Stamp Tax on Building Plots for Housing and Commerce: Partial Annulment of Assessments Limited to Second Installments (CAAD 642/2015-T)

ENGLISH TRANSLATION

Carla Castelo Trindade, Arbitrator appointed by the Deontological Council of the Administrative Arbitration Centre in the process identified above, notified on 1 July 2019 of the decision handed down by the Central Administrative Court South (2nd Section – Tax Litigation) on 25 June 2019, in the context of process no. 22./17.4BCLSB hereby proceeds to:

REFORMATION OF THE ARBITRAL DECISION

The erudite decision of the Central Administrative Court considered that:

"Furthermore emphasizing that, as is unequivocally evident from the tenor of the ruling issued by the Central Administrative Court South on 27/10/2016, in the context of process no. 09711/16, the claim advanced and sought by the Claimant in the arbitral proceedings corresponds to the annulment of the acts of assessment of Stamp Tax, effected under item 28.1 of the General Table of Stamp Tax, relating to the year 2014, and relating to the second instalments, in the amount of € 10,337.48 and not the acts of assessment of Stamp Tax in their entirety, namely Assessment No. 2014..., with the amount payable of € 15,506.88 and Assessment No. 2014..., with the amount payable of € 15,506.88, on which the arbitral tribunal pronounced itself.

It thus concludes that once again the Arbitral Tribunal should not have decided to annul the entirety of the Stamp Tax assessments for the year 2014, relating to the aforementioned properties and in the total amount of € 31,013.80, given that it is clearly exceeding the claim formulated by the party, and is not, moreover, faced with matters of ex officio jurisdiction.

Now, in light of all the foregoing, as it is unequivocal that the object of the proceeding corresponds to the annulment of the acts of assessment bearing numbers 2015... and 2015... effected under item 28.1 of the General Table of Stamp Tax, relating to the year 2014, and relating to the second instalments, in the amount of € 10,337.92, and not the acts of assessment of Stamp Tax in their entirety (...)."

In this manner, it is incumbent to reform the decision in accordance with the rescissory judgment of the Central Administrative Court South, maintaining the annulment of the acts of assessment no. 2014... and no. 2014..., but solely with respect to the 2nd instalments, condemning the Respondent to the reimbursement of the amount corresponding to the two instalments in question.

This shall be done below.

REPORT

On 20 October 2015, the company "A..., SA", holder of tax identification number ..., with registered office at Street..., no...., in..., ...-... ... (hereinafter Claimant), filed an application for constitution of a singular arbitral tribunal, pursuant to and for the purposes of the provisions of Articles 2 and 10 of the Legal Framework for Tax Arbitration, approved by Decree-Law 10/2011 of 20 January (LFTA).

By means of the application for constitution of the arbitral tribunal and for arbitral pronouncement, the Claimant seeks the annulment of the acts of assessment of Stamp Tax, effected under item 28.1 of the General Table of Stamp Tax, relating to the year 2014, to which the second instalments correspond, in the amount of € 10,337.92 (ten thousand, three hundred and thirty-seven euros and ninety-two cents), corresponding to the collection notes nos. 2015... and 2015....

In effect, not accepting the aforesaid Stamp Tax assessments, the Claimant requested the constitution of this arbitral tribunal, formulating the following claims (see page 6 of the application for constitution of the arbitral tribunal):

"- The annulment of the acts of assessment;

• Decree the reimbursement of the tax and indemnity interest."

With the petition five documents were attached.

As the Claimant opted for non-designation of an arbitrator, pursuant to the provisions of paragraph (a) of Article 6(2) and paragraph (b) of Article 11(1) of the LFTA, as amended by Article 228 of Law No. 66-B/2012 of 31 December, the Deontological Council appointed Dr. Carla Castelo Trindade as arbitrator of the singular arbitral tribunal, who communicated acceptance of the mandate within the applicable period.

The parties were notified of the appointment, and no request for recusal of the appointment was filed by Dr. Carla Castelo Trindade.

Thus, in accordance with the provision of paragraph (c) of Article 11(1) of the LFTA, as amended by Article 228 of Law No. 66-B/2012 of 31 December, the singular arbitral tribunal was constituted on 4 January 2016.

On 8 February 2016, the Tax and Customs Authority (hereinafter Respondent) filed a response in which it alleged, on the one hand, the material incompetence of the Arbitral Tribunal and, on the other, the total lack of merit of the application for arbitral pronouncement, arguing that the collection notes for the second instalments of Stamp Tax should be maintained, as they constitute the correct interpretation of Item 28 of the General Table as amended by Law No. 55-A/2012 of 29 December.

Given that, in this case, none of the purposes legally entrusted to the meeting referred to in Article 18 of the LFTA was verified and, taking into account the position adopted by the parties in the pleadings, pursuant to Articles 16(c) and 19 of the LFTA, as well as the principles of procedural economy and prohibition of useless acts, the holding of this meeting was dispensed with and the parties were notified to file observations.

No observations were filed.

Thus, and in compliance with the principle of adversarial proceedings, on 3 May of the preceding month, the tribunal issued the following order: "In light of the position of the Respondent assumed in its response, notify the Claimant to, within 10 days, attach to the proceedings the acts of assessment of Stamp Tax corresponding to the first and second instalments and also to pronounce on the exception raised by the Respondent. All pursuant to Article 16(c) and Article 19 of the LFTA."

On 6 May 2016, the Claimant responded to the lack of merit of the dilatory exception of incompetence raised by the Respondent, saying, in particular, the following:

"(...) hereby informs the Arbitral Tribunal that the Tax Administration never notified it of the assessments of stamp tax of item 28.1 of the General Table of Stamp Tax, for the year 2014 (payable in 2015), nor of the time limits for voluntary payment and, furthermore, to react against them through litigation, but rather notified it for voluntary payment of these instalments and the payment due dates for each of them, namely:

• April 2015, July 2015 and November 2015 and that it could lodge a claim or contest them pursuant to Articles 70 and 102 of the Tax Code."

Further it advanced that:

"Following the indication suggested that it could lodge a claim against the assessment and contest it pursuant to Articles 70 and 102 of the Tax Code, the Claimant resorted to contesting and questioned each of the instalments, with proceedings being initiated at the Administrative Arbitration Centre under process nos. 441/2015-T, 642/2015-T and 22/2016-T, respectively."

In light of this response, in particular, having considered the information that an earlier application for constitution of an arbitral tribunal had already been the subject of a request relating to the first instalments, the tribunal issued the following order addressed to the Administrative Arbitration Centre:

"Your Excellencies,

In the process identified above there will be analysed a question of lis pendens.

Now, given that:

• Article 582(2) of the Civil Procedure Code (applicable subsidiarily to the LFTA) mandates that lis pendens be raised in the action brought second in time;

• the taxpayer in response to the order of 3 May aforementioned, stated that the first instalments of the acts of assessment here at issue were the subject of an application for constitution of an arbitral tribunal that is pending at the Administrative Arbitration Centre with no. 441/2015,

I hereby request that you inform me of the status of this process no. 441/2015."

Following this request the Administrative Arbitration Centre informed this arbitral tribunal that:

"In execution of Your Excellency's Arbitral Order, we inform you that Arbitral Process nos. 441/2015-T, which was conducted at this Centre, has already been concluded.

Further, we inform you that the corresponding arbitral decision was notified to the parties on 31-03-2016 and is already published on the CAAD website."

PROPER EXECUTION OF PROCEDURE

The arbitral tribunal was duly constituted.

