Stamp Tax on Building Land Under Verba 28.1 TGIS: CAAD Arbitration on €1M Threshold

ARBITRAL DECISION

The arbitrator, Dr. Henrique Nogueira Nunes, designated by the Deontological Council of the Center for Administrative Arbitration ("CAAD") to form the Arbitral Tribunal, constituted on 11 December 2015, agrees to the following:

1. REPORT

1.1

A…, with fiscal identification number…, hereinafter designated as "Applicant", requested the constitution of the Arbitral Tribunal under articles 2.º, no. 1, paragraph a) and 10.º of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT").

1.2

The request for arbitral pronouncement has as its object the declaration of illegality of the tax assessment act for stamp duty better identified under the collection documents issued with numbers 2014…, in the amount of € 3,706.00, 2014…, in the amount of € 3,706.00, and 2014…, in the amount of € 3,706.00, effected under the provisions of item 28.1 of the TGIS, referring to the year 2013. Additionally, the Applicant petitions for the reimbursement of the allegedly unduly paid tax and the payment of compensatory interest.

1.3

To support its request, the Applicant alleges, in summary, the following defects:

(i) It considers that the assessment sub judice is not substantiated, in accordance with the provisions of articles 77.º and following of the General Tax Law, and should therefore be annulled in accordance with article 135.º of the CPA, applicable by reference of paragraph d) of article 2.º of the CPPT.

(ii) That the said assessment does not refer to any opinion or information containing the factual and legal substantiation that led to its issuance.

(iii) Considering that the substantiation of the assessment in question does not exist, the assessment act in the present proceedings is manifestly illegal.

(iv) On the other hand, it argues that in 2013, the year of the tax to which this assessment refers, there is no objective incidence that sustains it.

(v) Whereby it must always be concluded that, in this case, the taxable fact did not occur.

(vi) Since no taxable fact exists, by virtue of the lands for construction not forming part of the material objective incidence norm, it is unequivocal that the assessment sub judice is illegal.

(vii) And the pretension to tax the lands for construction thus inescapably escapes the excluding domain of typicality or closed delimitation of the tax type.

(viii) It also argues that the patrimonial value of the property amounts to the global sum of €1,111,800.00 (cf. article 38.º, no. 2, of the IMI Code), but only if the two designations are added together: commerce and housing.

(ix) And that, at the time, the part of the land destined for housing in the future did not meet the required amount under the incidence norm, as it fell short of €1,000,000.00 (one million euros).

(x) Especially since it is uncontroversial that the parcel affected to commerce did not form part of the provision of item 28.1 of the TGIS.

(xi) And that the Respondent taxed indiscriminately for the global value of the property, without heeding said separation.

(xii) In these terms, it concludes, also on this basis, that the Stamp Tax assessment in dispute is illegal, which determines its annulment, for total lack of fulfillment of the legal requirements for taxation.

(xiii) It seeks, in the request, the reimbursement of the paid tax and recognition of the right to compensatory interest.

1.4

The Tax and Customs Authority, hereinafter designated as "Respondent" or "AT", responded, in summary, as follows:

(i) It raises an exception matter on grounds of expiry of the right of action, arguing that the legally defined time period for challenging the tax assessment act in question in the proceedings has been exceeded.

(ii) And that having exceeded the time limit for direct challenge (that is, of the primary act), the "timeliness" of the request could only be founded on the existence of any means of challenging the assessment act where a decision had been rendered denying/dismissing, in whole or in part, the claims therein made by the tax subject (which would constitute a second-instance act).

(iii) And that, it argues, clearly and unequivocally results from the initial petition, the direct challenge of the assessment act in question in the proceedings, whereby the request formulated (leading to the declaration of illegality of the act and, consequently, its annulment) should be declared dismissed as untimely, and consequently the Respondent be absolved of the instance.

(iv) It also responds by Challenge, alleging that there exists no defect of lack of substantiation, inasmuch as it argues that the substantiation of tax acts may be effected in summary manner and should always contain the applicable legal provisions, the qualification and quantification of the taxable facts and the operations of determination of the taxable matter and the tax.

(v) And that it is demonstrated that the Applicant perfectly understood the meaning and scope of the assessments, as results from the very legal-argumentative exercise it makes in the arbitral proceedings.

