) and p) above, the Applicant having insisted that it be.
r) At the end of the meeting the Applicant wrote out and signed a statement, in the "Appraisal Report," in the following terms (see document 2 attached with the RAD and AP3):
"I do not agree with the applicability of special contribution because there is no 'construction land' nor areas resulting from 'demolition of existing urban properties' pursuant to paragraph 2 of article 1 D.L. 43/98 and as stated in ALV/.../...//DMU."
s) From the Final Plans approved by the PMC - and submitted to the Respondent's Services on 07.03.2017 for purposes of appraisal of the property in compliance with article 31 of IMPI - there are identified, in yellow, under Alterations, specific elements to be demolished (see document 10 attached with the RAD).
t) By Letter no...., of 05.02.2016, from the Respondent, the Applicant was notified of the Draft Assessment of SC (see document 2 attached with the RAD and AP3).
u) The Applicant exercised his right to be heard in writing, arguing for non-subjection to SC and for the illegality of the intended assessment (see document 3 attached with the RAD and AP3).
v) The Respondent maintained the assessment and notified the Applicant of the SC assessment, in the total amount payable of € 2,442.52, by Letter no. 2018..., of 27.06.2018 (see document 1 attached with the RAD and AP3).
w) From the Letter in u) above (hereinafter "Assessment Letter") it appears, among other things:
"(...) You are hereby notified of the assessment of Special Contribution approved by Decree-Law no. 43/98, of 3/3, of the property located at Rua..., no.... and..., entered in the urban property register of the extinct parish of..., Porto, under article..., following approval of the works of ALV/.../.../.... as per the annexed document composed of six pages.
You are further notified pursuant to article 15 of the Regulation of Special Contribution, to effect voluntary payment of the amount of € 2,442.52 (two thousand four hundred and forty-two euros and fifty-two cents), by the end of the month following that of notification. After expiry of the period, should the contribution not be shown as paid, accrual interest shall commence and a certificate of debts shall be extracted for coercive collection. (...)"
x) From the Information attached to the Letter in u) and v) above it appears, among other things:
"(...)
-
The building work permit issued identifies the type of works to be carried out: Extension/Alteration;
-
As can be verified by reading the article referred to in the previous point, the issue involves the interpretation and application of the Special Contribution Regulation in force. As in any other situation of application of law, it is necessary to know the scope of the fiscal norm and decide, then, from the facts that fall within its scope;
-
In that sense, - following Legal Opinion No. 84/2005, of 07-04-2005, prepared by the Directorate of Services (...) - more than the designation of the nature of the work (either made by the chamber when licensing, or by the taxpayer in his application), what must be relevant, when assessing such framing, is the project as it was approved, which served as the basis for licensing, as well as the factual situation, the works actually carried out, if in non-compliance with the permit.
The factual elements apprehended in this way are those that must be confronted with the scope of application provisions provided in the Special Contribution Regulations. We cannot therefore say, a priori, that the so-called 'extension/alteration works', in compliance with the respective licensing permits, are, or are not, outside the field of application of special contributions. It shall always be necessary for a case-by-case analysis and a prior understanding of the content of such scope provisions.
- In the same sense, we can see the conclusions of the same legal opinion which states that 'It cannot be said, a priori, that the so-called 'extension, alteration works', in compliance with the respective licensing permits, are, or are not, outside the field of application of special contributions; It is always necessary for a case-by-case analysis that takes into account the works to be carried out, as referred to in the project, and the works actually carried out, if in non-compliance with the permit.'"
y) Attached to the Assessment Letter is a document titled "Calculation of Compensatory Interest," in which the amount of € 2,395.00 is indicated as capital, and € 47.51 as compensatory interest between 31.01.2015 and 30.07.2015.
z) By means of an application submitted for this purpose, the property was awarded an honorable mention under the so-called "João de Almada Prize 2017 – Recovery of Architectural Heritage of the City of Porto," "marking good practices identified in the intervention" (see document attached by the Applicant in the course of the Tribunal meeting).
aa) The Assessment Letter is dated 27.06.2018, indicates as the period for voluntary payment of SC the end of the month following that of notification to the Applicant, and from the respective registered mail receipt, Registration RF... PT, it appears, in "Identification of who received the object," a name, signature and identification document number, the date thereto being 3 July (see AP3, p. 63).
bb) The Applicant proceeded to payment of Special Contribution and compensatory interest on 20.08.2018 (see document 4 attached with the RAD and AP3).
cc) On 29.11.2018 the Applicant filed the Request that gives rise to the present proceedings in the CAAD system.
2.2. Unproven Facts
It was not proved that the Respondent carried out a prior inspection before appraisal.
As for the remainder, and with relevance to the decision of the case, there are no facts that have not been established.
2.3. Substantiation of Factual Matter
The facts established as proven were so based on the documents attached to the proceedings, including with the RAD and in the Administrative File ("AF"), critically appraised - all documents which are hereby fully reproduced - and likewise on the positions manifested by the Parties in the pleadings. As well as on evidence from party statements, freely appraised by the Tribunal, and on testimonial evidence produced and critically appraised.
