Summary
Full Decision
ARBITRAL DECISION
Claimant/Applicant: A…, LDA
Respondent: Tax and Customs Authority (hereinafter A.T.A.)
1. Report
On 07-10-2015, the company A…, LDA, legal entity no. …, with registered address at Rua…, no. …, … D, Lisbon, hereinafter referred to as the Claimant, submitted to the Administrative Arbitration Centre (CAAD) a request for the constitution of an arbitral tribunal with a view to, immediately, the annulment of the tacit dismissal of a request for revision of a tax act of assessment of item 28.1 of the TGIS, and immediately, the annulment of tax acts of assessment of Stamp Tax, relating to the years 2012 and 2013, and relating to the urban property registered in the urban property tax register under article … of the union of parishes of …, … and … –…, municipality of Oeiras, with the tax property value of 1,631,360.00 €.
The Claimant alleges that the property to which the Stamp Tax assessments refer is a building lot, and therefore does not have residential use, since its subdivision permit assigns it to commerce, services and garages. Thus, the Claimant considers that the assessments in question are illegal.
The Claimant further requests the restitution of the tax improperly paid in the amount of 32,627.20 €, plus the amount paid as interest and costs in the amount of 749.60 €, and also compensatory interest at the legal rate, from the date on which it made the payment to the date of issuance of the credit note in favor of the Claimant.
A sole arbitrator, Suzana Fernandes da Costa, was appointed on 01-12-2015.
In accordance with article 11, section 1, paragraph c) of the RJAT, the single arbitral tribunal was constituted on 21-12-2015.
The A.T.A. presented its response on 29-01-2016 (within the legal time limit for this purpose).
The A.T.A. begins by presenting a defense by exception, alleging the absolute material incompetence of the Arbitral Tribunal to assess acts of dismissal of ex officio revision requests that do not involve the assessment of the legality of the assessment acts. The A.T.A. states that in the case at hand it is a tacit dismissal of a revision request and, therefore, there was no analysis of the merits regarding the assessment act, nor any decision on the admissibility of the ex officio revision request or on the timeliness of its submission.
The A.T.A. refers to the inadequacy of the procedural remedy, asserting that the challenge to the assessment is not the appropriate means to discuss matters related to property registration acts, nor does the Arbitral Tribunal have the competence to determine alterations to the property tax register, since the Claimant alleges that the land lot is assigned to commerce and that in the register it is classified as building land.
Finally, the A.T.A. presents a defense by challenge, arguing that the request for a declaration of illegality and consequent annulment of the contested assessment should be judged inadmissible, since the assessment in question constitutes a correct interpretation of item 28.1 of the General Stamp Tax Table, as the said property has the legal nature of a property with residential use.
The A.T.A. further requested, on the same date, the waiver of the meeting provided for in article 18 of the Tax Arbitration Regime.
On 22-02-2016 an order was issued requiring notification of the Claimant to comment on the exception, within 10 days.
The Claimant commented on the exception on 03-03-2016. The Claimant begins by alleging that what it challenged was not the act of tacit dismissal, but rather, as stated in its arbitral request, what it requested was the annulment of the Stamp Tax assessments. As for the inadequacy of the procedural remedy, the Claimant states that it did not intend with the arbitral request to alter the register, nor was it requested that the tribunal rule on this matter.
And it ends by requesting that the exceptions of absolute material incompetence of the Arbitral Tribunal and inadequacy of the procedural remedy alleged by the Respondent not proceed.
On 12-05-2016 an order was issued requiring notification of the Claimant to, within 10 days, comment on the A.T.A.'s request to waive the meeting provided for in article 18 of the RJAT.
The Claimant informed the case that it agreed with the waiver of the meeting.
On 23-05-2016, an order was issued waiving the meeting provided for in article 18 of the RJAT, taking into account the position of the parties and the fact that the Claimant had already commented on the exception contained in the Respondent's response. This order further required notification of the Claimant and Respondent to, if they wished, in this order and successively, present written arguments within 10 days, with the Respondent's time period counted from notification of the joining of arguments by the Claimant or from the end of the time period for it to submit its arguments.
The date for issuing the decision was also set for 21-06-2016, and the Claimant was warned that by that date it should proceed with payment of the subsequent arbitration fee.
The Claimant presented its arguments on 03-06-2016, and the Respondent on 20-06-2015.
The parties have legal personality and capacity and are legitimate (articles 4 and 10, sections 1 and 2 of the RJAT and article 1 of Ordinance no. 112-A/2011 of 22 March).
