Stamp Tax on Land for Construction: Verba 28 TGIS Exemption in CAAD Ruling 652/2015-T

ARBITRAL DECISION

I. REPORT

1. A…, S.A., taxpayer no…, with registered office at Rua do…, …, in Lisbon, requested the establishment of an arbitral tribunal in tax matters with a view to declaring the illegality of stamp tax assessments in the total amount of €35,710.80, relating to the urban property of the category "land for construction," registered in the respective property register of the Union of Parishes of … and … under article…. The aforementioned assessments, made on the basis of the provisions of article 1 of the Stamp Tax Code (CIS), combined with Item 28 of the respective General Table and transitional provisions established in article 6 of Law no. 55-A/2012, of 29 October, relate to the year 2012. Having duly made payment of the assessed tax, the Claimant also requests, as a consequence of the declaration of illegality of those acts, that the Tax Authority be condemned to restitution of the amounts unduly paid, increased by the corresponding indemnification interest.

2. As the basis of its claim, the Claimant, besides invoking double taxation, alleges, in summary, that the taxation provided for in the cited provisions has as its object urban properties "with residential use," not including "land for construction" which, by nature, does not exhibit such aptitude, thus considering that the assessments in question are vitiated by illegality due to error attributable to the Tax Authority services.

3. For its part, the Respondent – the Tax and Customs Authority (AT) – in response to the allegations, contested the Claimant's claim, presenting a defense by exception, invoking the untimeliness of the request for arbitral pronouncement and by counter-argument, pronouncing itself in favor of the lack of merit of the claim, that is, the maintenance of the questioned tax assessments.

4. The request for establishment of an arbitral tribunal, presented on 26 October 2015, was accepted by the President of CAAD and automatically notified to the Respondent (AT) on 6 November following.

5. Pursuant to the provisions of subparagraph a) of paragraph 2 of article 6 and subparagraph b) of paragraph 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as arbitrator of the singular arbitral tribunal, who communicated acceptance of the assignment within the applicable timeframe, and notified the parties of this appointment on 22 December 2015.

6. Having been duly notified of this appointment, the parties did not manifest willingness to refuse the arbitrator's appointment in the terms combined with article 11, paragraph 1, subparagraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

7. Thus, in accordance with what is prescribed in subparagraph c) of paragraph 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the singular arbitral tribunal was constituted on 8 January 2016.

8. Regularly constituted, the arbitral tribunal, without prejudice to what it may decide regarding the exception invoked by the Respondent, is materially competent, given what is prescribed in articles 2, paragraph 1, subparagraph a), of the RJAT.

9. The parties possess judicial personality and capacity and have legitimacy (articles 4 and 10, paragraph 2, of the RJAT, and article 1 of Ordinance no. 112-A/2011, of 22/03).

10. Given the knowledge that derives from the procedural documents making up the present case, which is deemed sufficient, the Tribunal decided to dispense with the meeting referred to in article 18 of the RJAT as well as the production of testimonial evidence.

11. No oral arguments were made as being unnecessary. The case is not vitiated by nullities and no other issues have been raised that would prevent the consideration of the merits of the case, with the conditions being met for a final decision to be pronounced.

II. FACTUAL MATTER

1. With relevance for consideration of the issues raised, the following factual elements are highlighted, which are deemed entirely proven in light of the documents making up the present case:

12.1. The Claimant is owner of the urban property of the category "land for construction," located at …, …, registered in the respective property register of the Union of Parishes of … and … under article….

12.2. The said property, classified in the register as "land for construction," has a total area of 8,500 square meters and a tax value of €2,380,720.00, having been acquired by the current owner by contract of purchase and sale executed on 1 October 2010.

12.3. From the elements attached to the present case, namely from a copy of the respective property record and certificate of the property registration, it is evident that, as of the date to which the contested assessments relate, the land had no building or construction erected on its ground.