Regarding evidence from party statements, the Tribunal understands that the Applicant gave his statements truthfully about the facts in which he was involved and about which he was questioned. Regarding the testimony of the witnesses, and notwithstanding their professional relationship with the Applicant during the time of the facts in question in the proceedings, the Tribunal considers that they gave their testimony with impartiality, revealing to the Tribunal the knowledge they possessed regarding the facts they referred to, there being no reason to question their truthfulness.
The fact established as unproven was so not only based on critical appraisal of the documents attached and exposition by the Respondent in the Pleadings, but also based on evidence from party statements produced.
It is for the Tribunal to select, from those alleged by the Parties, the facts that matter for the appraisal and decision of the case by prospecting plausible hypothetical solutions to legal questions (see article 16, letter e) and article 19 of the LFTA and also article 123, paragraph 2 of the TAP and article 596 of the CPC[4]), encompassing in its powers of fact-finding instrumental facts and facts that are complementary to or specification of those alleged by the Parties (see articles 13 of the TAP, 99 of the GTL, 90 of the ATCP and articles 5, paragraph 2 and 411 of the CPC[5]).
3. Preliminary Questions – Matter of Exception
3.1 – On Expiration of Right of Action
Since the exception of expiration of the right of action is subject to ex officio examination (see article 608, paragraph 2 of the CPC, final part) and, if verified, determines the impossibility of examination of the merits of the case, and its examination must precede that of any other question even if subject to ex officio examination,[6] the Tribunal understands, ex officio and expressly, to examine it as follows.
Pursuant to the combined provisions of articles 10, paragraph 1, letter a) of the LFTA and 102, paragraph 1, letter a) of the TAP, the Applicant's right to file the RAD expires after expiration of the period of 90 days counted from the end of the period for voluntary payment of the tax obligation in question.
It appears from the Assessment Letter (in coherence with article 15, paragraph 1 of the RSC[7]) that voluntary payment should be effected "by the end of the month following that of notification."
The date on the respective registered mail receipt, see letter z) of the established facts, in the place for completion by the person other than the Recipient to whom the letter was delivered, is 3 of the month of July.
Establishing the rules for notification to taxpayers, article 39 of the TAP states, in its paragraph 3, that when there is registered mail, notification is deemed effected on the date of the respective signature, even when affixed by a third party, as was the case. The norm thus establishes: "Where there is registered mail, notification is deemed effected to the person of the notified party, even when the registered mail receipt has been signed by a third party present at the taxpayer's address, it being presumed in this case that the letter was timely delivered to the recipient."
Thus, having the registered mail been signed on 3 July, as aforementioned, the Applicant must be considered notified of the Assessment on that date and consequently - see article 15, paragraph 1 of the RSC (see note 7) - it must be concluded that the last day of the period for voluntary payment of SC was 31 August 2018, and the period of 90 days (article 10, paragraph 1, letter a) of the LFTA) is counted with commencement on 1 September 2018.
The Applicant filed the RAD in the CAAD system on 29 November 2018 (see cc) established facts). The right of action was not, therefore, on that date, expired, the Applicant having filed the RAD in time, on the 90th day after the end of the period for voluntary payment – see article 10, paragraph 1, letter a) of the LFTA.
3.2 – On the Exception of Material Incompetence of the Tribunal
The Respondent in its submissions invokes the exception of incompetence of the Arbitral Tribunal ratione materiae. The Applicant expressing itself in this respect to the effect of the untimeliness of such invocation and, without prejudice, to the non-verification thereof, as briefly set out above (see Report, pp. 5-6).
Let us see. Even if this were not the case, i.e., even if the Respondent had not invoked the exception, this Tribunal would still have to examine it. Pursuant, first and foremost, to article 16 of the TAP, in establishing, in its paragraph 1, that violation of competence rules ratione materiae determines absolute incompetence of the Tribunal and, in paragraph 2, that: "Absolute incompetence is subject to ex officio examination (...)". And also pursuant to article 13 of the ATCP which establishes, in turn, that: "The scope of administrative jurisdiction and the competence of administrative courts, in any of their types, is a matter of public order and its examination precedes that of any other matter."
Conclusions that would always also be drawn, without surprise, from the CPC, see its articles 96, letter a) and 97, paragraph 1,[8] article 278, paragraph 1, letter a), and articles 577, letter a) and 578: violation of competence rules ratione materiae determines absolute incompetence of the Tribunal, may be argued by the Parties and must be raised ex officio by the Tribunal; absolute incompetence constitutes a dilatory exception and, as such, prevents the Tribunal from examining the merits of the case, leads to dismissal of the instance[9] and is subject to ex officio examination.
"In order for it to be able to decide on the merits or substance of the question it is required that the tribunal before which the action was brought be competent."[10] And the Arbitral Tribunal, it must be stated, has competence to decide on its own competence: it is the "principle of the Arbitral Tribunal's competence of competence,"[11] long recognized as a rule in matters of arbitration.[12]
Should material incompetence of the Tribunal be verified, we would be faced with an insuperable dilatory exception, with the necessary consequences.
