Summary
Full Decision
ARBITRAL DECISION
I. Report
1. A..., S.A. (Tax ID/Company ID...), with headquarters at ..., n.º..., ..., ..., in Lisbon ("Claimant"), submitted, pursuant to the provisions of articles 2 and 10 of Decree-Law no. 10/2011 of 20 January, on 20/12/2018, a request for arbitral pronouncement on the legality of the tax assessment act for Additional Municipal Property Tax (AIMI) no. 2018..., relating to the year 2018, implemented through collection document no. 2018....
2. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Respondent.
2.1. The Claimant did not proceed with the appointment of an arbitrator, and therefore, pursuant to the provisions of article 6, no. 1, and articles 11, no. 1, paragraphs a) and b) of the RJAT (Rules of Arbitral Procedure in Tax Matters), the President of the Deontological Council of CAAD appointed the undersigned as arbitrator of the singular arbitral tribunal, who communicated acceptance of the appointment within the applicable timeframe.
2.2. The parties were duly notified of this appointment and did not express any intention to refuse the arbitrator's appointment, in accordance with the combined provisions of article 11, no. 1, paragraphs a) and b), of the RJAT, and articles 6 and 7 of the Deontological Code.
2.3. Thus, in accordance with the provisions of article 11, no. 1, paragraph c) of the RJAT, the Arbitral Tribunal was constituted on 28 February 2019.
3. To support the request for arbitral pronouncement, the Claimant alleges, in summary, the following:
- The identified AIMI tax assessment act suffers from a legal defect, due to error regarding the legal prerequisites, consisting of the incorrect interpretation and application of the provisions of article 135-B, no. 2 of the IMI Code.
- Only urban properties intended for residential purposes and land for construction, as defined in article 6 of the IMI Code, are covered by the AIMI regime.
- In the present case, the real property assets constitute property of companies intended to trade them, and do not, in turn, constitute any indication of taxpaying capacity. On the contrary, they constitute a necessary condition for the exercise of their respective economic activity, as occurs with a company that holds any other type of merchandise that it intends to trade within the scope of its activity.
- Urban properties used for economic activities are not subject to AIMI, and the holding of this type of property does not result in a factor demonstrating wealth, nor a sufficient indicator of taxpaying capacity of the owners thereof.
- The Claimant considers that, given that its activity falls within the purchase and sale of real estate, its assets, intended for the pursuit of its economic activity, in accordance with the guiding principles of the Portuguese legal system, should not be considered for the purposes of determining AIMI. The Claimant further states that its position is corroborated by numerous arbitral case law.
- The Claimant considers that the exclusion of the scope of application of land with commercial, industrial or service use is the only interpretation that appears consistent with the legislative option enshrined in article 135-B, no. 2 of the IMI Code, which excludes from the scope of the tax urban properties classified as "commercial, industrial or service properties".
- The Claimant considers that an extensive interpretation of the exclusion rule present in article 135-B, no. 2 of the IMI Code should be performed. If this is not done, that is, if the rule is interpreted in an exclusively literal manner and, consequently, if it is considered that land for construction intended for "commerce, industry or services" are included within the scope of AIMI, the Claimant considers that it will be materially unconstitutional.
- The AIMI tax assessment act object of the present request for arbitral pronouncement suffers from a legal defect, due to error regarding the legal prerequisites, consisting of the incorrect interpretation and application of the provisions of article 135-B, no. 2 of the IMI Code, in the part in which it considers subject to AIMI the component of the taxable patrimonial value of land for construction that was determined on the basis of the potential future uses of "services" and "commerce".
- It is all too evident that any error in the assessment will be attributable to the services, with the Claimant considering this to be the case underlying the present request, since, in its understanding, the existence of an error in the AIMI assessment for the 2018 period is unequivocal.
- Given the above, having fully paid the identified AIMI assessment, and given that there was an error attributable to the Tax Authority services in the assessment of the tax, which resulted in the payment of tax in an amount exceeding what is legally due, the Claimant considers that compensatory interest is due, calculated from the date of the wrongful payment of the tax until the date of processing of the respective refund. In this sense, the Claimant petitions the right to receive the compensatory interest that is shown to be due upon the granting of the present request for arbitral pronouncement.
3.1. The Claimant concludes by petitioning: i) that the present arbitral action be upheld and, as a result, the AIMI tax assessment act no. 2018... be partially annulled; ii) that, as a consequence of said partial annulment, a decision be issued ordering the refund of the amount of €4,550.17, paid wrongfully as AIMI; iii) that a decision be issued ordering the payment of the compensatory interest that is shown to be due, in the event this request is granted.