II.1 Exception of Incompetence

Regarding the competence of this tribunal, it should be noted that the Respondent raised the dilatory exception of incompetence of the arbitral tribunal, contending its material incompetence to, in light of the provision of Article 2 of the LFTA, assess the legality of an instalment, in this case the second, of the acts of assessment of Stamp Tax.

All because, in the view of the Tax Administration, the second (and, this tribunal presumes, the first or third) instalments are not, in themselves, a tax act.

It is not, however, correct. This notwithstanding the decisions that have been handed down by some arbitral tribunals, in particular the decision issued in the context of process no. 441/2015-T.

See why:

The cognitive itinerary of this tribunal begins with a clear distinction between the legal qualification of the act of assessment of Stamp Tax as a tax act albeit made concrete for purposes of payment at two or three different moments in time and payment itself. The first question will lead to this tribunal being considered as competent, the second will lead to potential questions of lis pendens, res judicata or exceptions of timeliness.

There is, as will be seen, only one assessment of Stamp Tax. The tax arising from this assessment may, however, be paid in three instalments. If the taxpayer wishes to discuss the legality of the tax, the act being scrutinized is the act of assessment, the period for reaction being counted from the date of the first, second or third instalment as we shall see.

As is known, assessment constitutes the operation through which the tax rate is applied to the taxable matter, thereby determining the amount owed by the taxpayer.

Following this, the act of assessment is the administrative act through which that operation of calculating the tax owed is executed by the Tax Administration.

CASALTA NABAIS makes a distinction between assessment in the strict sense and assessment in the broad sense, including in the latter, beyond the operation of strict assessment – application of the rate to the taxable matter and consequent determination of the collection – other operations intended to determine the amount of tax, including subjective entry – identification of the taxpayer or passive subject of the tax legal relationship – and objective entry – determination of the taxable matter, identification of the rate(s) to be applied and any deductions from the collection determined. The same author, referring to assessment in the strict sense, includes assessment in the second moment of the dynamics of taxes, clarifying that:

"[by] assessment, in turn, the collection is determined by applying the rate to the taxable matter, a collection that comes to coincide with the tax to be paid, unless there is occasion for deductions from the collection, in which case the assessment also encompasses this latter operation" (See Casalta Nabais (2015), "Manual of Tax Law", 297 and 62).

Furthermore:

"Assessment constituted [also] an executable administrative act, executive, semi-executive and that, given its character, on the one hand, strictly bound and, on the other, largely generalized, lends itself greatly to having an IT nature, that is, to be practiced by resorting to IT means, as is already the case, for our system provides, indeed requires, the submission and consultation of declarations of taxpayers and third parties via IT, that is, electronic declarations" (See Casalta Nabais (2015), 301-302).

With regard to the assessment of Stamp Tax it should be noted that Article 3 of Law No. 55-A/2012 of 29 October introduced amendments to various articles of the Stamp Tax Code, approved by Law No. 150/99 of 11 September, among which Article 44, whose number 5 came to provide that:

"5 – Where assessment of the tax referred to in item no. 28 of the General Table takes place, the tax is paid in the periods, terms and conditions defined in Article 120 of the Property Tax Code."

And, in turn, Article 120 of the Property Tax Code, as amended by Article 215 of Law No. 66-B/2012 of 31 December (State Budget for 2013), has the following wording:

"Article 120 - Payment period:

1 – The tax shall be paid:

a) In one instalment, in the month of April, when its amount is equal to or less than € 250;

b) In two instalments, in the months of April and November, when its amount is greater than € 250 and equal to or less than € 500;

c) In three instalments, in the months of April, July and November, when its amount is greater than € 500.

2 – (...).

3 – (...).

4 – In the case provided for in nos. 1 and 3, failure to pay an instalment or an annuity, within the established period, entails the immediate maturity of the remainder.

5 – If the delay in assessment is attributable to the passive subject, it shall be notified to proceed to payment of the tax relating to all years in arrears." (emphasis added)

From these norms it follows that payment of Stamp Tax must be made in three instalments, in the months of April, July and November, when its amount is greater than € 500.

Here a point must be made clear.

An instalment does not equate to a tax assessment. An instalment is part of a tax assessment that is divided in time for purposes of payment.

Moments of assessment and moments of payment are clearly individualized in the law.

For purposes of payment we have already referred to the rules set out in the law. Let us now look at the rules for purposes of assessment.

Pursuant to number 7, Article 23 of the Stamp Tax Code, as worded by Article 3 of Law No. 55-A/2012 of 29 October:

"7 – Where the tax is owed for the situations provided in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the Property Tax Code" (emphasis added).

Here it is worth reinforcing that the assessment of Stamp Tax is, pursuant to number 7 of Article 23 of the respective Code, only one. And it is made annually. It being the case that its payment may, pursuant to law – notably – Article 120 of the Property Tax Code, occur in three instalments whose sum will, a priori, equal the amount of the annual assessment.

Now, as an arbitral tax tribunal has understood, in Process no. 726/2014-T, the expression "the tax is assessed annually" indicates that a single annual assessment is made, although it may be divided, for purposes of payment, into instalments, and not in as many assessments as there are instalments into which the debt is to be satisfied – "the division of an assessment into instalments will thus be nothing more than a mere revenue collection technique" and, we add, a distribution of the tax burden to the passive subject.

In fact, regarding the assessment of Stamp Tax, it has been repeatedly stated, in various decisions of arbitral tribunals constituted under the aegis of the Administrative Arbitration Centre (in this sense, among others, the decisions issued in processes nos. 205/2013-T, 408/2014-T, 726/2014-T, 736/2014-T, 90/2015-T and 137/2015-T):

"the tax assessment is only one and only it shall constitute a damaging act, susceptible to being the subject of a single contest, so that, when the law provides for its payment in various instalments, staggered in time, the annulment of the tax act shall have consequences relating to all of them, causing the obligation to pay to cease or imposing the obligation to restore the amounts of tax already paid by the passive subject, as well as indemnification of the situation through the payment of indemnity interest, all at the charge of the Tax Authority." (arbitral decision issued in process no. 90/2015-T).

Here we agree with the decisions referred to above. However, do not be confused. Saying that the assessment of Stamp Tax is only one, and that there are not as many assessments as instalments, thus denying the separate and individual challengeability of each of the instalments, does not mean that the challengeability of the acts of assessment of Stamp Tax that, for purposes of payment, are divided into two or three instalments is altogether denied.

That is, there is no doubt that we have only one act of assessment of Stamp Tax (in the concrete case two) which, by force of the provision of Article 120 of the Property Tax Code, subsidiarily applicable, must be paid in three instalments. Each instalment constitutes only the tripartite payment of the same act of assessment of the (Stamp) tax in question.

In the same sense, see process no. 479/2015-T, in which it was understood that:

"In sum, and from the combination of the legal provisions referred to above, it is possible to conclude that Stamp Tax is assessed annually, payment in instalments being nothing more than a technique of tax collection and not its partial payment.

Accordingly, the assessment is only one and only it constitutes a damaging act, susceptible to being contested. (...)

That is, the declaration of illegality of the tax acts of assessment of Stamp Tax, to which the respective payment instalments correspond, is required.

From all the foregoing it follows that, contrary to what the Tax Authority states, the object of the application for arbitral pronouncement is the tax act of assessment and not each of the Stamp Tax instalments individually considered".(...)"

Thus, the argument invoked by the Tax Authority regarding the incompetence of the arbitral tribunal, as well as the non-challengeability of the acts, is undermined, so the verification of the exceptions in question is judged to lack merit."

Let us then look at the concrete case.

With respect to the land for construction relating to Article ..., on 20 March 2015 the assessment of Stamp Tax No. 2014... was issued in the total amount of € 15,506.90 (as per the computer printout attached to the administrative file).

