Stamp Tax on Vertical Property: Per-Unit VPT Assessment Under Clause 28.1 TGIS (CAAD 647/2015-T)

Tax Arbitral Jurisprudence

Case no. 647/2015-T

Decision Date: 2023-04-28

Claim Value: € 10,326.73

Subject Matter: Stamp Tax. Vertical ownership. Item 28.1 of the TGIS – Reform of the arbitral decision (attached to the decision).
Replaces the arbitral decision of 10 March 2016.

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SUMMARY:

"In the case of a building constituted in vertical ownership, the incidence of Stamp Tax must be determined, not by the TPV resulting from the sum of the TPV of all divisions or floors susceptible to independent use (individualized in the property register), but by the TPV attributed to each of those floors or divisions intended for housing."

ARBITRAL DECISION

The arbitral decision rendered on 10 March 2016 in the context of the case referenced above, which is hereby fully reproduced, did not rule on the request for annulment of the first and second instalments of Stamp Tax assessments (item 28.1 of the TGIS) for the year 2014 and for the various divisions for independent use and residential purpose of the urban building identified therein, having concluded that the dilatory exception of "unassailability of the impugned act" was applicable, which it discovered of its own motion.

From the said arbitral decision, the Claimant lodged an appeal with the Central Administrative Court South, giving rise to case no. 09511/16.5 BCLSB, in which, among the grounds raised, it invoked the fact that it had been "seriously prejudiced" by the fact that, in the invitation directed to it for perfection of the initial petition, in order to clarify which of the requests – principal or subsidiary, which were mutually incompatible – it intended the action to proceed, the Arbitral Court did not communicate its intention to know of its own motion of the "unassailability of the impugned act", in which case it would always have opted to impugn the totality of the assessment acts.

By Decision rendered on 27 October 2022 in the Appeal no. 09511/116.5 BCLSB, the Venerable Central Administrative Court South decided upon the annulment of the impugned arbitral decision, on the basis of violation of the principle of contradiction, as per the excerpt that follows:

"Upon examination of the case file, it is found that by order of 11/02/2016 from Her Honour the Arbitrating Judge, the appellant was heard in the following terms (…)

(…)

The truth is that, in its defence, the Respondent, here impugned, did not raise the issue of unassailability of the impugned acts, having merely expressed its position, based on arguments and reasons, on the substantive issues raised in the request for arbitral pronouncement. So much so, that it concluded by requesting dismissal of the claim and not of the suit (art. 89/2 of the CPTA).

On the other hand, even though the Claimant, in response to the aforementioned order, expressly opted for continuation of the proceedings with respect to the subsidiary claim – recalling that the principal claim was for annulment of the "tax acts relating to the second instalment of the year 2014 …" and the subsidiary claim, to apply "if Your Excellency considers that the stamp tax can only be impugned in its entirety", that of "acceptance of the impugning of all tax assessment acts of the year 2014 relating to the above-identified building" – the truth is that such does not permit the objectively supposing that it has understood the position of the TAS regarding the assailability or otherwise of the stamp tax instalments and that this was the subject matter of the contradiction afforded.

Indeed, judicial acts, such as decisions and judicial orders, follow the rules of interpretation and integration provided in the conjugated provisions of articles 236 and 295 of the Civil Code, which obligates the court to express itself clearly and objectively, so as not to defeat the expectation that the interested party might legitimately have cherished, in view of the tenor of the judicial act, as to the decision to be rendered.

When such is not the case, we are faced with a surprise decision (art. 3, no. 3 of the CPC), which is not compatible with the principle of contradiction, structural to civil and tax proceedings and which the Arbitral Court must especially observe in the conduct of the process (articles 16 al. a) and 29, no. 1, of the RJAT), which was not verified in the case at hand.

This ground of the appeal is well-founded."

Thus, the Central Administrative Court South decided upon the annulment of the impugned arbitral decision, ordering the remission of the case file to the CAAD "for compliance with the omitted formality."

With the case file reopened on 19 December 2022, an arbitral order was rendered on 21 December notifying the Parties to, within the period of 15 (fifteen) days, if they so wish, pronounce themselves on the intention of the arbitral tribunal to know of its own motion, pursuant to the terms and for the purposes of the provision contained in article 89, nos. 2 and 4, paragraph i), of the Code of Procedure in Administrative Courts (CPTA) of the dilatory exception of "unassailability of the impugned act", by reference to the autonomous impugnation of the instalments into which the Stamp Tax assessments (Item 28.1 of the TGIS) for the year 2014 were subdivided, identified in the request for arbitral pronouncement.