4. The Tax and Customs Authority (hereinafter abbreviated as "Respondent" or "AT") submitted a response, invoking, in summary, the following:
- The subject matter of the request under analysis consists of the tax assessment act for Additional Municipal Property Tax (AIMI) for the year 2018, identified by no. 2018..., in the total amount of €105,481.57, with the Claimant challenging the amount of €4,550.17, as it relates to the component of the taxable patrimonial value of land for construction without residential use.
- The Additional Municipal Property Tax (AIMI) created by article 219 of Law no. 42/2016 of 28 December, which approved the State Budget for 2017, by adding articles 135-A to 135-K to the IMI Code, now constituting chapter XV of that code, emerges as a special taxation of high-value heritage intended to ensure the financing of Social Security.
- AIMI as special taxation of high-value heritage intended to ensure the financing of Social Security applies "to the sum of the taxable patrimonial values of urban properties situated in Portuguese territory of which the taxpayer is the holder" (see article 135-B, no. 1 of the IMI Code). Similarly to the regime of Municipal Property Tax (IMI), the taxpayers of Additional IMI are owners, usufructuaries or superficiaries of the respective properties, regardless of their status as individuals or legal entities, equating to these "any structures or centers of collective interests without legal personality that appear in the property registers as taxpayers of municipal property tax, as well as undivided succession represented by the head of household" (see no. 1 and no. 2 of article 135-A).
- As follows from article 135-B of the IMI Code, it is verified that AIMI applies to properties classified as residential and as land for construction – regardless of their potential use (given the fact that the law refers, without more, to article 6 of the IMI Code) – insofar as the same are not expressly listed in the rule defining the negative scope of application. That is, the legislator did not establish the exclusion from the scope of the tax of land for construction based on reasons related to its potential use.
- In the opinion of the Respondent, it can be stated that, with regard to AIMI applicable to urban properties of which legal entities and equivalent structures are owners, usufructuaries or superficiaries (article 135-A, no. 2 of the IMI Code), the tax assumes the nature of a real property tax, insofar as the calculation of the amount to be paid abstracts from the economic dimension of the entities, namely the qualification as small, medium or large enterprise, and does not affect the total net assets of the entities.
- With respect to legal entities and equivalent structures, AIMI has the nature of real property taxation, thus reflecting the idea that the elements comprising the real estate assets held by these entities perform, as a rule, an economic function, and therefore do not represent mere accumulation of wealth.
- It is unequivocally concluded that the subjection of land for construction and properties classified as residential to the rule defining the scope of AIMI is effected independently of their potential use, as well as the nature and specificities of their holder.
- Given that in the final approved version currently in force the delimitation of the scope and exclusion from scope has been expressly established based only on the types of properties indicated in article 6 of the IMI Code, the legislator's option must therefore be respected.
- Contrary to what the Claimant alleges, there is no illegality in the AIMI assessments, nor does the ratio legis present in article 135-B of the IMI Code have the scope intended by the Claimant.
- It is not apparent that the taxation of the real estate property of the Claimant violates the principle of tax equality and taxpaying capacity merely because the holding of real estate constitutes the very object or directly contributes to the development of its economic activity. In short, it does not appear that the application of AIMI to properties held by companies engaged in the real estate sector, namely land for construction acquired with the intention of promoting buildings intended for sale, is discriminatory, or that these companies should merit more advantageous treatment than that granted to the generality of owners of urban properties.
- It is not apparent that the taxation of land for construction, with use for "commerce and services", in the manner provided in articles 135-A and 135-B of the IMI Code, conflicts with the principle of equality, justice and taxpaying capacity. Similarly, it is concluded that the taxation of land for construction held by legal entities – which form part of their real estate assets and are intended for the development of their economic activity – in the manner provided in articles 135-A and 135-B of the IMI Code, conflicts with the principle of equality, justice and taxpaying capacity.
- As has been fully demonstrated and in accordance with majority case law, the taxation under AIMI does not entail unjustified negative discrimination against property ownership by companies whose economic activity is the purchase and sale of real estate when, simultaneously, the law excludes from taxation properties intended for commerce, industry or services.
- With regard to the payment of compensatory interest provided for in article 43 of the LGT, for all that has been stated above, it is understood that the challenged acts do not suffer from any defect that would determine their annulment.
