Summary
Full Decision
ARBITRAL DECISION
I – REPORT
Claim
A… LDA, taxpayer no. …, with registered office at Rua …, no. …–…, …, …-… Lisbon, hereinafter referred to as the Claimant, filed, on 26-10-2016, pursuant to the provisions of paragraph a) of no. 1 of article 2 and article 10 of Decree-Law no. 10/2011, of 20 January, which approves the Legal Regime of Arbitration in Tax Matters (RJAMT), an application for arbitral determination, in which AT - TAX AND CUSTOMS AUTHORITY, hereinafter referred to as the Respondent, is named, with a view to:
- The declaration of nullity and alternatively the declaration of voidability and subsequent annulment of the act of dismissal of the gracious complaint filed against the act of collection of stamp duty no. 2015…, relating to land for construction registered in the urban property register under article … of the parish of …– Lisbon.
- The declaration of nullity and alternatively the declaration of voidability and subsequent annulment of the above-identified collection act.
- The condemnation of the Respondent to reimburse the Claimant the amounts of tax improperly paid, plus the corresponding compensatory interest.
The Claimant alleges, in essence and with relevance for the resolution of the case, the following:
- Being the owner of the land for construction registered in the urban property register under article … of the parish of …– Lisbon and the Tax Authority having proceeded to collect stamp duty thereon (pursuant to item 28.1 of the respective General Table), the Claimant was never notified of this collection, whereby we are faced with the vice of nullity of the act and of the entire proceeding;
- The documents – payment notices – present the vice of lack of identification of the author of the act, which, violating art. 151, no. 1, paragraph a) of the Administrative Procedure Code, constitutes grounds for nullity of the act;
- Alternatively, such vices constitute grounds for voidability of the acts, pursuant to art. 163 of the CPA;
- The Claimant is a company whose business purpose is the civil construction industry, buildings and iron frameworks, particularly the construction of buildings, acquisition, sale, subdivision of real property, including horizontal property;
- Within the scope of its business purpose the Claimant acquires land for construction, develops the projects and executes the construction, establishes horizontal property and sells the respective fractions;
- The land for construction in question is the raw material for transformation with the building of houses intended to be sold with various uses;
- Item 28.1 of the General Table of Stamp Duty (TGIS) became applicable to land for construction with authorized or planned building for housing with the wording introduced by Law 83-C/2013, of 31 December;
- The reason behind the introduction of item 28.1 of the TGIS is the taxation of luxury real property, as appears evident from the explanatory memorandum of Law 55-A/2012;
- Non-residential real property, therefore that intended for the exercise of productive activity, are excluded from the provision of item 28.1;
- Art. 81, paragraph f) of the Constitution of the Portuguese Republic (CRP) determines that "it is the responsibility of the State to ensure the efficient functioning of markets, so as to guarantee balanced competition between companies, which, as decided in the arbitral decision in process 507/2015-T, is not compatible with the tax distinction of these based on the tax value of real property necessary for the development of the activity;
- What is recorded in the property register (of the urban real property in question) is not "housing" but rather "land for construction";
- The purpose to which the Claimant assigns the land is not housing, but transformation into buildings which, in this case, after sale, will result in housing and commerce, an allocation that results from the promise-to-purchase contract that forms an integral part of the deed of sale and purchase: housing, 4730.12 m2, commerce 413.90 m2;
- The Municipal Master Plan (PDM) provides for the location a minimum housing allocation of 70% and maximum of 90%, and an allocation for commerce minimum of 10% and maximum of 30%;
- However, the Tax Authority does not separate this commercial allocation and taxes it also as housing, thereby violating constitutional principles of legality and typicality of the tax;
- On the other hand, the fractions to be constructed will have a tax property value (VPT) clearly below one million euros, whereby they also will not fall within item 28.1 of the TGIS; consequently, by all the more reason, the land does not either, violating its taxation the constitutional principle of equality enshrined in article 13 of the CRP;
- There is an objective and subjective exclusion given the business purpose of the Claimant which is documented in the Tax Authority and is verifiable in its business purpose;
- The fact that non-residential urban real property are excluded from the tax (item 28.1 of the TGIS), therefore intended for business and productive activities, determines that it is equally excluded from the subjection;
- The taxation of the land in the present case in stamp duty penalizes the Claimant in an aggravated manner who, within the scope of its freedom of economic initiative, develops its activity in the sector of purchase of land, construction and subsequent sale of constructed buildings, without this being able to be considered as an increase in contributory capacity, but only as a productive factor, determining unequal tax treatment with other sectors of productive activity, also violating the principle of tax equality;
- Art. 7, no. 2 of the General Tax Law (LGT) stipulates that taxation should take into account the competitiveness and internationalization of the Portuguese economy within a framework of sound competition", adding no. 3 of the same article that taxation does not discriminate any profession or activity;
- Furthermore, art. 5, no. 1 of the LGT determines that "taxation promotes social justice, equal opportunities and the necessary corrections of inequalities in the distribution of wealth and income," adding no. 2 that taxation respects the principles of generality, legality, equality and material justice;
- It is clearly not what is verified in the case at hand which also violates, beyond the constitutional norms invoked, these normative provisions, by discriminating taxpayers whose purpose is productive activity, with violation of the principle of equal treatment in economic competitiveness and with administrative distortion of sound competition;
- The presuppositions of the taxes set forth in no. 1 of art. 4 of the same LGT are equally violated, which determine that taxes are essentially based on contributory capacity, revealed, pursuant to law, through income or its use and patrimonial assets, none of which situations occur in the present case.
Response of the Respondent
In its Response, the Respondent alleges, briefly, the following:
a) As regards the lack of notification
- From the reading of Law 55-A/2012, of 29 October, it results that the tax due by Item 28.1 of the TGIS has a periodic character and its collection is made ex officio by AT, based on elements pre-determined in the property register;
- As Jorge Lopes de Sousa refers to, regarding the notifications of periodic taxes mentioned in no. 4 of art. 38 of the CPPT, "although (...) the designation of "notifications" is attributed (...), these are not acts of the nature of notifications provided for in art. 36 of the CPPT, since they do not underlie any procedural decision of the Tax Authority, any act in tax matters, but are instead issued mechanically by the services" (in Tax Procedure and Process Code, Áreas Editora, 6th edition, Vol. I, page 376);
- Thus, the notification sent to the Claimant is nothing more than the respective payment notice, issued pursuant to art. 6 of Law no. 55-A/2012 of 29 October, of no. 1 of art. 119 of CIMI, through the mechanism provided in no. 4 of art. 38 CPPT;
- On this matter, the Supreme Administrative Court ruled in Decision no. 1089/09, of 20-10-2010, where it states: "(…) the collection of CA and IMI, made within the normal period, does not require notification to the taxpayer, the sending of the payment notice mentioned in articles 22 and 23 of the CCA and in articles 119 and 120 of CIMI being sufficient to make the debt exigible. This notification of the collection act is only required when it is a question of collection "outside the normal period" or when it is an "additional collection".