12.4. In determining the tax value of the land in question, determined by an appraisal carried out on 4 June 2010, consideration was given to, among other relevant elements, an allocation coefficient corresponding to the residential use of the property to be constructed, in accordance with what is provided in article 45 of the Municipal Property Tax Code (CIMI).

12.5. Taking into account the tax value definitively determined and the allocation coefficient considered in the appraisal of the land, the Tax and Customs Authority (AT) understood that the prerequisites for the incidence of stamp tax provided for in Item 28 of the respective Table were fulfilled, with the corresponding assessments relating to the year 2012 being made.

12.6. In these terms, the Claimant was duly notified of assessment no. 2012…, of 07-11-2012, made on the basis of article 6, paragraph 1, subparagraph f), sub-item i), of Law no. 55-A/2012, of 29 October, with the amount of €11,903.60 being determined, payment of which was made by the Claimant on 19 December 2012.

12.7. Subsequently, the Claimant was notified of the assessment made on 21 March 2013, with reference to the same property and year, in the amount of €23,807.20, divided for payment in various installments to which correspond the notes nos. 2013…, 2013…, and 2013… - 1st, 2nd, and 3rd installments, respectively.

12.8. The first of the said installments, in the amount of €7,935.74, was paid on 3 June 2013, the following ones, each in the amount of €7,935.73, were paid on 31 July and 29 November 2013, respectively.

12.9. On 18 March 2015, the Claimant filed a request for revision of the tax act, requesting the ex officio annulment of the assessments now contested, on the grounds of error attributable to the services and double taxation.

12.10. Having the revision request been denied, by decision notified to the Claimant on 11 June 2015, a hierarchical appeal was lodged on 22 July following, on which no decision was rendered until the date of presentation of the present request for arbitral pronouncement.

1. There are no facts relevant to the merit of the decision that have not been proven.

III. CUMULATION OF CLAIMS

1. The present request for arbitral pronouncement relates to two stamp tax assessment acts. However, given the identity of the tax facts, the tribunal competent to decide, and the factual and legal grounds invoked, the Tribunal considers that nothing prevents, in light of what is provided in articles 3 of the RJAT and 104 of the Tax Procedure Code, the cumulation of claims.

IV. ON THE DILATORY EXCEPTION

1. Having summarized the relevant factual elements, it is important, first of all, to analyze and decide the exception invoked by the Respondent.

2. According to the Respondent's allegation, the object of the claim is the stamp tax assessments identified above, whose legality it submits to the Tribunal's consideration.

3. However, the Respondent continues, "pursuant to the request for Constitution of the Arbitral Tribunal under analysis, the immediate object of the case should be the dismissal of the hierarchical appeal presented by the Claimant on 22 July 2015, as referred to in point 14 of the request for arbitral pronouncement, which was presumed tacitly dismissed on 21-09-2015 (see article 66, paragraph 5 of the Tax Procedure Code)."

4. Thus, "Pursuant to what is provided in article 10, paragraph 1, subparagraph a) of the RJAT, intending the Claimant to challenge the acts of Stamp Tax Assessment in question, the request for constitution of an Arbitral Tribunal should have been presented within the period of 90 days counted from the end of the period for voluntary payment, in accordance with what is provided in article 102, paragraph 1, subparagraph a) of the Tax Procedure and Process Code (CPPT)."

5. In these terms, given that the assessment notes show as final payment dates the 20th of December 2012, April 2013, July 2013, and November 2013, respectively, and having the Claimant presented the request for constitution of the Arbitral Tribunal on 26 October 2015, the legally defined period for challenging the assessment acts in question in arbitration had already been exceeded. Accordingly, "not having been requested the consideration of the legality of the second-degree act, there does not exist the support that could defend the timeliness of the claim and consequently the possibility of the Arbitral Tribunal to consider the same regarding the assessment acts that the Claimant intends to review."