The present request for arbitral pronouncement was presented in a timely manner, in accordance with article 10, section 1, paragraph a) of Decree-Law no. 10/2011 of 20 January.
The proceeding does not suffer from nullities and no prior questions were raised.
2. On the Exception of Incompetence of the Arbitral Tribunal
In its response, the Respondent presents a defense by exception, alleging the absolute material incompetence of the Arbitral Tribunal to assess acts of dismissal of ex officio revision requests that do not involve the assessment of the legality of the assessment acts.
The A.T.A. states that in the case at hand it is a tacit dismissal of a revision request and, therefore, there was no analysis of the merits regarding the assessment act, nor any decision on the admissibility of the ex officio revision request or on the timeliness of its submission.
The Claimant requests the constitution of the arbitral tribunal to rule on the legality of the Stamp Tax assessments under item 28.1 of the TGIS, for the years 2012 and 2013, justifying the timeliness of its request in the tacit dismissal of the ex officio revision request for said assessments.
The question that arises is whether the Arbitral Tribunal is competent to assess the request for arbitral pronouncement against the tacit dismissal of the request for revision of the assessments in these proceedings.
The CAAD has already ruled on this question in proceedings no. 320/2015-T and no. 323/2015-T.
Let us analyze the competence attributed to the arbitral tribunals functioning under the CAAD.
Article 2 of the RJAT provides that:
"1 — The competence of the arbitral tribunals comprises the assessment of the following claims:
a) The declaration of illegality of acts of assessment of taxes, of self-assessment, of withholding at source and of payment on account;
b) The declaration of illegality of acts of determination of taxable matter when it does not give rise to the assessment of any tax, of acts of determination of collective taxable matter and of acts of determination of property values."
Ordinance no. 112-A/2011, of 22 March, approved under article 4, section 1 of the RJAT, establishes the terms of binding the Tax Administration to the jurisdiction of the arbitral tribunals functioning under the CAAD, having determined the binding of the A.T.A. to the assessment of claims relating to taxes, with the exceptions provided for in paragraphs a) to d) of article 2 of that ordinance. However, in this case, the application of any of those exceptions is not in question.
Thus, it is understood that the competence of the arbitral tribunals comprises the assessment of the legality of acts of assessment of taxes, that is, acts through which the amount of tax to be paid is determined. However, the taxpayer may choose to proceed with direct challenge of the tax act or, alternatively, the law grants him the option, through the administrative route, administratively challenging the act, and subsequently, bringing the respective judicial challenge or request for arbitral pronouncement, in case of dismissal, express or tacit.
In the present proceedings, the Claimant presented a request for ex officio revision of the Stamp Tax assessment in question in these proceedings, relating to the years 2012 and 2013, due by the application of item no. 28.1 of the TGIS, to the property of which it is the owner.
Thus, we understand, as was understood in the decision of the CAAD in proceedings no. 320/2015-T and no. 323/2015-T, that the acts that decide requests for revision of a tax act constitute acts of second and third degree insofar as they involve the assessment of legality of first-degree acts, that is, assessment acts. And as such, it must be understood that the assessment of those acts falls within the scope of the competence of the arbitral tribunals. Only in cases where the act of second or third degree has assessed a prior question whose resolution prevented the assessment of the legality of the primary act (such as timeliness, lack of legitimacy or incompetence), would they be outside the material scope of competence of the arbitral tribunals functioning under the CAAD.
Thus being, the arbitral tribunal, in accordance with article 2, section 1, paragraph a) of the RJAT, can review the legality of the tax assessment act, also in cases where the declaration of illegality can be obtained as a result of the declaration of illegality of second or third degree acts.
Article 2, section 1, paragraph a) of the RJAT does not exclude cases where the declaration of illegality results from the declaration of illegality of the second-degree act, nor cases where that declaration of illegality is requested as a result of the tacit dismissal of the ex officio revision request of the tax act.
Thus it would not be the case if the A.T.A. had refused to assess the ex officio revision request on the ground of any prior question that would prevent the assessment of the legality of the tax act, which was not the case.
The tacit dismissal constitutes a fiction intended to enable the use of contentious challenge remedies (article 57, section 5 of the LGT). It appears, thus, that the segment of article 2/1 of the RJAT that alludes to claims regarding requests for "declaration of illegality of acts" encompasses the declaration of illegality of tacit dismissals of acts of assessment of Stamp Tax, in accordance with article 2, section 1, paragraph a) and 10, section 1 of the RJAT, combined with article 102, section 1, paragraph d) of the CPPT.