- Therefore, the alleged lack of notification of stamp duty collections, invoked by the Claimant, is unfounded;
b) As regards the lack of identification of the author of the act
- On the Tax Portal, at http://info.portaldasfinancas.gov.pt/, the following information can be found (which is, necessarily, of the Claimant's knowledge):
Electronic notification consists of a notification generated in digital format (PDF) and sent by electronic data transmission to the Electronic Postal Box, which is a service that allows receiving mail in digital format, with legal value, respecting the characteristics defined in no. 1 of art. 3 of the Law on Electronic Commerce (Dec.-Law no. 7/2004, of 7 January), which guarantees the integrity and confidentiality of its mail.
This service is concessioned to CTT (ViaCTT Service).
- ViaCTT is an electronic postal box that functions as a digital mail receptacle. CTT only place documents from entities previously authorized (subscribed) by citizens or companies in the EPB.
- Accession to electronic notifications, with the activation of the electronic postal box, is established in law (art. 19, no. 9 of the General Tax Law – LGT) with a mandatory character for all IRC taxpayers and for resident taxpayers included in the normal VAT regime."
- It is further stipulated that article 4 of Decree-Law no. 112/2006, of 9 June, provides that:
1 – The public electronic postal box service is the service that allows the subscriber to receive, by electronic means or by electronic and physical means, written or other communications from services and bodies of direct, indirect or autonomous administration of the State, as well as from independent administrative entities and courts, including, in particular, summonses and notifications within the scope of administrative procedures or legal proceedings of any kind, invoices, receipt notices, correspondence and advertising addressed.
(...)
4 – Each subscriber can only be the holder of one electronic postal box, regardless of the service provider, for purposes of receiving by electronic means communications from the entities indicated in no. 1, being able, however, the same to also be intended for receiving written or other communications from other entities.
- In light of the foregoing, notification having been received in the name of the Claimant and for its electronic postal box, it must be considered as correct and in conformity with the current legal norms.
- In such circumstances, it becomes clear that the notification of the collection in question produced all its effects in the legal sphere of the Claimant.
- So much so that the Claimant filed a gracious complaint.
c) As regards the illegality of the collection
- Urban real property that are land for construction and to which have been assigned a housing allocation within the scope of their respective valuations, as such allocation is recorded in the respective registers, are subject to Stamp Duty;
- The legislator chose to determine the application of the methodology of evaluation of real property in general to the evaluation of 'land for construction', as results from the expression 'value of authorized buildings' to which article 45, no. 2 of CIMI refers and applying to it consequently the allocation coefficient provided for in article 41 of CIMI;
- In conclusion, in the evaluation of land for construction the legislator wanted the methodology of evaluation of urban real property in general to be applied, thus it should be taken into account all the coefficients, above identified, namely the allocation coefficient provided for in art. 41 of CIMI, further resulting this legal imposition from no. 2 of art. 45 of CIMI, by referring to the value of buildings authorized or provided for in the same land for construction;"
- Whence, for purposes of determining the tax property value of land for construction it is clear the application of the allocation coefficient in the sphere of valuation;
- Fiscally the real properties are land for construction, in such capacity they were acquired and thus they are predially classified, and, therefore, they are without doubt, lots of land for construction, more exactly urban real property with a housing vocation;
d) Of the activity pursued by the claimant
- The Arbitral Tribunal should not assess or discuss the merits of the legislative measure and its scope, but should limit itself to its assessment in the aspect of its conformity with the constitutional text;
- That is, this Tribunal should, in this context, from the perspective of prohibition of arbitrariness flowing from the principle of equality, "only verify whether the legislative solution presents itself in absolute terms as intolerable or inadmissible, from a legal-constitutional perspective, for the reason that no intelligible foundation can be found for it", verifying whether, in the case at hand, "discriminatory distinctions have been established, that is, inequalities of treatment materially unfounded, without any reasonable foundation or without any objective and rational justification" in Decision of the Constitutional Court no. 528/2012, of 7 November;
- The legislator defined an economic presupposition, constitutionally valid, as a manifestation of contributory capacity (whose intended beneficiaries have effectively special contributory capacity in light of the criterion adopted) required for the payment of this tax.
e) Of the alleged (but non-existent) unconstitutionality of the collections
- In this sense the principle of equality materializes itself and thus possesses various dimensions, such as (i) the prohibition of arbitrariness, (ii) the prohibition of discrimination and (iii) the obligation of differentiation.
- In the case sub judice the Claimant raises the violation of the principle of equality before tax law in the dimension of the prohibition of differentiation in equal situations.
- On this dimension, the Constitutional Court pronounced itself in decision no. 563/96, of 16 May, in the following terms:
"The principle of equality of the citizen before the law is adopted by article 13 of the CRP which, in its no. 1, provides, generically, that all citizens have the same social dignity, being equal before the law, specifying no. 2, in turn, that "no one can be privileged, benefited, prejudiced, deprived of any right or exempted from any duty by reason of ancestry, sex, race, language, territory of origin, religion, political or ideological convictions, instruction, economic situation or social condition".
(...)
- The principle postulates that equal treatment be given to situations of fact that are essentially equal and unequal treatment for situations of fact that are unequal (prohibiting, conversely, unequal treatment of equal situations and equal treatment of unequal situations) - cf., among so many others, and beyond the already cited decision no. 186/90, the decisions nos. 39/88, 187/90, 188/90, 330/93, 381/93, 516/93 and 335/94, published in the aforementioned official journal, I Series, of 3 March 1988, and II Series, of 12 September 1990, 30 July 1993, 6 October of the same year, and 19 January and 30 August 1994, respectively.