(vi) For this reason, it says, the request for arbitral pronouncement and the substantiation presented by the Applicant is evidence that this party became aware of the cognitive and evaluative iter.

(vii) It comes equally to argue that the concept of properties with "residential designation", with the wording in force at the date of the taxable facts, for purposes of the provision of item 28 of the TGIS, encompasses lands for construction as urban properties affected to housing.

(viii) And that article 6.° of the CIMI classifies properties in accordance with their licensing or normal destination and not in accordance with their affectation (concept inherent to their respective evaluation).

(ix) For all the foregoing, it alleges that the assessment in dispute embodies a correct interpretation and application of law to the facts, not suffering from a defect of violation of law, and should, consequently, the claim made be judged dismissed and absolved of the request.

(x) As to the different affectations of the land, it argues that, although the property in question has two distinct affectations and the evaluation having calculated separately the value of each of them, the truth is that it is, only and simply, a single property.

(xi) Whereby, taking into account that the property subject to the request for arbitral pronouncement is predominantly affected to housing, it is that, it says, the affectation relevant for purposes of valuation and matricial registration, whereby the objective and subjective requirements of subjection to stamp duty are verified, specifically item 28.1 of the TGIS.

(xii) It concludes for the maintenance of the assessment act, alleging, equally, that compensatory interest is not due.

1.5

The Tribunal considered it advisable to dispense with the holding of the first meeting of the Arbitral Tribunal, in accordance with the provisions of article 18.º of the RJAT, which did not merit any opposition from the parties. An exception was identified that will be considered and decided in the present decision. The parties were notified to present submissions should they wish to, both having decided to do so, reinforcing, in essence, the positions previously expressed. A time period was set for the rendering of the arbitral decision by 10 March 2016.

1.6

The Tribunal was regularly constituted and is competent ratione materiae in accordance with article 2.º of the RJAT.

The parties have legal personality and capacity, show themselves to be entitled and are regularly represented (cf. articles 4.º and 10.º, no. 2 of the RJAT and article 1.º of Regulation no. 112-A/2011, of 22 March).

No nullities were identified in the proceedings.

2. QUESTIONS TO BE DECIDED

In the arbitral petition, the Applicant presents the following questions:

1. Does the stamp tax assessment act in question in the proceedings suffer from the defect of lack of substantiation and, consequently, should it be annulled as illegal?

2. Can a land for construction be qualified as a "property with residential designation" and, if so, may it be encompassed within the scope of application of item 28.1 of the TGIS, amended by article 4.° of Law no. 55-A/2012, of 29 October?

3. Can the AT tax a property, in its entirety, under item 28.1 of the TGIS, even though it has different designations?

In the Response, the Respondent raises a preliminary question in the matter of exception of expiry of the right of action.

3. MATTER OF FACT

With relevance to the consideration and decision on the merits, the following facts are taken as proved:

A) The Applicant is the owner of a plot of land for construction, registered in the property register under the current matricial article…, of the Union of parishes of…, … and …, municipality of …, district of …. (cf. Document no. 4 attached by the Applicant with the request for arbitral pronouncement).

B) The Applicant was notified of the stamp tax assessments no. 2014…, relating to the first installment, in the amount of € 3,706.00 (three thousand seven hundred and six euros), no. 2014…, relating to the 2nd installment, in the amount of € 3,706.00 (three thousand seven hundred and six euros), and no. 2014…, relating to the 3rd installment, in the amount of € 3,706.00 (three thousand seven hundred and six euros), all referring to the year 2013, totaling € 11,118.00 (eleven thousand one hundred and eighteen euros) - (cf. Document no. 1 attached with the request for arbitral pronouncement and Documents attached by the Applicant in response to Arbitral Order dated 02 March 2016).

C) The Applicant proceeded to pay the sums in question, in the context of the stamp tax assessments identified in the proceedings and described in the point above (cf. Documents attached by the Applicant in response to Arbitral Order dated 02 March 2016).

D) With reference to 2013, the land in question in the proceedings had, according to the construction feasibility project supplied by the Municipal Chamber of…, approved designation of Commerce and Housing. (Cf. Document no. 4 and Document no. 5 attached by the Applicant with the request for arbitral pronouncement).