Thus, the exception of incompetence raised by the Respondent does not proceed.
3. On the Exception of Inadequacy of Procedural Remedy
The Respondent also refers to the inadequacy of the procedural remedy, asserting that the challenge to the assessment is not the appropriate means to discuss matters related to property registration acts, nor does the Arbitral Tribunal have the competence to determine alterations to the property tax register.
The Respondent mentions that the land in question in the present proceedings has a subdivision permit granted by the Municipal Chamber of … with assignment to commerce, offices and covered parking since 1988 and there was never any construction on the lot. However, in the property register it is classified as building land.
The A.T.A. further argues that the law establishes its own procedural remedy for alterations intended to adapt the register to the physical and economic reality of properties, and that judicial challenge is not the appropriate remedy for this.
Analyzing the arbitral request, it is verified that the Claimant "requests the annulment of the assessments identified above and the restitution to the Claimant of the tax improperly and illegally assessed", justifying this with the fact that there exists, for the building land in question, a subdivision permit since 1988 that assigns it to commerce, services and garages, and there is no construction on the land, therefore it does not have residential use.
And the Claimant does not request any alteration to the property register relating to the property of which it is the owner.
Thus, the exception of inadequacy of procedural remedy alleged by the Respondent must not proceed.
4. Matters of Fact
4.1. Proven Facts:
Having analyzed the documentary evidence produced, the following facts are considered proven and of interest for the decision of the case:
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The Claimant was, at the date of 2012 and 2013, the owner of the urban property registered in the property register under article … of the union of parishes of …, … and … -…, municipality of Oeiras, described as building land and with a tax property value of 1,631,360.00 €, as per the property record attached to the arbitral request as document 1.
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The Claimant was notified of Stamp Tax assessment no. 2012…, for the year 2012, in the amount of 16,313.60 €, relating to the urban property identified in the previous point.
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The Claimant was notified of Stamp Tax assessment no. 2014…, for the year 2013, in the amount of 16,313.64 €, relating to the urban property identified in the previous point, payable in three installments: one by 30-04-2014, another by 31-07-2014 and another by 30-11-2014, as per the assessment and collection documents attached to the arbitral request.
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The Claimant presented, on 10-03-2015, a Request for Ex Officio Revision of the Stamp Tax assessment in question in these proceedings, which received no decision.
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The Claimant proceeded to pay the Stamp Tax assessments for the years 2012 and 2013 attached to the arbitral request, as well as interest and costs in the amount of 749.60 €, as per the proof of payment attached to the arbitral request.
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The revision request had as its object the assessment of the legality of the Stamp Tax assessments and did not have as its object any prior question that would prevent the assessment of the legality of the act.
No other facts with relevance to the decision of the case were proven.
4.2. Reasoning of the Proven Matters of Fact:
Regarding the proven facts, the conviction of the arbitrator was based on the documentary evidence attached to the case file and on facts admitted by agreement.
5. Matters of Law:
5.1. Object and Scope of the Present Proceeding
The question to be decided in these proceedings is whether the property that was the subject of the Stamp Tax assessment, being building land, has residential use and whether item 28.1 of the General Stamp Tax Table (TGIS) is applicable to it.
On this same question have ruled, among others, the decisions of the CAAD issued in proceedings number 53/2013-T, 49/2013-T, 42/2013-T, 180/2013-T, 75/2013-T, 215/2013-T, 240/2013-T, 284/2013-T, 288/2013-T, 310/2013-T, 12/2014-T, 151/2014-T, 202/2014-T, 210/2014-T, 276/2014-T, 514/2014-T, 516/2014-T, 523/2014-T, 599/2014-T and 663/2014-T.
The Supreme Administrative Court has also ruled on this question, specifically in the decisions of proceedings no. 048/14 of 09-04-2014, 07/14 of 02-07-2014, no. 0676/14 of 09-07-2014, no. 0395/14 of 28-05-2014, no. 01871/13 of 14-05-2014 and no. 055/14 of 14-05-2014, no. 0425/14 of 28-05-2014, no. 0396/14 of 28-05-2014, no. 0274/14 of 14-05-2014, no. 046/14 of 14-05-2014, 01481/14 of 15-04-2015, 0764/14 of 15-04-2015, no. 0279/15 of 22-04-2015, no. 021/15 of 29-04-2015 and no. 01479/14 of 17-06-2015. As stated in the decision issued in proceedings no. 0676/14 of 09-07-2014: "Since the legislator has not defined the concept of 'properties (urban) with residential use', and resulting from article 6 of the IMI Code – subsidiarily applicable to the Stamp Tax provided for in the new item no. 28 of the General Table – a clear distinction exists between 'residential urban properties' and 'building land', these cannot be considered, for purposes of the incidence of Stamp Tax (Item no. 28.1 of the TGIS, as worded by Law no. 55-A/2012, of 29 October) as urban properties with residential use."