- The principle does not prevent that, taking into account the legislator's freedom of configuration, differentiations of treatment may (should) be established, "reasonable, rational and objectively founded", under penalty of, if this does not occur, "the legislator being incurring in arbitrariness, by failure to comply with objectively justified solutions by constitutionally relevant values", in the consideration of cited decision no. 335/94. The point is that there be sufficient material foundation that neutralizes arbitrariness and eliminates unfounded discrimination (what matters is that one does not discriminate in order to discriminate, as J.C. Vieira de Andrade tells us - The Fundamental Rights in the Portuguese Constitution of 1976, Coimbra, 1987, p. 299).
- In this way, the principle of equality presents itself as a "negative principle of control" at the external limit of the legislator's initiative of configuration – cf. Gomes Canotilho and Vital Moreira, op. cit., p. 127 and, for example, decisions nos. 157/88, published in the Official Gazette, I Series, of 26 July 1988, and the already cited nos. 330/93 and 335/94 – without, however, removing from it, the necessary plasticity to, in confrontation with two (or more) groups of addressees of the norm, validate differences that justify diverse legal treatment, in the comparison of the concrete factual and legal situations posed in face of a determined reference point ("tertium comparationis"). The difference can, in truth, justify unequal treatment, eliminating arbitrariness (cf., on this matter, Gomes Canotilho, in Journal of Legislation and Case Law, year 124, p. 327; Alves Correia, The Urban Plan and the Principle of Equality, Coimbra, 1989, p. 425; decision no. 330/93)."
- Reinforcing, "only those choices of regime made by the ordinary legislator can be censured, based on violation of the principle of equality, in those cases in which it is proven that they result in differences of treatment between persons that find no justification in reasonable, perceptible or intelligible grounds, taking into account the constitutional ends that, with the measure of difference, are pursued", as well as that "[t]his principle, in its dimension of prohibition of arbitrariness, constitutes an essentially negative criterion (...) which, not eliminating the "freedom of legislative configuration" - understood as the freedom that belongs to the legislator of "defining or qualifying the situations of fact or relationships of life that are to function as elements of reference to treat equally or unequally" -, entrusts to the courts not the power to substitute themselves for the legislator, "weighing the situation as if they were in his place and imposing their own idea of what would be, in the case, the reasonable, just and opportune solution (of what would be the ideal solution of the case)", but rather that of "removing those legal solutions that are entirely incapable of credentialing themselves rationally" in Decision of the Constitutional Court no. 187/2013 of 5 April;
- Thus, this Tribunal should, in this context, from the perspective of prohibition of arbitrariness flowing from the principle of equality, "only verify whether the legislative solution presents itself in absolute terms as intolerable or inadmissible, from a legal-constitutional perspective, for the reason that no intelligible foundation can be found for it", verifying whether, in the case at hand, "discriminatory distinctions have been established, that is, inequalities of treatment materially unfounded, without any reasonable foundation or without any objective and rational justification" in Decision of the Constitutional Court no. 528/2012, of 7 November;
- In the case at hand, such is not verified;
- The legislator defined an economic presupposition, constitutionally valid, as a manifestation of contributory capacity (whose intended beneficiaries have effectively special contributory capacity in light of the criterion adopted) required for the payment of this tax;
- From the norm there do not result unjustified differences of treatment between taxpayers, for different situations are treated differently, against that constitutional principle;
- With item 28.1 of the TGIS the legislator assumed as a measure of equality, which was intended to "reinforce the principle of social equity in austerity, guaranteeing an effective apportionment of the sacrifices necessary for the fulfillment of the adjustment program", such that equality in the apportionment of sacrifices aimed at with item 28.1 of the TGIS by the "fiscal effort required" to the owners of "urban residential properties of higher value" compared with "those who live off the income of their work";
- Thus, for the legislator, item 28.1 of the TGIS aimed to rebalance the apportionment of sacrifices, so that these would not fall only on "those who live off the income of their work" (which, evidently, had in mind the measures realized in the scope of IRS as to the alteration of the structure of rates and brackets of IRS, to the 3.5% surtax, and to the solidarity additional rate);
- From what has been expounded, it is then clear that the tax legislator considered that the ownership, usufruct or right of superficies of a residential real property or land for construction the building of which, authorized or provided for, was housing, of VPT equal to or greater than € 1,000,000.00 represented a manifestation of wealth and was susceptible, by itself, of revealing significant contributory capacity, thus making item 28.1 of the TGIS apply to the possession of a determined type of real property, by opposition to income from work and pensions, already affected by other fiscal measures (and not only);
Subsequent Proceedings
By order of 4 March 2017, after obtaining the consent of the Parties, the Tribunal determined that the holding of the meeting provided for in article 18 of the RJAMT was not necessary.
II – PRELIMINARY EXAMINATION
The singular Arbitral Tribunal was duly constituted on 12-01-2017, the arbitrator having been designated by the Deontological Council of CAAD, with the respective legal and regulatory formalities complied with (articles 11, no. 1, paragraphs a) and b) of the RJAMT and 6 and 7 of the Deontological Code of CAAD).
The Parties have legal personality and capacity, are entitled to participate and are duly represented, pursuant to articles 4 and 10 of the RJAMT and article 1 of Ordinance no. 112-A/2011, of 22 March.
No nullities were identified in the proceedings.
III – QUESTIONS TO BE DECIDED
The questions to be decided are:
1) The existence of the vice of lack of notification of the impugned collection act and, if affirmative, its consequences;
2) The existence of a vice of form due to lack of indication of the author of the impugned collection act and, if affirmative, its consequences;
3) The inapplicability of the taxation established in item 28.1 of the TGIS, in the wording that it assumed with law 83-C/2013 of 31 December, to land for construction, such as that which was the subject of the impugned collection, when belonging to a company that intends it for the building of urban real property;
4) The violation, by the part of the norm of incidence of item 28.1 of the TGIS, to the extent it is applicable to land for construction held by construction companies, of the norms contained in articles 7, nos. 2 and 3, 5, no. 1, and 4, no. 1 of the LGT and the respective consequences in the sphere of invalidity of the collection act;
5) The constitutionality of the norm of incidence of item 28.1 of the TGIS.
