Summary
Full Decision
ARBITRAL DECISION
Carla Castelo Trindade, Arbitrator appointed by the Deontological Council of the Administrative Arbitration Centre to form this arbitral tribunal makes the following:
I – REPORT
On 30 October 2015, "A…, Lda.", holder of tax identification number…, with headquarters at …, n.º … …, …-… … (hereinafter Claimant), submitted a request for the constitution of a single-arbitrator tribunal, pursuant to the terms and effects of articles 2 and 10 of the Legal Regime for Tax Arbitration, approved by Decree-Law no. 10/2011 of 20 January (LRTA).
By means of the request for the constitution of the arbitral tribunal and arbitral ruling, the Claimant seeks the annulment of the Stamp Duty tax assessment acts, carried out under item 28.1 of the GSTD, relating to the year 2014, to which the first and second instalments refer, in the total amount of € 15,231.68 (fifteen thousand two hundred and thirty-one euros and sixty-eight cents) corresponding to the collection notices nos. 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; and 2015….
Indeed, not conforming with the Stamp Duty assessments above identified, the Claimant requested the constitution of this arbitral tribunal, petitioning the declaration of illegality and consequent annulment of the Stamp Duty assessment acts, on the grounds that, as it is understood:
i. Defect of violation of law through erroneous interpretation and application of Item 28.1 of the General Stamp Duty Table (GSTD);
ii. Unconstitutionality of the provision in item no. 28 of the GSTD, by violation of the principles of equity, legality, contributive capacity, justice, equality and fiscal proportionality, in accordance with articles 103 and 104 of the CRP, in the interpretation given to it by the Tax and Customs Authority.
With the petition, 21 documents were attached.
As the Claimant opted for not appointing an arbitrator, pursuant to the terms of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the LRTA, as amended by article 228 of Law no. 66-B/2012 of 31 December, the Deontological Council appointed Dr. Carla Castelo Trindade as arbitrator of the single-arbitrator tribunal, who communicated acceptance of the appointment within the deadline.
The parties were notified of this appointment, and no request for recusal of the appointment as arbitrator was submitted by Dr. Carla Castelo Trindade.
Thus, in accordance with the provision in paragraph c) of no. 1 of article 11 of the LRTA, as amended by article 228 of Law no. 66-B/2012 of 31 December, the single-arbitrator tribunal was constituted on 20 January 2016.
On 19 February 2016, the Tax and Customs Authority (hereinafter "Respondent") submitted a response in which it defended itself by exception - alleging the unchallengeable nature of the instalments of the tax assessment act for Stamp Duty, pursuant to article 89, no. 1, paragraph c) of the Code of Procedure in Administrative Courts (CPAC) (which corresponds to the current article 89, no. 4, paragraph i) of the CPAC, as amended by Decree-Law no. 214-G/2015 of 2 October), ex vi article 29, no. 1, paragraph c) of the LRTA - and by substantive defence, defending the total lack of merit of the request for arbitral ruling and advocating for the maintenance of the collection notices of the first and second instalments of Stamp Duty, as they embody the correct interpretation of Item 28 of the General Table amended by Law no. 55-A/2012 of 29 December.
Considering that, in this case, none of the purposes legally committed to the meeting referred to in article 18 of the LRTA were present and, taking into account the position taken by the parties in their pleadings, pursuant to articles 16, paragraph c) and 19 of the LRTA, as well as the principles of procedural efficiency and prohibition of futile acts, the holding of this meeting was dispensed with, and the parties were notified to submit arguments.
No arguments were submitted.
II. PRELIMINARY MATTERS
The arbitral tribunal was regularly constituted.
The Respondent invoked, in its response, the dilatory exception of unchallengeable nature of the instalments of the Stamp Duty assessment act, in view of articles 23, no. 7 of the Stamp Duty Code and 113, no. 1 and 120 of the Property Tax Code (CIMI), pursuant to article 89, no. 4, paragraph i) of the CPAC, ex vi article 29, no. 1, paragraph c) of the LRTA.
Should the exception raised be upheld, it would prevent the examination of the merits of the case, for which reason it is necessary to decide on this matter immediately.