On 4 January 2023, a request was filed by the Claimant, in which, in addition to the previous request, the request for annulment of the third instalment is formulated, as well as the subsidiary request for total annulment of the Stamp Tax assessments for the year 2014, for payment of which third instalment it was notified in November 2015, relating to the various floors or divisions susceptible to independent use and residential purpose of the urban building registered under the article … of the parish of …, as per the collection notes identified therein, in the total amount of € 15,582.56:

€ 825.88 relating to the first floor (no. 2015…);
€ 825.88 relating to the second floor (no. 2015…);
€ 850.64 relating to the third floor (no. 2015…);
€ 850.64 relating to the fourth floor (no. 2015…);
€ 858.90 relating to the fifth floor (no. 2015…);
€ 858.90 relating to the sixth floor (no. 2015…);
€ 185.05 relating to the seventh floor (no. 2015…);
€ 825.88 relating to the first floor (no. 2015…);
€ 825.88 relating to the second floor (no. 2015…);
€ 850.64 relating to the third floor (no. 2015…);
€ 850.64 relating to the fourth floor (no. 2015…);
€ 858.90 relating to the fifth floor (no. 2015…);
€ 858.90 relating to the sixth floor (no. 2015…);
€ 825.86 relating to the first floor (no. 2015…);
€ 825.86 relating to the second floor (no. 2015…);
€ 850.63 relating to the third floor (no. 2015…);
€ 850.63 relating to the fourth floor (no. 2015…);
€ 858.90 relating to the fifth floor (no. 2015…);
€ 858.90 relating to the sixth floor (no. 2015…) and,
€ 185.05 relating to the seventh floor (no. 2015…).

By arbitral order of 8 February 2023, the Tax and Customs Authority was notified to, within the period of 10 (ten) days, pronounce itself on the enlargement of the claim, formulated by the Claimant in the final part of the request presented on 4 January 2023.

The Respondent offered no comment.

By arbitral order of 15 March 2023, being in question a matter exclusively of law and the documentary evidence attached to the request for arbitral pronouncement being sufficient for the determination of the factual matter, the meeting to which article 18 of the RJAT refers was dispensed with, as was the examination of the witness listed by the Claimant.

The Parties were further notified to present, if they so wished, written allegations, within the simultaneous period of 15 days (article 120 of the CPPT, by operation of article 29, no. 1, paragraph a) of the RJAT), with 28 April 2023 being set as the probable date for rendering the arbitral decision.

No allegations were produced.

The facts already proven in the arbitral decision of 10 March 2016, not contested, are considered proven, to which are added those contained in the request referred to in point 1.5, above.

The following facts were deemed proven in the impugned decision:

"2. FACTUAL MATTER

2.1. Facts deemed proven:

2.1.1. Both at the date of the occurrence of the tax event (31 October 2012) and at the date of the request for constitution of the arbitral tribunal, the Claimant was the owner of the urban building registered under the article … of the parish of …, municipality of Lisbon, corresponding to the former article … of the extinct parish of …, consisting of 10 floors and with 11 floors or divisions susceptible to independent use, with the total property value of € 2,207,410.00, with 7 of said floors being for residential purpose;

2.1.2. The sum of the TPVs attributed to the floors or divisions susceptible to independent use and residential purpose is the amount of € 1,558,250.00, which is the value indicated in each of the Stamp Tax collection notes as "Property Value of the building – total subject to tax";

2.1.3. The TPV attributed to each floor or division susceptible to separate rental and residential purpose varies between € 37,010.00 and € 257,670.00 (art. 4 of the initial petition);

2.1.4. The tax instalments impugned are set forth in the collection notes relating to the 1st and 2nd instalments of the Stamp Tax assessments for the year 2014 (except as to the 7th floor, of which only the 1st instalment is impugned), of 20 March 2015, identified by the Claimant (article 39 of the initial petition), were based on the TPV of each of the divisions susceptible to independent use and the rate of 1%:

2.1.6. The collection notes relating to the 2nd instalments of the Stamp Tax assessments for 2014 were paid on 17 July 2015, in the total amount of € 5,070.78;

2.1.7. The sum of the Stamp Tax assessments for the year 2014, issued by the AT on 20 March 2015 for the identified property, is € 15,582.50."

There were no relevant facts for the decision of the case that should be considered as unproven.

LEGAL MATTER – REASONING

On the request for annulment of the Stamp Tax assessment acts (Item 28.1 of the TGIS)

As stated above, the arbitral decision rendered on 10 March 2016 dismissed the Tax and Customs Authority from the suit, having known of its own motion of the dilatory exception of "unassailability of the impugned act", pursuant to article 89, nos. 2 and 4, paragraph i) of the CPTA, by reference to the autonomous impugnation of each of the instalments into which the Stamp Tax assessment act of Item 28.1 of the TGIS is subdivided.

For the same reasons adduced therein, the arbitral tribunal cannot assess the autonomous request for annulment of the third instalment of the same assessments.

However, after reopening of the case file, the Claimant, in the alternative, came to formulate a request for total annulment of the same assessment acts, identifying their respective values and payment documents and informing that it was notified, in November 2015, of payment of the third instalment of such assessments.

It is therefore important to ascertain the possibility of enlargement of the claim which, translating into an objective modification of the suit, functions, in the part of the enlargement, as a new initial petition, for which the Respondent was duly notified to pronounce itself.