This act of assessment gave rise to three instalments. All of them part of it. A first, in the amount of € 5,168.95, a second, in an equal amount of € 5,168.95 and whose payment deadline was 31 July 2015 and which corresponded to collection note 2015.... And, a third, also which is believed to be of equal amount.

As for the land for construction relating to Article..., on 20 March 2015 the assessment of Stamp Tax No. 2014... was also issued in the total amount of € 15,506.90 which also gave rise to three instalments. A first, in the amount of € 5,168.95, a second, in an equal amount of € 5,168.95 and whose payment deadline was also 31 July 2015 and which corresponded to collection note 2015... and, finally, a third, also which is believed to be of equal amount.

That is, it is a single act of tax assessment – here two, corresponding to the two plots of land, the acts of assessment nos. 2014... and 2014... – although paid in three instalments.

And it is the legality of the acts of assessment of Stamp Tax that the Claimant contests, although it has filed an application for constitution of an arbitral tribunal for each instalment. If each act of assessment was € 15,506.90 and gave rise to three instalments, each instalment is € 5,168.95 and forms part of/is within those first € 15,506.90. The Claimant contests here part – € 5,168.95 – of a whole – € 15,506.90 – although it is always the same acts of assessment of Stamp Tax – those nos. 2014... and ... – in the part that naturally corresponds to the second instalments of € 5,168.95 each.

Once more, there is no doubt that the assessment of Stamp Tax is only one and that it is made annually. There is also no doubt that the act of assessment cannot be confused with payment. There is also no great doubt that when payment is bipartite or tripartite the act of assessment giving rise to it is not mischaracterized into a collection note or in the appearance of a tax act to the extent that each payment/instalment is part of a whole, the underlying tax act.

What cannot be confused are questions of the object of the claim – annulment of the underlying tax act relating to one or more instalments relating to the payment of that act – with questions of legal qualification of the acts. Or put another way, one cannot confuse the legal qualification of the act of assessment of Stamp Tax as a tax act even though made concrete for purposes of payment at two or three different moments in time with payment itself.

For from the question of knowing which object of the claim flow, as will be seen, possible questions of lis pendens, or at the limit, questions of res judicata. This, in the case that taxpayers contest or request applications for constitution of arbitral tribunals for each instalment to the extent that the same act is always being analyzed.

That is, if faced with notification for payment of the first instalment, the passive subject requests constitution of an arbitral tribunal contesting the legality of the act of assessment of Stamp Tax, again requesting constitution of an arbitral tribunal contesting the legality of the same act of assessment when notified of the second and third instalments, the exception of lis pendens or res judicata may occur, to the extent that within the scope of these three applications for constitution of an arbitral tribunal presented, the claim is always the same: the annulment of the act of assessment of Stamp Tax, whose payment is distributed in three instalments.

In fact, and without prejudice to analyzing this question further ahead, it should be noted that Article 581 of the Civil Procedure Code, applicable in the scope of arbitral tax proceedings, establishes as a requirement of the exception of lis pendens and res judicata the triple identity of parties, claim and cause of action. That is, that the parties be the same from the point of view of their legal status, that the same legal effect be sought and that the claim advanced in the two actions proceeds from the same legal fact.

Now, the exception of lis pendens or res judicata may occur in the case in question and whenever the payment of a given tax is distributed in two or three instalments, when the passive subject requests the constitution of an arbitral tribunal contesting the legality of the act of assessment after the end of the voluntary payment period of the first, second and third instalment.

All because we have the same object – tax act of assessment of Stamp Tax.

Already from the latter, that is, from questions of legal qualification of the acts flows the "confusion" of competences of the tribunals, in particular of the arbitral ones.

This conclusion would even be reached in a more empirical argument and consequently less legal. If in the case of taxes whose payment is not made once only – as the cases possibly of Property Tax or Stamp Tax – the taxpayer is not notified of the act of assessment but only of the two or three instalments that may be due, would this mean that the taxpayer could not react administratively, judicially or jurisdictionally to this act (a tax act, or tax matter or other)?

A conclusion like this would contradict, at a minimum, the principle of effective judicial protection and access to law, with constitutional foundation in either Article 20 or Article 268(4) of the Constitution of the Portuguese Republic.

Recall that the principle of effective judicial protection requires that for any and all conflicts worthy of judicial resolution it be possible to find a competent Court and a procedural means that confers adequate and sufficient protection to interests worthy of legal protection.

In the words of GOMES CANOTILHO and VITAL MOREIRA, the right to effective judicial protection is enshrined in Article 20(1) of the Constitution, being itself, "a fundamental right constituting an indispensable guarantee of the protection of fundamental rights, being therefore inherent in the idea of a State governed by law". (see Gomes Canotilho/Vital Moreira (2010), "Constitution of the Portuguese Republic Annotated", Vol. I, 408).

This principle and fundamental right is also reflected in Article 9 of the General Tax Code in which, in number 1, access to tax justice is guaranteed for the full and effective protection of all rights or interests legally protected and, in number 2, the right of access to the courts, providing for the possibility of contesting or appealing tax acts that infringe rights or legally protected interests.

Now, with respect to questions of competence – those which relate to the legal qualification of the acts – Article 2(1)(a) of the LFTA determines the competence of the arbitral tribunal to assess claims relating to the declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account.

Recovering what was referred to above, the object of the present arbitral proceeding corresponds, without a shadow of doubt, to the acts of assessment of Stamp Tax nos. 2014... and 2014..., regardless of whether, by mere revenue collection technique, its payment (and, logically, its collection) is found to be distributed in two or three instalments.

And in the name of the principle of effective judicial protection, these acts of assessment of Stamp Tax - it is insisted, although they are paid in three instalments – shall necessarily be subject to scrutiny.

In this manner, the dilatory exception of material incompetence of the arbitral tribunal lacks merit.

II.2 Exception of Formal Res Judicata

Assuming that the object of the claim in the case of taxes paid in two or more instalments, as in the case at hand, is the annulment of the underlying tax act – this was, moreover, the basis for the lack of merit of the exception raised by the Tax Administration – it remains to ascertain what other particularities this reality may raise in order to understand that, although there is already a decision formally rendered based on the same tax act object of this application for constitution of an arbitral tribunal – process no. 441/2015-T – we are still not faced with an exception of res judicata.

In fact, this question relates to another which is prejudicial to it. We are referring to the problematic of timeliness. That is, from the date from which the taxpayer may react against a tax act of a tax whose payment is due in more than one time.

As is known, Article 102(1)(a) of the Tax Code to which Article 10(1) of the LFTA refers, establishes that the period of 90 (ninety) days for presentation of an application for constitution of an arbitral tribunal is counted from the end of the period for voluntary payment of the tax liabilities legally notified to the taxpayer.

Consequently, the following question arises: may the taxpayer contest the act of assessment of Stamp Tax from the end of the period for voluntary payment:

• Of the first instalment?

• Of the second instalment?

• Or of the third instalment?

The arbitral tax tribunals have already pronounced on this question.

In Process no. 726/2014-T, having the taxpayer requested the constitution of the arbitral tribunal relating to the second instalment of Stamp Tax, the arbitral tribunal understood that:

"The first instalment of each of the aforementioned assessments not having been paid by the end of the month of April 2014, the second and third instalments would immediately become due.

However, such maturity proves ineffective with respect to the passive subject, due to the fact that the Tax Authority again notified it, granting it a new period to proceed with (voluntary) payment of the second instalments of those assessments, during the month of July 2014, as evidenced by the collection notes attached to the application for arbitral pronouncement.