5.2. Question of the Classification of Building Land within the Scope of Incidence of Item 28.1 of the TGIS
5.2.1. Regime of Law no. 55-A/2012, of 29 October
Law no. 55-A/2012, of 29 October, added item 28 to the General Stamp Tax Table (TGIS), with the following wording:
28 – Ownership, usufruct or superficies right of urban properties whose tax property value as shown in the register, in accordance with the Code of Municipal Property Tax (CIMI), is equal to or greater than € 1,000,000 – on the tax property value used for purposes of IMI:
28.1 – For property with residential use – 1 % (…);
In the transitional provisions contained in article 6 of that Law no. 55-A/2012, the following rules were established:
c) The tax property value to be used in the assessment of the tax corresponds to that resulting from the rules provided for in the Code of Municipal Property Tax by reference to the year 2011; (…)
f) The applicable rates are as follows:
i) Properties with residential use assessed in accordance with the IMI Code: 0.5 %;
ii) Properties with residential use not yet assessed in accordance with the IMI Code: 0.8 %;
Item 28.1 TGIS and sub-paragraphs i) and ii) of paragraph f) of section 1 of article 6 of Law no. 55-A/2012, contain a concept that is not used in any other tax legislation, which is that of "property with residential use".
Let us see:
5.2.2. Concept of Properties Used in the CIMI
In the CIMI, the types of properties are enumerated in articles 3 to 6. The concept of "property with residential use" cannot be seen in any of these articles.
The closest notion to the literal content of this expression used is that of "residential properties", which section 2 of article 6 of the CIMI defines as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of license, that have as their normal purpose residential uses.
However, the non-coincidence of the terms of the expression used in item no. 28.1 of the TGIS with that which is extracted from section 2 of article 6 of the CIMI, points to the fact that it was not intended to use the same concept. Neither is this concept found in any other statute.
5.2.3. Concept of "Property with Residential Use"
Item 28.1 of the TGIS referred in 2013 to "property with residential use".
The word "use" in this context of use of a property has the meaning of "action of assigning something to a determined use".
As stated in the decision of the CAAD issued in proceedings no. 53/2013-T, in which the Counselor Judges Jorge Lopes de Sousa, Dr. Conceição Pinto Rosa and Dr. Alberto Amorim Pereira served as arbitrators:
"it is to be concluded that the interpretative elements available, including the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', clearly point to the fact that it was not intended to encompass within the scope of incidence of item no. 28.1 situations of properties that are not yet devoted to residential use, namely building land held by companies".
Those classified as building land, and in view of the provisions of article 6, section 3 of the IMI Code, are those in which the owner has acquired the right to build thereon or to proceed with subdivision operations, as well as those that have been acquired expressly for that purpose. In this sense see JOSÉ MARIA FERNANDES PIRES in Lessons on Taxes on Heritage and Stamp Duty, Almedina, 2010, page 97.
It should be noted that in the classification as building land, the use to which future constructions may be devoted is irrelevant, namely residential, commercial, industrial or for services.
In turn, in the decision of the Supreme Administrative Court of 09-07-2014, proceedings no. 0676/14, in which Counselor Dulce Neto serves as reporter, it is stated that "residential use always appears in the IMI Code referred to 'buildings' or 'constructions', existing, authorized or foreseen, because only these can be inhabited, which is not the case with building land, which does not have, in itself, conditions for such, being not capable of being used for residence except if and when the construction authorized and foreseen for it is built thereon (but in that case they would no longer be 'building land' but another type of urban property – 'residential', 'commercial, industrial or for services' or 'other' – article 6 of the CIMI)."
Likewise, in the decision of the Supreme Administrative Court, of 14-05-2014, proceedings no. 046/14, in which Counselor Ascenção Lopes serves as reporter, it is stated that "since the legislator has not defined the concept of 'properties (urban) with residential use', and resulting from article 6 of the IMI Code – subsidiarily applicable to the Stamp Tax provided for in the new item no. 28 of the General Table – a clear distinction exists between 'residential urban properties' and 'building land', these cannot be considered, for purposes of the incidence of Stamp Tax (Item 28.1 of the TGIS, as worded by Law no. 55-A/2012, of 29 October), as urban properties with residential use."