As stated, the Respondent invoked, in its response, the dilatory exception of unchallengeable nature of the instalments of the Stamp Duty assessment act. This is because, in the understanding of the Tax Administration, the object of judicial challenge or the tax arbitration process is the tax assessment act, and the first and second instalments (and, this tribunal presumes, also the third instalment) are not, in themselves, a tax act, but merely a division of the overall assessment made annually.
However, it is not correct. This is notwithstanding the decisions that have been issued by some arbitral tribunals, namely the decision issued in the context of process no. 557/2015-T.
Let us see why:
The cognitive path of this tribunal departs from a distinction between the legal classification of the Stamp Duty assessment act as a tax act even though implemented for the purposes of payment in two or three different moments in time and actual payment. The first question will lead to the admission of the challengeability of the instalments of Stamp Duty tax assessment acts and, consequently, the competence of this tribunal; the second will lead to possible questions of lis pendens, res judicata, or exceptions based on procedural delay.
There is, as will be seen, only one Stamp Duty assessment. The tax resulting from these assessments can be paid in three instalments. If the taxpayer wishes to dispute the legality of the tax, the act being reviewed is the assessment act that gave rise to it, and the period for reaction is counted from the date of the first, second, or third instalment, as we shall see.
As is known, assessment is the operation by which the tax rate is applied to the taxable matter, thus determining the amount owed by the taxpayer. Accordingly, the assessment act is the administrative act through which this operation of calculating the tax owed is carried out by the Tax Administration.
CASALTA NABAIS distinguishes between assessment in the strict sense and assessment in the broad sense, including in the latter, in addition to the assessment operation stricto sensu - application of the rate to the taxable matter and consequent determination of the tax - other operations intended to determine the amount of tax, including subjective assessment – identification of the taxpayer or person liable in the tax legal relationship – objective assessment – determination of the taxable matter, identification of the rate(s) to be applied and any deductions to the assessed tax. The same author, referring to assessment in the strict sense, places assessment in the second moment of the dynamics of taxes, clarifying that:
"[through] assessment, in turn, the tax is determined by applying the rate to the taxable matter, tax that comes to coincide with the tax to be paid, unless there is occasion for deductions from the tax, in which case the assessment also encompasses this latter operation" (Cf. Casalta Nabais (2015), "Manual of Tax Law", 297 and 62).
Furthermore:
"Assessment also constituted an administrative act that is enforceable, executive, semi-executive and which, given its nature, on the one hand strictly bound and, on the other, widely standardized, lends itself greatly to having an electronic nature, that is, to being practiced using electronic means, as already happens, since our system provides for, even imposing, the delivery and consultation of declarations by taxpayers and third parties via electronic means, that is, electronic declarations" (Cf. Casalta Nabais (2015), 301-302).
With regard to the assessment of Stamp Duty, it should be noted that article 3 of Law no. 55-A/2012 of 29 October introduced amendments to various articles of the Stamp Duty Code, approved by Law no. 150/99 of 11 September, among which its 44th article, whose no. 5 came to provide that:
"5- Where there is an assessment of the tax referred to in item no. 28 of the General Table, the tax is paid in the deadlines, terms and conditions defined in article 120 of the CIMI."
And, in turn, article 120 of the Property Tax Code, as amended by article 215 of Law no. 66-B/2012 of 31 December (State Budget for 2013), has the following wording:
"Article 120 – Payment Deadline
1 - The tax must be paid:
a) In one instalment, in the month of April, when its amount is equal to or less than € 250;
b) In two instalments, in the months of April and November, when its amount is greater than € 250 and equal to or less than € 500;
c) In three instalments, in the months of April, July and November, when its amount is greater than € 500.
2 – (…).
3 – (…).
4 - In the case provided for in nos. 1 and 3, non-payment of an instalment or annuity within the established deadline implies the immediate maturity of the remainder.
5 - If the delay in assessment is attributable to the taxpayer, the latter is notified to proceed with payment of the tax for all years in arrears." (emphasis ours)
From these provisions it follows that payment of Stamp Duty must be made in three instalments, in the months of April, July and November, when its amount exceeds € 500.