6. With the grounds that are summarized above, the Respondent concludes that "as it clearly and unequivocally results from the request for arbitral pronouncement, the direct challenge of the tax acts referred to above, the claim filed (conducive to the annulment of the assessment acts) should be declared to lack merit, as untimely, in that the expiration of the right to sue constitutes a dilatory exception preventing the consideration of the merits of the case, pursuant to what is provided in paragraphs 1 and 2 of article 576 of the Civil Procedure Code (by virtue of subparagraph e) of article 2 of the Tax Procedure Code and subparagraphs a) and e) of paragraph 1 of article 29 of the RJAT, which is hereby requested."

7. This understanding is not shared. Indeed, it clearly results from the provision of article 10, paragraph 1, subparagraph a), of the RJAT that, in situations such as that evident in the present case, in which there has been an administrative claim and/or hierarchical appeal, the period for presenting a request for arbitral pronouncement is counted from notification of the decision rendered therein or, where applicable, from the formation of the presumption of tacit dismissal.

8. It is noted that this matter has been the subject of various arbitral decisions, recalling at this point the Arbitral Decision rendered in case no. 419/2014-T, from which the following is transcribed:

"As follows from the competence attributed to the arbitral tribunals functioning in CAAD to consider the legality of assessment acts, and not of decisions dismissing hierarchical appeals or administrative claims, when there is administrative challenge of assessment acts, these assessment acts are always challengeable within a period counted from notification of the dismissal decision, as article 10, paragraph 1, indicates them as starting points. For this reason, the party requesting arbitration does not have to challenge the second or third-degree acts and, even when challenging these, it is understood that the object of the arbitral case is always the mediate object constituted by the assessment acts maintained by second or third-degree acts, as long as the party requesting arbitration does not attribute to these own defects. But, obviously, if the party requesting arbitration merely intends to have the illegality of assessment acts declared, which are those that, being susceptible to coercive enforcement, affect its legal sphere, it does not have to challenge the second or third-degree acts, which lack autonomous injurious character.

Moreover, a hypothetical deficiency in the formulation of the claim would not have as a corollary the dismissal of the case, merely giving rise, if necessary, but always when necessary, to a correction, as imposed by subparagraph c) of paragraph 1 of article 18 of the RJAT, in harmony with the constitutional right to challenge contentiously all acts of the Administration that injure the rights of taxpayers (articles 20, paragraph 1, and 268, paragraph 4, of the Constitution of the Portuguese Republic)."

1. In the same sense, it may be read in an Arbitral Decision of 27 October 2015, in case no. 124/2015-T:

"We are once again in that case in which there seems to be a confusion between the material scope of arbitration (article 2, of the RJAT) and the date from which the request for arbitral pronouncement may be filed (article 10, of the RJAT) and also and once again, this is about the approach of the question of the recourse-ability, through arbitration, of second or third-degree acts. The problematic of second and third-degree acts in tax arbitration concerns, as is understood, at least two distinct issues: a first one, to know whether, having resorted to an administrative gracious remedy, the object of the arbitral case will be the decision to be rendered by the Tax Authority – in the context of an administrative claim, hierarchical appeal or official revision request – or, on the contrary, the assessment act, self-assessment, withholding at source or payment on account; a second one, which interlinks issues of competence and issues of period, and which is to know whether the tribunal will have competence – and, if so, to what extent – to consider a first-degree act when the claim is presented following a tacit dismissal of an administrative claim, hierarchical appeal or official revision request previously filed.

With respect to the first issue, even in the context of judicial challenge, it was debatable whether, before an express decision of an administrative claim, hierarchical appeal or official revision request, the taxpayer was challenging directly the assessment act previously claimed, appealed or revised (the first-degree act) or the decision itself (of dismissal) of the claim, appeal or official revision request that, in turn, considered the (il)legality of the challenged act – the second-degree act. The Administrative Supreme Court (STA) pronounced itself on the issue, in a ruling dated 18 May 2011, rendered in the context of case no. 0156/11, admitting that "(…) the real object of the challenge is the assessment act and not the act that decided the claim, so that it is the defects of that one and not of this decision that are truly in question (…)."