E) The land in question in the proceedings has the taxable patrimonial value of € 1,111,800.00 (one million, one hundred and eleven thousand and eight hundred euros), whose value is divided as follows:

€ 534,357.62 (five hundred and thirty-four thousand, three hundred and fifty-seven euros and sixty-two cents), ascertained by reference to commerce, and

€ 577,436.06 (five hundred and seventy-seven thousand, four hundred and thirty-six euros and six cents), ascertained by reference to housing.

(Cf. Document no. 4 attached by the Applicant with the request for arbitral pronouncement).

F) The taxable patrimonial value (VPT) was determined by the AT on 15 February 2013. (cf. Document no. 4 attached by the Applicant with the request for arbitral pronouncement).

G) On 12 February 2015, the Applicant filed a request for official review against the assessment identified in point B) of the matter of fact, seeking its annulment. (cf. Documents no. 4 and 5 attached by the Applicant with the request for arbitral pronouncement and Administrative Proceedings attached by the Respondent).

H) On 29 June 2015, the Applicant was notified of the dismissal of the official review proceedings that were processed under no. …2015… (cf. Document no. 3 attached by the Applicant with the request for arbitral pronouncement and Administrative Proceedings attached by the Respondent).

I) The identified urban property, classified as land for construction, had no building or construction erected on its soil as of the date of the facts (2013), its respective taxable patrimonial value as of the date of the facts being greater than € 1,000,000.00, specifically amounting to:

– cf. the corresponding assessment acts attached to the request for arbitral pronouncement and urban property register, respectively, Document no. 1 and Document no. 4 attached by the Applicant with the request for arbitral pronouncement and Documents attached by the Applicant in response to Arbitral Order dated 02 March 2016).

J) The AT, considering the Taxable Patrimonial Value assigned to the land for construction above identified, understood the objective requirements for the assessment of Stamp Duty to be verified, arising from the amendment to the TGIS of item no. 28 provided in Law no. 55-A/2012, of 29 October.

K) On 28 September 2015, the Applicant submitted a request for the constitution of the Arbitral Tribunal with the CAAD – cf. electronic request in the CAAD system.

4. FACTS NOT PROVED

There are no facts with relevance to the decision on the merits that were not proved.

5. SUBSTANTIATION OF THE DECISION ON MATTER OF FACT

As to the essential facts, the agreed matter is conformed identically by both parties and the Tribunal's conviction was formed on the basis of the documentary (official) elements attached to the proceedings and above itemized, whose authenticity and veracity was not questioned by any of the parties.

6. ON LAW

In accordance with the questions enunciated, which appear in point no. 2 of the present Decision, and taking into account the matter of fact fixed in point no. 3, it is now important to determine the applicable law.

First and foremost, it is necessary to consider the exception matter raised by the AT in its response, relating to the exception of expiry of the right of action.

The Respondent invokes that the deadline for payment was April 2014 and that with the request for arbitral pronouncement being filed on 28 September 2015, the 90-day period provided in article 10.º, no. 1 of the RJAT, combined with article 102.º, nos. 1 and 2 of the CPPT, had already elapsed, the exception being verified, thus the request formulated would be untimely and the Tribunal cannot hear it, and the Respondent should be absolved of the instance.

It must be stated from the outset that the Respondent is not correct.

The Respondent would be correct if the Applicant had challenged, directly, the tax assessment act, without making any reference to the so-called immediate or direct administrative act, in this case, the dismissal of the official review act.

However, this did not happen given the concrete circumstances of the proceedings.

The Applicant submitted the request for the constitution of the Arbitral Tribunal on 28 September 2015.

But it did so following the notification made by the AT, on 03 June 2015, of dismissal of the official review request submitted.

This results, unquestionably, from the evidence attached to the proceedings.

And from the very object of the request, as such formulated by the Applicant itself in the arbitral petition (cf. articles 1.º and 2.º of the arbitral petition).

Thus, complying with the provisions of paragraph b) of no. 2 of article 10.° of the RJAT.

In these terms, the time period for filing the request for constitution of the Arbitral Tribunal did not commence on the expiry of the voluntary payment period of the tax, but rather, on the date of dismissal of the tax review request, as, indeed, comes to say the Applicant, the request for constitution of these arbitral proceedings being timely.

Thus, and without need for further additional comments, the exception of expiry raised by the Respondent is dismissed.