Here it must be made clear that a point.
An instalment does not equate to a tax assessment. An instalment is part of a tax assessment that is divided in time for payment purposes. On this point, the Respondent is correct.
In fact, assessment moments and payment moments are clearly individualized in the law.
For payment purposes, we have already referred to the rules contained in the law. Let us now look at the rules for assessment purposes.
Pursuant to no. 7 of article 23 of the Stamp Duty Code, as amended by article 3 of Law no. 55-A/2012 of 29 October:
"7 - Where the tax owed for situations provided for in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI" (emphasis ours).
Here it is worth emphasizing that the assessment of Stamp Duty is, pursuant to no. 7 of article 23 of its Code, only one. And it is carried out annually. Provided that its payment may, pursuant to the law – chiefly article 120 of the Property Tax Code – occur in three instalments whose sum will, as a rule, make up the amount of the annual assessment.
Now, as one tax arbitral tribunal has understood, in Process no. 726/2014-T, the expression "the tax is assessed annually" suggests that only one annual assessment is carried out, although it may be divided, for payment purposes, into instalments, and not into as many assessments as there are instalments in which the debt must be satisfied – "the division of an assessment into instalments will therefore be nothing more than a mere technique of revenue collection" and we add, of the distribution of the tax burden by the taxpayer.
In truth, regarding the assessment of Stamp Duty, it has been repeatedly stated in various decisions of arbitral tribunals constituted under the auspices of the CAAC that (in this sense, among others, the decisions issued in processes nos. 205/2013-T, 408/2014-T, 726/2014-T, 736/2014-T, 90/2015-T and 137/2015-T):
"the tax assessment is only one and only it will constitute a harmful act, capable of being the subject of a single challenge, so that, when the law provides for its payment in several instalments, staggered over time, the annulment of the tax act will have consequences in relation to all of them, causing the obligation to pay to cease or imposing the obligation to refund the amounts of tax already paid by the taxpayer, as well as compensation of the situation through the payment of indemnity interest, all at the expense of the Tax Authority." (arbitral decision issued in process no. 90/2015-T).
We agree with the decisions referred to above.
However, do not be confused.
To say that the Stamp Duty assessment is only one, and that there are not as many assessments as there are instalments, thus denying the independent and individual challengeability of each of the instalments, does not mean that the challengeability of the Stamp Duty assessment acts that, for payment purposes, are divided into two or three instalments, is entirely denied.
That is, there is no doubt that we have only one Stamp Duty assessment act that, by force of the provision of article 120 of the Property Tax Code, subsidiarily applicable, must be paid in three instalments. Each instalment constitutes only the tripartite payment of the same (Stamp) tax assessment act in question.
This was also the understanding of a tax arbitral tribunal, in process no. 479/2015-T, in which it was understood that:
"In sum, and from the combination of the legal provisions referred to above, it is possible to conclude that Stamp Duty is assessed annually, and payment in instalments is nothing more than a technique of tax collection and not a partial payment of it. [5]
Thus, the assessment is only one and only it constitutes a harmful act, capable of being challenged. (…)
That is, the declaration of illegality of the Stamp Duty tax assessment acts is required, to which the respective payment instalments correspond.
By all the above, it follows that, contrary to what the AT states, the object of the request for arbitral ruling is the tax assessment act and not each of the stamp duty tax instalments individually considered". (…)
Thus collapses the argument invoked by the AT regarding the incompetence of the arbitral tribunal, as well as the unchallengeable nature of the acts, so the application of the exceptions in question is considered to lack merit".
Let us then look at the specific case:
Regarding the property, in full ownership, located at Avenue …. n.º…, registered in the urban property roll under article… in 2015, Stamp Duty assessment acts were issued on the patrimonial value of each of the floors/divisions capable of independent use, totaling an amount subject to tax of € 2,284,750.00.
These assessment acts gave rise to the issuance of collection notices, for each floor/division capable of independent use, for payment in three instalments. All of them an integral part of the assessment acts.