We can thus conclude that "building land" cannot be considered as "property with residential use" for purposes of application of item 28.1 of the General Stamp Tax Table.
Prohibition of Analogy and Extensive Interpretation
One might, on the other hand, raise the question of the possibility of applying analogy to the item provided for in item 28.1 of the TGIS. Now, on this matter, section 4 of article 11 of the General Tax Law provides that:
"4. Gaps resulting from tax rules covered by the reservation of law of the Assembly of the Republic are not susceptible to integration by analogy"
As for the matters covered by the reservation of law, attention should be paid to article 103, section 2 of the CRP and article 8 of the LGT. According to these rules the principle of tax legality encompasses incidence, rate, tax benefits and taxpayer guarantees. This is also referred to in the work "The Principle of Tax Legality" by Ana Paula Dourado, Almedina, 2007, page 106.
As item 28.1 TGIS is a rule of incidence, covered by the principle of tax legality, its analogous application to situations not expressly provided for therein is prohibited.
Similarly, neither would extensive interpretation of said item be admissible that would allow including in the expression contained in the law building land. On interpretation, article 11, sections 1 to 3 of the LGT and article 9 of the Civil Code govern. We understand that it is not possible to make an extensive interpretation of said item that includes therein building land, since the same would always have to have a minimum correspondence in the letter of the law, which is not the case.
Regarding the historical element, the fact that item 28.1 TGIS was subsequently expressly altered, with the State Budget Law for 2014, in order to include, from 01.01.2014, building land, also makes it possible to conclude that such properties were not taxed in the version in effect until 31.12.2013.
Application of the Regime to the Claimant's Situation
The Claimant's property is building land. For the reasons stated, it is not a property with residential use, and therefore the Stamp Tax provided for in item 28.1 of the TGIS does not apply to that property.
For this reason, the assessment whose declaration of illegality is requested is affected by a defect of violation of that item no. 28.1 TGIS, due to error regarding the presuppositions of law, which justifies the declaration of its illegality and annulment (article 135 of the CPA).
6. On Compensatory Interest
The Claimant requests condemnation of the A.T.A. to return the tax improperly paid, plus compensatory interest.
Article 43, section 1 of the LGT establishes that "compensatory interest is due when it is determined, in a gracious claim or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount superior to that legally due".
In the case at hand, the error that affects the Stamp Tax assessments is attributable to the Tax and Customs Authority that carried out the assessment acts on its own initiative, and therefore the Claimant is entitled to compensatory interest from the date of payment of each amount until reimbursement, at the legal supplementary rate, in accordance with articles 43, sections 1 and 4, and 35, section 10, of the LGT, article 559 of the Civil Code and Ordinance no. 291/2003, of 8 April.
As results from said article 43, section 1 of the LGT, the right to compensatory interest depends on the payment of tax debt in an undue amount.
Being affected by illegality the Stamp Tax assessments, compensatory interest is due from the date of payment until complete reimbursement by the A.T.A., in accordance with articles 43 of the LGT and 61, section 2 of the CPPT.
7. Decision
In light of the foregoing, it is determined:
a) To judge the exception of incompetence of the Arbitral Tribunal inadmissible;
b) To judge the exception of inadequacy of procedural remedy inadmissible;
c) To judge the request formulated by the Claimant in the present tax arbitral proceeding admissible, as to the illegality of Stamp Tax assessments no. 2012…, for the year 2012, in the amount of 16,313.60 €, and no. 2014…, for the year 2013, in the amount of 16,313.64 €.
d) To judge admissible the request for condemnation of the Tax and Customs Authority to reimburse the Claimant, the amount of tax and costs improperly paid, plus compensatory interest in accordance with legal terms, from the date on which such payment was made until the date of complete reimbursement of the same.
7. Value of the Proceeding:
In accordance with article 315, section 2, of the CPC and 97-A, section 1, paragraph a) of the CPPT and 3, section 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the action is fixed at 33,376.80 €.
8. Costs:
In accordance with article 22, section 4, of the RJAT, and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at 1,836.00 € due by the Tax and Customs Authority.
Notify.
Lisbon, 21 June 2016.
Text prepared by computer, in accordance with article 138, section 5 of the Code of Civil Procedure (CPC), applicable by remand of article 29, section 1, paragraph e) of the Tax Arbitration Regime, reviewed by me.
The sole arbitrator
Suzana Fernandes da Costa