Entering into the matter of challenge, as regards the questions raised by the Applicant, and this party not having established any priority (other than of an argumentative nature) between those questions it submitted for judgment, considering, even, the very request formulated, it will be necessary to know first of the defect whose substantiation determines, according to the prudent criterion of the judge, more stable or effective protection of the offended interests, as prescribed in no. 2 of article 124.º of the CPPT.

Thus, the analysis of the second of the questions posed to the Tribunal will be initiated, concerning the matter of objective incidence, already that, proceeding with the same, the Applicant will obtain, from the outset, more effective and stable protection of its interests.

6.1. On the scope of objective incidence of item 28.1 of the TGIS

The assessments that constitute the immediate object of this arbitral action have their origin in item 28.1 of the TGIS, amended by article 4.º of Law no. 55-A/2012, of 29 October, having as an essential requirement being faced with real estate that is encompassable within the concept of "properties with residential designation".

Since in the situation under scrutiny the real estate in question is exclusively a land for construction, lacking any building, it is important to determine the meaning of the expression "properties with residential designation" so as to conclude whether or not it encompasses lands for construction.

The matter under analysis has already been the object of extensive tax arbitral case law. We refer, in particular, without concerns for exhaustiveness, to the decisions rendered in the following cases: 42/2013-T, of 18-10-2013; 48/2013-T, of 09-10-2013; 49/2013-T, of 18-09-2013; 53/2013-T, of 02-10-2013; 75/2013-T, of 01-11-2013; 144/2013-T, of 12-12-2013 and 158/2013-T, of 10-02-2014.

The Judicial Tribunals have equally pronounced themselves on this same question. We refer to the decisions rendered by the Supreme Administrative Court ("STA") in the following cases: 048/14, of 09-04-2014 and 0270/14, of 23-04-2014.

Both the cited arbitral case law and the cited judicial case law, which we endorse, considers that lands for construction are outside the scope of the provision of item 28.1 of the TGIS, in the wording in force as of the date of the facts, in the terms that are explained below, beginning by analyzing the legislative context in which the amendment of item 28 to the TGIS occurred.

A. Context of the approval of item 28.1 of the TGIS and its respective regime

In the discussion in Parliament of the Proposed Law no. 96/XII (2nd), which was at the origin of Law no. 55-A/2012, which amended item 28 to the TGIS, the Secretary of State for Tax Affairs stated that:

"(...) In order for the tax system to promote greater equality, it is fundamental that the budgetary consolidation effort be distributed among all taxpayers and focus on all types of income, encompassing with special emphasis capital income and high-value properties. This matter, it should be recalled, was extensively addressed in the Constitutional Court's ruling (...).

This proposal has three essential pillars: the creation of special taxation on urban properties worth more than 1 million euros; the increase in taxation on capital income and capital gains; and the strengthening of rules to combat tax fraud and evasion.

First, the Government proposes the creation of a special rate to tax residential urban properties of higher value. It is the first time in Portugal that special taxation is created on high-value properties intended for housing. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses worth equal to or greater than 1 million euros. With the creation of this additional rate, the tax effort required of these owners will be significantly increased in 2012 and 2013" (emphasis ours) – cf. Journal of the Republic Assembly, I series, no. 9/XXII-2, of 11 October 2012, pp. 31-32.

Both the houses and the residential urban properties here referred to are not reconducible to lands for construction. It is noted that residential urban properties are one of the classificatory concepts contained in article 6.º of the IMI Code clearly distinct from lands for construction. In fact, article 6.º, no. 1, cited provides that:

"1 - Urban properties are divided into:
(i) Residential;
(ii) Commercial, industrial or for services;
(iii) Lands for construction;
(iv) Others." (emphasis ours)

Thus, residential urban properties and lands for construction are, for purposes of IMI (whose applicability, by reference, to Stamp Duty is, as shall be seen below, to be invoked), two distinct categories, with their own classifications and legal definitions contained in the mentioned article 6.º of the IMI Code.

In light of the foregoing and as emphasized in the arbitral decision in case no. 75/2013-T, of 1 November 2013, it appears clear that "in the spirit of the Proposed Law that gave rise to Law no. 55-A/2012 was not the taxation of lands for construction, there being, on the other hand, no evidence to the contrary from the Deputies who approved the law".