Let us assess, then, if this is the case.
Tax Arbitration, as an institutionalized form of arbitration that it is, has its own specificities. Starting with the fact that, despite its nature as arbitration, it deals with (claims) that are indisposable. Thus, respect for the Principle of indisposability, applicable to the TA, led the legislator - see article 4 of the LFTA - to be so exacting as to determine that the common agreement to arbitrate suffer adaptations here and, thus, that the TA bind itself to the arbitration route, previously, by Ordinance.
From which it follows that the competence of the present Tribunal is ascertained by the provisions set out in this respect in the combined provisions of the LFTA and Ordinance no. 112-A/2011, of 22 March (hereinafter "Binding Ordinance"). Ordinance through which one of the parties, the TA, came previously to bind itself to the jurisdiction of Arbitral Tribunals functioning under the auspices of CAAD. To which it decided thus to submit itself, on the terms and conditions defined there by combination with the provisions of the LFTA.
Now, if on one hand in the LFTA the competence of Arbitral Tribunals is established pursuant to its article 2, paragraph 1, on the other, pursuant to article 2 of the said Ordinance, the TA circumscribed (excluding) from that sphere of competence (which it thus delimited) the consideration of claims relating to certain situations, to which it did not accept to bind itself.
And here we are, in a first approach, arrived at the crux of the question now under our examination. Namely: did that delimitation of competence undertaken by way of the Ordinance exclude or not, from the set of claims in which the TA accepted to bind itself to the jurisdiction of Arbitral Tribunals, claims relating to taxes that do not constitute taxes stricto sensu?
Let us see the relevant legal provisions.[13]
In the LFTA, article 2 states, as is most relevant here, as follows:
"Article 2 - Competence of Arbitral Tribunals and Applicable Law
1 – The competence of Arbitral Tribunals comprises consideration of the following claims:
a) Declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account;
(...)."
In turn, in the Binding Ordinance, the respective article 2 is as follows:
"Article 2 – Object of Binding
The services and bodies referred to in the previous article bind themselves to the jurisdiction of Arbitral Tribunals that function at CAAD which have as their object the consideration of claims relating to taxes whose administration is entrusted to them referred to in paragraph 1 of article 2 of Decree-Law no. 10/2011, of 20 January, with the exception of the following:
a) Claims relating to declaration of illegality of acts of self-assessment, withholding at source and payment on account that have not been preceded by recourse to the administrative route pursuant to articles 131 to 133 of the Code of Tax Procedure and Process;
b) Claims relating to acts of determination of taxable matter and acts of determination of tax matter, both by indirect methods, including the decision of the revision procedure;
c) Claims relating to customs duties on importation and other indirect taxes that apply to goods subject to import duties; and
d) Claims relating to tariff classification, origin and customs value of goods and tariff quotas, or whose resolution depends on laboratory analysis or on diligences to be undertaken by another member state in the context of administrative cooperation in customs matters."
Without further elaboration, as unnecessary for our case as shall be seen, one might be tempted to draw from the combined wording of these provisions that the sphere of material competence of Tax Arbitral Tribunals would have been thus "circumscribed" (excluding from it) claims regarding any other taxes than those taxes belonging to the species taxes. This because (as we have just seen) the wording of article 2 of the LFTA makes reference to "taxes" and, then, article 2 of the Ordinance uses the word "taxes."
Better explained, the question would be raised of assessing whether should be understood as excluded from the scope of material competence of Arbitral Tribunals other situations than those which the legislator, by the Binding Ordinance, excluded expressly throughout the letters of the respective article 2 (see above). To know whether, in referring to "taxes" in the Binding Ordinance while simultaneously referring to article 2, paragraph 1 of the LFTA, from whose wording the expression "taxes" appears, yes or no it was intended to exclude from the scope of material competence of Arbitral Tribunals taxes that are not taxes in the strict sense.
Very briefly on this point, let it be said that, notwithstanding the fact that our Legal Order does not contain a legal definition of "tax," it is settled understanding that this same figure – the genus – encompasses among us several possible species. As derives, first and foremost, both from our Constitution (see article 165, paragraph 1, letter i)), and from the General Tax Law (see articles 3 and 4). See how it is provided, under the heading "Classification of taxes," article 3, paragraph 2 of the GTL: "Taxes comprise taxes, including customs and special taxes, and other tax species created by law, namely taxes and other financial contributions in favor of public entities."