- In light of all the above [it is concluded] that Additional Municipal Property Tax does not violate any legal or constitutional principle, namely the principle of equality provided for in article 55 of the LGT, and in articles 13 and no. 4 of article 103, both of the Constitution of the Portuguese Republic (CRP), nor the principle of justice provided for in article 55 of the LGT and in no. 2 of article 266 of the CRP. Nor is there any error on the part of the Respondent in the interpretation of article 135-B of the IMI Code, by subjecting AIMI to land for construction whose potential use is for "commerce, industry or services", since that interpretation corresponds entirely and faithfully and rigorously to the text, meaning and ratio of the law.
4.1. The AT concludes by petitioning that the present request for arbitral pronouncement be judged as not well-founded, by lack of proof, and, consequently, that the Respondent be absolved of all petitions, in the terms requested.
5. As no exceptions were invoked and there is no disputed matter of fact, since the questions to be decided are matters of law, the Arbitral Tribunal, through an order of 1 July 2019, considered that there was no justification for hearing witnesses and dispensed with the hearing provided for in article 18 of the RJAT, which it did in exercise of the principles of autonomy in the conduct of the proceedings and in order to promote speed, simplification and informality thereof. The date of 12 July 2019 was also set for the issuance of the arbitral decision.
II. Preliminary Matters
6. The arbitral tribunal was regularly constituted and is materially competent, as provided in articles 2, no. 1, paragraph a), and 4, both of the RJAT.
7. The parties have judicial personality and capacity, are legitimized and are represented (see articles 4 and 10, no. 2, of the same law, and articles 1 to 3 of Ordinance no. 112-A/2011 of 22 March).
8. By the foregoing, and as no nullities are verified, the examination of the merits of the request is required.
III. Question to be Decided
9. In its arbitral petition, the Claimant alleges that the Additional IMI tax assessment act in question (no. 2018...), relating to the year 2018, "suffers from a legal defect, due to error regarding the legal prerequisites, consisting of the incorrect interpretation and application of the provisions of article 135-B, no. 2 of the IMI Code".
10. Based on the foregoing, the essential question to be decided in the present proceedings concerns the evaluation of the conformity of said act with the provisions of the IMI Code.
IV. Merits
IV.1. Factual Matters
11. With relevance to the examination and decision of the question of merits, the following facts are established and proven:
A. The Claimant (Portuguese limited company, with headquarters and effective management in Portugal, which has real estate activity as its corporate object) was, on 1 January 2018, the owner of various plots of land for construction registered in the urban property register of the parishes of ... and of ..., of the municipality of Lisbon, namely the land corresponding to matrix articles U-... and U-..., both of the parish of ... (see Docs. 3 and 4 attached to the present proceedings), and the land corresponding to matrix articles U-... and U-..., both of the parish of ... (see Docs. 5 and 6 attached to the proceedings).
B. On 16/8/2018, the Claimant was notified of the AIMI assessment issued by the 11th Tax Office of Lisbon, for reference to the year 2018, identified with no. 2018... and dated 30/6/2018, and implemented through collection document no. 2018... (see Doc. 1 attached to the proceedings).
C. The determination of the TPV (Taxable Patrimonial Value) was carried out in accordance with what is contained in the property register, as provided in article 135-C of the IMI Code, with the properties in question not being covered by the exclusions provided for in no. 2 of article 135-B, nor by no. 3 of article 135-C of the IMI Code.
D. From the AIMI assessment referred to above resulted an amount to pay of €105,481.57, of which €78,154.85 correspond to land for construction (see Doc. 1 attached).
E. The Claimant proceeded to pay the entire amount in question (see Doc. 2 attached) but, considering that "the collection of part of the said amount lacks legal basis", submitted the present request for arbitral pronouncement on 20/12/2018.
IV.2. Facts Not Proven
12. There are no other facts with relevance to the examination of the merits of the case that have not been proven.
IV.3. Justification for the Establishment of Factual Matters
13. The Tribunal does not have to pronounce on all details of the factual matters alleged by the parties, and it is the tribunal's duty to select the facts that are relevant to the decision and to distinguish the factual matter that it considers proven and declare what it considers not proven (cf. article 123, no. 2, of the CPPT, and article 607, no. 3, of the CPC, applicable by virtue of article 29, no. 1, paragraphs a) and e), of the RJAT).
14. In this manner, the facts pertinent to the judgment of the case are selected and shaped according to their legal relevance, which is established in consideration of the various solutions for the subject matter of the dispute in applicable law (see article 596, no. 1, of the CPC, applicable by virtue of article 29, no. 1, paragraph e), of the RJAT).
15. The conviction of the Arbitral Tribunal was based on the free assessment of the positions taken by the Parties (as regards factual matters) and on the content of the documents attached to the proceedings, not disputed by the Parties.