Once the context is established, it should be noted that the regime in question came to be approved by Law no. 55-A/2012, of 29 October, and, among several amendments it made to the Stamp Duty Code, it amended item 28 of the TGIS, with the following wording:

"28 – Ownership, usufruct or surface right of urban properties whose taxable patrimonial value recorded in the register, in accordance with the Code of the Property Tax on Real Estate (CIMI), is equal to or greater than € 1,000,000 – on the taxable patrimonial value used for purposes of IMI:

28.1 – For property with residential designation – 1%;

28.2 – For property, when the tax subjects that are not natural persons are resident in a country, territory or region subject to a clearly more favorable fiscal regime, appearing on the list approved by regulation of the Minister of Finance – 7.5%". (emphasis ours)

B. The concept of "property with residential designation"

It is thus important to interpret the provision of item 28.1 of the TGIS and determine its meaning and scope, in light of the absence of a legal definition of the concept of property with residential designation (a notion fundamental to the delimitation of the objective incidence), whether in the Stamp Duty Code itself or in any other enactment, including the IMI Code applicable by reference.

In fact, as highlighted in the Arbitral Decision relating to case no. 53/2013-T, of 2 October 2013, the concept of "property with residential designation" is not employed by the other tax legislation, in particular, as is relevant in this case, in the Stamp Duty Code and the IMI Code, the latter, of subsidiary application within the scope of item 28 of the TGIS, as provided in articles 2.º, no. 4; 3.º, no. 3, paragraph u); 5.º, paragraph u); 23.º, no. 7; 46.º, no. 5 and 67.º, no. 2, all of the Stamp Duty Code.

In the same sense, refers the Arbitral decision in case no. 144/2013-T, of 12 December 2013, that this concept used by item 28.1 (of property with residential designation) "not only does not appear defined in any provision of the Stamp Duty Code, but is also not used in the IMI Code, enactment to which article 67.º, no. 2 of the CIS expressly refers when matters not regulated in the CIS are in question relating to item 28."

Tax norms must be interpreted like any others, having surpassed the conception that they would have the exceptional character that was once assigned to them.

It should be noted in this regard that article 9.º of the Civil Code marks the prevalence of the spirit over the letter of the law, though expressly placing the letter as a limit to the search for meaning. Article 9.º of the Civil Code represents the emanation of a general hermeneutic principle, assisting it, for that reason, with intrinsic validity. It provides:

"1. Interpretation should not be confined to the letter of the law, but should reconstruct from the texts the legislative thinking, having especially in account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

1. However, the legislative thinking that does not have in the letter of the law a minimum of verbal correspondence, albeit imperfectly expressed, cannot be considered by the interpreter.

2. In fixing the meaning and scope of the law, the interpreter shall presume that the legislator enshrined the most correct solutions and knew how to express its thinking in adequate terms."

The LGT, in its article 11.º, came, in the specific field of tax laws, to enshrine a set of interpretation rules as follows:

"1. 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.

1. Whenever, in tax norms, terms specific to other branches of law are used, they should be interpreted in the same sense as that which they have there, unless otherwise directly results from the law.

2. If doubt persists as to the meaning of the applicable incidence norms, the economic substance of the taxable facts should be considered.

3. Gaps resulting from tax norms covered by the reservation of law of the Republic Assembly are not susceptible to analogical integration."

It appears that the text of the LGT adds nothing, referring to the general rules and principles, besides incorporating distinct principles of difficult compatibility.

As seen above, the IMI Code uses (in its article 6.º, no. 1) the notion of residential urban properties, which it enshrines as an autonomous category distinct from that of lands for construction, but does not provide for the concept of "property with residential designation", whose interpretation is now necessary.

At this point, we resort again to arbitral case law and to the Decision rendered in case no. 53/2013-T, above referenced, which is here endorsed and from which the following excerpt is transcribed:

"3.2.5. Concept of 'property with residential designation' as referring to residential properties

The concept closest to the literal wording of this expression used is manifestly that of 'residential properties', defined in no. 2 of article 6.º of the CIMI as encompassing 'buildings or structures' licensed for residential purposes or, in the absence of license, that have as their normal destination residential purposes.

