Stamp Tax Verba 28.1 on High-Value Property in Vertical Ownership – CAAD Decision 644/2015-T

ARBITRAL DECISION

Process No. 644/2015 - T

The arbitrator Nuno Cunha Rodrigues, designated by the Deontological Council of the Center for Administrative Arbitration (CAAD) to form the present Arbitral Court, constituted on 04.01.2016, decides as follows:

I.1. REPORT:

1. On 21-10-2015, the company "A… S. A.", NIPC…, filed a request for constitution of a singular arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority is the Respondent.

2. The request for constitution of the Arbitral Court was accepted by the Illustrious President of CAAD and automatically notified to the Tax and Customs Authority on 02-11-2015.

3. Pursuant to the provisions of paragraph a) of No. 2 of Article 6 and paragraph b) of No. 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, with the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council designated as arbitrator of the singular arbitral tribunal the present signatory, who communicated acceptance of the charge within the applicable period, and notified the parties of such designation on 16-12-2015.

4. In accordance with the provisions of paragraph c) of No. 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, with the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the singular arbitral tribunal is deemed constituted on 04-01-2016.

5. On 14 February 2016, the meeting required by Article 18 of the RJAT was waived, given the position evidenced by the parties.

6. In the present process, the Company "A… S. A." seeks to have declared illegal and annulled the assessment notes Nos. 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015… concerning Stamp Duty in the total amount of € 10,026.50, for the year 2014, issued by the Tax and Customs Authority – as per documents No. 1 to 9 attached to the initial request.

I.2. The grounds of the Claimant's request are as follows:

1. The Claimant has been the owner since 11 April 2014 of the property registered under the article … in the urban registry of the parish of … (Lisbon), situated on Rua…, No. … in Lisbon, under vertical property regime.

2. In 2012, each division with independent use was subject to assessment pursuant to the Municipal Property Tax Code (CIMI), which implied that the total property value (VPT) of each one amounted to:

a) Division with independent use: AGFD – VPT: 60,150.00;

b) Division with independent use: AGFE – VPT: 73,130.00;

c) Division with independent use: CAVE – VPT: 76,000.00;

d) Division with independent use: RC – VPT: 193,490.00;

e) Division with independent use: 1D – VPT: 121,710.00;

f) Division with independent use: 1E – VPT: 102,580.00;

g) Division with independent use: 2D – VPT: 122,110.00;

h) Division with independent use: 2E - VPT: 103,640.00;

i) Division with independent use: 3D – VPT: 105,180.00;

j) Division with independent use: 3E – VPT: 120,660.00.

1. Since the total VPT, relating to the sum of the various VPTs of the several divisions with independent use amounted to 1,002,650.00 Euros, the TA assessed Stamp Duty pursuant to item 28.1 of the General Table of Stamp Duty, issuing several assessment notes, applying to the VPT of each Division with independent use the rate of 1% provided in the cited item, since the total VPT of the property (that is, the sum of all VPTs of the units with independent use) amounted to 1,002,650.00 Euros.

2. The Claimant considers that no Stamp Duty should be due pursuant to item 28.1 of the General Table of Stamp Duty, with respect to a property divided by the TA itself, for purposes of tax property assessment, into several divisions with independent use, of which the VPT of each does not amount to 1,000,000.00 Euros.

3. Pursuant to item 28 of the General Stamp Duty Table, the following is subject to Stamp Duty:

"Ownership, usufruct or right of superficies of urban properties whose tax property value contained in the registry, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 - on the tax property value used for purposes of IMI:

28.1 - For residential property or for land for construction whose construction, authorized or planned, is for residential purposes, as provided in the IMI Code - 1 %;

28.2 - For property, when the taxable persons who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance - 7.5 %."

1. In accordance with the aforementioned item, only the ownership of urban properties with residential use, whose tax property value contained in the registry, pursuant to the CIMI, is equal to or greater than (euro) 1,000,000, is subject to Stamp Duty.

2. Still pursuant to item 28, only properties with a value equal to or greater than 1,000,000 Euros may be subject to taxation.

3. The Claimant understands that the legislator intended that such value, when attributed to a residence (house, autonomous fraction or division of independent use), reflected above-average taxpaying capacity and therefore susceptible to determining a higher fiscal burden (in this sense see CAAD Decisions: Process No. 95/2013-T and Process No. 50/2013).

4. For this reason, the existence of property in vertical or horizontal ownership whose total value exceeds € 1,000,000, is not in itself indicative of the taxpaying capacity that the legislator considered relevant.