"(…) the challenge is not, therefore, limited by the grounds invoked in the administrative claim, and may be based on any illegality of the tax act. (…)"

This is the first issue that must be made clear: the object of the arbitral case is the assessment act.

A different issue from this is to know whether the request for arbitral pronouncement was presented within the period. Here the Tribunal understands that the arbitration legislator was clear in compartmentalizing issues of competence and issues of periods.

Thus it is that as to competence or material scope in which the object of arbitration is, as concluded, the consideration of the illegality of assessment acts.

As to the period, the taxpayer may resort to arbitration immediately upon notification of the assessment acts of taxes, self-assessments, withholdings at source and payments on account or, having resorted to the administrative route, after notification of the dismissal decision or the formation of tacit dismissal. This answer is found, in turn, in article 10. From this provision one should not, however, derive the competence for direct consideration of second-degree acts. This is a provision that concerns solely and exclusively the starting point of the period for filing the request for arbitral pronouncement. It is a provision that concerns therefore the moment from which the counting of the period for requesting the establishment of the arbitral tribunal begins.

Indeed, article 2, paragraph 1, subparagraph a), determines that arbitral tribunals have competence to consider "the declaration of illegality of assessment acts of taxes, self-assessments, withholdings at source and payments on account." There is, therefore, no reference to acts dismissing administrative claims, hierarchical appeals or official revision requests, that is, there is no mention of the arbitrability of dismissal decisions, express or tacit, of the prior administrative routes used. There is not, nor did there need to be.

It is understood in this regard that second or third-degree acts may always be arbitrable, insofar as they themselves behave, and only to this extent, the (il)legality of the assessment acts in question. At the basis of this understanding will be, for part of the Doctrine, a teleological interpretation, namely because subparagraph a) of paragraph 1, article 10, expressly refers to the "decision of hierarchical appeal" and there is also, as is understood, the fact that the second or third-degree act is considering the assessment, self-assessment, withholding at source or payment on account act that is the object of arbitration.

One defends here, accordingly, an interpretation according to which the own defects of acts dismissing administrative claims, hierarchical appeals or revision requests of the tax act are not arbitrable because they escape the material scope of tax arbitration. In other words, these dismissal acts may only be "brought" to arbitral jurisdiction, in the strict condition that they themselves have considered the (il)legality of the tax act that the taxpayer, truly and effectively, intends to challenge through the arbitral route.

In this sense, see the arbitral decision rendered in case no. 272/2014-T]:

"65 - The dismissal of an administrative claim embodies, within the framework of judicial challenge, the case provided for in paragraph 2 of article 102 of the Tax Procedure Code, raising the question of whether, given the competences legally entrusted to arbitral tribunals, the same will be competent to, in any circumstances, consider acts dismissing administrative claims.

66 - The competence of the arbitral tribunals functioning with CAAD being circumscribed and limited, as already mentioned above, to the declaration of illegality of assessment acts of taxes, self-assessments, withholdings at source and payments on account, the consideration of acts dismissing administrative claims, by the said tribunals, must be conditioned by the effective knowledge that such acts had of the legality of the assessment acts with which they are related.

67 - The decision dismissing the administrative claim, rendered in the aforementioned circumstances, reaffirms the legality of the assessment act in question and reconfirms it, as it was initially configured.

68 - The dismissal of the administrative claim is an injurious act susceptible to challenge by the interested party, which, insofar as it proceeds to the reaffirmation of the primary underlying assessment act and from which it is inseparable, cannot fail to have its consideration entrusted to arbitral tribunals, which, as already mentioned, have their competences fundamentally centered on the declaration of illegality of assessment acts of taxes.""