In this regard, no. 1 of article 63 of the CPTA, under the heading "Enlargement of the Suit", provides that "1 – Until the close of the discussion in first instance, the subject matter of the proceedings may be enlarged to include the impugnation of acts that may arise within the scope of or as a consequence of the procedure in which the impugned act is inserted, as well as to the formulation of new claims that may be cumulated with it."

Considering that the new claim is presented as closely connected with the initial claim of which it constitutes a development and that at the date of the request for constitution of the arbitral tribunal (22-10-2015, as per the CAAD register) the Claimant had not yet been notified to proceed with payment of the third instalments of the Stamp Tax assessments for 2014, relating to the identified urban building in the case file, the enlargement of the claim must be accepted and the merits of the request for total annulment of the assessments relating to the various floors or divisions susceptible to independent use of the already identified urban building must be decided.

On the concept of residential urban building.

Item 28 of the TGIS, as worded by Law no. 83-C/2013, of 31 December (State Budget Law for 2014), applicable to the situation under analysis, provided that Stamp Tax is levied on

"28 – Ownership, usufruct or right of superficies of urban buildings whose property value for tax purposes contained in the register, under the terms of the Municipal Tax on Real Estate Code (CIMI), is equal to or greater than (euro) 1,000,000 – on the property value for tax purposes used for purposes of IMI:

28.1 – For each residential building or land for construction whose building, authorized or planned, is for housing, under the terms provided for in the IMI Code – 1%

(…)".

Thus, they constitute cumulative requirements for application of the rule contained in Item 28.1 of the TGIS, that the real estate to be taxed be a residential urban building, whose property value for tax purposes, for purposes of IMI, be equal to or greater than € 1,000,000.00.

No. 2 of article 67 of the Stamp Tax Code, added by Law no. 55-A/2012, of 29 October and repealed by Law no. 42/2016, of 28 December, in force at the date of the facts, provided that "2 – For matters not regulated in this Code relating to item no. 28 of the General Schedule, the provisions of the CIMI shall apply, subsidiarily."

Article 6 of the IMI Code, inserted in Chapter I, under the heading "Scope", enumerates, in no. 1, the species of urban buildings, which may be classified as:

a) Residential;

b) Commercial, industrial or for services;

c) Land for construction;

d) Other,

Nos. 2, 3 and 4 of the same article delimit what is to be understood by each of those designations, establishing in its no. 2 that "2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal destination each of these purposes."

According to the property register description, the urban building registered under the article … of the parish of …, municipality of Lisbon, of which the case file deals, is a "Building intended for offices, consisting of Basement, cellar, ground floor and seven floors, the last being set back and with one residential unit" (…), which immediately precludes its qualification as a residential building for purposes of article 6 of the IMI Code and, consequently, for purposes of article 67, no. 2 of the Stamp Tax Code or of item 28.1 of the TGIS.

Although the property records relating to each of the divisions susceptible to independent use, from the first to the seventh floor, indicate that they are intended for housing, the fact is that none of those divisions susceptible to independent use constitute a building, taking into account the concept of building contained in article 2 of the IMI Code, in particular its no. 4, because they cannot be equated to autonomous fractions of a building constituted under the regime of horizontal ownership.

On the TPV relevant for purposes of item 28 of the TGIS.

With respect to the determination of the property value for tax purposes of buildings not constituted in horizontal ownership, article 7, no. 2 of the IMI Code applies, regarding "urban buildings with parts classifiable in more than one of the classifications of no. 1 of the preceding article", in which case, in accordance with its paragraph b) "(…) each part is valued by application of the corresponding rules, and the value of the building is the sum of the values of its parts".

And this is the only rule of the IMI Code in which reference is made to the "[overall] value of the building", although this has no relevance at the level of tax assessment.

Under no. 3 of article 12 of the CIMI, "Each floor or part of a building susceptible to independent use is considered separately in the property register, which also itemizes its respective property value for tax purposes".

In the case at hand, to none of the autonomous parts and for residential purpose of the urban building registered under the article … of the parish of …, municipality of Lisbon, was a TPV equal to or greater than € 1,000,000.00 attributed, varying between € 37,010.00 (seventh floor) and € 257,670.00 (fifth and sixth floors), with the sum of their respective TPVs totaling the amount of € 1,558,250.00.

Now, the literal element of the aforementioned rules (no. 1 of article 6, no. 2 of article 7 and no. 3 of article 12, all of the IMI Code) reveals itself to be prohibitive of the AT formulating a new rule of incidence, different from that created by the legislator, seeking to tax an alleged overall property value for tax purposes of buildings or an alleged overall property value for tax purposes of divisions susceptible to independent use with residential purpose.

It therefore remains to conclude, in accordance with the jurisprudence of the Supreme Administrative Court, that "In the case of a building constituted in vertical ownership, the incidence of Stamp Tax must be determined, not by the TPV resulting from the sum of the TPV of all divisions or floors susceptible to independent use (individualized in the property register), but by the TPV attributed to each of those floors or divisions intended for housing"[1].