5. Moreover, if that were the legislator's intention, it would certainly have drafted the said item in a completely different manner, so that it was clear that taxation should fall on the totality of the real property assets of each owner, whenever the VPT of the set of properties held by him was equal to or greater than 1,000,000 Euros.

6. Pursuant to the CIMI, properties licensed for such purposes or whose normal use is residential must be considered residential, regardless of the legal situation of the concrete property situation, but rather the purpose to which it is intended, its normal use.

7. Since the VPT of each division, with independent use, is not equal to or greater than 1,000,000 Euros, the Claimant does not agree that the property is subject to stamp duty pursuant to item 28.1 of the General Table of Stamp Duty, and the stamp duty assessment carried out by the TA, taking into account the global value of the divisions susceptible to independent use, is clearly illegal because contrary to law (in this sense see CAAD Decisions: Process No. 238/2014-T, Process No. 88/2014-T, Process No. 95/2013-T, Process No. 72/2014-T; Process No. 194/2014-T, Process No. 203/2014-T; Process No. 50/2013-T, Process No. 428/2014-T).

8. The Claimant concludes by affirming that the principle of equality determines that what is equal must be treated equally and what is different treated differently. There being no justification for differentiated treatment of fractions of divisions susceptible to independent use, it is concluded that it is illegal and unconstitutional to consider as a reference value for purposes of CIS the sum of the VPT of the property, instead of the individual VPT of each division, because it violates the constitutional principle of equality (cf. Article 13 of the Constitution of the Portuguese Republic).

9. The Claimant further requests that she be awarded compensation, since, by not having made payment of the Tax within the period granted to her for that purpose, she presented, with the competent Tax Office, a bank guarantee to suspend the ongoing enforcement, having borne a cost relating to its issuance of 197.71 €, and should, therefore, be indemnified, pursuant to and for the purposes of Article 53 of the General Tax Law and Article 171 of the Code of Tax Procedure and Process, for the provision of an undue guarantee.

I.3. In response to the Claimant's request, the TA presented its defense as follows:

A) BY EXCEPTION:

Absolute material incompetence of the Arbitral Court to recognize the claimant's right to payment of compensation for provision of an undue guarantee.

1. Paragraph a) of No. 1 of Article 2 of the RJAT determines that the competence of arbitral courts comprises:

"a) The declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account;

1. And Article 4 of the RJAT states:

"The binding of the tax administration to the jurisdiction of courts established pursuant to this law depends on an order of the Government members responsible for the areas of finance and justice, which establishes, in particular, the type and maximum value of disputes covered."

1. For its part, Order No. 112-A/2011, of 22.03, established the following:

"Article 2

Object of the binding

The services and organisms referred to in the previous article bind themselves to the jurisdiction of arbitral courts operating in CAAD that have as object the appreciation of claims relating to taxes whose administration is entrusted to them referred to in No. 1 of Article 2 of Decree-Law No. 10/2011, of 20 January, with the exception of the following:

a) Claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure pursuant to Articles 131 to 133 of the Code of Tax Procedure and Process;

b) Claims relating to acts of determination of the taxable base and acts of determination of the taxable matter, both by indirect methods, including the decision of the revision procedure;

c) Claims relating to customs duties on imports and other indirect taxes that fall on goods subject to import duties; and

d) Claims relating to tariff classification, origin and customs value of goods and tariff contingents, or whose resolution depends on laboratory analysis or proceedings to be carried out by another Member State in the context of administrative cooperation in customs matters."

1. That is, the appreciation of matters relating to the enforcement process, where the guarantee provided falls, is not covered within the scope of the material competence of the Arbitral Court.

2. Thus, the Respondent understands that it results from the legal provisions mentioned above, namely those set forth in Articles 2 and 4, No. 1, of the RJAT and Article 2 of Order No. 112-A/2011, of 22/03, that the arbitral tribunal is materially incompetent to appreciate and decide the Claimant's request in everything that relates to the appreciation of matters relating to the tax enforcement process, in particular to appreciate the right to compensation for a guarantee unduly provided to suspend the enforcement process, due to lack of legal provision.

3. To this end, the Respondent invokes what was decided in Arbitral Process No. 17/2012-T, of 14 May 2012 as well as the decision rendered in Arbitral Process No. 175/2013-T, of 16 January 2014;

4. The Respondent understands that it is not bound to arbitral jurisdiction in the matter relating to the enforcement process.

5. According to the legal provisions mentioned above, since there is no legal provision for the competence of the Arbitral Court to recognize rights, there is also absolute material incompetence of the arbitral tribunal to proceed with the recognition of rights, in particular the right to payment of compensation for provision of an undue guarantee.