Thus, having the period for voluntary payment of the second instalments of the assessments of Stamp Tax ending on 31 July 2014 and having the application for arbitral pronouncement been presented before the lapse of 90 days from that date, the exception of its alleged untimeliness cannot prevail".

That is, as the taxpayer was notified of the second instalment the tribunal understood that it could request the constitution of an arbitral tribunal relating to the act of assessment of Stamp Tax within 90 (ninety) days from the end of the voluntary payment period of this second instalment.

Already in Process no. 205/2013-T, the arbitral tribunal constituted there noted that "from the circumstance that the value of the assessment may be paid in various instalments, it does not follow that there are three assessments". Thus, where it is an assessment that may be paid in various instalments, that tribunal understood that the passive subject was not prevented from "contesting the same due to the fact that only the payment period of one of them has elapsed", thus admitting that the taxpayer could request the constitution of the arbitral tribunal from the end of the voluntary payment period of the first instalment.

As for us, we understand that, by force of the provision of Article 102(1)(a) of the Tax Code, to which Article 10(1) of the LFTA refers, the taxpayer may challenge judicially, file a gracious claim or request the constitution of an arbitral tribunal – in this case – within 90 (ninety) days from the end of the voluntary payment period of either the first, the second, or the third instalment.

May challenge the act of assessment of Stamp Tax as soon as there is knowledge of the same with the notification of the first payment instalment, with the period for judicial challenge/gracious claim/request for constitution of an arbitral tribunal being counted from the end of the period for voluntary payment of this first instalment. Thus, it was already understood in process no. 205/2013-T.

However, if the act of assessment of the tax is not contested at this point, it may be done when notified of the second instalment, or even of the third, if it does not contest when notified of the second instalment.

Thus, we understand, on the one hand, because the application for constitution of an arbitral tribunal relates to the act of assessment in full and not to the instalment, that is, what the taxpayer invokes is the illegality of the act of assessment, requesting its annulment. On the other hand, the period for reaction restarts whenever the period for voluntary payment of any of the instalments ends.

There is already arbitral jurisprudence in this sense, rendered in the context of process no. 484/2015-T, in which it was stated that: "Thus the application for annulment of the act may be requested at any moment from the date of notification of one of the instalments or from the rejection of the gracious claim." (emphasis added)

One cannot deny, therefore, the possibility of challenging these acts of assessment due to lack of timeliness, considering that the period for presentation of an application for constitution of an arbitral tribunal would be counted from the date of the end of the period for voluntary payment of the first instalments, because it would be the date on which the taxpayer would have knowledge of the tax assessment, in this case of the acts of assessment nos. 2014... and 2014.... Such a solution would be, similarly to what we saw above, violative of the constitutional principle of effective judicial protection.

In the case at hand, with the period for voluntary payment of the second instalments ending on 31 July 2015 and the application for constitution of an arbitral tribunal having been presented on 20 October 2015, there is no doubt that the application is timely.

However, saying that the taxpayer may react through litigation against any of the instalments to the extent that the underlying tax act is the same does not mean that they may react against all. We know that by reacting against the first, with the object of the claim being the (il)legality of the act of assessment of Stamp Tax, a decision regarding this will "contaminate" the following instalments. Not reacting to the first they may react against the second and so on successively.

However, if they react against all - using different means or initiating distinct proceedings - there will be lis pendens or res judicata all because the object of the claim – the tax act of assessment of Stamp Tax – is the same.

Before, however, analyzing this question of lis pendens or possible res judicata further, a note must be made here.

Even if it were considered, which is not the case, that in the case of tax assessments in various instalments the taxpayer would have to react to the whole upon notification of the first instalment, it would still be within the period to appeal the illegality of the following ones to the extent that this is what is stated in the notification of each instalment as to the means of defense. And even if there were error in the indication of the means of defense, Article 37(4) of the Tax Code determines that when the taxpayer has used the means of defense indicated in the notification and the tribunal comes to consider this means as wrong, as in the case of the taxpayer immediately contesting through litigation an act that should have been the subject of a necessary gracious claim for example, the adequate means of reaction may still be exercised within 30 (thirty) days from the date of final judgment of the judicial decision.

This solution is enshrined in the name of good faith and protection of the confidence of taxpayers who followed the information indicated by the Administration in the notification of the act which at a minimum alleging a defect attributable to it would act in abuse of law, in venire contra factum proprium.

Thus, questions of untimeliness would also never arise.

Let us then return to the question of lis pendens and possible res judicata.

In accordance with the provision in the response of the Claimant to the order issued by this arbitral tribunal on 3 May 2016, the Claimant presented, prior to the claim now being analyzed, an application for arbitral constitution relating to the first instalments (Process no. 441/2015-T) of the same acts of assessment of Stamp Tax here at issue.

The Claimant thus presented, contrary to what was said above, three applications for constitution of the arbitral tribunal (the third being in progress under no. 22/2016-T). All with the same object: acts of assessment of Stamp Tax nos. 2014... and 2014....

In this manner, if process no. 441/2015-T had not yet been decided, the dilatory exception of lis pendens would be verified, to the extent that the triple identity required by Article 581 of the Civil Procedure Code is verified. Let us see why.

The rule of lis pendens applicable to tax proceedings, whether judicial or arbitral, is that which is in the Civil Procedure Code.

Now, in civil proceedings lis pendens, or the exception of lis pendens, presupposes the repetition of a cause while the earlier one is still in progress, pursuant to the provision of Article 580(1) of the Civil Procedure Code. The exception of lis pendens aims to prevent the tribunal from being placed in the alternative of contradicting or reproducing an earlier decision as provided for in Article 580(2) of the Civil Procedure Code. In turn, Article 581 enumerates the requirements of lis pendens (and res judicata), establishing what is understood by "repetition of the cause". Thus, this article requires that the triple identity of parties, claim and cause of action be verified.

That is, that the parties be the same from the point of view of their legal status, that the same legal effect be sought and that the claim advanced in the two actions proceeds from the same legal fact.

Lis pendens thus has subjective limits – the identity of the parties from the point of view of legal status – objective limits – the identity of the claim and cause of action, pursuant to Articles 581(3) and (4) cited – and also temporal limits – once the occurrence of lis pendens must be assessed by reference to the moment when it is assessed - which means that, even if there is a repetition of the cause, if the active party comes to withdraw from one of the actions before the exception of lis pendens is assessed, the situation of lis pendens ceases to exist.

Now, there is no doubt whatever that the identity of the parties is verified, to the extent that the Claimant is in both proceedings A..., SA and the Respondent is the Tax Administration. As for the identity of the claim, this is also identical in both proceedings – the declaration of illegality and consequent annulment of the acts of assessment of Stamp Tax nos. 2014... and 2014....

Regarding the identity of the cause of action, this depends on the invocation of the same grounds for declaration of illegality of the act sought to be challenged. This is verified, as results from the decision already rendered in Process no. 441/2015-T which we reproduce here:

"1.10. The Claimant alleges, first, that item 28 of the General Table of Stamp Tax, in the wording it took on after the entry into force of the State Budget Law for 2014 taxes "land for construction whose authorized or planned construction is for housing", which is equivalent to saying that for purposes of the application of this item land for construction for which construction authorized or planned is simultaneously for housing and commerce is irrelevant, regardless of the respective taxable value.

1.11. Now, for the Properties authorized constructions are affected simultaneously to housing and commerce. In fact, by permit no. .../2006, which the Claimant attached as doc. no. 5 to its application for arbitral pronouncement, the content of which is taken as reproduced, each of the buildings authorized therein has an area of 6,750.00 m2 for housing, another of 840 m2 for commerce and another still of 3,160.00 m2 for parking and storage, which automatically removes the Properties from the field of subjection to that item of the General Table.