IV – FACTS ESTABLISHED
The following are the facts established as relevant for the decision:
- The Claimant appeared at the date of the tax facts in the tax real property register (property register) as owner of the land for construction registered in the urban property register under article … of the parish of …– Lisbon;
- The Respondent collected stamp duty on the above-identified land, pursuant to item 28.1 of the TGIS, for the year 2015, in the amount of 23,997.40 €;
- The Claimant received three payment notices for the tax collected, corresponding to three installments;
- The collection notices do not identify the number of the collection nor the author of the act;
- The Claimant filed a gracious complaint against the collection on 22-04-2016;
- The said gracious complaint received a decision of dismissal on 7-7-2016, which was notified to the Claimant on 31-08-2016;
- In the promise-to-purchase contract incorporated in the deed of sale and purchase through which the Claimant acquired the land for construction subject to the impugned collection, it is stated that the building to be constructed will have an area of 4,730.12 m2 allocated to housing and an area of 413.9 m2 allocated to commerce.
The facts established were so based on documentary evidence contained in the proceedings and provided by the Parties.
V - REASONING
1) The existence of the vice of lack of notification of the impugned collection act and, if affirmative, its consequences
The obligation to notify administrative acts with external efficacy is enshrined in article 268, no. 3, of the Constitution of the Portuguese Republic (CRP), thus integrating into the framework of the rights and guarantees of the administered.
The same obligation finds express provision at the level of tax norms, namely in articles 36, no. 1, of the Tax Procedure and Process Code (CPPT) and 45, no. 1 of the General Tax Law (LGT).
Article 36 of the CPPT provides:
1 - Acts in tax matters that affect the rights and legitimate interests of taxpayers only produce effects in relation to them when they have been validly notified to them.
2 - Notifications shall always contain the decision, its grounds and means of defense and deadline to react against the notified act, as well as the indication of the entity that made it and whether it did so in the exercise of delegation or sub-delegation of powers.
In turn, article 45, no. 1 of the LGT states:
1 - The right to collect taxes lapses if the collection is not validly notified to the taxpayer within four years, when the law does not set another period.
Regarding the meaning to be attributed to the expression "acts in tax matters that affect the rights and legitimate interests of taxpayers" should be understood that they are, among others, the tax acts of correction or determination of the taxable material and of the collection of the tax (TC, decision no. 130/2002 of 14-03-2002).
On the other hand, article 119 of the Code of the Municipal Property Tax (CIMI) provides that:
"1 - The services of the Directorate-General of Taxes send to each taxpayer, by the end of the month prior to that of payment, the respective payment notice, with discrimination of the real properties, their parts susceptible of independent use, respective tax property value and the collection attributed to each municipality of the location of the real properties."
This provision has an antecedent in the sphere of the Code of Autarchic Contribution, whose article 22, no. 1 provided that "The central services of the Directorate-General of Contributions and Taxes shall send to each taxpayer, by the end of January, a notice for payment, with discrimination, in relation to each municipality, of the real properties, their parts susceptible of independent use, respective taxable value and collection."
Based on these provisions of the Autarchic Contribution and IMI, the Supreme Administrative Court has sometimes understood that there is no need for notification of the act of collection of IMI when performed within the normal periods (STA, decision of 18-11-2015, proc. no. 319/14; STA, decision of 20-10-2010, proc. no. 1089/09; STA, decision of 18-09-2008, proc. no. 300/08; STA, decision of 20-10-2010, proc. no. 1089/09).
With due deference, we cannot fail to point out that this doctrine of the Supreme Administrative Court, on the one hand, does not appear to us to be entirely consolidated, and on the other hand is equivalent to admitting that the ordinary legislator can remove, without apparent good reason, the obligation of notification of administrative acts enshrined in 268, no. 3, of the Constitution of the Portuguese Republic, thus operating a legislative weakening of the guarantees of taxpayers enshrined constitutionally.
We also have difficulty following the reasoning of this doctrine, set out in the following terms in the decision of the STA of 18-09-2008, proc. 300/08: "the lack of notification of a collection may well not contend with the (in)exigibility of the collected obligation. It may happen that the obligation is already due, and, therefore, is exigible independently of the notification of its collection. In truth, the notification of the collection is only due, when legally imposed – with notification serving as an interpellation for payment of the collected obligation, and the taxpayer being placed in default from such notification. It being certain that, independently of notification-interpellation, there is default of the debtor, if the obligation has a fixed period – cf., for example, paragraph a) of no. 2 of article 805 of the Civil Code. And, thus, if that is the legal regime established, the debt of tax may become certain, liquid and exigible without need for the respective notification, right after its collection."
The Supreme Court equates, in this excerpt, the function of the notification of the tax act to the function that interpellation for payment of a debt whose due date depends on that same interpellation has.
Now, once more with due deference, we believe that the reason for the obligation to notify administrative acts enshrined in art. 268, no. 3 of the Constitution goes far beyond the aspect of the due date of the tax debt. It is certain that valid notification makes the collection effective, causing the tax debt to become due. But one of the principal reasons for the obligation to notify tax acts lies in actually enabling the taxpayer, through notification, the exercise of various means of defense against the act, such as, first and foremost, the exercise of prior hearing.
Let us listen, on this matter, - on the reason for the obligation to notify the collection act and on its importance as a guarantee of taxpayers - what the Constitutional Court says in decision no. 72/09 of 11-02-2009:
"One may ask why the constitutional legislator established this duty of the Administration, instead of granting it, simply, the power to practice acts (and to execute them) without worrying about the knowledge thereof by their addressees.
The reason for this constitutional choice lies in the protection of two different values that are reduced, in essence, to two structuring principles of our legal order: on one side, the principle of security (inherent in the idea of State of Law), from which flows the necessary cognoscibility, by the addressees of the acts of the Administration, of all elements that integrate them; on the other side – but in a manner inseparable from the first – the principle of effective judicial protection, given that only what is cognoscible will be impugnable.
From this stems the close relationship that is established, on this matter, between the provision of no. 3 and the provision of no. 4 of article 268 of the CRP. The duty of notification is enshrined in no. 3. Such duty has, as has just been seen, a reason for being or an autonomous foundation, insofar as it is itself a realization of a broader idea of security – or of the necessary cognoscibility of all acts of power –, which is inscribed in the principle of State of Law. But it is a duty that is justified by being, it also, an instrument for the realization of the principle of effective judicial protection, enshrined in no. 4 of the same article, given that, if the acts of the administration are not cognoscible, it will never be possible to come to guarantee the effective judicial protection of the "rights and interests" of the administered."