6. The Respondent understands that the competence of the Arbitral Court is inscribed within the scope of the control of the legality of assessment acts, and the law does not contain said competence for the recognition of rights.

7. The incompetence of the court constitutes a dilatory exception of ex officio knowledge that determines the dismissal of the instance pursuant to Article 576 and paragraph a) of Article 577 of the Code of Civil Procedure (CPC) applicable ex vi Article 29, No. 1, paragraph e) of the RJAT.

B) DEFENSE BY CHALLENGE:

1. The Respondent defended itself by challenge considering that it results from item 28 and 28-1 of the General Table, from Article 2, No. 4 of the Stamp Duty Code and from Articles 3, No. 3, paragraph u) and 8 of the C.I.M.I. that the taxable event of stamp duty consists of ownership, usufruct or right of superficies of urban properties whose tax property value contained in the registry, pursuant to the (CIMI), is equal to or greater than € 1,000,000.

2. The Respondent understands that the property value relevant for purposes of the incidence of the tax is, thus, the total property value of the urban property and not the property value of each of the parts that compose it, even when susceptible to independent use.

3. Article 80, No. 2, of the C.I.M.I. states that, except as provided in Articles 84 and 92, each property corresponds to a single article registered in the matrix.

4. The principle that each property corresponds to only one registry article is only excepted, thus, with respect to mixed properties in which, according to the aforementioned Article 84, each of the distinct parts is registered in the matrix in the part corresponding to it, and with respect to properties constituted in horizontal ownership in which, despite the fact that, pursuant to Article 2, No. 4, of the C.I.M.I., each autonomous fraction is deemed to constitute a property, each building under horizontal ownership regime corresponds to a single registry registration.

5. The urban property was not constituted under horizontal ownership regime on the date of the taxable event of stamp duty - 31 December 2014 - a case in which each of the autonomous fractions would be deemed an urban property, including for purposes of the subjection to stamp duty of item 28.1 of the General Table, but under vertical ownership regime.

6. It provides, however, as appears from its respective building matrix of stories or independent divisions, assessed pursuant to Article 12, No. 3, of the C.I.M.I, which states that each story or property susceptible to independent use is considered separately in the registry inscription, which also discriminates the respective tax property value on which IMI is assessed.

7. Such legal rule is not unprecedented, having correspondence in the body of Article 232, first rule, of the Code of Real Property Contribution and Tax on Agricultural Industry (C.C.P.I.I.A.), which provided that each dwelling or part of property be automatically taken for purposes of determination of the collectible income on which assessment must fall.

8. Thus, within the scope of the C.C.P.I.I.A., the collectible income had necessarily to correspond to the sum of the rent or rental value of each of the components of the property with economic autonomy.

9. Such legal rule is thus relevant, for purposes of Registration in the building matrix, the autonomy that, within the same property, can be attributed to each of its parts, economically and functionally independent.

10. In that case, the registry registration must make reference to each of the parts and also to the property value corresponding to each one, ascertained separately pursuant to Articles 37 and following of the C.I.M.I.

11. The unity of the urban property in vertical ownership composed of several stories or divisions is, however, not affected by the fact that all or some of those stories or divisions are susceptible to independent economic use.

12. Such property does not cease to be a single one, and thus its distinct parts are not legally equated to autonomous fractions under horizontal ownership regime.

13. As Silvério Mateus and Leonel Curvelo de Freitas affirm, "Real Property Taxes and Stamp Duty Commented and Annotated", Lisbon 2005, pp. 159 and 160, each of the parts of the property can be the object of leasing or any other type of use by the owner, which must be expressed in the respective building matrix.

14. In the present case, the tax property value on which the incidence of stamp duty of item 28.1 of the General Table depends had to be, as it was, the global property value of the property and not that of each of its independent parts.

15. The fact that the IMI was ascertained on the basis of the tax property value of each part of property with independent economic use does not equally affect the application of Article 28, No. 1, of the General Table.

16. Another interpretation would, indeed, violate the letter and spirit of item 28.1 of the General Table and the principle of legality of the essential elements of the tax provided for in Article 103, No. 2, of the Constitution of the Portuguese Republic. (C.R.P.)

17. It is the law's role - law of the Assembly of the Republic and authorized decree-law - to establish the essential elements of the incidence of taxes.

18. A type of incidence according to which the tax property value of urban properties on which the application of item 28.1 of the General Table depends is the property value of each story or division susceptible to independent use and not the global tax property value of the urban property with residential use has certainly no expression in the law.

19. The Respondent further considered that it does not see how the taxation in question would have violated the principle of equality.