The Stamp Duty assessment acts in question thus gave rise to a first instalment in the total amount of € 7,615.86 to which correspond the collection notices 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015… and 2015… – and whose deadline for payment was 30 April 2015.
The same assessment acts also gave rise to a second instalment, in the amount of € 7,615.82 – to which correspond the collection notices 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015… and 2015… – and whose deadline for payment was 31 July 2015.
Also giving rise to a third of equal amount to the second instalment whose challengeability was sought in a separate process under number 120/2016 and which, as will be seen, will also form part of the object of this process now under analysis.
As far as it matters here and now, this is a single tax assessment act, issued on the VPT of the part of the property allocated to housing, although paid in three instalments, with each collection notice, an integral part of a given instalment – insist on the same tax act – concerning a division/floor capable of independent use.
And it is the legality of the Stamp Duty assessment acts that the Claimant contests, even though it has submitted a request for the constitution of an arbitral tribunal for the first and second instalments and another for the third. Each instalment, in the amounts stated above and which appear in the collection notices attached to these proceedings, forms part of/is included within the total amount of tax assessed by the Respondent. The Claimant contests here part – the part equivalent to the first and second instalments – of a whole – the Stamp Duty assessment acts issued.
Once again, there is no doubt that the Stamp Duty assessment is only one and is made annually. Nor is there any doubt that an assessment act cannot be confused with payment. Nor do we have great doubts that when payment is bi or tripartite, the assessment act from which they derive is not altered in the appearance of a collection notice or appearance of a tax act insofar as each payment/instalment is part of a whole, the underlying tax act.
What cannot be confused are questions of the object of the request – annulment of the underlying tax act to one or more instalments relating to payment of that act – with questions of legal qualification of acts. Or put another way, cannot be confused the legal qualification of the Stamp Duty assessment act as a tax act even though implemented for the purposes of payment in two or three different moments in time with actual payment.
This is because from the question of what is the object of the request flow possible questions of lis pendens, or at the limit, questions of res judicata. This in the case of taxpayers challenging or requesting the constitution of arbitral tribunals for each instalment insofar as the same act is always being analyzed. Which is moreover what occurred regarding the third instalments in this case in the total amount of € 7,615.82 (seven thousand, six hundred and fifteen euros and eighty-two cents), corresponding to collection notices nos. 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; and 2015… and which were subject to arbitral process no. 120/2016 where a decision of dismissal by exception of lis pendens was issued.
That is, if upon notification for payment of the first instalment, the taxpayer requests the constitution of an arbitral tribunal challenging the legality of the Stamp Duty assessment act, and again requests the constitution of an arbitral tribunal challenging the legality of the same assessment act when notified of the second and third instalments, the exception of lis pendens or res judicata may be verified, insofar as within the scope of these three requests for the constitution of an arbitral tribunal submitted, the request is always the same: the annulment of the Stamp Duty assessment act, whose payment is distributed in three instalments. This is moreover what occurred in process no. 120/2016 referred to above.
In any case, and since the Claimant requested the constitution of the arbitral tribunal to challenge the legality of the Stamp Duty assessment acts underlying the first and second instalments, simultaneously, no question of lis pendens or res judicata that arose in the mentioned process no. 120/2016 will be raised in this process.
However, we insist on the idea that the object of the request for arbitral ruling submitted by the Claimant is the examination of the (il)legality of the Stamp Duty assessment acts, of item 28 of the GSTD, referring to the year 2014, issued on the patrimonial value of the parts of the property with housing allocation. Thus, when the Claimant requests the constitution of an arbitral tribunal after the expiration of the voluntary payment deadline of the first and second instalments, and even though it brings these collection notices to the knowledge of this Arbitral Tribunal, what it seeks is, in fact, the review of the assessment acts underlying them, and therefore the discussion of the legality of the third instalments in the total amount of € 7,615.82 (seven thousand, six hundred and fifteen euros and eighty-two cents), corresponding to collection notices nos. 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; and 2015….