IV.4. Legal Matters
16. The Claimant alleges in the present proceedings that it found, in the AIMI assessment in question, that "the totality of land for construction is being considered, for the purposes of the scope of AIMI, regardless of its respective use." In its view, "having regard to the applicable legislation, at the time of the facts, the Claimant considers that the assessment is incorrectly determined, in that it should have been only €73,604.68, that is, the amount corresponding only to the residential component of the patrimonial value of the land for construction [in accordance with the table presented in §22 of its request for arbitral pronouncement]".
17. The Claimant bases its statement on the understanding that, "in the present case, what is at issue is the determination of AIMI as regards land for construction that includes uses other than the 'residential', uses which (commercial and services), in the understanding of the Claimant, are not subject to AIMI."
18. The Claimant adds that, for companies that have, as is its case, as their corporate object the real estate activity, the properties in question do not constitute "any indication of taxpaying capacity", but are rather "a necessary condition for the exercise of their respective economic activity", and therefore concludes that "urban properties used for economic activities are not subject to AIMI, and the holding of this type of property does not result in a factor demonstrating wealth, nor a sufficient indicator of taxpaying capacity of the owners thereof."
19. The Claimant further considers that "the exclusion of the scope of application of land with commercial, industrial or service use is the only interpretation that appears consistent with the legislative option enshrined in no. 2 of article 135-B of the IMI Code, which excludes from the scope of the tax urban properties classified as 'commercial, industrial or service properties'".
20. Consequently, it concludes that it is "excluded from the tax base the taxable patrimonial value of land for construction whose determination was based on the use of 'commercial, industrial or services'", and that "that is the only interpretation that appears consistent with the legislative option enshrined in no. 2 of the aforementioned article 135-B of the IMI Code".
21. These are, in summary, the reasons why the Claimant now considers that it "paid wrongfully as AIMI the amount of €4,550.17, for reference to land for construction whose use associated with the final construction projected for each of them was 'commercial, industrial or services'".
22. In its response, the Respondent considers that "it follows from [article 135-B of the IMI Code] that AIMI applies to properties classified as residential and as land for construction - regardless of their potential use (given the fact that the law refers, without more, to article 6 of the IMI Code) - insofar as the same are not expressly listed in the rule defining the negative scope of application. That is, the legislator did not establish the exclusion from the scope of the tax of land for construction based on reasons related to its potential use."
23. The Respondent adds that "the legislator excluded from the scope industrial, commercial or service properties and 'others' but expressly chose to maintain other properties that also form part of the assets of companies, such as those classified as residential or land for construction, by not including them in the negative delimitation established. That is, it did not ensure, nor did it intend to ensure, in all cases that real estate assets used in the exercise of any economic activity would not be affected, contrary to what the Claimant intends."
24. The Respondent further considers that, "given that in the final approved version currently in force the delimitation of the scope and exclusion from scope has been expressly established based only on the types of properties indicated in article 6 of the IMI Code, [...] the legislator's option must be respected", and also that "there is no reason to conclude that the legislator did not know how to express its thought in adequate terms, as must be presumed, by virtue of the provision of article 9, no. 3, of the Civil Code, on the contrary, the question [of the possible reference to the use of properties] was duly considered, having been abandoned in the final wording."
25. The Respondent thus concludes that, "contrary to what the Claimant alleges, there is no illegality in the AIMI assessments, nor does the ratio legis present in article 135-B of the IMI Code have the scope intended by the Claimant."
26. With regard to the alleged violation of the principle of equality, the Respondent alleges, in summary, that "it is not apparent that the taxation of the real estate property of the Claimant violates the principle of tax equality and taxpaying capacity merely because the holding of real estate constitutes the very object or directly contributes to the development of its economic activity", given that "it does not appear [...] that the application of AIMI to properties held by companies engaged in the real estate sector, namely land for construction acquired with the intention of promoting buildings intended for sale, is discriminatory, or that these companies should merit more advantageous treatment than that granted to the generality of owners of urban properties."
27. Let us proceed with the analysis.
28. The essential question at issue here has already been the subject of abundant examination in arbitral proceedings. The largely majority understanding of CAAD arbitral case law is that which will also be defended here, for the reasons that will be set out below.
29. Pursuant to the provisions of article 6, no. 3 of the IMI Code, "land for construction is deemed to be land situated within or outside an urban agglomeration for which a building or construction license or authorization has been granted, advance notice accepted or favorable preliminary information issued for a subdivision or construction operation, and also that which has been declared as such in the acquisition deed, except land for which the competent authorities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal territorial planning plans, are intended for spaces, public infrastructure or public facilities."