If it is understood that the expression 'property with residential designation' coincides with [that] of 'residential properties', it is manifest that the assessments will suffer from error on the factual and legal assumptions, since all the properties with respect to which Stamp Duty was assessed under the aforesaid item no. 28.1 are lands for construction, without any building or structure, required to meet that concept of 'residential properties'.

For this reason, if the interpretation is adopted that 'property with residential designation' means 'residential property', the assessments whose declaration of illegality is sought will be illegal, for there being in any of the lands any building or structure.

However, the lack of coincidence of the terms of the expression used in item no. 28.1 of the TGIS with that extracted from no. 2 of article 6.º of the CIMI, points in the direction of not having intended to use the same concept.

3.2.6. Concept of 'property with residential designation' as a concept distinct from 'residential properties'

The word 'designation', in this context of the use of a property, has the meaning of 'action of destining something to a determined use'.

'When, as is usually the case, norms (legislative formulas) have more than one meaning, then the positive function of the text translates into giving greater support to or suggesting more strongly one of the possible meanings. It is that, among the possible meanings, some will correspond to the more natural and direct meaning of the expressions used, while 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 selection of the less immediate meaning of the text, the interpreter should opt in principle for that meaning which better and more immediately corresponds to the natural meaning of the verbal expressions used, and namely to their technical-legal meaning, in the supposition (not always exact) that the legislator knew how to express its thinking correctly'.

The relevance of the wording of the law is especially emphasized in the matter of interpretation of tax incidence norms, which are reducible to a mixture, under a common denomination, of an incongruous set of taxes of completely different natures (on income, on expenditure, on property, on acts, etc.), which leaves no appreciable margin for application of the primordial 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 outside the General State Budget, by a fiscal legislator without perceptible overall fiscal guidance, which is successively implementing norms of fiscal aggravation in line with the setbacks in budgetary execution, the impositions of international institutional creditors (represented by the "troika") and the oversight of the Constitutional Court. (…)

In this context, as there are no reliable interpretive elements that allow detecting legislative coherence in the solution adopted in the aforesaid item no. 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretive purposes in light of no. 3 of article 9.º of the Civil Code), the wording of the legal text must be the primordial element of interpretation, in accordance with the presumption, imposed by that same no. 3 of article 9.º, that the legislator knew how to express its thinking in adequate terms.

In light of those meanings of the words 'designation' and 'designate', which are 'give destination' or 'apply', the formula used in that item no. 28.1 of the TGIS, clearly encompasses properties already applied to residential purposes, whereby it is important to inquire whether it will also encompass properties that, although not yet applied to residential purposes, are destined to these and those whose destination is unknown.

In light of the literal wording of item no. 28.1, it is to be excluded from the scope of application of Stamp Duty provided therein the lands for construction of some Applicants that do not yet have any defined use, since they are not yet applied to or destined for residential purposes. That is, lands for construction that do not have defined use cannot be considered properties with residential designation, as they do not yet have any designation or other destination than construction of unknown type. An interpretation in the sense that item no. 28.1 refers to properties whose designation is unknown has no minimum of verbal correspondence in the letter of that norm, whereby a hypothetical legislative thinking of that type cannot be considered by the law interpreter, in face of the prohibition contained in no. 2 of article 9.º of the Civil Code.

But this is not enough to clarify the situation of those lands for construction that, although not yet applied to residential purposes, already have a determined destination, namely, in the subdivision license (…).

For this reason, it will be necessary to clarify when it can be understood that a property is designated for residential purposes, namely whether it is when such destination is fixed in a licensing act or similar, or only when the effective attribution of that destination is concretized.

From the outset, the comparison of item no. 28.1 of the TGIS with no. 2 of article 6.º of the CIMI, which defines the concept of residential properties, points manifestly in the direction of an effective designation being necessary.

In truth, a building or structure licensed for housing or, even without license, but which has as its normal destination housing, is, in light of no. 2 of that article 6.º an residential property.

For this reason, on the assumption that the legislator of Law no. 55-A/2012 knew how to express its thinking in adequate terms (as imposed by article 9.º, no. 3, of the Civil Code that one must presume), if it intended to refer to those properties already licensed for housing or that have housing as their normal destination, it would certainly have used the concept of 'residential properties', which would express perfectly and clearly its thinking, in light of the definition given by that no. 2 of article 6.º of the CIMI.