Returning more specifically to the case in the proceedings. Should it be understood that the legislator by so expressing itself (in article 2 of the LFTA/article 2 of the Binding Ordinance) had actually wanted to exclude taxes of the species Contributions,[14] it would still be possible to understand, it seems to us, that it is to be examined from the perspective of the legal nature of the tax in question (and consequent legal regime to be considered applicable), to then be able to conclude as to its inclusion or not in the sphere of material competence of Arbitral Tribunals.[15] This always without ceasing to verify the issue of active entitlement in the tax legal relationship in question, which should belong to the tax administration, with the meaning that the legislator intended to signify by the expression "whose administration is entrusted to them," which it used in the body of article 2 of the Binding Ordinance. For this, it is certain,[16] will have been intended by the legislator as a necessary condition for the material competence in question.
Without further elaboration in this respect, let us nevertheless advance. For, in the case of the proceedings, it does not even become necessary to continue to travel this path. Let us see why.
The tax whose assessment is placed in question – the Special Contribution ("SC") – was created (and as such denominated) by the legislator, by authorized DL (D.L. no. 43/98[17]), justified by the substantial appreciation benefiting "rural properties and construction lands surrounding them" - see Preamble of the Statute - as a result of investments made for the accomplishment of certain railway infrastructure, their respective accesses and connected public investments.[18] Still in the Preamble, and among other things, one reads: "Such appreciation justifies the creation of a special contribution, in accordance with measures already adopted, in case of public works of high costs, in zones benefited by the respective undertaking."
The legislator provides, in article 4, paragraph 3 of the GTL, that "Special contributions which are based on the obtaining by the taxpayer of benefits or increases in value of their goods resulting from public works or from the creation or expansion of public services or from the special wear of public goods occasioned by the exercise of an activity are considered taxes."
Attending to the legal regime of "our" SC (whether by considering the Preamble and other legislation it refers to, or by the provision of the Statute, including the Regulation - "RSC"), it is easily concluded that we are faced with a contribution subsumed in paragraph 3 of article 4 of the GTL, of the type also sometimes referred to as "betterment contribution" or "improvement contribution."
Tax, therefore, pursuant to the GTL - article 4, paragraph 3, above - considered a tax.
In commentary to this article of the GTL, António Lima Guerreiro writes:[19] "Paragraph 3 of this article, while not truly containing a definition of special contributions, clarifies that they are taxes." / "(...) the said advantage does not result from a service directly rendered to the taxpayer, but is merely indirect." And further, thus: "Special contributions are not, therefore, a tertium genus distinct from taxes and taxes, but a category of taxes. (...) They currently appear, among special contributions, the so-called betterment contributions rehabilitated after the return of large public works from the end of the decade 80, as are those in Decrees-laws numbered (...) and 43/98, of 3 March (...)." Precisely, therefore, "our" DL.
It is our understanding that, first and foremost, the confrontation between articles 3 (paragraphs 2 and 3) and 4 (paragraphs 2 and 3) of the GTL does not favor the much-desired conceptual clarity in the matter of tripartition, which is today peacefully accepted,[20] of the genus taxes (into taxes, contributions and taxes). And that the difficulties of legal qualification in matters of contributions will not be unrelated to this. But, be that as it may, the fact is that the legislator expressly distinguishes from other contributions special contributions – in paragraph 3 of article 4 of the GTL, thus: "(...) are considered taxes."
Now, independently of deepening whether the legislator intended here merely to refer to the legal regime applicable to taxes, or, more than that, was recognizing special contributions as having a legal nature indistinguishable from that of taxes, it becomes clear that with respect to these taxes in particular the legislator expressly determined that the legal regime to which taxes are subject be applicable – the legal regime of taxes.
Command to which, let it be said, the legislator was not unaware, first and foremost, when creating the SC: it was indeed created, we have already seen, by authorized DL.
See also, in this respect, how Casalta Nabais writes:[21] "(...) the aforementioned provisions of the GTL either repeat what prescribes that constitutional provision [article 165, paragraph 1, letter i)], as does article 3, paragraph 3, or consider special contributions taxes, as prescribes article 4, paragraph 3, which states: (...). Whereby and in conclusion, the referred tertium genus – the other financial contributions – does not appear to be yet the object of its own legal regime, since 'special contributions' are considered taxes and the other 'financial contributions' are equated, in terms of their regime, with taxes."[22]
In our case, if doubts remained as to whether it was a tax considered by the legislator to be a tax, by virtue of the legal regime applicable, they would easily be dispelled. With effect, not only is Doctrine[23] unequivocal in this sense, but also the Jurisprudence that has been produced regarding this tax leads us to the same conclusion.[24] Among others, the Constitutional Court Decisions[25] no. 63/2006, published in DR 1st Series-A of 3 March 2006, and no. 579/2011, case no. 493 11 and the Decision of the STA of 30.01.2013, in case no. 0804/12 can be consulted with interest for the subject.
More. The Respondent itself has already recognized this. See the Decision of the STA of 29.10.2014, case no. 0406/12, in which one reads, at the beginning of the full text, thus: "(...) the Public Treasury filed an appeal to the Central Administrative Tribunal of the North (...) ended its appeal submissions by formulating the following conclusions: (...) E. In fact, Special Contribution – to be qualified as a tax – was created by the cited Decree-Law no. 43/98, of 03 March, in whose Preamble it is said of its relationship to the investments made or to be made (...) which would substantially appreciate the rural properties and construction lands surrounding them (...)."