30. On the other hand, it is also necessary to take into account what is provided in Law no. 42/2016 of 28/12 (State Budget for 2017), which added articles 135-A to 135-K to the IMI Code, in which the regime of Additional Municipal Property Tax (AIMI) is contained.
31. It is necessary to take into account not only the text of the articles mentioned (with emphasis, in this case, on article 135-B), but also what is contained in the Report of that Budget, insofar as this may make it possible to understand what the ratio and scope of the introduced amendments are: "The revenue increase measures, in addition to updating the IEC's and ISV by 3%, focus on the introduction of two new types of taxation: a progressive additional surcharge on IMI and an extension of the IABA base to soft drinks. The two measures represent together only about 0.5% of total tax revenue. In both cases the revenue is dedicated. The dedication of progressive taxation of real estate property to the Financial Stabilization Fund of Social Security corresponds to the objective of the government's program to broaden the financing base of Social Security, while introducing a tax that falls on holders of larger real estate assets, strengthening the overall progressivity of the system. [...]. The additional surcharge on municipal property tax introduces into the taxation of real estate property a progressive element of personal basis, taxing more heavily the larger assets, with a marginal rate of 0.3% applied to assets exceeding €600,000 per taxpayer. To avoid the impact of this tax on economic activity, excluded from the scope are rural properties, mixed properties, industrial properties and those used for tourist activity, and companies are also allowed to exclude properties used in their productive activity up to €600,000. The possibility of deducting the amount of tax paid at collection relating to real estate income constitutes additionally an incentive to rental and productive use of assets. This tax replaces the previous 1% stamp duty on the value of property above 1 million euros. With a much lower rate (0.3%) it is also fairer because it takes into account the total value of the real estate portfolio and not, in isolation, the value of each property." (emphasis added).
32. Considering the excerpt cited and, on the other hand, the fact that, pursuant to no. 2 of article 135-B of the IMI Code, only "urban properties classified as 'commercial, industrial or service properties' and 'others' may be excluded from Additional Municipal Property Tax in accordance with paragraphs b) and d) of no. 1 of article 6 of this Code." – knowing that paragraph c) of this article 6 establishes "land for construction" – the conclusion is evident, which we here share with, for example, Arbitral Decision of 23/4/2019 (case 559/2018-T), that "the negative delimitation of the scope of AIMI that was to be approved does not take as its basis the activity to which urban properties are intended, but rather defining itself by reference to the species listed in article 6 of the IMI Code, regardless of their use in business economic activity."
33. Indeed, and as also correctly noted, in this regard, by Arbitral Decision of 15/1/2019 (case 420/2018-T), "the wording of article 135-B of the IMI Code that came to be approved does not exclude the application of AIMI to properties intended for residential purposes and land for construction used by legal entities within the scope of their economic activity. The legislative concern of 'avoiding the impact of this tax on economic activity' was announced in the Draft Law of the State Budget for 2017 and was implemented, to some extent, through the exclusion from the scope of application of 'urban properties classified in the species "industrial", as well as urban properties licensed for tourist activity, the latter provided that its destination is duly declared and proven' and the deduction from the taxable value of the amount of '€600,000.00, when the taxpayer is a legal entity with agricultural, industrial or commercial activity, for properties directly used in its operation'. However, it was not on the basis of the activity to which properties are intended that the exclusion from scope came to be defined, since in the wording that came to be approved the exclusion from scope was defined only on the basis of the types of properties indicated in article 6 of the IMI Code, without any reference to the use or non-use in the operation of legal entities. Distinct concepts are the use of a property, which presupposes utilization, and the purpose for which it is intended, the 'normal destination', underlying the classifications of properties, to which no. 2 of article 6 of the IMI Code refers. If the intent of avoiding application to properties directly used in the operation of legal entities had been maintained in the final wording of the Budget, it would certainly have been maintained the reference to this use that appeared in the proposal and that clearly expressed this legislative option. Thus, having been removed this reference to the use of properties, there is no legal basis for concluding that residential properties and land for construction used in the operation of legal entities do not count toward the scope of AIMI." (emphasis added).
34. One cannot thus arrive at any other conclusion than to consider, as abundant arbitral case law does, that the use of properties in the economic activities of legal entities does not preclude taxation under AIMI (in the same sense expressed here and coinciding with the Arbitral Decisions already cited, and with those cited below, see, for example: no. 678/2017-T, no. 682/2017-T, no. 683/2017-T, no. 684/2017-T, no. 690/2017-T, no. 6/2018-T, no. 310/2018-T, no. 401/2018-T, no. 502/2018-T, no. 506/2018-T, no. 517/2018-T, no. 535/2018-T and no. 574/2018-T).