20. In fact, horizontal and vertical ownership are differentiated legal institutions.

21. The constitution of horizontal ownership implies, it is fact, a mere legal alteration of the property, with no new assessment (Official Circular No. 40,025 of 11 August 2000, from the Directorate of Municipal Tax Services, D.S.C.A.).

22. The legislator may subject to a distinct legal tax framework, and therefore discriminatory, properties in horizontal and vertical ownership regimes, without such discrimination needing to be considered necessarily arbitrary.

C) WITH RESPECT TO THE RIGHT TO COMPENSATION FOR PROVISION OF AN UNDUE GUARANTEE, THE RESPONDENT ALLEGED THE FOLLOWING:

1. Article 53 of the LGT regulates the right to compensation for provision of an undue guarantee, contemplating two distinct situations.

2. No. 1 of the aforementioned provision states:

"The debtor who, to suspend execution, offers a bank guarantee or equivalent shall be indemnified in whole or in part for losses resulting from its provision, if he has maintained it for a period exceeding three years in proportion to the outcome in administrative appeal, challenge or opposition to execution that have as object the debt guaranteed."

1. In turn, No. 2 of the same provision establishes:

"The period referred to in the previous number does not apply when it is verified, in courtesy claim or judicial challenge, that there was error attributable to the services in the assessment of the tax."

1. That is, the taxable person has the right to compensation for provision of an undue guarantee in cases where the guarantee provided has been maintained for a period exceeding three years or, regardless of the period during which it was maintained, in cases where there was error attributable to the services in the assessment of the tax.

2. In the case in question, the situation that the law configures as "error attributable to the services" did not occur.

3. Indeed, the law did not provide for objective liability, but rather liability linked to the fault of the services.

4. This fault (the "attributability to the services") – by way of intent or negligence – must be alleged and proven, and does not result automatically from any illegality.

5. That is, the duty to indemnify does not result immediately and automatically from the annulment of the act, being only due when it is determined that there was error attributable to the services.

6. In the case in question, there is no existence of any error attributable to the services in the issuance of the challenged assessments, and therefore the Claimant's request for any compensation for provision of an undue guarantee is unfounded.

II. PROCEDURAL MATTERS

1. The Court is competent and is regularly constituted, pursuant to Articles 2, No. 1, paragraph a), 5 and 6, all of the RJAT.

2. The parties have legal personality and capacity, are legitimate and are legally represented, pursuant to Articles 4 and 10 of the RJAT and Article 1 of Order No. 112-A/2011, of 22 March.

3. The process is not affected by any nullities.

PRELIMINARY ISSUE:

OF THE INCOMPETENCE OF THE ARBITRAL TRIBUNAL.

1. The Respondent raised a preliminary issue, having defended itself by exception by considering that the arbitral tribunal is not competent, which requires analysis.

2. The Respondent invokes that the arbitral tribunal is materially incompetent to appreciate and decide the Claimant's request in everything that relates to the appreciation of matters relating to the tax enforcement process, in particular to appreciate the right to compensation for a guarantee unduly provided to suspend the enforcement process, due to lack of legal provision.

3. Notified to exercise the adversarial principle, the Claimant did not comply with such understanding by considering that it was because she did not make payment of the Stamp Duty within the period granted to her that she provided, with the Tax Office of Lisbon…, the competent bank guarantee, having borne a cost relating to its issuance in the amount of € 197.71 (one hundred ninety-seven euros and seventy-one cents).

4. Being with respect to that cost that the Claimant requested that payment of compensation be arbitrated for provision of an undue guarantee, pursuant to and for the purposes of Article 53 of the General Tax Law (LGT) and Article 171 of the CPPT.

5. The Claimant invokes Article 2 of Order No. 112-A/2011, of 22 March, pursuant to which "the services and organisms referred to in the previous number bind themselves to the jurisdiction of arbitral courts operating in CAAD that have as object the appreciation of claims relating to taxes whose administration is entrusted to them referred to in No. 1 of Article 2 of Decree-law No. 10/2011, of 20 January (…)."

6. The Claimant further understands that the aforementioned provision cannot be interpreted as an obstacle to the competence of the Arbitral Courts to appreciate requests for compensation for guarantee unduly provided and that the provision of guarantee is umbilically linked to the existence of a concrete tax assessment, that is, the Stamp Duty assessment note, item 28.1 of the General Table of Stamp Duty, relating to 2014 in the amount of € 10,026.50 (ten thousand twenty-six euros and fifty cents), for which reason the Arbitral Court is materially competent to appreciate the request.