Consequently, it must be presumed that the use of a different expression is aimed at a distinct reality, whereby, in good hermeneutics, 'property with residential designation', cannot be a property merely licensed for housing or intended for that purpose (that is, it will not be enough that it be a 'residential property'), having to be a property that already has an effective designation for that purpose.

That this is the meaning of the expression 'designation', in the same context of classification of properties that the CIMI makes, is confirmed by article 3.º in which, with respect to rural properties, reference is made to those 'that are designated or, in the absence of concrete designation, have as their normal destination a use generating agricultural income', which shows that the designation is concrete, effective. In truth, as can be seen from the latter part of this text, a property can have as its destination a determined use and be or not designated to it, which shows that the designation is, at the level of the link of a property to a determined use, something more intense than the mere destination and which may or may not occur, downstream of this and not upstream.

Moreover, the text of the law by adopting the formula 'property with residential designation', instead of 'urban properties of residential designation', which appears in the referred 'Statement of Reasons', points strongly in the direction of the residential designation already being concretized, since only then will the property be with that designation.

As concerns article 45.º of the CIMI, it has no relation whatsoever to the classification of properties, only indicating the factors to be considered in the valuation of lands for construction. What is pondered there, in making reference to the 'building to be constructed' is the consideration of the destination of the land, which, as seen, is something that, in the context of the CIMI, does not imply designation and occurs before this.

The correctness of this interpretation in the sense that only properties actually designated for housing fit within the scope of application of item no. 28.1 of the TGIS is also confirmed by the perceptible ratio legis of the restriction of the field of application of the norm to properties with residential designation, in the context of the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', which article 9.º, no. 1, of the Civil Code also raises to interpretive elements.

From the outset, the limitation of Stamp Duty taxation to 'properties with residential designation' leaves perceivable that it was not intended to encompass within the scope of application of the tax properties with designation to services, industry or commerce, that is, properties designated to economic activity, which is understood in a context where, as is well-known, the economy finds itself in a recessional spiral, publicly proclaimed at the highest level, with unemployment rates reaching maximum historical levels, with an avalanche of business closures resulting from economic unsustainability.

Bearing in mind this situation and being it is known and public that the reanimation of economic activity and the increase of exports are the ways out of the crisis, it is understood that legislative measures were not taken that would hinder economic activity, namely the increase in fiscal burden that hampers it and affects competitiveness in international terms.

For this reason, it is to be concluded that the available interpretive elements, including the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', point clearly in the direction of it not having been intended to encompass within the scope of application of item no. 28.1 situations of properties that are not yet designated for housing, namely lands for construction held by companies."

In this respect, for the reasons just set out, the understanding advocated by the AT that the notion of designation (residential) of an urban property should be sought in the real estate evaluation regime contained in article 45.º of the IMI Code (which takes into account the designation coefficient provided for in article 41.º of the same Code) cannot be correct.

In fact, as well noted in the decision of arbitral case no. 144/2013-T, "If the primary meaning of 'designation', as we have said, suggests an effective, direct destination, given to a determined asset, we do not see how this understanding can be undermined by the finding that the legislator, within the scope of the evaluation of lands for construction, authorizes (to admit that it does authorize) the use of the designation coefficient, having in view what may be constructed therein.

C. The case Sub Judice

In accordance with the matter of fact, which results as consensual, the real estate underlying the Stamp Duty assessments effected, here challenged, constitutes a land for construction, lacking any building.

Taking as correct and valid (as we do) the understanding that item 28.1 of the TGIS, with the wording in force at the time of the taxable fact in question in the proceedings, postulates the necessity of an effective residential designation of an urban property and not merely a potential one, a land for construction cannot be considered included in that item, since it does not permit, by its own nature, to have an effective and current residential designation.

Thus, in the situation at hand, we are not faced with a property with current residential designation, whereby Stamp Duty provided for in item 28.1 of the TGIS cannot apply to it, the disputed assessment suffering from error in the assumptions, embodied in the violation of the said item 28.1, and should be annulled (cf. article 163.º of the CPA, of subsidiary application ex vi articles 2.º paragraph d) of the CPPT and 29.º, no. 1, paragraphs a) and d) of the RJAT).