It is further to be concluded that the cumulative requirements on which depends the taxation under the objective rule of incidence of Item 28.1 of the TGIS are not met, with respect to the urban building registered under the article … of the parish of …, municipality of Lisbon – neither can it be qualified as a residential building, as it includes divisions susceptible to independent use with a purpose other than residential, nor was any of its divisions intended for housing assigned a property value for tax purposes equal to or greater than € 1,000,000.00.

Laboring under the errors pointed out, the impugned assessments are defective due to violation of law for error in the legal premises, due to erroneous interpretation and application of the rule that formed the basis of their issuance, justifying their annulment, under article 163, no. 1 of the CPTA.

Legal consequences of the annulment of the Stamp Tax assessments

At the end of the request for arbitral pronouncement, the Claimant requests the annulment of the Stamp Tax assessments for the year 2014, relating to the urban building identified therein, "with all the legal consequences."

Under article 24 of the RJAT, the effects or legal consequences of the arbitral decision on the merits of the claim, from which no recourse or appeal lies, include, among others, the binding of the tax administration to the restoration of the "situation that would exist if the tax act which was the subject of the arbitral decision had not been undertaken", which includes "the payment of interest, regardless of its nature, under the terms provided in the General Tax Law and the Code of Tax Procedure and Process." (cf. article 24, no. 1, paragraph b) and no. 5 of the RJAT).

The regime of compensatory interest is found in article 43 of the LGT, whose no. 1 provides that "Compensatory interest is due when it is determined, in friendly settlement or judicial impugnation, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due."

With the illegality of the Stamp Tax assessment acts declared, having been demonstrated, in the concrete case, the erroneous application of the objective rule of incidence contained in item 28.1 of the TGIS, which justifies its annulment, the right of the Claimant to compensatory interest on the amounts unduly paid is recognized, from the date of their respective payment, as provided in no. 5 of article 61 of the CPPT, since such illegality is exclusively attributable to the Tax Administration, which undertook those tax acts without the necessary legal support.

In light of the solution given to the questions above, knowledge of the remaining questions raised by the Parties is prejudiced, namely that of the unconstitutionality of Item 28 of the TGIS, repealed by Law no. 42/2016, of 28 December.

4. DECISION

On the basis of the factual and legal grounds set forth above, and under article 2 of the RJAT, the sole arbitral tribunal decides:

1. To find the request for arbitral pronouncement well-founded and to declare the illegality, with the consequent annulment, of the Stamp Tax assessments for the year 2014 which are the subject thereof;

2. To condemn the Respondent to pay compensatory interest, under the terms of article 43, no. 1 of the LGT, on the amounts now annulled and to be restituted.

PROCESS VALUE: In accordance with the provision of article 306, nos. 1 and 2 of the CPC, 97-A, no. 1, paragraph a) of the CPPT and 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the process is fixed at € 15,582.56 (fifteen thousand, five hundred and eighty-two euros and fifty-six cents).

COSTS: Calculated in accordance with article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached thereto, in the amount of € 918.00 (nine hundred and eighteen euros), to be borne by the Respondent.

Lisbon, 28 April 2023.

The Arbitrator,

/Mariana Vargas/

Document prepared on computer, under the terms of no. 5 of article 131 of the CPC, applicable by reference of paragraph e) of no. 1 of article 29 of DL 10/2011, of 20 January.

The drafting of this decision is governed by the Orthographic Agreement of 1990.

| CAAD: Tax Arbitration | Case no.: 647/2015-T | Subject: IS – Item 28.1 TGIS; Vertical ownership | *Replaced by the arbitral decision of 28 April 2023. |

ARBITRAL DECISION

REPORT

A…, with headquarters at Avenue …, no. … – …, in Lisbon (area of the Lisbon Finance Service …) and with VAT no. … (hereinafter referred to as the Claimant), comes, under the terms and for the purposes provided for in articles 2 and 10 of Decree-Law no. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters (RJAT), to request the constitution of an Arbitral Tribunal, in which the Tax and Customs Authority (AT) is Respondent, with a view to the declaration of illegality and consequent annulment of the Stamp Tax assessments (Item 28.1 of the TGIS), relating to the 2nd instalment for the year 2014, issued on 20 March 2015, with respect to the various floors or divisions susceptible to independent use of the urban building registered under the article … of the parish of …, of which it is the owner.

In the alternative, should the Tribunal consider that Stamp Tax can only be impugned in its entirety, the Claimant requests that the impugnation of all the tax assessment acts for the year 2014, relating to the building which it identifies, be judged to have been proven and well-founded, with all the legal consequences, attributing to the claim the economic value of € 10,326.73 (ten thousand, three hundred and twenty-six euros and seventy-three cents).