1.12. Even if this were not so understood, it seems clear that those parts of the taxable value of the Properties attributable to areas allocated to commerce and parking and storage cannot be subject to this tax, so the tax and customs administration, rather than considering a total taxable value for each of the Properties, should have discriminated the taxable value relating exclusively to housing, also quantifying the taxable values relating to commerce and parking and storage, which was not done.

1.13. The Claimant further alleges it to be certain and sure that, after the buildings authorized for those land for construction are built, none of its parts susceptible of separate income will have a taxable value equal to or greater than €1,000,000.00, so that in light of the principles of contributive capacity, equality and justice, there cannot be taxation before that construction".

In fact, the first proceeding relating to the first instalments of the acts of assessment nos. 2014... and 2014... has already been decided, with the decision being notified to the parties on 31 March 2016, so the temporal requirement of lis pendens is not verified: although the cause is repeated, the earlier one is no longer in progress.

In this manner, being the same parties, the same claim and an identical cause of action, in a subsequent arbitral proceeding, the exception of lis pendens is not verified but there may be a possible dilatory exception of res judicata, which would bar the tribunal from assessing the merits of the case pursuant to Articles 576(2) and 577(f) of the Civil Procedure Code.

The exception of res judicata presupposes, as is known, the repetition of a cause after a first cause has already been decided by judgment that has become final, pursuant to the provision at the end of Article 580(1) of the Civil Procedure Code, and aims to prevent the tribunal from being placed in the alternative of contradicting or reproducing an earlier decision.

Article 581 of the Civil Procedure Code enumerates the requirements of res judicata, establishing what is understood by "repetition of the cause". From this article it follows that res judicata, similarly to lis pendens, has subjective limits – the identity of the parties from the point of view of legal status – objective limits – the identity of the claim and cause of action, pursuant to Articles 581(3) and (4) cited – and also temporal limits – once the occurrence of res judicata must be assessed by reference to the moment when it is assessed.

And, it is repeated, there is no doubt that the parties, the claims and the causes of action are the same in our case and in process no. 441/2015-T.

Now, as doctrine understands peacefully, the effect of res judicata consists of the unsusceptibility of substitution or modification of the decision by any tribunal, including the tribunal that handed it down. The outcome of the conflict expressed in the decision becomes indisputable (See João Paulo Remédio Marques (2011), "The Declaratory Action in Light of the Revised Code", 670).

Now, for the decision to become indisputable or unmodifiable it shall be necessary that it become final, which occurs as soon as it is not susceptible of ordinary appeal, either because the period for filing an appeal has elapsed, or because the action does not permit ordinary appeal or because the parties simply waived or withdrew the appeal.

According to ANTUNES VARELA, MIGUEL BEZERRA and SAMPAIO E NORA, both recourse decisions or orders relating to questions of procedural character may become final, as well as the decision relating to the material relationship in dispute. In the first case, we have a formal or procedural decision that does not assess the merits of the case, forming formal res judicata and in the second, we have a decision that assessing the merits of the question forms material or substantive res judicata (See Antunes Varela, Miguel Bezerra, Sampaio e Nora (2004), Manual of Civil Procedure, in accordance with Decree-Law 242/85,701-704).

Thus, "material res judicata has binding force within and outside the proceeding, preventing the same or another tribunal, or any other authority, from being able to define differently the concrete law applicable to the litigated material relationship" (emphasis added). That is, there will be material res judicata whenever the question decided concerns the litigated material relationship, that is, the merits of the case. Material res judicata has binding force within and outside the proceeding, thus preventing the same tribunal, or another tribunal (or any other administrative entity), from being able to decide differently the same claim. This effect prevents, as is known, a decision previously rendered and final from being modified by a second decision in a subsequent proceeding – a guarantee of unmodifiability and non-repetition of final decisions as an expression of the principle of certainty and legal security.

In turn, "formal res judicata has binding force only within the proceeding, preventing the judge from being able to alter the decision rendered in the same action, but not preventing that, in another action, the same concrete procedural question be decided differently by the same tribunal or by another subsequently called to assess the case". That is, there will be formal res judicata, binding only in the proceeding in which the decision was rendered, when the question decided is of a procedural character. In this case, the tribunal cannot, in the same action, alter the decision rendered, but nothing prevents the same procedural question from being decided, in another action, differently.

Whether formal res judicata or material res judicata, rendering the procedural decision or the decision on the merits unmodifiable, aim to guarantee individuals the minimum of certainty in Law or legal security.

The exception of res judicata, in turn, guarantees the unmodifiability of the final decision, not permitting the bringing of a new action aimed at assessing the question already solved by that decision. Thus, when the requirements of Article 581 of the Civil Procedure Code are verified, that is, when the parties, the claim and the cause of action are the same, the exception of res judicata will be verified which prevents the tribunal from assessing the merits of the case. Already existing a decision with the force of res judicata that has been rendered on the merits of the same case, another tribunal in another proceeding cannot assess it under pain of contradicting the decision rendered or having to repeat it.

But this dilatory exception which prevents the tribunal from assessing the merits of the case will be verified only when the decision rendered in the previous proceeding and final enjoys material res judicata, to the extent that, as was seen, merely formal decisions that do not assess the merits of the case, with the force of formal res judicata, only have binding force within the proceeding, not preventing other tribunals from deciding the same formal question and the merits of the case.

Here we arrive at the need to determine whether the decision rendered in the context of Process no. 441/2015-T was a decision of form and procedural character or whether, on the contrary, it was a decision that assessed the merits of the case, relating to the litigated material relationship.

Should the decision rendered be of a procedural or formal character (for example: absolution of the instance by dilatory exception of lack of standing of one of the parties), it will have the force of formal res judicata, whereby it will have binding force only within the proceeding in the context of which it was rendered, not binding other tribunals. If so, not only may the formal questions already decided be assessed, but also the merits of the case which was not assessed.

On the contrary, if the decision concerns the litigated material relationship, that is, the merits of the case (declaring the illegality of the tax act, for example), it will enjoy the force of material res judicata, enjoying binding force within and outside the proceeding. With final judgment, this decision becomes unmodifiable so no tribunal may assess the merits of the case under pain of contradicting or having to reproduce an earlier decision.

Now, looking at the decision rendered in Process no. 441/2015-T, there is no doubt that this constitutes a formal decision and of procedural character, to the extent that it proceeded to absolution of the instance by verifying the dilatory exception of material incompetence of the arbitral tribunal.

Here we transcribe the decision of this Process no. 441/2015-T to preclude any type of doubt:

"4. Decision

Pursuant to and with the grounds set out, the incompetence of the arbitral tribunal is determined, which prevents the assessment of the merits of the case and imposes absolution of the Respondent of the instance." (emphasis added).

Having the tribunal understood that the dilatory exception of incompetence of the tribunal was verified, this prevented the assessment of the merits of the case, so, by force of the provision of Article 576(2) of the Civil Procedure Code, applicable subsidiarily ex vi Article 29(1)(e), the decision could be no other than absolution of the instance.

In this manner, being a merely formal decision, which decided a procedural question, it enjoys only formal res judicata. With final judgment it became an unmodifiable decision but, with binding force only within process no. 441/2015-T, that is, binding only the tribunal that rendered it.