Let us see:

In accordance with the provisions of paragraph b) of Article 24 of the RJAT, the arbitral decision on the merits of the claim that is not subject to appeal or challenge binds the tax administration as of the end of the period provided for appeal or challenge, and the latter must, in the exact terms of the success of the arbitral decision in favor of the taxable person and until the end of the period provided for spontaneous execution of the sentences of the tax courts, "restore the situation that would exist if the tax act subject to the arbitral decision had not been performed, adopting the necessary acts and operations for that purpose".

In the legislative authorization on which the Government based itself to approve the RJAT, granted by Article 124 of Law No. 3-B/2010, of 28 April, it is proclaimed, as a primary directive of the institution of arbitration as an alternative form of jurisdictional resolution of conflicts in tax matters, that "the tax arbitration process must constitute an alternative procedural means to the process of judicial challenge and to the action for recognition of a right or legitimate interest in tax matters".

Although Article 2, No. 1, paragraphs a) and b), of the RJAT uses the expression "declaration of illegality" to define the competence of arbitral courts operating in CAAD and does not make reference to constitutive (annulling) and condemnatory decisions, it should be understood, in harmony with the aforementioned legislative authorization, that the powers are included in its competences that in judicial challenge process are attributed to tax courts in relation to acts whose appreciation of legality is included in their competences.

On the other hand, although the process of judicial challenge is essentially a process of mere annulment (Articles 99 and 124 of the CPPT), condemnation of the tax administration to payment of indemnity interest and compensation for undue guarantee can be pronounced therein.

As was stated in arbitral decision No. 66/2013-T, "in fact, although there is no express norm to that effect, it has been consistently understood in tax courts, since the entry into force of the reform tax codes of 1958-1965, that a request for condemnation to payment of indemnity interest can be cumulated in judicial challenge process with the request for annulment or declaration of nullity or non-existence of the act, because in those codes it is stated that the right to indemnity interest arises when, in courtesy claim or judicial process, the administration be convinced that there was error of fact attributable to the services."

This regime was, subsequently, generalized in the Code of Tax Procedure, which established in No. 1 of its Article 24 that "there shall be a right to indemnity interest in favor of the taxpayer when, in courtesy claim or judicial process, it is determined that there was error attributable to the services", then, in the LGT, in whose Article 43, No. 1, it is established that "indemnity interest is due when it is determined, in courtesy claim or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than legally due" and, finally, in the CPPT in which it was established, in No. 2 of Article 61 (to which corresponds No. 4 in the wording given by Law No. 55-A/2010, of 31 December), that "if the decision that recognized the right to indemnity interest is judicial, the payment period counts from the beginning of the period of its spontaneous execution".

With respect to the request for condemnation to payment of compensation for provision of an undue guarantee, Article 171 of the CPPT establishes that "compensation in case of a bank guarantee or equivalent unduly provided shall be requested in the process in which the legality of the debt to be enforced is disputed" and that "compensation must be requested in the claim, challenge or appeal or in case its foundation is subsequent within 30 days after its occurrence".

Thus, it is unequivocal that the judicial challenge process encompasses the possibility of condemnation to payment of undue guarantee compensation and it is, in principle, the adequate procedural means for formulating such request, which is justified by obvious reasons of procedural economy, since the right to compensation for undue guarantee depends on what is decided on the legality or illegality of the assessment act.

The request for constitution of the arbitral tribunal has as its corollary that it is in the arbitral process that the "legality of the debt to be enforced" will be discussed, and therefore, as results from the express tenor of that No. 1 of Article 171 of the CPPT, the arbitral process is also adequate to appreciate the request for compensation for undue guarantee.

Furthermore, the cumulation of requests relating to the same tax act is implicitly presupposed in Article 3 of the RJAT, when it speaks of "cumulation of requests even if relating to different acts", which shows that the cumulation of requests is also possible with respect to the same tax act and requests for compensation for indemnity interest and condemnation for undue guarantee are susceptible to being covered by that formula, and therefore an interpretation in this sense has, at least, the minimum of verbal correspondence required by No. 2 of Article 9 of the Civil Code.

Whereby it is considered that the exception of incompetence invoked is not well-founded.

Consequently, the conditions are met to appreciate the merits of the request.

III. GROUNDS

A) ESTABLISHED FACTS

Before entering into the appreciation of the substantive issues, it is necessary to present the factual matter relevant for the respective understanding and decision, which, having examined the documentary evidence and the tax administrative process attached to the file and also taking into account the facts alleged, is established as follows:

1. The claimant has been the owner since 11 April 2014 of the property registered under the article … in the urban registry of the parish of …(Lisbon), situated on Rua…, No. … in Lisbon, under vertical ownership regime.