It seems to us, then, that, being faced with a matter of rights and guarantees of the administered before the public administration, and lacking a valid foundation for the removal of either art. 268, no. 3 of the CRP, or of art. 36, no. 1, of the CPPT, or of art. 45, no. 1 of the LGT, and not even existing, moreover, a legal norm that expressly removes the obligation of notification of the acts of collection of IMI, it cannot fail to be considered necessary the notification of the act of collection of IMI, which must be made pursuant to art. 38, no. 4 of the CPPT, as it is a periodic tax, as long as it is made within the periods provided for in the law.
Being certain that it does not seem to us that the act of collection of IMI lacks any characteristic or element that makes it subservient to the class of tax acts that, pursuant to art. 36, no. 1 of the CPPT, require to be notified, namely as to the requirement of being susceptible of affecting rights and legitimate interests of taxpayers.
Nor does it seem to us equally valid the argument based on the mass-produced character of the acts of collection of IMI. Most of the elements necessary for notification are already contained in the payment notice that is generated automatically by a computer program. All that the tax administration has to do is alter this program, so as to include in the document sent to the taxpayer the elements that may be missing so that one is faced with a notification complete and in conformity with the law, namely, the reference to the granting of a period for exercise of the right of prior hearing and include a mention of the character of "notification" of the communication.
Notification is the act by which a fact is brought to the knowledge of a person (or someone is called to trial), pursuant to art. 35, no. 1 of the CPPT.
In the case of IMI collections, they are - in practice, that not in strict compliance with the law - brought to the knowledge of the taxpayer through the "payment notice".
Whence it can be said that the "payment notice", if sent to the taxpayer, is nonetheless a notification. Now, this understanding is also, on some occasions, accepted by the Supreme Administrative Court itself, which justifies our opinion that the doctrine of the Supreme Administrative Court previously exposed is not fully consolidated:
Let us note what the Supreme Administrative Court says in the decision of 19-09-2012, proc. no. 659/12:
"It is also unequivocal, and in this all the procedural participants agree, that the payment notice sent to the Taxpayer – from which the only elements that can be considered as part of the statement of reasons for the collection now impugned that were externalized by AT – refers to the location of the real property, the article registration, the VPT, the date of collection, the year to which it relates, the applicable rate, the absence of exemption and the collected amount, it being certain that from the administrative proceeding no other elements are recorded.
The question raised in the present case is reduced to knowing whether the elements contained in that notice, by which the collection was notified to the taxpayer, are or are not sufficient to comply with the legal requirements of reasoning, namely whether the statement of reasons should integrate the reasons why the VPT was set at the amount referred to therein."
Now, everything that on this matter is valid for IMI was equally valid for the taxation imposed pursuant to item 28 of stamp duty (until the repeal thereof with Law 42/2016, of 28/12), pursuant to art. 67, no. 2 of the respective code. Therefore, it is not certain, in our understanding, and in consonance, we emphasize, with the doctrine of the Supreme Administrative Court itself set out in the decision previously cited, that notification of the collection of stamp duty did not occur. That notification was made through the notice or payment notice, as the Supreme Administrative Court also considered in the sentence previously cited. Whether that notification was made in conformity with the law is a different question.
The allegation of nullity and, alternatively, of voidability of the impugned collection act due to lack of notification is therefore unfounded, already not only because the lack of notification would not produce the invalidity of the collection act but because the pointed vice of lack of notification is not verified.
2) The existence of a vice of form due to lack of indication of the author of the impugned collection act and, if affirmative, its consequences
Article 36 of the CPPT provides:
1 - Acts in tax matters that affect the rights and legitimate interests of taxpayers only produce effects in relation to them when they have been validly notified to them.
2 - Notifications shall always contain the decision, its grounds and means of defense and deadline to react against the notified act, as well as the indication of the entity that made it and whether it did so in the exercise of delegation or sub-delegation of powers.
Now, the term "entity" does not, in administrative law, have a precise meaning, being able to be understood in a broader sense than that of a legal entity but certainly not being able to be confused with an organ of a legal entity.
In turn, article 114, no. 2 of the Code of Administrative Procedure (CPA) provides, regarding notification of administrative acts:
2 - The notification of the administrative act must include:
(...)
b) The identification of the administrative procedure, including the indication of the author of the act and the date thereof;
(...)
The importance of the indication of the author of the act relates to the possibility of defense of the addressees of the act, namely through administrative means, since the complaint is directed to the author of the act, while hierarchical appeal is directed to the body hierarchically superior to the author of the act.
The system of electronic notification and the obligation for legal entities to be notified through an electronic mailbox cannot, obviously, result in a waiver of the requirements legally required for notification, including that of the indication of the author of the act, as no legal norm provides that it should be so.
Now, the author of the act is the organ that practiced the act (as is extracted, for example, from art. 126 of the CPA). Administrative acts are, in fact, practiced by "organs", and not by "entities".
Thus understood no. 2 of article 36 of the CPPT, in consonance, as we have already seen, with article 114, no. 2 of the CPA, from it it is withdrawn that the notification of a collection act must contain the identification of the organ that practiced it.
Analyzing the payment notices that were communicated to the Claimant, and through which the collection act was notified, it is verified that the same do not, effectively, contain the indication of the organ author of the act.
Simply, the consequence of the lack of indication of the author of the act is not the nullity of the act, as the Claimant intends, and nor even its voidability, but only its inefficacy (TCAN, decision of 28-02-2013, proceeding no. 11/04.7BEBRG; TCAN, decision of 04-05-2012, proceeding no. 544/07.3BECBR).
Null is, rather, the notification itself, by force of no. 12 of art. 39 of the CPPT.
Being the notification null, such nullity does not affect the validity of the act, in relation to which it is an extrinsic element, but only its efficacy, pursuant to art. 77, no. 6 of the LGT (TCAS, decision of 30-10-2013, proc. no. 6346/13).