The grounds for the request for annulment of the second instalments of the Stamp Tax assessment acts for the year 2014 are as follows:

The identified building is an urban building consisting of ten floors and divisions for independent use, all intended for housing, whose property value for tax purposes (TPV), determined separately under the terms of article 7, no. 2, paragraph b) of the Municipal Tax on Real Estate Code (CIMI), varies between € 37,010.00 and € 257,670.00, in a total of € 1,558,250.00;

The AT holds that the criterion for determining the incidence of Stamp Tax of item 28.1 of the General Schedule of Stamp Tax (TGIS) is the overall TPV of the floors and divisions intended for housing;

The Claimant considers this position of the AT manifestly illegal and even unconstitutional, as subjection to Stamp Tax of item 28.1 of the TGIS is determined by the combination of two criteria: residential purpose and TPV contained in the register equal to or greater than € 1,000,000.00, the concept of urban building being that which results from article 2 of the CIMI, in conjunction with article 6 of the same Code, in which the different species of urban buildings are indicated, including residential ones;

The legislator made no distinction between buildings in vertical ownership and those subject to the regime of horizontal ownership; thus, in the case of a building with characteristics identical to those described, the incidence of Stamp Tax is determined by the TPV attributed to each of the floors or divisions for independent use, with taxation only occurring if any of those floors had a TPV greater than € 1,000,000.00;

The criterion used by the AT lacks legal foundation, as it differs from that adopted by the IMI Code, which is subsidiarily applicable to matters relating to item 28 of the TGIS;

The consideration that the reference value is the sum of the TPVs attributed to each of the floors is unconstitutional, insofar as it translates a clear violation of the principles of equality and fiscal proportionality: the legislator cannot treat equal situations differently, as, if the building were constituted in horizontal ownership, none of its fractions would be subject to Stamp Tax.

II – On the subsidiary claim:

"The Claimant may autonomously impugn the assessment of each of the instalments of stamp tax, with respect to the same property and the same stamp tax";

"In July 2015 the Claimant was notified to proceed with payment of the 2nd instalment of stamp tax, which nonetheless constitutes a tax act";

"Upon being notified of payment of each of the instalments (1st, 2nd and 3rd instalments), the Claimant is notified of the assessment of isolated tax acts and with autonomous periods for impugnation";

(…) "Under the terms and for the purposes of the provision of article 2, no. 1 of the Legal Framework for Arbitration in Tax Matters, the arbitral tribunals have competence to decide on tax assessment acts and on acts of determination of taxable matter";

"On the basis of the assessment act issued, the same produces three acts: (i) the determination of the collection; (ii) the determination of the property value of the building; and (iii) the assessment of a tax (albeit in three instalments)";

Thus, the Claimant holds that the taxpayer may resort to the arbitral tribunals that function under the aegis of the CAAD to request the appraisal and/or proceed with the impugnation of the instalments, for which it would have the period of 90 days, counted from the notification of each of the Stamp Tax instalments;

However, should the Tribunal consider that Stamp Tax can only be impugned "in its entirety", the Claimant requests that all the tax assessment acts for Stamp Tax for the year 2014, which it identifies, be annulled, in the overall amount of € 10,326.73, value which it attributes to the suit.

Notified under the terms and for the purposes provided for in article 17 of the RJAT, the AT presented its response, which is briefly set forth as follows:

The Claimant is the owner of the urban building registered in the respective property register of the parish of…, municipality of Lisbon, under article…, in the regime of full ownership, also referred to as vertical;

The property value for tax purposes of the various floors susceptible to independent use was determined separately, under the terms of article 7, no. 2, paragraph b) of the IMI, with the property value of the floors with residential purpose, taken into account in the assessments, at the rate of 1%, being € 1,558,250.00;

The Claimant impugns the payment documents it identifies: -Payment doc. no. 2015… of 2014 (AT); - Payment doc. no. 2015… of 2014 (AT); - Payment doc. no. 2015… of 2014 (AT); - Payment doc. no. 2015… of 2014 (AT); - Payment doc. no. 2015… of 2014 (AT); - Payment doc. no. 2015… of 2014 (AT), all of which referring to the assessment which was their origin being dated 20/03/2015;

According to the AT, from these Stamp Tax assessments resulted an overall amount of € 10,326.73;

It is the understanding of the Claimant that the taxation of item 28 should be assessed on the basis of the property value for tax purposes contained in the register of each of the floors or parts; it is to the property value for tax purposes contained in the register that the wording of the law directs attention to determine the incidence of Stamp Tax of item 28 of the TGIS;

However, the Claimant is the owner of a building in the regime of full or vertical ownership, for which reason there do not exist autonomous fractions to which the tax law can attribute the qualification of building, as follows from the notion of building of article 2 of the CIMI, in accordance with which only the autonomous fractions of a building under the regime of horizontal ownership are deemed to be buildings – no. 4 of the cited article 2 of the CIMI;

Thus, the now Claimant, for purposes of IMI and stamp tax, by force of the wording of the said item, is not the owner of 12 autonomous fractions, but rather of a single building, although it contends that the AT should consider, for purposes of assessment of this tax, that there exists analogy between the regime of full ownership and that of horizontal ownership, as it is illegal for there to be discrimination in the legal – tax treatment of the two ownership regimes;