It should be noted that the above is not subject to any alteration by virtue of the coming into force of Law no. 83-C/2013, of 31 December (General State Budget 2014) which amended item 28.1 of the TGIS, now taxing lands for construction, since no interpretive nature was assigned to this law, which prevents its application to taxable facts occurring prior to its coming into force, as is the case in the proceedings at issue.

The substantiation of the invalidity in question, conferring secure and effective protection of the interests of the Applicant, prejudices the consideration of the first and third questions raised, for which reason the same will not be considered.

6.2. On the reimbursement of the amount paid and the request for Compensatory Interest

The Applicant seeks the reimbursement of the amount paid under the assessment acts in dispute in the proceedings, in the total amount of € 11,118.00, increased by compensatory interest for the unduly paid amount.

In the case at issue, it is manifest that, following the illegality of the assessment acts, for the reasons that have been better set out in this decision, there is place for reimbursement of the tax paid by the Applicant, by force of the provisions of the cited articles 24.º, no. 1, paragraph b) of the RJAT and 100.º of the LGT, as this is essential to "reestablish the situation that would exist if the tax assessment act which is the object of the arbitral decision had not been practiced".

With respect to compensatory interest, it is also clear in the proceedings that the illegality of the tax assessment acts challenged is directly attributable to the Respondent, which, by its initiative, practiced them without legal support, suffering from a mistaken interpretation (and, therefore, application) of the legal norms to the specific case.

Consequently, the Applicant has the right to receive compensatory interest, in accordance with the provisions of articles 43.º, no. 1, of the LGT and 61.º of the CPPT.

The compensatory interest should be paid to the Applicant from the date on which it made the respective payments of the stamp tax assessments in question in the proceedings until the complete reimbursement of the amounts paid, at the legal rate.

In these terms, the Applicant's request proceeds.

7. DECISION

In light of the foregoing, this Singular Arbitral Tribunal agrees:

• To judge the request for arbitral pronouncement well-founded and declare the annulment of the Stamp Duty assessments, better identified in the proceedings under the numbers 2014…, 2014…, and 2014…, in the total value of € 11,118.00, with the legal consequences.

• To judge well-founded the request for condemnation of the Respondent to reimburse to the Applicant the amount paid as stamp duty, increased by compensatory interest in accordance with legal terms, from the date on which such payment was made until the date of complete reimbursement thereof.

The value of the case is set at Euro 11,118.00, in accordance with the provisions of articles 3.º, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), 97.º-A, no. 1, paragraph a) of the CPPT and 306.º of the CPC.

The amount of costs is set at Euro 918.00, under article 22.º, no. 4 of the RJAT and Table I attached to the RCPAT, to the charge of the Respondent, in accordance with the provisions of articles 12.º, no. 2 of the RJAT and 4.º, no. 4 of the RCPAT.

Let it be notified.

Lisbon, 8 March 2016.

The Arbitrator,

Dr. Henrique Nogueira Nunes

Text prepared by computer, in accordance with article 131.º, no. 5 of the Code of Civil Procedure, applicable by reference of article 29.º, no. 1, paragraph e) of the RJAT.

The wording of this arbitral decision is governed by the spelling prior to the Orthographic Agreement of 1990.

[1] Numbers 2 to 4 of article 6.º of the IMI Code define the concepts in question:

"2 – Residential, commercial, industrial or for services are buildings or structures licensed for such or, in the absence of license, that have as their normal destination each of these purposes.

3 – Lands for construction are considered those lands located within or outside an urban agglomeration, for which a license or authorization for subdivision or construction operation has been granted, prior communication admitted or favorable prior information issued, and also those that have been so declared in the acquisition title, excepting lands where the competent entities forbid any of those operations, namely those located in green areas, protected areas or that, according to municipal territorial planning plans, are affected to spaces, infrastructure or public facilities. (wording of Law no. 64-A/2008, of 31 December)

4 – The provision of paragraph d) of no. 1 includes lands located within an urban agglomeration that are not lands for construction nor are covered by the provision of no. 2 of article 3.º and also buildings and structures licensed or, in the absence of license, that have as their normal destination purposes other than those referred to in no. 2 and also those of the exception of no. 3."

[2] See Oliveira Ascensão, "Interpretation of laws. Integration of gaps. Application of the principle of analogy", in Magazine of the Bar Association, Year 57 – III, Lisbon, December 1997, pp. 913-941.