Had the decision of the proceeding assessed the merits of the case, with the final judgment of that decision, there is no doubt that the regime provided for in the Civil Procedure Code and defended by doctrine is that this decision, becoming unmodifiable, enjoyed binding force within and without the proceeding. That is, if in the context of process no. 441/2015-T the arbitral tribunal had declared the (il)legality of the act of assessment of Stamp Tax, this tribunal could not pronounce on the merits of the question, under pain of contradicting or having to repeat the earlier decision.

The effect of res judicata would prevent a decision previously rendered and final from being modified by a second decision in a subsequent proceeding, in the name of the guarantee of unmodifiability and non-repetition of final decisions as an expression of the principle of certainty and legal security.

However, this was not what occurred in our case. Being the decision rendered in the context of the previous proceeding merely formal, it enjoys the force of formal res judicata, binding only in the proceeding in which the decision was rendered.

Thus, nothing prevents the same procedural question from being decided, in another action, differently. That is, the exception of res judicata is not verified, notwithstanding that the parties, the claim and the cause of action are the same. This is so because, it is repeated, a decision with the force of formal res judicata, only has binding force within the proceeding, not binding other tribunals.

Nor does the question arise here of whether the arbitral decision did not assess the merits of the claim due to a fact attributable to the passive subject, to the extent that such is only relevant for the provision of Article 24(3) of the LFTA, that is, for purposes of counting periods for claims, challenges, revision, promotion of ex officio revision, revision of taxable matter or for raising a new arbitral pronouncement of the acts object of the arbitral claim submitted.

It should also be noted that the concretization of what one understands by "attributable to the passive subject" proves difficult. At the limit, it could be said that the occurrence of any dilatory exception would be attributable to the passive subject to the extent that it was they who did not properly configure the competence of the tribunal, the legality of the joinder or joinder, the non-occurrence of lis pendens or res judicata, etc. It is, however, believed that it shall be incumbent on the arbitral tribunal to assess the culpability of that "error" of the passive subject. Put another way, and taking as reference the cases of incompetence of the arbitral tribunal, there are questions so doubtful that they determine in Doctrine and in case law itself contradictory positions, which, should a dilatory exception of incompetence be upheld, the non-assessment of the merits may not be attributable to the passive subject. (Carla Castelo Trindade (2016), "Legal Framework for Tax Arbitration Annotated", 464).

Moreover, the Tax Administration could never invoke the exception of res judicata – which we understand not to be verified – without coming against its own conduct. In fact, in process no. 441/2015-T, just as in the case at hand, the Respondent raised the exception of incompetence of the arbitral tribunal, to the extent that it argued that the Claimant contested the first instalments of the acts of assessment, which do not constitute in themselves any tax act. Now, the exception of res judicata depends, as has been seen, on the triple identity of parties, claim and cause of action and the claim may only be the same if it is understood that in both process no. 441/2015-T and in this one the Claimant contests the acts of assessment of Stamp Tax and not the first or second instalments.

Having said this, it is concluded that this tribunal can assess the formal question of competence, as it has indeed already done, and can (and must) assess the merits of the case, assessing the legality of the acts of assessment of Stamp Tax here challenged.

The proceeding does not suffer from nullities.

The parties enjoy standing and capacity and are legitimate.

All considered, it is incumbent to decide.

III. ON THE FACTS

III.1. PROVEN FACTS

Regarding the matter of fact, it is important, first and foremost, to emphasize that the tribunal does not have to pronounce on everything that was alleged by the parties, being incumbent upon it, instead, the duty to select the facts that matter for the decision and distinguish proven from unproven facts. All as provided by Article 123(2) of the Tax Code and Article 607(2), (3) and (4) of the Civil Procedure Code, applicable ex vi Article 29(1)(a) and (e) of the LFTA. In this manner, the facts pertinent for judgment of the case are chosen and cut out in function of their legal relevance, which is established having in mind the various plausible solutions of the legal question(s) (see Article 596 of the Civil Procedure Code applicable ex vi Article 29(1)(e) of the LFTA).

Now, given the positions assumed by the parties, the documentary evidence and the Administrative File attached to the record, the following facts with relevance for the decision are considered proven:

1. The Claimant is the sole owner of two plots of land for construction located in ..., with an area of 1,560 m2, designated as plots 38 and 39, registered in the property matrix of the parish of ..., municipality of ..., under articles ... and ..., respectively.

2. The land for construction was evaluated in 2012, with a taxable value being determined for each of them of € 1,550,690.00 (one million, five hundred and fifty thousand, six hundred and ninety euros) (see Doc. 3 and Doc. 4 of the application for constitution of the arbitral tribunal).

3. The land for construction is registered in the Property Matrix under articles ... and ... as allocated to housing (Doc. 3 and Doc. 4, relating to the Property Registry).

4. There are not yet any buildings on the land.

5. Construction was authorized by the Municipal Council of ... on these two plots of land of buildings with areas allocated to collective housing and commerce/services (page 7 of Doc. 5/Permit no. .../2006).

6. By permit no. .../2006 each of the buildings authorized on the Properties has an area of 6,750.00 m2 allocated to housing, another of 840 m2 allocated to commerce and another still of 3,160.00 m2 allocated to parking and storage (see page 11 of Doc. 5 of the application for constitution of the arbitral tribunal).

7. The Claimant was notified to proceed with payment of the first instalments of the act of assessment of Stamp Tax, relating to the year 2014, made under item no. 28.1 of the General Table of Stamp Tax, in the amount of € 5,168.96 (five thousand one hundred and sixty-eight euros and ninety-six cents) relating to each of the land for construction, registered under articles ... and ... of which it is the owner.

8. The Claimant proceeded with payment of the first instalments of Stamp Tax relating to the year 2014 here challenged, relating to each of the aforementioned plots of land, on 20 April 2015, in a total amount of € 10,337.92 (ten thousand, three hundred and thirty-seven euros and ninety-two cents);

9. The Claimant was also notified to proceed with payment of the second instalments of the act of assessment of Stamp Tax, relating to the year 2014, made under item no. 28.1 of the General Table of Stamp Tax, in the amount of € 5,168.96 (five thousand one hundred and sixty-eight euros and ninety-six cents) relating to each of the land for construction, registered under articles ... and ... of which it is the owner. (See Doc. no. 1 and doc. no. 2 attached with the Claimant's petition).

10. The Claimant proceeded with payment of the second instalments of Stamp Tax relating to the year 2014 here challenged, relating to each of the aforementioned plots of land, on 23 July 2015, in a total amount of € 10,337.92 (ten thousand, three hundred and thirty-seven euros and ninety-two cents); (see Doc. no. 1 and 2 attached with the Claimant's petition).

III.2. UNPROVEN FACTS

As stated, regarding the matter of fact taken as settled, the tribunal does not have to pronounce on everything that was alleged by the parties, being incumbent on it, instead, the duty to select the facts that matter for the decision and discriminate proven from unproven facts as provided by Article 123(2) of the Tax Code applicable ex vi Article 29(1)(a) and (e) of the LFTA. In this manner, the facts pertinent for judgment of the case were, as stated above, chosen and cut out in function of their legal relevance, there being no other factuality alleged that is relevant to the correct resolution of the procedural matter.

IV. ON THE LAW

Given the positions of the parties assumed in the pleadings filed, the central question to be resolved by the present arbitral tribunal consists of assessing the legality of the acts of assessment of Stamp Tax.

Having the Claimant imputed various defects to the impugned tax acts it is necessary to determine the order of assessment of the same, and the order of Article 124 of the Tax Code must be observed, applicable by force of Article 29(1)(a) of the Legal Framework for Tax Arbitration.