Now, to contend that the interpreter and applier of tax law apply, by analogy, to the regime of full ownership the regime of horizontal ownership would be, to say the least, abusive and illegal;

Therefore, it cannot be accepted that it be considered, for purposes of item 28.1 of the TGIS, that the parts susceptible to independent use have the same tax regime as the autonomous fractions of the regime of horizontal ownership, under penalty of violation of the principle of legality;

The fact that the IMI was calculated on the basis of the property value for tax purposes of each part of the building with independent economic use does not equally affect the application of item 28.1 of the TGIS, as any other interpretation would violate the letter and spirit of the rule, as well as the principle of legality of the essential elements of the tax, provided for in article 103, no. 2 of the Portuguese Republic Constitution (CRP);

Horizontal ownership and vertical ownership are differentiated legal institutes and the legislator may submit to a distinct legal tax framework the buildings in regimes of horizontal and vertical ownership, without this discrimination necessarily being considered arbitrary, as has been decided by the Constitutional Court (cf. Decisions nos. 620/2015, of 3 December and 692/2015, of 16 December, available at www.tribunalconstitucional.pt);

The tax event of Stamp Tax of item 28.1 consists of ownership of urban buildings whose property value for tax purposes contained in the register, under the terms of the CIMI, is equal to or greater than € 1,000,000.00, being therefore relevant for purposes of the incidence of the tax the overall property value of the urban building and not the property value of each of the parts that comprise it, even when susceptible to independent use.

The AT concludes by requesting the dispensation of the meeting to which article 18 of the RJAT refers, as well as the dispensation of remission of the case file and also of allegations, given that in question are matters exclusively of law, the documentary evidence necessary for the decision already being incorporated in the proceedings and the position of the parties being sufficiently defined.

However, given the noted divergence between the principal claim, relating to the 2nd instalment of the Stamp Tax assessments for the year 2014 and the identified building in the initial petition and the subsidiary claim, equivalent to the value of the suit, the Claimant was invited to indicate which claim it wished the proceedings to continue with, as well as to pronounce itself on the questions raised by the AT in its response.

In the allegations presented, the Claimant (i) came to clarify that it intended for the proceedings to continue with the appraisal of the subsidiary claim "for annulment of all the tax assessment acts for stamp tax for the year 2014 which are itemized in article 39 of the initial petition"; (ii) to defend that the Decisions rendered by the Constitutional Court invoked by the AT in the response do not impose a different solution from that advocated by the Claimant and confirmed by the jurisprudence of the CAAD and the STA regarding the rules provided for in items 28 and 28.1 of the TGIS, which "merely applies the principles enshrined in the rule of incidence" and, (iii) to request the payment of compensatory interest on the value of the tax paid.

The AT counter-alleged, reiterating the arguments already presented in its response and contending that the impugned tax acts should remain in the legal order, as they do not violate any legal or constitutional provision.

The request for constitution of the Arbitral Tribunal was filed with the CAAD on 22 October 2015, having been accepted by His Excellency the President of the CAAD and automatically notified to the AT on 2 November 2015.

The Claimant informed that it did not intend to use the faculty of designating an arbitrator, for which reason, under the terms of no. 1 of article 6 of the RJAT, the undersigned was appointed arbitrator by His Excellency the President of the Deontological Council of the CAAD, a charge which she accepted within the legally provided period, without opposition from the Parties.

The Sole Arbitral Tribunal was duly constituted on 7 January 2016 to appraise and decide the litigation which is the subject of the present proceedings.

The Parties possess legal personality and capacity, are legitimate and are duly represented (articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

The proceedings do not suffer from nullities and no exceptions were invoked.

FACTUAL MATTER

2.1. Facts deemed proven:

2.1.1. Both at the date of the occurrence of the tax event (31 October 2012) and at the date of the request for constitution of the arbitral tribunal, the Claimant was the owner of the urban building registered under the article … of the parish of…, municipality of Lisbon, corresponding to the former article … of the extinct parish of…, consisting of 10 floors and with 11 floors or divisions susceptible to independent use, with the overall property value of € 2,207,410.00, with 7 of said floors being for residential purpose;

2.1.2. The sum of the TPVs attributed to the floors or divisions susceptible to independent use and residential purpose is the amount of € 1,558,250.00, which is the value indicated in each of the Stamp Tax collection notes as "Property Value of the building – total subject to tax";

2.1.3. The TPV attributed to each floor or division susceptible to separate rental and residential purpose varies between € 37,010.00 and € 257,670.00 (art. 4 of the initial petition);

2.1.4. The tax instalments impugned are set forth in the collection notes relating to the 1st and 2nd instalments of the Stamp Tax assessments for the year 2014 (except as to the 7th floor, of which only the 1st instalment is impugned), of 20 March 2015, identified by the Claimant (article 39 of the initial petition), were based on the TPV of each of the divisions susceptible to independent use and the rate of 1%:

2.1.6. The collection notes relating to the 2nd instalments of the Stamp Tax assessments for 2014 were paid on 17 July 2015, in the total amount of € 5,070.78;

2.1.7. The sum of the Stamp Tax assessments for the year 2014, issued by the AT on 20 March 2015 for the identified property, is € 15,582.50.