1. Accompanying the position expressed in the arbitral decisions in the segments transcribed above, to which one agrees without reservation, it is found that, in the present case, the hierarchical appeal of the dismissal act of the official revision request for the assessments was filed on 22 July 2015. Not having been the subject of an express decision, the presumption of tacit dismissal occurred on 23 October 2015. Thus, with the request for arbitral pronouncement being presented on 26 of the same month, therefore within the period provided for in subparagraph a) of paragraph 1 of article 10 of the RJAT, one cannot fail to recognize that it is timely.

2. In these terms, the exception invoked by the Respondent (AT) is deemed totally to lack merit.

V. ON THE MERITS OF THE CLAIM

1. Considering the factual matter set out above, it is important, first of all, to conduct an analysis, albeit brief, of the prerequisites for the incidence of stamp tax on urban properties with residential use, using the relevant fiscal norms for the definition of the respective legal concepts.

2. Through Law no. 55-A/2012, of 29/10, Item 28 was added to the General Table of Stamp Tax, subjecting to this tax urban properties whose tax value shown in the register, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000.

3. The taxable base is constituted by the tax value considered for purposes of the Municipal Property Tax, that tax being assessed annually by AT with respect to each urban property (Stamp Tax Code, article 23, paragraph 7), at the rate of:

• 1%, for urban property with residential use;

• 7.5%, for property, when the taxpayers, not being natural persons, are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance.

1. With respect to the years 2012 and 2013, the transitional regime provided for in article 6 of Law no. 55-A/2012, of 29/10, is applicable, with the following specificities:

a) The taxable event occurs on 31 October 2012;

b) The taxpayer of the tax is the one mentioned in paragraph 4 of article 2 of the Stamp Tax Code on the date referred to in the preceding subparagraph;

c) The tax value to be used in the assessment of the tax corresponds to what results from the rules provided for in the Municipal Property Tax Code by reference to the year 2011;

d) The assessment of the tax by the Tax and Customs Authority must be made by the end of the month of November 2012;

e) The tax shall be paid, in a single installment, by the taxpayers by 20 December 2012;

f) The applicable rates are as follows:

i) Properties with residential use assessed in accordance with the Municipal Property Tax Code: 0.5%;

ii) Properties with residential use not yet assessed in accordance with the Municipal Property Tax Code: 0.8%;

iii) Urban properties when the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance: 7.5%.

2 - In 2013, the assessment of the stamp tax provided for in item no. 28 of the respective General Table shall apply to the same tax value used for purposes of the assessment of municipal property tax to be made in that year.

1. The taxpayers, and holders of the economic interest (tax debtors), are the owners, usufructuaries or superficiaries of the properties on 31 December of the year to which the tax relates – with respect to 2012, in accordance with the transitional regime referred to in the preceding point, this date is brought forward to 31 October – as follows from article 8 of the Municipal Property Tax Code, by express reference of articles 3, paragraph 3, subparagraph u), and 2, paragraph 4, of the Stamp Tax Code.

2. As to the date of constitution of the tax obligation, tax connection, assessment and payment of the stamp tax in question, the corresponding rules of the Municipal Property Tax Code are applicable, also by express reference of articles 5, paragraph 1, subparagraph u), 4, paragraph 6, 23, paragraph 7, 44, paragraph 5, 46, paragraph 5, and 49, paragraph 3, of the Stamp Tax Code. In general, by reference of article 67, paragraph 2, of the same Code, the provisions of the Municipal Property Tax Code are supplementarily applicable to matters not specially regulated.

3. The norm of incidence of stamp tax referring to urban properties, it is important to have in mind that the relevant concept is the one contained in article 2 of the Municipal Property Tax Code, as, moreover, is provided for in paragraph 6 of article 1 of the Stamp Tax Code.

4. Appealing to elements of a physical, patrimonial and economic nature, that provision of the Municipal Property Tax Code defines as property "every tract of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or erected thereon, with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value..."

5. For purposes of the Municipal Property Tax, properties are classified as rural, urban or mixed, this classification being particularly relevant both for the purposes of application of the rules for determination of the respective tax value and for the purposes of application of tax rates.