Sufficing ourselves with what precedes, it must therefore be considered that the tax whose assessment is in question in these proceedings is a tax. A species of tax that, without need for further considerations, falls within the material competence of Arbitral Tribunals.
And, no doubts arise, it is a tax administered by the TA. The norms in the Chapters which in the RSC address "Determination of taxable matter," "Assessment and collection" and "Official revision, administrative objection and judicial impugnation" are unequivocal in this respect, as is, first and foremost, article 3 of D.L. no. 43/98, which states thus: "The administration of the contribution referred to in this statute is the responsibility of the General Directorate of Taxes (GDTI)."
This Tribunal is therefore materially competent, and there are no remaining exceptions that prevent examination of the merits of the case.
4. Matter of Law
4.1. Questions to be Decided
The questions to be decided in the present proceedings are of Law and Fact, namely:
A) Was there or was there not an omission of legal formalities, namely: (i) defect of form by breach of the obligation to carry out prior inspection, and (ii) defect of lack of grounds/insufficient grounds?
B) Was there or was there not a defect of violation of law by error regarding the factual and legal presuppositions, the norm typifying the tax having been applied to facts not subsumible within the respective scope of application?
Should it be decided that D.L. no. 43/98 was effectively applied, there must be assessed the constitutionality questions raised by the Applicant (organic unconstitutionality of the Statute for not complying with the respective Authorization Law and for exceeding the period of the latter; material unconstitutionality of the Statute for violation of the principles of proportionality and of capacity to contribute with violation of articles 104 and 266/2 of the CRP, "in the interpretation according to which SC is due regardless of verifying, concretely, to what extent the CRIP or CREP (or any other public road works) appreciated the Applicant's property").
Finally, there must be decided as to (i) reimbursement of amounts paid and, deciding for reimbursement, as to (ii) indemnificatory interest.
In conformity with the provision of article 124 of the TAP, which governs the order of examination of defects in the judgment, we shall proceed first to the examination of the defect of violation of law (in B above), for being, of those invoked, the defect whose substantiation determines "more stable or effective protection of the offended interests." As follows.
B) Was there or was there not a defect of violation of law by error regarding the factual and legal presuppositions, the norm typifying the tax having been applied to facts not subsumible within the respective scope of application?
The Applicant invokes that the Assessment in question in the proceedings is affected by "error in the factual presuppositions and error of Law by violation of articles 1/1 and 2, 2/1, 4/3 and 6 of the RSC." The Respondent manifests itself to the contrary, arguing that the Assessment should be maintained in the Legal Order.
This involves appraising whether or not the factual situation taken as a presupposition of the Assessment, verified by the Respondent to thus issue the Assessment, was actually verified in reality.
In other words, to appraise and decide whether the incidence typified in the respective norm was actually verified in reality and thus whether the scope norm was respected. In the case, in its aspect of objective incidence.
Let us see. D.L. no. 43/98 provides, as is now relevant, as follows:[26]
"ANNEX - REGULATION OF SPECIAL CONTRIBUTION
CHAPTER I - Scope of Application
Article 1
1 - Special Contribution applies to the appreciation in value of rural properties, resulting from the possibility of their use as construction land for urban purposes, located in the areas of the following parishes: (...)
2 - Special Contribution also applies to the appreciation in value of construction land and of areas resulting from demolition of existing urban properties located in the areas referred to in the previous paragraph.
Article 2
1 - The value subject to contribution is the difference between (...).
2 - The values serving to determine the difference are determined by appraisal pursuant to this Regulation.
Article 3
Contribution is due by holders of construction rights in whose name the building or work permit is issued.
CHAPTER II - Determination of Taxable Matter
Article 4
1 - The appraisal referred to in paragraph 2 of article 2 shall be the responsibility of a commission composed of the taxpayer or his representative and two experts appointed by the General Directorate of Taxes from those included in the district lists.
2 - (...)
3 - The appraisal shall be carried out with prior inspection, with decisions being duly substantiated."
There is not raised in the proceedings a question of subjective incidence, for the Applicant is the owner of the property in relation to which the Assessment was issued - an urban property, which he acquired as such (hereinafter also "the Property") - and in that a building work permit was issued in his name by the PMC – see article 3 of the RSC (above).
The question raised is, we have already said, regarding objective incidence, and here regarding the framing or lack thereof of the factual situation regarding the Property in paragraph 2 of article 1 of the RSC, above. And not in what respects the Property being located in one of the areas (of parishes) covered by the DL, for in that part objective incidence is established.
Regarding the objective incidence in question.
To frame itself in any of the norms of objective incidence, the situation would have to be in the norm contained in paragraph 2 of article 1 of the RSC (above). For we are faced with an urban property, while in paragraph 1 of article 1 incidence is only determined over rural properties, whereas in paragraph 2 it is determined that SC "also applies to the appreciation in value of construction land and of areas resulting from demolition of existing urban properties located (...)"