35. Note also that the question of interpretation raised by the Claimant finds minimal support in the legal text in question. As correctly noted, in this regard, by Arbitral Decision of 16/7/2018 (case 676/2017-T), "the literalness of articles 135-A/1 and 135-B/1 and 2 of the IMI Code is clear and lends itself to no interpretative doubt. Since the language of the law, or grammatical element, is the first element to be invoked in legal interpretation, and given that it must be presumed that the legislator knew how to express its thought in adequate terms (no. 3 of article 9 of the Civil Code), it will not be necessary to invoke other elements from among those available in the hermeneutical toolkit. In fact, it is clear that the legislator, in defining the negative delimitation of the scope of the tax by reference to urban properties classified as 'commercial, industrial or service properties' and 'others' pursuant to paragraphs b) and d) of no. 1 of article 6 of the IMI Code, is precisely intending to refer to that typology of properties in accordance with the characterization that the Code itself attributes to it. As was recorded in the Arbitral Judgment issued in case no. 664/2017-T, whose case law we now follow, as we agree with it, 'The exclusion of the tax thus encompasses properties classified as commercial, industrial or service properties, understood as such the buildings or constructions licensed for those purposes or which have as normal destination each of these purposes. It also embraces the residual species referred to in paragraph d) of no. 1 of that article 6, wherein are included lands situated within or outside an urban agglomeration that are neither land for construction nor rural properties and also buildings and constructions that do not fit into any of the previous classifications. The scope of objective application, by effect of the referral to that article 6, has thus been defined not only by reference to a certain species of urban properties, but also by reference to the administrative procedure through which the classification was effected or, in the absence of a license, to the normal destination of those properties for commercial, industrial and service purposes or others.' It is true that the legislative concern of 'avoiding the impact of this tax on economic activity' was announced in the Draft Law of the State Budget for 2017 and was implemented through the exclusion from the scope of application of 'urban properties classified in the species "industrial", as well as urban properties licensed for tourist activity, the latter provided that its destination is duly declared and proven' and the deduction from the taxable value of the amount of '€600,000.00, when the taxpayer is a legal entity with agricultural, industrial or commercial activity, for properties directly used in its operation'. However, it was not on the basis of the activity to which properties are used that the exclusion from scope came to be defined, since in the wording that came to be approved, as we have seen, the exclusion from scope was defined solely on the basis of the types of properties indicated in article 6 of the IMI Code, without any reference to the use or non-use in the operation of legal entities." (emphasis added).
36. Furthermore, as correctly noted by Arbitral Decision of 4/5/2018 (case 675/2017-T), "if the intent of avoiding application to properties directly used in the operation of legal entities had been maintained in the final wording of the Budget, it would certainly have been maintained the reference to this use that appeared in the proposal and that clearly expressed this legislative option. [...] [having made no reference] to the use of properties, there is no legal basis for concluding that residential properties and land for construction used in the operation of legal entities do not count toward the scope of AIMI. [As Baptista Machado states, in Introduction to Law and the Legitimizing Discourse, page 182] 'In the absence of other elements that would lead to the selection of the less immediate meaning of the text, the interpreter should opt in principle for that meaning which best and most immediately corresponds to the natural meaning of the verbal expressions used, and in particular to their technical-legal meaning, on the assumption (not always exact) that the legislator knew how to express its thought correctly.' In the case at issue, given the abandonment of the proposed wording in which relevance was given to the use of properties, there is no reason to conclude that the legislator did not know how to express its thought in adequate terms, as must be presumed, by virtue of the provision of article 9, no. 3, of the Civil Code." (emphasis added).