6. To this effect, the Municipal Property Tax Code establishes, in its article 3, a positive definition of rural property, defining urban property and mixed property, in its articles 4 and 5, in merely residual terms: they are thus classified all those realities that, while integrating the fiscal concept of property, are not to be classified as rural properties.

7. According to that provision, rural properties are those which, situated outside an urban agglomeration, meet one of the following requirements:

• They are not to be classified as land for construction;

• They are affected, or have as normal use, the production of agricultural income, as considered for purposes of personal income tax;

• Not having agricultural use, they are not constructed or have, only, buildings or constructions merely ancillary, without economic autonomy and of reduced value.

1. They are, further, thus classified properties situated within an urban agglomeration which, by force of legal provision, may not have use generating income (in the case of green spaces, gardens, etc.) or may only be used in agricultural activities and actually have that specific use.

2. A property that does not meet the requirements referred to above is classified as urban.

3. It may, therefore, be concluded that, for purposes of the Municipal Property Tax and, in the case, stamp tax, land for construction is an urban property, in that it meets the requirements making up the concept of property – physical reality, patrimonial character and economic value – and, whatever use or purpose it is having, in the case of vacant land, is expressly excluded from the concept of rural property.

4. Referring to urban properties, paragraph 1 of article 6 of the Municipal Property Tax Code distinguishes various categories, dividing them into residential, commercial, industrial or service properties, land for construction and others, in accordance with the following criteria:

• "residential, commercial, industrial or service": buildings or constructions licensed for such purposes or, in the absence of a license, that have as normal purpose each of those purposes (Municipal Property Tax Code, article 6, paragraph 2).

• "land for construction," the land situated within or outside an urban agglomeration for which a license or authorization has been granted, prior communication admitted or favorable prior information issued for a subdivision or construction operation, and also those that have thus been declared in the acquisition title, except for the land in which the competent entities prohibit any of those operations, namely those located in green zones, protected areas or which, in accordance with municipal land use plans, are assigned to public spaces, infrastructure or equipment. (Municipal Property Tax Code, article 6, paragraph 3, as amended by Law no. 64-A/2008, of 31/12).

• "Others," considered as such the land situated within an urban agglomeration that is neither land for construction nor classified as rural property, in accordance with its respective legal concept, and also buildings and constructions licensed, or in the absence of a license, that have as normal purpose other purposes than those above referred to (Municipal Property Tax Code, article 6, paragraph 4).

1. In defining the scope of incidence provided for in Item 28 of the General Table of Stamp Tax, the legislator considers, as a relevant element of tax capacity, high-value properties which, in the segment relating to taxpayers resident in Portuguese territory, are held for residential purposes.

2. However, by making the taxation apply to urban properties "with residential use," the legislator does not establish, in the Stamp Tax Code, any specific concept which, for that purpose, should be considered, but rather refers the application of the regime of taxation of properties to which Item 28 refers to the norms of the Municipal Property Tax Code.

3. It shall, therefore, be in the framework of this Code that the meaning of that expression must be found, an understanding which, moreover, is shared by the Claimant and the Respondent, though with different conclusions.

4. As concerns the definition of the different categories of urban properties, the said Code, as referred to above, establishes a clear distinction between "residential" properties and "land for construction." The former are classified according to the respective municipal license, or, if none exists, as a result of normal use. The latter are defined according to their legal potentiality.

5. Taking into consideration the legislation relating to construction and urban development, particularly as regards the various types of licensing, the classification of a property as "residential," for tax purposes, does not present any particular feature: those which, under the legal provisions, are thus classified are residential.

6. In the absence of licensing, what is relevant for classification is the normal purpose of the property. Here too the tax law does not offer any specific concept. It follows, however, both from general knowledge and from the legislation applicable to urban buildings, that the purpose of housing presupposes the existence of a minimum of conditions that preserve personal intimacy and family privacy (article 65 of the Constitution of the Portuguese Republic).