This conclusion was, moreover, reached by the Respondent itself, when it stated, in article 1 of its Response that:
The object of the present request for arbitral ruling is the annulment of the stamp duty assessment acts of item 28 of the General Stamp Duty Table, relating to the year 2014, of 20/03/2015, on the sum of the patrimonial value of floors with housing allocation that comprise the urban property above identified, to which correspond the collection documents for payment of the 1st and 2nd instalments, with a deadline for payment of, respectively, April and July 2015. (emphasis ours)
As for the second questions above stated, that is, questions of legal qualification of acts, these frequently give rise to the "confusion" of competences of courts, in particular arbitral ones, and, in the formulation adopted here by the Respondent, the alleged unchallengeable nature of the instalments of tax assessment acts (in this case, Stamp Duty).
The conclusion that we have been defending above would even be reached in a more empirical argument and consequently less legal. Let us see:
If in the case of taxes whose payment is not made all at once – as may be the case with Property Tax or Stamp Duty – the taxpayer is not notified of the assessment act but only of the two or three instalments involved, would this mean that the taxpayer could not react administratively, judicially or jurisdictionally to this act (a tax act, tax matter or other)? A conclusion such as this would at least contradict the principle of effective jurisdictional protection and access to the law, with constitutional grounding in both article 20 and article 268, no. 4 of the Constitution.
Recall that the principle of effective jurisdictional protection requires that for any and all conflicts deserving judicial resolution it be possible to find a competent Court and a procedural means that provides adequate and sufficient protection to interests worthy of legal protection.
In the words of GOMES CANOTILHO and VITAL MOREIRA, the right to effective jurisdictional protection is enshrined in article 20, no. 1 of the CRP, being itself, "a fundamental right constituting an essential guarantee of the protection of fundamental rights, and therefore inherent to the idea of the rule of law" (Cf. Gomes Canotilho/Vital Moreira (2010), "Constitution of the Portuguese Republic Annotated", Vol. I, 408)
This principle and fundamental right is also laid down in article 9 of the LGT in which access to tax justice is guaranteed, in no. 1, for the full and effective protection of all rights or legally protected interests and, in no. 2, the right of access to courts, providing for the possibility of challenge or appeal of acts in tax matters that harm rights or legally protected interests.
Now, as far as questions of competence are concerned – those relating to the legal qualification of acts – article 2, no. 1, paragraph a) of the LRTA determines the competence of the arbitral tribunal to examine claims relating to the declaration of illegality of acts assessing taxes, self-assessment, withholding at source and payment on account.
Recovering what was mentioned above, the object of the present arbitral process corresponds, without doubt, to the Stamp Duty assessment acts underlying the challenged collection notices, regardless of, by mere technique of revenue collection, their payment (and logically their collection) being distributed in two or three instalments.
And in the name of the principle of effective jurisdictional protection, these Stamp Duty assessment acts – insist, although they are paid in three instalments – will necessarily be challengeable.
Thus, the dilatory exception of unchallengeable nature of the instalments of assessment acts lacks merit.
This means then that, as the challenge concerns the Stamp Duty assessment acts, in their entirety, and not only the first and second instalments of this tax, the Claimant's request and the value of the case must be corrected ex officio to € 22,847.50, namely for the purposes of costs.
Indeed, doctrine has understood that, faced with an error in the determination or indication of the value of the economic utility of the request by the taxpayer, the arbitral tribunal should correct the error ex officio, as soon as it becomes aware of it, being able to do so by order, interlocutory decision or even in the final decision (Cf. Carla Castelo Trindade (2016), "Legal Regime for Tax Arbitration Annotated", p. 284).
Alongside this expansion of the request, the existence of lis pendens was also declared in the context of process no. 120/2016 insofar as there is a triple identity of parties from the point of view of legal standing, request and cause of action, pursuant to article 581, nos. 3 and 4 of the CPC.