Appraising and framing.
It is well known how typicity in tax matters encompasses, from the outset, incidence, as one of the essential elements of taxes that it is. We move within the scope of the principle of tax legality, with the implications proper to it.[27] If the factual situation does not fall within the legal type of the tax fact, there is no incidence. The provision of the norm is not filled by the fact which, if it were to verify itself, would have as consequence the birth of the tax. There is therefore no taxable matter (lato sensu).
On the other hand, we also know that in the interpretation of tax laws the general criteria of legal hermeneutics apply – pursuant to article 11, paragraph 1 of the GTL[28] and, through this, article 9 of the Civil Code.[29] We know how these rules and general principles of interpretation and application of laws, also in force, therefore, in Tax Law, operate. Being that the criteria or interpretive factors are essentially two: (i) grammatical element, corresponding to the letter of the law, the text, and (ii) logical element, subdivided this, in turn, into three others, namely, rational or teleological element, systematic element, and historical element. And that the letter and spirit of the law (grammatical element/logical element) must necessarily be used together.
The interpreter "(…) has to proceed from the presupposition that the law emanates from a reasonable legislator; and, for this reason, will have to ask himself how such a legislator would have thought and wanted the law when legislating in the conditionalism of the time of its publication and in the historical environment in which the law was sanctioned. (...)."[30] And, as Baptista Machado states: "(...) point of reference for interpretation: the unity of the legal system. Of the three interpretive factors referred to in paragraph 1 of article 9, this is undoubtedly the most important. (...)."[31] Specifically regarding interpretation of laws in Tax Law Saldanha Sanches stated thus: "(…) Teleological interpretation can thus lead to greater systematicity in Tax Law, as a technique necessarily structuring and attributing meaning to what, otherwise, will be mere conglomeration of laws, (…). Obtaining this systematic unity, which is an indispensable condition for avoiding arbitrariness in the application of tax law, necessarily passes through an interpretation that assures coherence, as a postulate to be obtained, in the ordering of the consequences of Law, (...)."[32]
Still with interest for our case, paragraph 2 of the same article 11 of the GTL provides thus: "Whenever, in fiscal norms, terms proper to other branches of law are used, they should be interpreted in the same sense they have therein, unless otherwise directly derives from law."
Well then.
Having reviewed the legal regime of the tax as established by D.L. no. 43/98, considering also the content of the Preamble thereof and likewise confronting the content of the respective Authorization Law[33] with what came to appear, in matters of incidence, of the authorized DL, and confronting, further, the DL that created and established the legal regime of a tax created in parallel in identical forms and to which reference is made in the Preamble of the DL,[34] no doubts remain to us that - not only in the letter of the law, but in the spirit of the legislator - what was intended to be taxed was the appreciation resulting (from public investments) for construction purposes (urban). Being the appreciation of construction areas what was sought to be taxed.
Let us see, then.
"Heading" the legal regime in question, the legislator states, in the Preamble, in the justification for creating the SC, expressly and only thus: "The investments made or to be made (...) will substantially appreciate rural properties and construction lands surrounding them."
Delimiting the incidence, in the DL, the legislator establishes, in turn, thus (see above): SC applies to the appreciation in value of rural properties, resulting from the possibility of their use as construction land for urban purposes (see article 1/1) and further to the appreciation in value of construction land and of areas resulting from demolition of existing urban properties (see article 1/2). Being that SC is due by holders of construction rights in whose name a building or work permit is issued (see article 3).
In the Authorization Law,[35] in turn, the Parliamentary legislator established, as possibilities for the scope of objective incidence for the SC to be created, the following:
"1) Subject rural properties that increase in value by the possibility of their use as land apt for urban construction to a special contribution;
- Subject to a special contribution construction-apt land, areas resulting from demolition of existing urban properties, as well as those of properties which, by effect of remodeling works, undergo alteration in their volumetry;"
The final part (the last of the situations on which the Authorization Law authorized creation of incidence) was not subsequently included by the legislator in D.L. no. 43/98. Which, all seen and weighed, will not have been by mere chance. In coherence with what we have just expounded and with what we shall see.
Confronting the terms used by the legislator in the DL that created SC and established its legal regime, with the terms, in turn, used by the legislator in the scope of Urban and Building Law and likewise having in mind some concepts proper to architecture and urban planning incorporated in Law, let us further assess.[36]
It follows from article 157 of the RTIM[37] that demolition only in certain and determined cases, few, should from the outset be authorized,[38] constituting the ultima ratio of urban protection measures. It being necessary to harmonize this norm, in turn, with the norms of the LFUB.[39] In the LFUB,[40] as one reads in its Preamble "(...) The principle of protection of the existing in matters of building works is further expressly enshrined, thus retaking a principle already addressed in the provisions of the General Regulation of Urban Building (...).". From article 60 of this latter Statute follows the Principle of protection of the existing, which in its active aspect, by embodying a deviation from the rule of tempus regit actum regarding reconstruction or alteration works, translates the public interest, thus recognized by the legislator, of recovery of built heritage.[41]
And in this latter Legal Statute, article 2 provides thus:
"Article 2 – Definitions
For purposes of this statute, it is understood by:
(...)
b) 'Construction works,' works of creation of new buildings;
(...)
d) 'Alteration works,' works resulting in modification of the physical characteristics of an existing building, or its fraction, namely its structural frame, the number of housing units or interior divisions, or the nature and color of exterior cladding materials, without increase of total construction area, implantation area or façade height;
(...)
e) 'Extension works,' works resulting in increase of implantation area, total construction area, façade height or volume of an existing building;
(...)"