37. Also in the same sense, see again Arbitral Decision of 16/7/2018 (case 676/2017-T): "there is no merit to the [understanding according to which one should consider] that 'land for construction' used for those [...] [economic] activities are equally included in that exclusion rule [...]. It happens that [such understanding] starts, from the outset, as has already been demonstrated, from the wrong premise regarding the meaning and scope of the provision of article 135-B, no. 2, of AIMI, according to which because it was the legislator's intention to exclude from taxation properties used for economic activities, it must be equally considered excluded from the scope of application of the Additional IMI land for construction whose potential use coincides with 'commercial, industrial or services' purposes. As the language of the law constitutes the starting point and limit of interpretation, the interpreter cannot arrive at a result that does not have in the language of the law the minimum verbal correspondence, even if imperfectly expressed (cf. no. 2 of article 9 of the Civil Code). This thesis, in addition to starting from a wrong premise (in the alleged intention of the legislator to relieve land used in economic activity), has no support in the language of the rule. In fact, article 135-B, no. 2, of the IMI Code merely excluded from the Additional surcharge properties classified as 'commercial, industrial or services' and 'others', referring to the characterization effected in article 6 of that Code as to those species of urban properties. [...]. Land for construction is, as results from no. 3 of that article 6, land that has been covered by a subdivision or construction licensing operation and is not intended for other urbanistic purposes, and is not to be confused with properties classified as "commercial, industrial or services", which are those that are licensed for those purposes or, in the absence of a license, have as normal destination each of these purposes. As was recorded in the Arbitral Judgment issued in case no. 664/2017-T, 'Having the legislator defined an exclusion clause by express and precise reference to certain species of urban properties, which are immediately identifiable in the context of the law, it is not possible to effect an extensive interpretation so as to include other typologies that the legislator manifestly did not wish to consider. Nor can one even arrive at that interpretative result on the basis of mere pragmatic considerations or of teleological identity. Even if it would be justified, from a tax policy perspective, to confer on land for construction intended for buildings for commercial, industrial or service purposes the same status that came to be attributed to properties classified as "commercial, industrial or service properties", the fact is that that was not the legislative option, which merely excluded from the scope of application of the tax those types of properties and not those others that potentially could be used for those same purposes.'" (emphasis added).
38. Despite what has been stated so far, the Claimant "considers that an extensive interpretation of the exclusion rule present in no. 2 of article 135-B of the IMI Code should be performed [and that,] if this is not done, that is, if the rule is interpreted in an exclusively literal manner and, consequently, if it is considered that land for construction intended for 'commerce, industry or services' are included within the scope of AIMI, the Claimant considers that it will be materially unconstitutional."
39. Thus, analysis of the alleged unconstitutionality is justified.
40. In this regard, we will follow, as we entirely agree with it, the understanding that was defended, for example, in Arbitral Decision of 16/7/2018 (case 676/2017-T): the "[interpretation [defended by the Tribunal] does not constitute any discriminatory treatment in violation of the principle of equality since we are speaking of different realities from the outset because land for construction is not assimilable to already built urban properties [...]. As was recorded in the Arbitral Judgment that we have been following [of 26/6/2018, issued in case no. 664/2017-T], 'the Constitutional Court has emphasized that one of the essential objectives constitutionally defined of the fiscal system, alongside the satisfaction of the financial needs of the State and other public entities, is that of fair distribution of income and wealth, as is apparent from article 103, no. 1, of the Constitution. It is this binding of the fiscal system to the idea of social justice and the reduction of inequality in the social distribution of income and wealth that requires it to be progressive. [...]. The progressivity of the fiscal system also constitutes a requirement of the principle of material equality. [...] [and] the principle of tax equality may be concretized through different aspects: a first is in the generality of the tax law, in its application to all without exception; a second, in the uniformity of the tax law, in treating equally those taxpayers who find themselves in equal situations and differently those who find themselves in different situations, in the measure of the difference, to be assessed by taxpaying capacity; a last, is in the prohibition of arbitrariness, in precluding the introduction of discriminations between taxpayers [provided] they are devoid of rational foundation (cf. Constitutional Court judgments no. 306/2010 and 695/2014)'." (emphasis added).
41. In light of the above stated, the referred Arbitral Decision of 16/7/2018 emphasizes that, "as can be read in the Report of the Budget for 2017 (page 60), [...] the creation of the Additional IMI, as a complementary tax on real estate property, aimed to introduce into taxation 'a progressive element of personal basis, taxing more heavily the larger assets', and, in that sense, is compatible with the principle of progressivity of taxation to which no. 3 of article 104 of the Constitution refers, which has as corollary the tendency imposition of higher taxation on those with greater taxpaying capacity. [And,] According to doctrine, it has also been understood that the taxation of assets, alongside the taxation of income, constitutes a projection of taxpaying capacity, functioning as an extension of the personal income tax and as a reinforcement of qualitative discrimination (Sérgio Vasques, "Taxpaying Capacity, Income and Assets", Taxation – Journal of Tax Law and Management, no. 23, Coimbra, 2005, pages 33 and 36). Now, in this context, it is not apparent that the taxation of real estate property of the [Claimant] violates the principle of tax equality and taxpaying capacity merely because the holding of real estate constitutes the very object of its economic activity. In fact, the properties held by it will be used for activities freely accessible to the generality of owners of properties and any other entities, albeit of business nature, engaged in real estate development. [...]. [...] the imposition on the generality of holders of residential property or land for construction intended for residential properties does not appear materially unconstitutional, in light of the principles of equality and taxpaying capacity.''" (emphasis added).