2.2. Reasoning of the factual matter proven:

The conviction of the Tribunal regarding the factual matter deemed proven resulted from the critical analysis of the documentary evidence attached to the request for arbitral pronouncement, expressly accepted by the Respondent.

2.3. Facts not proven

There are no relevant facts for the decision of the case that should be considered as unproven.

LEGAL MATTER – REASONING

Delimitation of the question to be decided – subject matter of the request for arbitral pronouncement:

In the judgment, the judge must pronounce upon all the questions he must appraise, refraining from pronouncing upon questions of which he should not know (final segment of no. 1 of article 125 of the CPPT, applicable subsidiarily to the tax arbitration process, by force of the provision of article 29, no. 1, paragraph a) of the RJAT).

The questions upon which the tribunal's powers of cognition fall are, in accordance with no. 2 of article 608 of the Code of Civil Procedure (CPC), applicable subsidiarily to the arbitration process, by reference of article 29, no. 1, paragraph e) of the RJAT, "the questions which the parties have submitted for its appraisal, excepting those whose decision is prejudiced by the solution given to others; it can only occupy itself with the questions raised by the parties, except where the law permits or requires it to know of others of its own motion."

Such procedural questions are, in tax proceedings, those enumerated in no. 1 of article 98 of the CPPT, which "may be known of its own motion or deduced at any time, until the final decision becomes final", under the terms of no. 2 of the same article, in addition to those contained in article 89 of the Code of Procedure in Administrative Courts (CPTA), subsidiarily applicable to the tax arbitration process, by force of the provision of article 29, no. 1, paragraph c) of the RJAT.

However, notwithstanding it being the Claimant's understanding that "it can autonomously impugn the assessment of each of the instalments of stamp tax, with respect to the same property and the same stamp tax" (article 30 of the initial petition) and the Respondent not having invoked any exception, even though it noted in its response that the Claimant "impugns the second instalments of the stamp tax assessments of Item 28.1 of the General Schedule attached to the Stamp Tax Code, relating to the identified building, in a total amount of € 5,255.53" and that, "According to the AT, it would be on this amount of € 1,558,250.00 that the AT assessed, under the terms of article 6, no. 1, paragraph f), sub-paragraph i), Stamp Tax of item 28.1 of the General Schedule, as amended by art. 4 of Law no. 55-A/2012, of 29 October, at the rate of 1 per cent", there must be, forthwith, a delimitation of the subject matter of the proceedings, so that, subsequently, it may be ascertained whether the arbitral tribunal has competence to know of the merits of the claim.

In the request for arbitral pronouncement, the Claimant came to formulate a principal request for annulment of the "tax acts relating to the second instalment of the year 2014" and, in the alternative, "the impugnation of all the tax assessment acts of the year 2014", attributing to the suit the economic value of € 10,326.73.

Subsequently, the Claimant came to declare that it intended for the proceedings to proceed with the subsidiary claim.

However, given that the assessments were made at the rate of 1% on the TPV globally attributed to the floors or divisions for independent use, with residential purpose, of € 1,558,250.00, their overall value, for the year 2014 and for the building identified in the initial petition, was € 15,582.50 and not € 10,326.73, as petitioned.

Comparing the tenor of the claim with the documents attached to the initial petition, one must conclude that the Claimant does not impugn the Stamp Tax assessment acts for the year 2014 in their entirety, but only the first and second instalments of such assessments, which had become due at the date of the petition.

On the (un)assailability of each of the instalments of a Stamp Tax assessment (Item 28.1 of the TGIS):

No. 7 of article 23 of the Stamp Tax Code, added by Law no. 55-A/2012, of 29 October provides that "7 – Where the tax due for the situations provided for in item no. 28 of the General Schedule is concerned, the tax is assessed annually, in relation to each urban building, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI."

In turn, no. 1 of article 113 of the CIMI, relating to the competence and period of assessment, provides that "1 – The tax is assessed annually, in relation to each municipality, by the central services of the Directorate-General of Taxes, on the basis of the property values for tax purposes of the buildings and in relation to the taxpayers listed in the registers on 31 December of the year to which it relates", with no. 1 of article 120 of the same Code determining that the tax be paid in one, two or three instalments, according to whether the value of the tax assessed is of value equal to or less than € 250.00 (paragraph a); greater than € 250.00 and equal to or less than € 500.00 (paragraph b); and greater than € 500.00 (paragraph c), respectively.

However, even in the case where the tax must be paid in more than one instalment, there exists only and solely one annual assessment, as a tax application act of a rate to a taxable matter, for determination of the collection or (in this case) of the tax to be paid. And it is this assessment act that is assailable, in whole or in part, but not for each of the instalments into which the tax is subdivided, as payment in instalments is nothing more than a technique of collection of the tax and not a partial payment thereof, which is susceptible to autonomous impugnation.