2. In 2012, each division with independent use was subject to assessment pursuant to the CIMI, which implied that the total property value (VPT) of each one amounted to:

a) Division with independent use: AGFD – VPT: 60,150.00;

b) Division with independent use: AGFE – VPT: 73,130.00;

c) Division with independent use: CAVE – VPT: 76,000.00;

d) Division with independent use: RC – VPT: 193,490.00;

e) Division with independent use: 1D – VPT: 121,710.00;

f) Division with independent use: 1E – VPT: 102,580.00;

g) Division with independent use: 2D – VPT: 122,110.00;

h) Division with independent use: 2E - VPT: 103,640.00;

i) Division with independent use: 3D – VPT: 105,180.00;

j) Division with independent use: 3E – VPT: 120,660.00.

1. Given that the total VPT, relating to the sum of the various VPTs of the several divisions with independent use amounted to 1,002,650.00 Euros, Stamp Duty was assessed pursuant to item 28.1 of the General Table of Stamp Duty.

2. As a consequence, the TA issued several assessment notes relating to stamp duty pursuant to the aforementioned item, applying to the VPT of each Division with independent use the rate of 1% provided in the aforementioned item, since the total VPT of the property (that is, the sum of all VPTs of the units with independent use) amounted to 1,002,650.00 Euros.

3. By not having made payment of the Tax within the period granted to her for that purpose, the Claimant presented, with the competent Tax Office, a bank guarantee to suspend the ongoing enforcement, having borne a cost relating to its issuance of 197.71 Euros.

III. B) UNPROVEN FACTS

There are no alleged or ex officio facts relevant to the decision that have not been established as proven.

III. C) MOTIVATION

The establishment of the factual matter was based on the tax administrative process, on the documents attached to the initial petition (assessment notes relating to each of the divisions of the property registered under the article … in the urban registry of the parish of …(Lisbon), situated on Rua…, No. … in Lisbon, under vertical ownership regime, as well as the guarantee provided), elements that were sufficient to found the conviction of the Court.

III. D) OF THE LAW

1. Article 4 of Law No. 55-A/2012, of 29 October, which entered into force on 30 October following, added an item to the TGIS then in force, with the following wording:

"28 - Ownership, usufruct or right of superficies of urban properties whose tax property value contained in the registry, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 - on the tax property value used for purposes of IMI:

28.1 - For property with residential use - 1 %;

28.2 - For property, when the taxable persons who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance - 7.5 %."

1. Pursuant to the provisions of No. 7 of Article 23 of the Stamp Duty Code (CIS) "In the case of tax due for the situations provided for in item No. 28 of the General Table, the tax is assessed annually, with respect to each urban property, by the central services of the Tax and Customs Authority, and the rules contained in the CIMI are applied, with the necessary adaptations."

Additionally, No. 2 of Article 67 of the CIS also establishes that "to matters not regulated in the present Code relating to item No. 28 of the General Table, the provisions of the CIMI apply, subsidiarily".

1. No. 4 of Article 2 of the CIMI stipulates: "For purposes of this tax, each autonomous fraction, under horizontal ownership regime, is deemed to constitute a property."

Pursuant to No. 3 of Article 12 of the CIMI: "Each story or part of property susceptible to independent use is considered separately in the registry inscription which also determines the respective tax property value".

It is necessary to analyze which interpretation should be given to No. 7 of Article 23 of the CIS, knowing that the Tax Administration (TA) now Respondent considered that, in urban properties with residential use, in vertical ownership, with stories or divisions susceptible to independent use, the aforementioned stories or divisions are not by formal legal definition considered urban properties (but shall be "parts of property" pursuant to No. 3 of Article 12 of the CIMI).

It therefore proceeded to sum their VPTs to determine whether the minimum VPT of 1,000,000 Euros was reached in the aforementioned property, a value on which, if equal to or greater than this threshold, it levied the 1% tax rate of item 28.1 of the TGIS.

Nevertheless, formally, the assessment note came subdivided into as many assessments as there are stories or parts of the property in vertical ownership, as also occurs at the level of IMI assessment.

Now, the aforementioned action by the TA goes against the interpretation that it makes of the provision in which it defends the application "with the necessary adaptations" of the "rules of the CIMI" to the situations provided for in item No. 28 of the General Table (No. 7 of Article 23 of the CIS).

Effectively,

1. By summing the VPTs of each story or independent division affected for residential purposes with a view to ascertaining the taxation threshold of 1,000,000 €, the TA stipulated a legal interpretation, without legal support, that is a global VPT of urban properties in vertical ownership, with residential use. This is because, although items 28 and 28.1 make reference to the noun "urban properties" and "for property", the fact is that, for purposes of ascertainment of the taxable matter, account must be taken of the "tax property value used for purposes of IMI".