7. The licensing, by the competent entity, or the normal use of a property whose purpose is housing refer, as could not be otherwise, to built properties that meet the characteristics required to be thus classified.

8. Land for construction – whatever the type and purpose of the building that will be, or may be, erected on it – does not, of itself, satisfy any condition to be thus licensed or for housing to be defined as its normal purpose.

9. Referring, therefore, the norm of incidence of stamp tax to urban properties with "residential use," without any specific concept being established for the purpose, one cannot extract from it that it contains a future potentiality, inherent in a distinct property that perhaps will be built on the land.

10. The expression "with residential use" conveys, in a simple reading, an idea of real and present functionality. From the provision in question it is not possible to extract, by interpretation, that, as is stated in the Respondent's response, the legislator's choice for that expression had in mind to integrate "other realities beyond those identified in article 6, paragraph 1, subparagraph a), of the Municipal Property Tax Code." Such interpretation has no legal support, given the principles contained in articles 9 of the Civil Code and 11 of the General Tax Law.

11. Indeed, if the legislator intended to encompass within the scope of incidence of the tax other realities than those resulting from the classification governed by article 6 of the Municipal Property Tax Code, he would have said so expressly. But he did not, instead referring, in bulk, to the concepts and procedures provided for in the said Code.

12. On the other hand, neither can the understanding of the Respondent be accepted that the concept of "residential use" derives from the provision of article 45 of the Municipal Property Tax Code.

13. This article refers to the rules applicable in determining the tax value of land for construction, establishing that this is what results from the value of the area of implantation of the building to be constructed added to the land adjacent to the implantation. In fixing the value of that area a percentage, variable between 15% and 45%, of the value of the buildings authorized or provided for is considered.

14. According to the Respondent, in fixing the value of the buildings authorized or provided for in the land being assessed, the coefficients applicable in determining the tax value are used, namely the allocation coefficient provided for in article 1 of that Code.

15. Concluding from this that the consideration of such a coefficient, dependent on the type of use provided for the property to be built on the land, would be determining for purposes of application of Item 28 of the General Table of Stamp Tax.

16. This conclusion is supported by the assumption that the expression "properties with residential use" appeals to a classification that overlies the categories provided for in paragraph 1 of article 6 of the Municipal Property Tax Code.

17. It is not, however, possible to accompany such conclusion. On the one hand, because nothing in the law allows one to conclude that the legislator of stamp tax intended to expand, for purposes of the incidence of this tax, the categories provided for in paragraph 1 of article 6 of the Municipal Property Tax Code, as already stated above; on the other hand, because the application of an allocation coefficient refers to one of the elements to be considered in the assessment of the land, that is, in the determination of the value of the buildings authorized or provided for.

18. Regardless of whether in determining the value of the buildings authorized or provided for land for construction an allocation coefficient should or should not be considered, it is admitted, as being obvious and of general knowledge, that the value of land is determinatively influenced by the type and characteristics of such buildings. However, this is a matter that exceeds the question on which the present request for arbitral pronouncement is focused.

19. In the conditions referred to, the circumstance that for a certain piece of land for construction the construction of a property intended for housing, or any other purpose, is authorized, even though it should be considered in its assessment, does not determine any change in the classification of the land which, for tax purposes, continues to be thus considered.

20. In these terms, as a clear distinction results from article 6 of the Municipal Property Tax Code between "residential" urban properties and "land for construction," the latter cannot be considered, for purposes of the incidence of stamp tax, as "properties with residential use."

21. Indeed, this is the position in which the constant and uniform jurisprudence has been oriented, both of the arbitral tribunals [i] and of the Administrative Supreme Court [ii], which is here accepted and reiterated.

22. It is true that article 194 of Law no. 83-C/2013, of 31/12, amended the wording of paragraph 1 of Item 28 of the General Table of Stamp Tax, this now providing that the taxation in question applies, at the rate of 1%, "For a residential property or for land for construction whose authorized or provided building is for housing..."