This effect of inefficacy of the act, in the case of collection, projects itself on two principal vectors. On one hand, the collection cannot give rise to enforcement proceedings, the lack of notification being a ground for opposition thereto (STA, decision of 07-02-2007, proceeding no. 1169/06). On the other hand, the lack of valid notification means that the running of the periods for defense against the act does not commence, whether through administrative or contentious means (STA, decision of 12-07-2000, proceeding no. 044474).
But the nullity of the notification does not determine the invalidity of the act, neither in the form of nullity nor of voidability.
The allegation of nullity and, alternatively, of voidability of the impugned collection act due to lack of indication of the author of the act in the notification is therefore unfounded.
3) The inapplicability of the taxation established in item 28.1 of the TGIS, in the wording that it assumed with law 83-C/2013 of 31 December, to land for construction, such as that which was the subject of the impugned collection, when belonging to a company that intends it for the building of urban real property
3.1) The application of item 28.1 to land for construction
Item 28.1 of the TGIS (in the version resulting from Law no. 83-C/2013, of 31 December) subjected to Stamp Duty the "ownership, usufruct or right of superficies of urban real property whose tax property value recorded in the register, pursuant to the Code of the Municipal Property Tax (CIMI), is equal to or greater than (euro) 1,000,000", specifying two categories of real property that fall within the scope of the tax: residential real properties and land for construction "the building of which, authorized or planned, is for housing, pursuant to the provisions of the Code of IMI" (wording of Law no. 83-C/2013 of 31 December).
The norm makes no distinction as to the quality of the owner of the land for construction.
In light of the text of the norm, it is evident, from the outset, that land for construction is not excluded either objectively or subjectively from the scope of application of norm 28.1 of the TGIS. Consequently, what the Claimant alleges in paragraphs 19 and 20 of the application for determination is not correct.
Nor is what the Claimant alleges in paragraph 24 of the application correct, in which it is stated that "non-residential real property, therefore that intended for the exercise of productive activity, are excluded from the provision of item 28.1 of the TGIS".
It is true, as the Claimant alleges in paragraphs 22 and 23, that, initially, the legislator aimed, with the tax of item 28.1, to reach only houses of housing of high value.
But through Law no. 83-C/2013 of 31 December, the legislator broadened the scope of application of the tax, extending it to land for construction, which is an entirely new tax fact, ceasing to be valid, in this part, as a subjective element of interpretation, the justifications that the legislator revealed when approving the initial version of the law.
3.2) The concept of land for construction
As regards what constitutes land for construction, there does not seem to be any doubt that the concept should be found in the Code of the Municipal Property Tax (CIMI), pursuant to the final part of the stated item 28.1 of the TGIS – "pursuant to the provisions of the Code of IMI".
According to article 6, no. 3 of CIMI, "Land for construction shall be considered land located within or outside an urban settlement, for which a license or authorization has been granted, prior communication admitted or favorable prior information issued for a subdivision or construction operation, and also those that have been so declared in the acquisition title, except land in which the competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, according to municipal planning and territorial management plans, are allocated to spaces, public infrastructure or facilities".
The real property subject to the impugned collection is classified as land for construction in the property register and the purchase and sale contract through which the Claimant acquired the ownership of the land expressly mentions that the same is intended for construction, which makes it land for construction by force of art. 6, no. 3 of the Code of IMI.
Therefore, there is no doubt that the real property in question meets the requirements to be classified as land for construction.
3.3) "Building, planned or authorized, for housing"
However, for the real property to be covered by the incidence of item 28.1 of the TGIS, it is not enough to meet the requirements to be classified as land for construction, it also being necessary that it be land "the building of which, authorized or planned, is for housing, pursuant to the provisions of the Code of IMI".
This second part of the norm is the one that raises the greatest problems of interpretation and practical application.
From the outset, it is not clear what was intended to be meant by the expression "pursuant to the CIMI", since the CIMI does not contain the category of "land for construction the building of which, authorized or planned, is for housing". It provides only in article 6, no. 3, the category of "land for construction", not distinguishing according to the type of building planned or authorized for the same.
In order to withdraw a useful meaning from the reference, it should be understood that the same authorizes seeking an atomized filling of the normative provision, resorting to various places of the Code of IMI.
Thus, we believe we should understand that, if the expression "land for construction" refers to no. 3 of art. 6, the expression "for housing" refers to no. 2 of the same provision. A building will be for housing when the building planned or authorized is intended for the normal purpose of housing.
When can it be said, on the other hand, that a land has a building "planned or authorized"?
The building should be considered authorized when a building permit has been requested from the competent services and that permit was granted. That is not what is verified in the present case.
As for finding a building "planned", the concept is much more vague.
It should be noted that art. 45, no. 2 of CIMI also speaks of "authorized or planned buildings", without, however, defining what they consist of.
As is evident, what is planned may not materialize. The possibility of non-materialization is inherent in any provision. Being so, when the law – in item 28.1 of the TGIS – speaks of planned buildings it necessarily accepts that possibility of non-materialization. That is, the law intends that land for construction be taxed when there is a provision for building, regardless of its future materialization.
In the concrete case, there are two relevant elements for speaking of "planned buildings".
One is the promise-to-purchase contract incorporated in the deed of sale and purchase through which the Claimant acquired the land for construction subject to the impugned collection. In that promise-to-purchase contract and, therefore, in the deed of sale and purchase, it is stated that the building to be constructed will have allocated to housing an area of 4,730.12 m2, while an area of 413.9 m2 will be allocated to commerce.
The second element is the applicable Municipal Master Plan which provides, for the location, the construction of urban buildings in which the housing part will occupy between 70% to 90% of the area to be built and the commercial part between 10% to 30% of the area to be built.
It thus appears beyond doubt that, in the present case, there is a provision for building.
It remains for us to determine whether it is possible to affirm in the case at hand that the "planned building is for housing".
For a planned or authorized building to meet the provision of this norm, is it enough that it be in part for housing, is it required that it be predominantly for housing, or is it necessary that it be exclusively for housing?
In the first place, it is observed that any of the three meanings above pointed can fit within the letter of the legal provision in question, since the stated norm does not contain the adverb "uniquely" or "exclusively". Hence, any of them will, in light of the literality of the norm, be admissible.