It is this literal element on which the said rule focuses. The tax property value to be considered in the operation of determination of the collectible matter and subsequent assessment of the IS of items 28 and 28.1 of the TGIS as to urban properties with residential use, in vertical ownership, with stories or divisions susceptible to independent use, is what results exclusively from No. 3 of Article 12 of the CIMI.

1. As the aforementioned article establishes, "Each story or part of property susceptible to independent use is considered separately in the registry inscription, which also determines the respective tax property value".

In the absence of exact terminological correspondence of the concept, the starting point of the interpretation is, naturally, the text of the law, and it is on the basis of it that the legislative thought must be reconstructed, as required by No. 1 of Article 9 of the Civil Code, applicable by virtue of the provision of Article 11, No. 1 of the General Tax Law (LGT).

The very literal tenor of the expression used in item 28.1 of the TGIS is "tax property value used for purposes of IMI". The rules of incidence of taxes as well as those that grant exemptions or exclusions from taxation must be interpreted in their exact terms, without recourse to analogy, making the certainty and security of their application prevail.

1. Which allows concluding that urban properties in vertical ownership, in their totality, do not have VPT, the law determining, in such cases, that the VPT be attributed to each story or part of the property separately – as provided for in No. 3 of Article 12 of the CIMI.

Thus, and similarly to what was stated in arbitral decision No. 242/2013-T, it is understood that there is no legal support for the sum of tax property values of the stories or parts of property susceptible to independent use, with residential use, in order to reach the eligible taxation threshold of € 1,000,000.00 or more.

Even though No. 7 of Article 23 refers to "the tax is assessed annually, in relation to each urban property", the expression "each urban property" encompasses, having regard to the stated principles of interpretation and application of rules, urban properties in horizontal ownership and stories or parts of urban properties in vertical ownership, as long as affected for residential purposes, always starting from the tax basis that is referred to in the law, the tax property value used for purposes of IMI (final part of item 28 of the TGIS).

As mentioned in the arbitral pronouncement rendered in the scope of process No. 203/2014-T, "at the level of interpretation of tax rules, the very particular rule contained in No. 3 of Article 11 of the LGT may be used": persisting doubt about the meaning of the rules of incidence to apply, the economic substance of the taxable facts must be considered.

• If for the stories that compose the autonomous fractions of residential urban properties, in horizontal ownership, (even if they are by definition and "ope legis" urban properties), per taxpayer, the VPTs are not added to determine the threshold of the eligible value for subjection to IS (1,000,000.00 euros) of item 28 of the TGIS (operation of determination of the collectible matter), why should this occur as to the "parts of property or stories" of urban properties in vertical ownership?"

And it continues:

• "In both cases, the same taxpaying capacity of the taxpayers manifests itself (their level of wealth at the level of real estate goods). It is the same "economic substance" analyzed from different perspectives, revealing the same "ability-to-pay".

• "From the literality of items 28 and 28-1 of the TGIS, especially from the final part of item 28 of the TGIS, combined with No. 7 of Article 23 of the CIS, it will be concluded, with the "necessary adaptations of the rules of the CIMI" that the VPTs of the stories or parts of the property identified above should not be added to find a new global VPT of urban property, in the part with residential use, an operation of determination of eligible collectible matter that the law does not contemplate."

By assessing the tax to now the Claimant, by considering that the VPT would be ascertained on the basis of the sums of the VPT of each story or independent division affected for residential purposes with a view to ascertaining the taxation threshold of 1,000,000.00 euros, the TA made an error in the application of the law.

1. The aforementioned procedure is in total opposition to the spirit underlying the rule contained in the added item 28 of the General Table of Stamp Duty, which expressly mandates taking into account the "tax property value used for purposes of IMI".

As results from the principle of legality as it is provided for in Article 103, No. 2 of the C.R.P., and being the rule in question one of incidence, it cannot be through the interpretive route assert a result that is not expressed in the law.

This error constitutes a vice of violation of law that determines the voidability of the assessment in question, pursuant to the provision of Article 163 of the Code of Administrative Procedure (CPA) approved in 2015, applicable ex vi Article 29, No. 1, paragraph d), of the RJAT.

1. In the same way, the TA's interpretation violates the principle of equality established in Articles 13 and No. 3 of 104 of the Constitution. This is because it would never be legally permissible to establish a different VPT for two types of Taxes, VPT without legal support for the application of distinct criteria that will influence the tax base.