The substantiation of any of the defects invoked by the Claimant will lead to the annulment of the tax acts. The defect of violation of law due to error as to the presuppositions shall be analyzed first to the extent that it is the one that will lead to the "most stable or effective protection of the injured interests" to the extent that its possible substantiation will prevent the renewal of the act, which does not occur with the annulment arising from the other defects.

Accordingly, the tribunal will first assess the defect of violation of law.

Defect of Violation of Law

The question here at issue consists of determining whether there was a defect of violation of law with the application of the rule of incidence of Stamp Tax, as it is currently worded, to the land for construction corresponding to plots 38 and 39, of which the Claimant is the owner.

Thus, it should be noted that it was Law No. 55-A of 29 October that amended Article 1 of the Stamp Tax Code, adding to the General Table of that tax item 28.

From this it is provided that Stamp Tax came to apply also to:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable value contained in the matrix, pursuant to the Property Tax Code, is equal to or greater than € 1,000,000 – on the taxable value used for the purpose of Property Tax:

28-1 – Per property with residential allocation- 1%;

28-2 – Per property, when the passive subjects that are not individuals are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance – 7.5%."

Thus, with the entry into force of item 28.1 properties with residential allocation with taxable value equal to or greater than € 1,000,000.00 became subject to Stamp Tax, at the rate of 1%.

In this manner, in the original wording of item 28.1, that rule of incidence only covered urban properties with residential allocation with taxable value equal to or greater than € 1,000,000.00 and not land for construction of equal value.

That is, in the original wording of item 28.1, land for urban construction, whether or not it had taxable value equal to or greater than € 1,000,000.00, were excluded from taxation.

However, with the entry into force of the State Budget for 2014 (Law No. 83-C/2013 of 31 December), item 28.1 came to provide that Stamp Tax applies to:

"28.1 Per residential property or per land for construction, whose authorized or planned construction is for housing, pursuant to the provisions of the Property Tax Code – 1%."

Thus, with respect to the "land for construction" here at issue it is fundamental to have in account this legislative evolution, to the extent that until the entry into force of the State Budget for 2014, the legislator only provided in the rule of incidence of Stamp Tax for urban properties with residential allocation. With the new wording of item 28.1, after the entry into force of the State Budget for 2014, the legislator, however, came to expressly provide for the taxation of land for construction "whose authorized or planned construction is for housing, pursuant to the provisions of the Property Tax Code" (emphasis added).

In fact, before the amendment to the wording of item 28.1, it was discussed whether in that rule of incidence automatically fell, beyond the species of urban properties "residential", the species "land for construction" or whether, on the contrary, the real rule of incidence only subjected to taxation in Stamp Tax urban properties with residential allocation.

Several were the decisions rendered by arbitral tribunals pronouncing on the illegality of acts of assessment of Stamp Tax that applied to land for construction with taxable value equal to or greater than € 1,000,000.00 prior to 2014, thus understanding that land for construction were not to be included in the rule of incidence.

In this sense, see in particular process no. 543/2014-T, in which it was stated that:

"The ratio legis was then to create a tax that would apply to, in the words of the State Secretary, "houses of value equal to or greater than 1 million euros" and not to land for construction. There would have been reason to do so, particularly because the reasons justifying the payment of tax on goods of "luxury" by an owner of a good greater than 1 million euros justify themselves, in the words of the Tax Administration, indistinctly in the cases of urban properties "residential" and "land for construction". However, that was not the objective of the legislator. And indeed it is that the year following, surely by understanding the gap of the original wording, amends the law adding therefore clearly this reality.

Well understanding the arguments of the Tax Administration this cannot, however, make itself substitute for the legislator, more so, it does not seem to us possible through extensive interpretation, using reasoning by parity of reason with the buildings considered urban residential properties, to conclude, without more, that the species of urban properties considered "land for construction" falls "by law" within the tax rule of incidence, by merely alleging the legal-formal qualification and the elements of the matrix, it being noted that it will be necessary to demonstrate its "residential allocation" in concrete terms.

In summary, it is thus concluded that the assessments of Stamp Tax are illegal due to a defect of violation of law due to error as to the legal presuppositions, which justifies its annulment pursuant to Article 135 of the Administrative Procedure Code, applicable pursuant to Article 29(1)(d) of the Legal Framework for Tax Arbitration and Article 2(c) of the General Tax Code".

However, from the new wording of item 28.1, resulting from the State Budget Law for 2014 it clearly results that Stamp Tax came to apply also to land for construction. But not all land for construction. Only those whose authorized or planned construction is for housing: "28 – Ownership, usufruct or right of superficies of urban properties whose taxable value contained in the matrix, pursuant to the Property Tax Code, is equal to or greater than € 1,000,000 – on the taxable value used for the purpose of Property Tax: 28.1 Per residential property or per land for construction, whose authorized or planned construction is for housing, pursuant to the provisions of the Property Tax Code – 1%".

Thus, the question that arises is not whether land for construction with value greater than € 1,000,000.00 whose construction is for housing are subject or not to Stamp Tax – of this there is no doubt with the new wording of item 28.1 - but rather whether land for construction allocated to both housing and commerce are embraced by that rule of incidence.

This question arises because it follows from the Subdivision Permit of the Municipal Council of ... no. .../2006 that there are authorized on plots 38 and 39, of which the Claimant is the owner, constructions allocated simultaneously to housing and commerce, with each of the buildings authorized therein having an area of 6,750.00 m2 allocated to housing and 840 m2 allocated to commerce.

However, it should be noted that this land for construction is registered in the Property Matrix under articles ... and ... as allocated solely to housing (Doc. 3 and Doc. 4, relating to the Property Registry).

Now, it seems that although the construction planned in the Property Registry is solely for housing, that authorized by the Permit of the Municipal Council of ... is simultaneously for housing and commerce.

It will then be necessary to understand which one will prevail for purposes of subjection to Stamp Tax.

For this purpose it is first necessary to look at the concept of "land for construction" arising from the provisions of the Property Tax Code, to which item 28.1 of the General Table of Stamp Tax refers to the extent that this Code does not contain a definition of "urban property", "land for construction" or "residential allocation".

In accordance with Article 2(1) of the Property Tax Code, a property is: "any parcel of land, including waters, plantings, buildings and constructions of any kind incorporated therein or resting thereon, having a character of permanence, provided that it forms part of the patrimony of an individual or legal entity and, in normal circumstances, has economic value, as well as waters, plantings, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are located, although situated in a parcel of land that constitutes an integral part of a different patrimony or does not have a patrimonial nature.

Urban properties, in turn, according to Article 6 of the Property Tax Code, are divided into:

"a) Residential;

b) Commercial, industrial or for services;

c) Land for construction;

d) Others".

Already from number 3 of Article 6 of the Property Tax Code it results that:

"3 - Land for construction shall be considered land situated within or outside an urban area, for which a license or authorization has been granted, prior communication admitted or favorable prior information issued for subdivision or construction operation, and also those that have been so declared in the title of acquisition, excepting land for which the competent entities forbid any of those operations, namely those located in green areas, protected areas or that, in accordance with municipal land use plans, are allocated to spaces, infrastructure or public equipment" (emphasis added).

Thus, land for construction should be considered land for which a license for subdivision operation, construction license, authorization for subdivision operation or construction authorization has been granted (See António Santos Rocha, Eduardo José Martins Brás (2015), Taxation of Assets, Property Tax-Property Transfer Tax and Stamp Tax Annotated and Commented, 44). The legal qualification depends on the Permit.

The same idea arises from the judgment of the Administrative Supreme Court of 27 November 2013, rendered in the context of process no. 76/2013 in which it was stated that "plots for construction are constituted with the issuance of a subdivision license, appearing, in a specified manner, in the respective permit".