There are several types of building works, in accordance with the classification followed by the legislator, see article 2 of the LFUB. Being that, for what is relevant to the case, the legislator tells us that there is construction work when there is creation of new buildings. Now, creation of new buildings implies, as a presupposition, non-existing building - ab initio, by ruin or demolition.[42] In a case like ours, where the (pre)existing building is an urban property of the species real estate intended for human use or "building," residential urban property,[43] there would have to have been demolition of the existing – demolition of this urban property – to be able to carry out subsequent construction work (see article 2, letter b) of the LFUB). From which a new building would result.
So we interpret then paragraph 2 of article 1 of D.L. no. 43/98, in the part relevant to the proceedings: with reference to urban properties SC applies to the appreciation in value of construction areas resulting from demolition of the existing.[44]
That is, the legislator, in D.L. no. 43/98, makes incidence fall only, when built urban properties are in question, on situations which, within our Legal Order, will be desirably exceptional – their demolition, with consequent creation of construction area. Makes incidence fall on situations of demolition of the existing, then. It seems to us, besides, to be this interpretation that allows maintaining coherence with the preference, embodied in our Legal Order, for recovery of real estate in detriment of its destruction for replacement by new buildings.
And it does not seem to us, in the case, that there has been demolition of the existing.
With effect, what occurred was a utilization of the existing, altering it with a view to its improvement. As we have just analyzed and as results, from the outset, from the established factual matter. The Property was maintained, having the work carried out recovered and altered the existing house (single-family dwelling), respecting the original design and constructive aspects, and adding elements of comfort and safety.
The works in question were therefore – see article 2, letter d) of the LFUB - alteration works[45] (see in this respect, among other things, how it is determined from the Measurement Map – see established facts, g) – which: (i) there was no existing to demolish – 3.1., (ii) there was existing to alter – 3.3., 4.3., (iii) there was no increase in implantation area – 3.3., first column, and there was extension of 4 m2 in terraces/balconies (open area) – 3.3., second column and 5.2.; (iv) there were no reconstruction works – 1.1., 3.5., 4.4.; (v) there were alteration works and, to the extent just verified, extension works – 1.2., 1.3., 5.2.; and let it further be noted that the implantation area (80 m2) remains unchanged since the beginning of the Property's entry in the register – see established facts, a), b) and c) ).
Note also that in interventions on pre-existing buildings these must reconduce themselves, in principle, to one of the species contained in article 2 of the LFUB; being in our case the extension that occurred of 4 m2 in the open area, the work will not cease to be alteration, even though with an element of extension, without alteration of the implantation area of the building. And that, in any case, there is not implicated in what is decisive concluded for our proceedings: there was no demolition of the existing.
There is no demolition of the existing, as there is no the consequent ("resulting," in the words of the legislator)[46] creation of construction area, construction that would be of a new building.
Nor would result differently from what has just been concluded the possible destruction of one or another element (such as, for example, a wall, a window, a step) in the context of alteration work. For such can always occur, even in works of diminute dimension. As even the habitual need to remove debris from the site of such works demonstrates. And it is in this context that, as could not fail to be, we understand the specific elements marked in yellow in the Alterations contained in the Final Plans – see letter s) established facts (above). We are faced with a building work affecting a pre-existing building, maintaining it, even if modified – improved.
And, it seems to us, the interpretation conveyed in Administrative Doctrine to which the Respondent refers having resorted for aid in interpretation of the norms it applied[47] also goes in this direction, highlighting that case-by-case analysis of facts is necessary and verification of works actually carried out if non-compliant with the permit, and that for there to be taxation there is required to be demolition with subsequent construction or reconstruction.
Note finally, how a less contextualized interpretation of what the legislator intended to refer to in the relevant part of paragraph 2 of article 1 of the DL would permit conduct, in the limit, to understanding that the same would have wanted to subject to incidence of SC situations such as that of a property owner who, intending to knock down an interior wall in his house (and by excess of zeal, by hypothesis, requesting a work permit from the Municipal Chamber), would be prevented from doing so unless proceeding to payment of SC, by virtue of the State having decided to undertake public works (as those covered by the DL) in the surrounding area. With justification in the appreciation arising from those public works.