The unassailability of the act constitutes a dilatory exception, under the terms of article 89, no. 4, paragraph i) of the Code of Procedure in Administrative and Tax Courts, applicable subsidiarily to the tax arbitration process, by operation of the provision of article 29, no. 1, paragraph c) of the RJAT.

On the (in)competence of the arbitral tribunal for the autonomous annulment of instalments of a Stamp Tax assessment (item 28.1 of the TGIS):

A question intimately connected with that dealt with in the preceding item is that of the competence of the arbitral tribunals functioning under the aegis of the CAAD for the declaration of illegality and autonomous annulment of each of the instalments that integrate a Stamp Tax assessment, issued under item 28.1 of the TGIS.

Indeed, the competence of the tax arbitral tribunals functioning with the CAAD is fixed by article 2, no. 1 of the RJAT, comprising the powers to proceed with the appraisal of claims relating to "the declaration of illegality of tax assessment acts, self-assessment acts, withholding at source acts and payment on account acts" (paragraph a)) and to "the declaration of illegality of acts fixing the taxable matter when not giving rise to assessment of any tax, acts of determination of the taxable base and acts fixing property values" (paragraph b).

In this regard, the Claimant contends for the competence of the arbitral tribunal to annul each of the instalments of a Stamp Tax assessment of item 28.1 of the TGIS, as "Upon being notified of payment of each of the instalments (1st, 2nd and 3rd instalments), the Claimant is notified of the assessment of isolated tax acts and with autonomous periods for impugnation" (article 32 of the initial petition) and, "On the basis of the assessment act issued, the same produces three acts: (i) the determination of the collection; (ii) the determination of the property value of the building; and (iii) the assessment of a tax (albeit in 3 instalments)" (article 35 of the initial petition).

This is, however, an understanding which cannot be accepted, as if the assessment, in the broad sense, encompasses several phases[2], among which that of determination of the taxable matter, the tax assessment act is the act through which the collection is determined.

Furthermore, what is at issue, in a Stamp Tax assessment act under item 28.1 of the TGIS, is not the operation of "determination of the property value of the building", under the terms of the CIMI, as this is autonomously assailable, in accordance with articles 97, no. 1, paragraph f) of the CPPT, 77 of the IMI Code, and may further be the subject of a request for arbitral pronouncement, under the terms of the final part of paragraph b) of no. 1 of article 2 of the RJAT, not being confused with or forming part of the assessment act or assessment in the strict sense.

On the incompetence of the arbitral tribunal to annul an instalment of a Stamp Tax assessment, the Collective Arbitral Tribunal constituted in case no. 442/2014-T pronounced itself, as per the excerpt that, with all due respect, is transcribed (available at https://caad.org.pt/tributario/decisoes/decisao.php?s_processo=442%2F2014-T&s_data_ini=&s_data_fim=&s_resumo=&s_artigos=&s_texto=&id=625):

" (…) the Claimant is correct in defending that the value of the proceedings should be that of the assessments whose declaration of illegality it requests and not the value of the 1st instalment of each of the referred buildings, as it is the illegality of the annual assessments that the Claimant seeks.

Moreover, the competence of the arbitral tribunals functioning at the CAAD encompasses requests for declaration of illegality of assessment acts and not of the instalments through which collection of the assessed amounts is made." (emphasis added).

Also, the incompetence of the arbitral tribunal constitutes a dilatory exception, under the terms of article 89, no. 4, paragraph a) of the CPTA, of knowledge of its own motion and which prevents the tribunal from knowing of the merits of the case, giving rise to the dismissal of the suit.

DECISION

On the basis of the factual and legal grounds set forth above, it is decided to declare the incompetence of this Sole Arbitral Tribunal for appraisal of the claim formulated by the Claimant, which prevents the continuation of the proceedings, as well as the appraisal of the merits of the case, dismissing the Tax and Customs Authority from the suit.

PROCESS VALUE: In accordance with the provision of article 306, nos. 1 and 2 of the CPC, 97-A, no. 1, paragraph a) of the CPPT and 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the process is fixed at € 10,326.73 (ten thousand, three hundred and twenty-six euros and seventy-three cents).

COSTS: Calculated in accordance with article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached thereto, in the amount of € 918.00 (nine hundred and eighteen euros), to be borne by the Claimant.

Lisbon, 10 March 2016.

The Arbitrator,

/Mariana Vargas/

Document prepared on computer, under the terms of no. 5 of article 131 of the CPC, applicable by reference of paragraph e) of no. 1 of article 29 of DL 10/2011, of 20 January.

The drafting of this decision is governed by the Orthographic Agreement of 1990.

[1] See the Decision of the Supreme Administrative Court of 30/10/2019, case 0969/16.3BESNT 01203/17, available at http://www.dgsi.pt/jsta.

[2] On the acts of tax assessment of taxes, in the broad sense and in the strict sense, see, inter alia, NABAIS, José Casalta, "Tax Law", 7th Edition, Almedina, Coimbra, 2014, pp. 352 and 353.