However, taking into account that land for construction for housing with a VPT equal to or greater than 1,000,000 euros is intended, in principle, for the construction of urban buildings in horizontal property and that urban buildings in horizontal property are never exclusively residential, being always complemented with fractions for commercial purposes or for services, it seems to us to exclude that the legislator wanted to limit the scope of application of the tax to exclusively residential buildings. The contrary would imply concluding that the legislator did not express itself well, saying one thing when it wanted to say another, and by establishing with that error of expression a norm of useless content, inapplicable, which would be contrary to the provision in no. 3 of art. 9 of the Civil Code: "In determining the meaning and scope of the law, the interpreter shall presume that the legislator established the most correct solutions and knew how to express its thought in adequate terms."
Taking this auxiliary element into account, and considering that, as has already been said, the letter of the law allows any of the meanings pointed out, it is possible to say that, provided there is planned for land the construction of real property with residential allocation, the land will fall within the scope of application of the norm.
In the present case, the planned buildings are 92.2% for housing and only the remaining 7.8% for commercial purposes. It thus appears clear that the non-residential part has a place only complementary to the residential part in the buildings to be constructed on the land in question.
In this sense, we believe it is correct to consider that the real property subject to the impugned collection is land for construction "the building of which, authorized or planned, is for housing", insofar as it is predominantly for housing, the commercial part being only complementary. That is, we consider that, in the concrete case, there are elements that allow determining with certainty that the building planned for the land in question is for housing.
According to the foregoing, it is concluded that the allegation (diffuse) of illegality of the collection due to error as to the verification of the factual and legal presuppositions of the norm of incidence of item 28.1 of the TGIS is unfounded.
4) The violation, by the part of the norm of incidence of item 28.1 of the TGIS, to the extent it is applicable to land for construction held by construction companies, of the norms contained in articles 7, nos. 2 and 3, 5, no. 1, and 4, no. 1 of the LGT and the respective consequences in the sphere of invalidity of the collection act
The Claimant alleges, in points 48 to 53 of the application for determination, without specifying what consequences result therefrom in the sphere of the invalidity of the collection act, that this violates: art. 7, no. 2 of the LGT, which determines that taxation should take into account the competitiveness and internationalization of the Portuguese economy, within a framework of sound competition; art. 7, no. 3 of the same law which determines that taxation does not discriminate any profession or activity; art. 5, no. 1 of the same law which determines that taxation promotes social justice, equal opportunities and the necessary corrections of inequalities in the distribution of wealth and income.
It happens that the General Tax Law is an ordinary law, not even being a reinforced law, and therefore cannot contain imperative commands directed to the legislator, being unable to determine the invalidity of norms (STA, decision of 15-03-2017, proc. no. 262/16).
Consequently, any eventual - and insufficiently demonstrated - nonconformity of the norm of incidence of item 28.1 of the TGIS – in which we have already seen land for construction belonging to construction companies can fall – with the aforementioned provisions of the LGT would never have the power to project itself onto an invalidity of the impugned collection.
The allegation of invalidity (not specified) of the collection due to violation of the aforementioned norms and provisions of the LGT is therefore unfounded.
5) The constitutionality of the norm of incidence of item 28.1 of the TGIS as regards land for construction
5.1) Violation of article 81, paragraph f) of the CRP
The Claimant alleges that article 81, paragraph f) of the CRP, prescribing that it is the responsibility of the State to ensure the efficient functioning of markets, so as to guarantee balanced competition between companies, is not compatible with the tax distinction of these based on the value of real property necessary for the development of activity, in the case real property as raw material of that activity.
Paragraph f) of art. 81 of the CRP does not directly address fiscal matters.
Furthermore, it also does not fit, within the Constitution, neither within the scope of fundamental principles, nor of fundamental rights.
It is a principle respecting the matter of the State's economic organization and, within this, more specifically, the question of competition. Furthermore, it is a norm of a programmatic character intended to be realized essentially in the sphere of competition law.
The fiscal system or a determined tax law can be more or less harmonious with various constitutional principles that are not fiscal constitutional principles, such as the principle of family protection, health or the right to housing. All fiscal law, moreover, directed to the coercive appropriation of fractions of the assets of individuals and legal entities, is in inevitable tension with the principle of protection of private property.
But fiscal law is based on a set of foundations, also of constitutional value, and which materialize in fiscal constitutional principles. If the fiscal system or the fiscal law in question does not depart from these own constitutional foundations, it must be concluded that the tension that may exist with other constitutional values does not generate unconstitutionality.
We thus consider that there is no vice of violation of constitutional law, by the part of the norm of incidence applied, as regards art. 81, paragraph f) of the CRP.
5.2) Violation of the principle of legality in the material aspect/typicality of fiscal laws, established in article 103, nos. 2 and 3 of the CRP
The Claimant alleges that by taxing, pursuant to item 28.1 of the TGIS, land in which is planned the building of a real property with an allocation simultaneously residential and commercial when the law speaks only of residential allocation, there is an incurrence in a violation of the principles of legality and typicality of fiscal laws, established in article 103, nos. 2 and 3 of the CRP.
The principle of fiscal legality (i.e., of taxes), is enshrined, in the Portuguese Constitution, fundamentally in articles 165, no. 1, paragraph i) and in art. 103, no. 2 of the CRP.
The two provisions should be interpreted together, according to dominant doctrine although not unanimous in Portugal.
In the sense that the two provisions are intimately linked and should be read together, the Constitutional Court pronounces in decision no. 274/86, of 8-10-1986:
"It can be said to be today agreed the interpretation according to which the reservation of legislative competence of AR in fiscal matters corresponds to the areas stated in nos. 1 and 2 of article 106 of the CRP. There is an evident textual connection between the provisions. In both places one speaks of "fiscal system" and "creation of taxes".
Here the connection between paragraph i) of no. 1 of article 168 and no. 2 of article 106 is of particular interest. In fact, although the first refers only to the "creation of taxes" and makes no reference to article 106, no. 2 (contrary to what happened with the parallel provision of the Constitution of 1933, in its last version), the interpretation that it comprises all elements referred to in no. 2 of article 106 is today indisputable and that there is a perfect homology, in this area, as to the scope of the two provisions. In fiscal matters regarding the regime of taxes, what is a reservation of law according to article 106, no. 2, is a reservation of law of AR according to article 168."