42. On the other hand, it is also recalled, by the referred Arbitral Decision of 16/7/2018, that "in line with what was understood in the Arbitral Judgment of 17 March 2016, issued in case no. 507/2015-T, 'a distinction must be made between the holding of real estate property intended for residential purposes which constitutes, in itself, a reasonably certain indication of economic affluence, superior to that of the generality of citizens, and the holding of rights over properties intended for the exercise of commercial, industrial, services provision activities or similar that may be recognized as factors of production and whose dimension and patrimonial value constitutes, not so much a manifestation of wealth, but a standard of adequacy for the operation of the enterprise. Thus, there appears to be constitutionally acceptable foundation for the restriction of the scope of Additional Municipal Property Tax to residential properties as compared with properties classified as commercial, industrial or services provision, the alleged unconstitutionality based on the violation of the principles of equality and taxpaying capacity being thus avoided.' [In fact, and] Resuming, once again, what was recorded in the Arbitral Judgment issued in case no. 664/2017-T, 'it must be kept in mind that we are dealing with different tax facts. In one case, the law subjects to taxation developable land that constitutes an economic asset by virtue of its capacity for construction. In another case, the law excludes from the tax the built property that performs an instrumental function in relation to productive activity. There is not a necessary connection between these two realities. Land for construction has its own patrimonial value that constitutes, in itself, an indicator of taxpaying capacity that is capable of being the object of an autonomous tax on property, independently of its eventual and future use through the implantation of a building for commercial, industrial or services purposes. The already built property that is classified as a commercial, industrial or services property has already a function instrumental in relation to a certain productive activity that the legislator, within its margin of free discretion, may wish to safeguard within the scope of its duties to promote economic and social development, which have constitutional basis (article 81 of the Fundamental Law).' " (emphasis added).
43. Given the argument cited, with which we agree, it can be seen that it would make no sense to exempt land for construction, as such, from AIMI, since, enjoying the same merely potential constructive capacity of the type of property to be built (for commerce, industry or services), such could have the undesirable consequence of discouraging, by this means, its construction and actual use in a productive activity.
44. Note finally what is referred to in the recent Constitutional Court Judgment no. 378/2018 of 4 July (albeit this concerns Item 28.1 of the TGIS) regarding the scope of the constitutional principle of tax equality: "the constitutional program of tax equalization, by means of taxes on property, does not entail any requirement of positive discrimination of enterprises as against the remaining taxpayers subject to this type of taxes".
45. It is concluded, in light of the foregoing, that there is no alleged violation of the principles of tax equality and taxpaying capacity, enshrined in articles 13 and 104, no. 3, of the CRP.
46. As the AIMI tax assessment act, in the challenged part, does not suffer from any defect that would determine its annulment, for the reasons that have been set out above, it must be concluded that the request for refund of the amounts paid as Additional IMI is prejudiced, and furthermore, that compensatory interest provided for in articles 43 of the LGT and 61 of the CPPT is not due.
V. DECISION
In light of the foregoing, it is decided:
- To judge totally unfounded the request for arbitral pronouncement, by lack of proof, absolving the Tax and Customs Authority of all petitions, in the terms requested, and maintaining in the legal order the challenged act.
VI. Case Value
The case value is fixed at €4,550.17 (four thousand five hundred and fifty euros and seventeen cents), pursuant to the provisions of article 32 of the CPTA and article 97-A of the CPPT, applicable by virtue of the provision of article 29, no. 1, paragraphs a) and b), of the RJAT, and article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).
VII. Costs
Pursuant to Table I attached to the RCPAT, the costs are in the amount of €612.00 (six hundred and twelve euros), to be paid by the Claimant, in accordance with the provisions of articles 12, no. 2, and 22, no. 4, of the RJAT, and article 4, no. 5, of the RCPAT.
Let notification be made.
Lisbon, 12 July 2019.
The Arbitrator
(Miguel Patrício)
Text prepared by computer, in accordance with the provision in article 131, no. 5, of the CPC, applicable by referral of article 29, no. 1, paragraph e), of the RJAT.
The wording of the present decision is governed by the spelling prior to the Orthographic Agreement of 1990.
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