And on the other hand, in situations in the opposite sense, such as in case of a larger-scale work, let it be said, neither will it be because an alteration is more substantial (or an extension is more pronounced) that we cease to be faced with an alteration (or an extension) to be faced with a new building.[48]
In the same sense, that what is at issue in the norm we have just interpreted is demolition of the existing and construction of a new building, see, among others, the learned Decision of the STA of 30.01.2013, case no. 0804/12, where one reads: "(...) The RSC considers that this value – or better, its realization of tax relevance – is consumed once determined specific conditions are verified: use of rural properties or construction land for urban construction or demolition of existing urban properties to building new constructions thereon, which are valued by the accessibility resulting from the identified public works of the statute."
And further, with interest for understanding the whole and that the interpretation we have just made is the one that respects necessary system coherence, see in the same Decision: "As follows from articles 1 and 2 above transcribed, the so-called 'betterment contribution' applies to the 'appreciation in value' of properties or land, located in the territorial areas defined in law, substantially and 'abnormally' appreciated as a direct result of important public investments." With effect, we shall say, it will not be through works carried out on an existing building, maintaining it, preserving it and improving it, that there will be configured an abnormal and substantial appreciation as a direct result of public works in surrounding areas.
Concluding, returning to the case of the proceedings.
There were no construction works – which give rise to creation of new building – see article 2, letter b) of the LFUB – and have as presupposition non-existing building. What could only happen - in the case of urban properties of the species of those in the proceedings, see paragraph 2 of article 1 of D.L. 43/98 - by way of demolition of the existing.
There were rather alteration works[49] – see article 2, letter d) of the LFUB. Works that have as presupposition an existing building, as purpose modification without impact increase, and as result partial innovation.[50] Not implying, therefore, demolition of the existing (which did not occur) with consequent creation of construction area (area which, had it been created, by demolition of the existing, would have had to be understood the legislator considered to benefit from appreciation – see criterion for determination of incidence elected by the legislator in article 1/2 of the DL in the part we have interpreted).
The factual situation in question does not, therefore, fall within the scope of application of the norm.
Anticipating the decision, it is concluded that the assessment in question is affected by a defect of violation of law, by error regarding the factual and legal presuppositions, determining its voidability.
4.2. Questions Rendered Prejudicial
From what precedes it results that the Assessment is unlawful by defect that prevents its renovation. It is considered, in consequence, rendered prejudicial the examination of the other defects imputed to it by the Applicant, by virtue of article 124 of the TAP – which presupposes, by ordering examination of defects, to cease being necessary examination of the remaining ones once judged substantiated one that assures effective protection of the impugnant's rights. As occurs in the present proceedings, in which declaration of illegality of the Assessment is requested.
Examination of the constitutionality questions raised by the Applicant also becomes prejudicial, since D.L. no. 43/98 was not applied, in relation to which such questions were raised. Being that non-application did not result from invoked unconstitutionality.
5. Reimbursement of Amounts Paid and Indemnificatory Interest
The Assessment is therefore affected by illegality, by error regarding factual presuppositions and error in the application of Law. It must in consequence be annulled, which by the present is decided, and the respective amounts, indebtedly paid, restituted to the Applicant.
The Applicant further petitions indemnificatory interest. Let us see if he is justified in this.
Article 24, paragraph 5 of the LFTA establishes the obligation of payment of interest, whatever its nature, pursuant to the terms provided in the GTL and TAP. In accordance with the provision of paragraph 1 of article 43 of the GTL, the obligation of payment of indemnificatory interest takes place when it is determined that there has been error, imputable to the Services, from which results payment of the tax debt in an amount superior to that legally due. And we have already seen that there was error, regarding factual presuppositions and error of Law, from which resulted payment in an amount superior to that due. In the case, not due. The error is imputable to the Services, which carried out the Assessment acts in violation of law, by applying the incidence norm to a factual situation not falling within it.
In the situation of the proceedings, therefore, the error in which the Respondent incurred cannot fail to be considered as being imputable to it, whereby the petition for condemnation to payment of indemnificatory interest, as below, is granted.
6. Decision
On such terms, this Arbitral Tribunal decides to judge the RAD substantiated, and thus:
a) Declare unlawful and consequently annul the assessment of SC and the assessment of compensatory interest more fully identified in the proceedings;
b) Condemn the Respondent to restitution to the Applicant of the amount indebtedly paid, of € 2,442.52;
c) Condemn the Respondent to payment of indemnificatory interest counted from the date of indebted payment (20.08.2018) until issuance of the respective credit note (see article 61, paragraph 5 of the TAP and article 43 of the GTL, with the rate see articles 43, paragraph 4 and 35, paragraph 10 of the GTL and article 559, paragraph 1 of the Civil Code).
7. Value of the Proceedings
Pursuant to the combined provisions of articles 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, 97-A, paragraph 1, letter a) of the TAP, and 306, paragraph 2 of the CPC, the value of the proceedings is fixed at € 2,442.52.
8. Costs
In accordance with the provision of article 22, paragraph 4 of the LFTA, article 4, paragraph 4 of the Regulation already referred
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