The principle of legality of taxes means, then, that it is reserved to the Assembly of the Republic, save authorization to the government, to create or extinguish taxes, and to define its essential elements, among which are the incidence and the rate (just as it is reserved to this organ of sovereignty to legislate, save legislative authorization to the government, in fiscal benefits and guarantees of taxpayers).
This understanding of the principle of legality, in the Portuguese legal order, corresponds to an "original" understanding of the principle. In this sense, the decision of the Constitutional Court no. 274/86, of 8-10-1986 said: "In fiscal matters regarding the regime of taxes, what is a reservation of law according to article 106, no. 2, is a reservation of law of AR according to article 168."
Not ignoring that the broad legislative powers that the government has in fiscal matters in the Portuguese constitutional order introduce turbidity into this conception of the principle of legality of taxes, taking into account that it is not the organic aspect of the principle that interests the question raised by the Claimant, we will accept as valid this "original" understanding.
Therefore, in the Portuguese tax constitutional order, the principle of legality means that there is a relative reservation of competence of the Assembly of the Republic as to the creation or extinguishment of a tax and as to the definition of its fundamental elements, in which are included the incidence and the rate of the tax.
This second part of the principle – requirement that the fundamental elements of the tax be defined by law of the Assembly of the Republic – corresponds to the principle of typicality of taxes (CASALTA NABAIS, J., Studies on the Case Law of the Constitutional Court, Editorial Notícias, 1993, pp. 265 and 266; in the same sense, the decision of the TC no. 127/2004 of 3-3-2004.
The principle of legality of taxes, in its aspect of principle of typicality, has a guaranteeing function, which is associated with legal certainty and the foreseeability and calculability of the tax obligation (DOURADO, A. P., Tax Law, 1st ed., Almedina, 2015, p. 124).
The function of guaranteeing the foreseeability of the tax obligation excludes that the tax administration can apply the tax to situations that are not covered by the norm of incidence and also that the courts can sanction such action.
The Claimant alleges that there is a violation of the principle of typicality insofar as the tax administration applied the tax to a situation – land for which a building is planned with residential and commercial allocation – that is not covered by the norm of incidence, which refers only to residential allocation.
The question we must clarify is whether the norm of incidence covers or does not cover the situation of the Claimant's land. If the norm of incidence does not cover the situation of the Claimant's land, then the collection would have indeed violated the principle of typicality of taxes.
To clarify the pointed question, one must interpret the norm of incidence which states that the tax applies to the ownership, usufruct or right of superficies of (...) residential real property or land for construction the building of which, authorized or planned, is for housing, pursuant to the provisions of the Code of IMI."
At present, the doctrine of strictly literal interpretation of fiscal norms is surpassed. Fiscal laws, like all others, use imperfect linguistic formulas that have to be interpreted like all other laws (STA, decision of 8-6-1977, proc. no. 830; STA, decision of 25-01-1995, proc. no. 18490; STA, decision of 24-01-2001, proc. no. 25699; STA, decision 06-02-2013, proc. no. 1004/12).
In this sense, no. 1 of art. 11 of the LGT provides that "In determining the meaning of fiscal norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed."
The expression "land for construction the building of which, authorized or planned, is for housing", because it is not defined in law, has to be interpreted. And as has already been stated above, it appears that land for which is planned the construction of real property whose housing allocation occupies 92.2% of the area to be built falls within the provision "land for construction the building of which, authorized or planned, is for housing". The contrary, that is to say that the building planned for that land is not for housing, is what seems to us to be contrary to the most natural meaning of the legal norm.
And being so, the application of the tax to the land in question does not contend with the principle of typicality of taxes.
5.3) Violation of the principle of tax equality
The Claimant says that the autonomous fractions that will be constructed on the land will have a tax property value clearly less than one million euros, "whereby they also will not fall within the provision of item 28.1 of the TGIS. Hence, by all the more reason, the land also does not. And thus its taxation violates the principle of tax equality."
As has already been said previously, the law provided, in its initial version, only for the taxation of built residential real property. It resulted from the preparatory work of the law that the legislator intended, with that initial version, to reach housing (houses) of luxury.
With Law no. 83-C/2013 of 31 December, the legislator created a new tax fact, independent of the first, for which the same elements of subjective interpretation no longer apply.
To sustain that there is a violation of the principle of equality in taxing land for construction when the real property that will be built thereon will not, in the future, be taxed, is the same as saying that there is a violation of the principle of tax equality in taxing residential fractions in IMI when the land is instead exempt, pursuant to art. 9, no. 1 paragraph d) of the Code of IMI.
It has, therefore, no foundation and cannot be considered to proceed, the allegation of violation of the principle of tax equality in this part.
The Claimant also alleges that there is a violation of the principle of equality in the taxation of land that is for it a productive factor, when companies of "other sectors of activity" do not have to bear taxes on their productive factors.
The principle of tax equality postulates that situations of equal contributory capacity be treated equally, at the tax level. But such a judgment has to be made by reference to a tax. It does not seem reasonable, to ground a judgment of unconstitutionality due to violation of the principle of tax equality, to vaguely invoke the taxation or non-taxation of productive factors of companies of different sectors of activity irrespective of the taxes that may be in question.
Moreover, there are various taxes that apply or can apply to productive factors and affect different sectors of activity with different intensity. It would suffice to give as an example IMI which most companies, in all productive sectors, have to bear on the real property where they have their installations or the IUC which companies bear on their vehicles.
Also in this part it is considered that the allegation is vague and not sufficiently founded, and the allegation of violation of the principle of tax equality cannot proceed.
5.4) Violation of the principle of confidence
The Claimant does not ground this allegation, whereby it is not possible to assess the question.
V – DECISION
In light of all the foregoing, it is decided not to declare illegal the collection act indirectly impugned, maintaining it in the legal order, and consequently, not to declare illegal the act of dismissal of the complaint directly impugned, dismissing in totality the Claimant's claim.
Economic utility value of the proceedings: The economic utility value of the proceedings is set at 23,997.40 euros.
Costs: Pursuant to article 22, no. 4, of the RJAMT, the amount of costs is set at 1,224.00 euros, pursuant to Table I attached to the Rules of Costs in Tax Arbitration Proceedings, to be borne by the Claimant.
Register and notify this arbitral decision to the parties.
Lisbon, Administrative Arbitration Center, 2 May 2017
The Arbitrator
(Nina Aguiar)
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