In fact, the principle of equality is one of the structuring principles of the Rule of Law, which has as its fundamental equation: to treat equally what is equal and differently what is different. The jurisprudence of the Constitutional Court has recognized the principle of taxpaying capacity as an expression of tax equality, extracting from it the precise technical requirements for the legal conformity of taxes with the aforementioned principle (cf. Decision No. 106/2013, of 20.02.2013).

The distinction between "full ownership" and "horizontal ownership" is not sufficient to justify differentiated treatment of the scope of application of item 28 of the Stamp Duty Table, since in both cases the same taxpaying capacity is verified.

See the position defended by CAAD, standing out, as merely exemplificatory, what was stated in the arbitral pronouncement rendered in process No. 132/2013-T:

"Indeed, how to justify, including in light of principles of social equity and tax justice defended by the legislator – note, in this regard, that the statement of the Council of Ministers of 20/9/2012 stated that the measure, among others, was fundamental "to strengthen the principle of social equity in austerity" –, that this taxation falls only on residential real estate assets and not on non-residential real estate assets? And how to reconcile this discrimination with what is provided in Article 104, No. 3, of the CRP?

Given the above, it is concluded that item No. 28, by opening the possibility of taxing in a differentiated manner the ownership of real estate assets of equal value held by different people due to criteria that may contend, without the minimum necessary justification, with, in particular, the principle of taxpaying capacity (such as the case of "dispersal" or "concentration" of residential real estate assets of each one), cannot fail to be considered unconstitutional, given the violation of the principle of equality."

In light of the above, the act of assessment of stamp duty that is the object of the present request for arbitral pronouncement is an act consequent to the violation of a constitutional principle - of equality - and is, therefore, void.

IV. COMPENSATION FOR UNDUE GUARANTEE

The Claimant further formulates a request for compensation for undue guarantee.

The regime of the right to compensation for undue guarantee is contained in Article 53 of the LGT, which establishes the following:

Article 53

Guarantee in case of undue provision

1. The debtor who, to suspend execution, offers a bank guarantee or equivalent shall be indemnified in whole or in part for losses resulting from its provision, if he has maintained it for a period exceeding three years in proportion to the outcome in administrative appeal, challenge or opposition to execution that have as object the debt guaranteed.

2. The period referred to in the previous number does not apply when it is verified, in courtesy claim or judicial challenge, that there was error attributable to the services in the assessment of the tax.

3. The compensation referred to in No. 1 has as a maximum limit the amount resulting from the application to the guaranteed amount of the indemnity interest rate provided for in the present law and may be requested in the courtesy claim or judicial challenge process itself, or autonomously.

4. Compensation for provision of an undue guarantee shall be paid by deduction from tax revenue of the year in which payment was made.

In the case in question, the acts of assessment of Stamp Duty have underlying a common error that affects them, which results from having understood that Stamp Duty should be assessed with respect to the sum of the VPT of the property, instead of the individual VPT of each division.

The assessments were of the sole initiative of the Tax Administration and the Claimant in no way contributed to their being made.

The Claimant paid € 197.71 in costs derived from the provision of guarantee, and therefore has the right to be indemnified for those costs and also for any subsequent ones that may be proven.

There being no elements that allow determining the amount of compensation, the condemnation must be made with reference to the amount that was proven to have been spent, plus what is to be assessed in execution of the present decision (cf. Article 609 of the Code of Civil Procedure and Article 565 of the Civil Code).

V. DECISION

In these terms, and with the grounds exposed, the Arbitral Court decides:

A) To judge as entirely well-founded the request for annulment of the stamp duty assessments impugned with the consequent annulment of those assessments.

B) To judge as well-founded the request for condemnation of the Tax and Customs Authority to pay to the Claimant compensation for the costs borne with the guarantee provided to suspend the tax enforcement process underlying the present process, in the amount of € 197.71, and to condemn the Tax and Customs Authority to pay to the Claimant the compensation that is assessed in execution of the present decision.

The value of the process is fixed at € 10,026.50 pursuant to paragraph a) of No. 1 of Article 97-A of the CPPT, applicable by virtue of paragraphs a) and b) of No. 1 of Article 29 of the RJAT and No. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Processes.

The value of the arbitration fee is fixed at € 918.00, pursuant to Table I of the Regulation of Costs of Tax Arbitration Processes.

The payment of the arbitration fee, pursuant to Table I of the Regulation of Costs of Tax Arbitration Processes, falls to the Respondent, pursuant to Articles 12, No. 2, and 22, No. 4, both of the RJAT, and Article 4, No. 4, of the aforementioned Regulation.

Lisbon, 7 March 2016

The Arbitrator,

Nuno Cunha Rodrigues