Before a license for subdivision operation, a license for construction, authorization for subdivision operation or authorization for construction is granted, land is not considered for construction for purposes of Property Tax and, consequently, for purposes of Stamp Tax. That is, the qualification as land for construction arises from the license or authorization. The same is stated in the aforementioned Administrative Supreme Court judgment: "The plots provided for in the defunct licensing ceasing to exist as such, cannot Property Tax apply to them".

In this manner, plots 38 and 39 of which the Claimant is the owner only came to qualify as "land for construction" for purposes of Stamp Tax with the authorization for subdivision provided in Permit no. .../2006. There is no doubt thus that they constitute "land for construction".

On the other hand, it is also necessary to look at how the taxable value of land for construction is calculated, pursuant to the Property Tax Code, to which item 28 of the General Table refers: "Ownership, usufruct or right of superficies of urban properties whose taxable value contained in the matrix, pursuant to the Property Tax Code is equal to or greater than € 1,000,000 – on the taxable value used for the purpose of Property Tax".

According to Article 37(3) of the Property Tax Code which regulates the initiative of the first valuation of urban properties, in relation to land for construction, a photocopy of the subdivision permit must be presented, which should be replaced, if there is no subdivision, by a photocopy of the construction license permit, approved plan, prior communication, favorable prior information or document proving constructive feasibility.

ANTÓNIO SANTOS ROCHA and EDUARDO JOSÉ MARTINS BRÁS argue that this obligation reveals an understandable concern with the accuracy of data, namely regarding the areas that are the "core" of valuation operations (See António Santos Rocha, Eduardo José Martins Brás (2015), Taxation of Assets, Property Tax-Property Transfer Tax and Stamp Tax Annotated and Commented, 132).

They further argue that, "as for the subdivision permit, the construction license permit, the approved plan or the document proving constructive feasibility, no interpretation doubts will be raised, given that they are translated into specific documents issued by the Municipality of the area of the property location".

Moreover, from number 1 of Article 45 of the Property Tax Code it follows that "the taxable value of land for construction is the sum of the value of the area of implantation of the building to be constructed, which is that situated within the perimeter of fixation of the building to the ground, measured by the outer part, added to the value of the land adjacent to the implantation".

The same authors understand that the taxable value of land for construction is the result of the weighing of three essential elements:

• The value of the authorized or planned construction area,

• The geographical location of the land itself and

• The remaining part of the land, that is, the area not occupied by the future building.

From this it clearly follows that the calculation of the taxable value of land for construction should be based on the areas of authorized or planned construction in the subdivision permit or construction permit.

Moreover, from the notes contained in the Manual Supporting the Valuation of Urban Properties, version 5.0, May 2011 it follows that in the case of the calculation of the taxable value of land for construction with different allocations, with discrimination of the respective areas, these should be considered in the respective calculation. In these cases, the taxable value corresponds to the sum of the taxable values of the different allocations.

Now, in our concrete case, from the subdivision permit no. .../2006 it follows that authorized constructions on plots 38 and 39 of which the Claimant is the owner, allocated simultaneously to housing and commerce, discriminating the areas allocated to housing (6,750.00 m2 each plot) and allocated to commerce (840 m2 each plot), arriving at the value of € 1,550,690.00.

Thus, although it appears in the urban property registry that these two land for construction are allocated to housing, it is assumed that the Tax Administration in the valuation of the taxable value of these land for construction, proceeded in accordance with that provided for in Article 45 of the Property Tax Code and in the Manual Supporting the Valuation of Urban Properties, version 5.0, May 2011, considering the allocation to housing and commerce of this land as authorized by the Permit.

Having arrived here, we conclude that plots 38 and 39 of which the Claimant is the owner constitute land for construction of value greater than € 1,000,000.00, whose authorized construction in the Permit is allocated simultaneously to housing and commerce, so there arises the question of whether they are embraced by the rule of incidence of item 28.1 of the General Table of Stamp Tax which provides that subject to taxation at 1% are land for construction of value equal to or greater than € 1,000,000.00 whose construction, authorized or planned, is for housing.

Item 28.1 of the General Table of Stamp Tax expressly provides for taxation in Stamp Tax of:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable value contained in the matrix, pursuant to the Property Tax Code, is equal to or greater than € 1,000,000 – on the taxable value used for the purpose of Property Tax:

28.1 Per residential property or per land for construction, whose authorized or planned construction is for housing, pursuant to the provisions of the Property Tax Code – 1%" (emphasis added)

Now, on the one hand, there is no doubt that the legislator did not wish to embrace land for construction whose authorized construction is (solely) for commerce. In this sense, see process no. 592/2014-T in which, there being in question a plot of land for urban construction intended for the construction of services, commerce and parking private and public, the arbitral tribunal understood that:

"Faced with the proven matter of fact, there is no doubt that to the property in question is not applicable item 28.1 of the General Table of Stamp Tax. (...) having been proven that the planned construction is only that of services, commerce and private and public parking it is manifest that the taxation in question is unwarranted, the act of assessment in question suffering from the defect of violation of law so the assessment cannot but be annulled".

On the other hand, we understand that item 28.1 of the General Table of Stamp Tax does not provide for the taxation of land for construction whose construction, authorized or planned, is jointly for housing and commerce/services, but only those whose authorized or planned construction is exclusively for housing. Put another way, we understand that there should be a restrictive interpretation of that norm, embracing only the taxation of land for construction whose authorized or planned construction be exclusively for housing and not for housing and commerce simultaneously, as in the case at hand.

This conclusion, however, depends on an analysis of the reasons that justified the introduction of item 28 to the General Table of Stamp Tax and, consequently, the taxation under the heading of Stamp Tax of urban properties with residential allocation of value equal to or greater than € 1,000,000.00.

In the explanatory statement of bill no. 96/XII (2a) which was at the origin of Law no. 55-A/2012 of 29/10 which, in turn, introduced item 28 to the General Table of Stamp Tax, it is stated that:

"these measures are fundamental to reinforce the principle of social equity in austerity, guaranteeing an effective distribution of the sacrifices necessary to comply with the adjustment program. The Government is strongly committed to guaranteeing that the distribution of those sacrifices will be made by all and not just by those who live off the income of their work. In accordance with that aim, this act broadens the taxation of capital and property, embracing equitably a broad set of sectors of Portuguese society".

In turn, in the presentation and discussion of the aforementioned bill in the Assembly of the Republic, in his speech, the State Secretary for Tax Affairs stated the following:

"The Government chose as a priority principle of its fiscal policy social equity. This is even more important in times of rigor as a way to guarantee fair distribution of the fiscal burden.

In the demanding period the country is going through, during which it is obliged to comply with the program of economic and financial assistance, it becomes even more pressing to affirm the principle of equity. It cannot always be the same ones - employees and pensioners, bearing the tax charges.

For the fiscal system to be fairer it is decisive to promote the broadening of the tax base requiring an increased effort from taxpayers with higher incomes and protecting in this way Portuguese families with lower incomes.

For the fiscal system to promote more equality it is fundamental that the effort of budgetary consolidation be distributed by all types of income embracing with special emphasis income from capital and properties of high value. This matter, it is recalled, was broadly addressed in the ruling of the Constitutional Court.

Finally, for the fiscal system to be more equitable, it is crucial that all be called to contribute in accordance with their contributive capacity, conferring on the tax administration reinforced powers to control and supervise situations of fraud and tax evasion.

In this sense the Government presents, today, a set of measures that effectively reinforce a fair and equitable distribution of the fiscal burden [text truncated at user's limit]..."