23. This is, however, an innovative provision, applicable from the date of entry into force of the said Law – 1 January 2014 – and therefore not encompassing situations that are the object of the present case, in which tax events occurred prior to the beginning of its validity.

24. It would not be otherwise only if that amendment had a clarificatory nature, applying then to past facts. But if the legislator intended to confer such a nature on the amended provision, he would not fail to make it clear in the respective text.

25. Now, not only did the legislator not do so, but one does not extract from the text of the provision any reference to its clarificatory character. On the contrary, the use, in the text of the new wording, of the disjunctive "or" expresses, in this context, a sense of alternative.

26. On the other hand, no controversy generated by the previous legal solution is known, as the interpretation possible of the provision in question, in its previous wording, has been pacifically and invariably affirmed by the jurisprudence referred to above.

27. As Baptista Machado states ("Introduction to Law and to Legitimating Discourse" … for the new law to be able to be clarificatory, of its nature, it is necessary that there be matter for clarification. If the rule of law was certain in the prior legislation, or if the jurisprudential practice that had for a long time been attributed a determined meaning to it, which remained constant and peaceful, the new law that comes to solve the respective legal problem, in different terms, must be considered an innovative law."

28. Thus, considering the literality of the new law as well as the constant and peaceful jurisprudence known, we cannot fail to conclude that we are not before a clarificatory law, but before an innovative law, applicable only for the future.

29. In these terms, one cannot fail to conclude for the illegality of the stamp tax assessments that constitute the object of the present request for arbitral pronouncement, also concluding that, in their origin, is found error attributable to the Tax Authority.

30. Having concluded that the stamp tax assessment acts that constitute the object of the present request for arbitral pronouncement are vitiated by the defect of violation of law that imposes their annulment, the consideration of the other issues relating to the legality of those acts is precluded, as being unnecessary, particularly the alleged double taxation (Civil Procedure Code, article 130).

DECISION

In these terms, and with the grounds stated, the Arbitral Tribunal decides:

a) To declare the dilatory exception invoked by the Respondent (AT) to lack merit;

b) To declare the request for arbitral pronouncement well-founded, as concerns the illegality of the contested assessments, determining, in consequence, their annulment and restitution to the Claimant of the amounts unduly paid, increased by the corresponding indemnification interest, counted in accordance with the legal terms.

Value of the Case: The value of the case is fixed at €35,710.80, pursuant to article 97-A, paragraph 1, subparagraph a) of the Tax Procedure Code, applicable by reference of article 29, paragraph 1, subparagraphs a) and b), of the RJAT and article 3, paragraph 2, of the Regulation of Costs in Tax Arbitration Cases.

Costs: Under article 22, paragraph 4, of the RJAT, and pursuant to Table I annexed to the Regulation of Costs in Tax Arbitration Cases, the amount of costs is fixed at €1,836.00, entirely borne by the Respondent (AT).

Lisbon, 4 March 2016,

The Arbitrator,

Álvaro Caneira.

[i] Among others, and referring only to the most recent decisions, see CAAD, 14/2015-T, 28/2015-T, 54/2015-T, 57/2015-T, 61/2015-T, 78/2015-T, 80/2015-T, 84/2015-T, 86/2015-T, 87/2015-T, 94/2015-T, 111/2015-T, 117/2015-T, 125/2015-T, 130/2015-T, 134/2015-T, 135/2015-T, 143/2015-T, 154/2015-T, 155/2015-T, 156/2015-T, 172/2015-T, 184/2015-T, 185/2015-T, 186/2015-T, 224/2015-T, 229/2015-T, 232/2015-T, 235/2015-T, 266/2015-T, 288/2015-T, 290/2015-T and 367/2015-T.

[ii] See Administrative Supreme Court, Cases 1870/13, 1871/13, 46/14, 48/14, 55/14, 270/14, 197/14, 271/14, 274/14, 317/14, 467/14, 396/14, 425/14, 676/14, 707/14, 739/14, 740/14, 796/14 and 1338/15.