That is, there is a repetition of the cause in this process and in the process referred to above insofar as the Claimant in both processes is "A…, Lda" and the Respondent is the Tax and Customs Authority, the request is equally identical, consisting in the declaration of illegality and consequent annulment of the same Stamp Duty assessment acts affecting the divisions with housing allocation of the same property in the year 2014. And finally, because the grounds invoked for the declaration of illegality of the acts to be challenged are the same - defect of violation of law through erroneous interpretation and application of Item 28.1 of the General Stamp Duty Table (GSTD) and the unconstitutionality of the provision in item no. 28 of the GSTD, by violation of the principles of equity, legality, contributive capacity, justice, and equality and fiscal proportionality, pursuant to articles 103 and 104 of the CRP, in the interpretation given to it by the Tax and Customs Authority.
In light of all the above, this Arbitral Tribunal is competent to hear the same, pursuant to article 2, no. 1, paragraph a) of the LRTA.
The process is not affected by nullities.
The parties enjoy legal standing and capacity and are legitimate.
All considered, it is necessary to decide.
III. MATTERS OF FACT
III.1. FACTS FOUND PROVEN
Regarding the factual matter, it is important first to note that the tribunal is not required to pronounce on everything alleged by the parties, but rather has the duty to select the facts that matter for the decision and distinguish proven from unproven matters. All in accordance with article 123, no. 2 of the Tax Procedure and Process Code and article 607, nos. 2, 3 and 4 of the Civil Procedure Code, applicable ex vi article 29, no. 1, paragraphs a) and e) of the LRTA. Thus, the facts pertinent to the judgment of the case are chosen and delineated according to their legal relevance, which is established in view of the various plausible solutions to the question(s) of law (cf. article 596 Civil Procedure Code applicable ex vi article 29, no. 1, paragraph e) of the LRTA).
Now, taking into account the positions taken by the parties, documentary evidence and the Administrative Process attached to the proceedings, the following facts with relevance to the decision are considered proven:
-
The Claimant is the sole owner in full of the property in full ownership located at Avenue…, n.º…, registered in the urban property roll of the parish of…, municipality of Lisbon, under article… (hereinafter "the property").
-
The property comprises a total of 12 (twelve) divisions with independent use, two of which are allocated to commerce/services and the remaining 10 allocated to housing (Cf. Doc. 21 of the request for constitution of arbitral tribunal).
-
The property has a patrimonial tax value of € 2,923,710.00 (two million, nine hundred twenty-three thousand, seven hundred and ten euros) (cf. Doc. 21 of the request for constitution of arbitral tribunal).
-
All divisions capable of independent use with housing allocation were subject to individual appraisal in 2014, with their patrimonial value determined separately, pursuant to the terms and effects of article 7, no. 2, paragraph b) of the Property Tax Code.
-
According to the appraisal carried out, each of the divisions was assigned the following patrimonial value (cf. Doc. 21 of the Request for Constitution of Arbitral Tribunal):
Floor/division | PTV
1st | 245,670.00
2nd | 245,670.00
3rd | 245,670.00
4th | 245,670.00
5th | 248,100.00
6th | 248,100.00
7th | 243,520.00
8th | 250,540.00
9th | 250,540.00
Port./10th | 61,270.00
-
The sum of the patrimonial value of divisions with housing allocation totals € 2,284,750.00 (two million, two hundred eighty-four thousand, seven hundred fifty euros).
-
On 20 March 2015, the Respondent assessed Stamp Duty provided for in Item 28.1 of the GSTD, at the rate of 1%, on the patrimonial value of each of the divisions of the property, capable of independent use and allocated to housing, in the total amount of € 22,847.50 resulting from the sum of the three instalments of all assessment acts.
-
The Claimant was notified to proceed with payment of the first instalments of the Stamp Duty assessment acts, relating to the year 2014, carried out under item no. 28.1 of the General Stamp Duty Table, corresponding to the following amounts and collection notices:
Floor/division | Collection notice | Amount to pay
1st | 2015… | € 818.90
2nd | 2015… | € 818.90
3rd | 2015… | € 818.90
4th | 2015… | € 818.90
5th | 2015… | € 827.00
6th | 2015… | € 827.00
7th | 2015… | € 811.74
8th | 2015… | € 835.14
9th | 2015… | € 835.14
Port./10th | 2015… | € 204.24
Total: | | € 7,615.86
(as per Docs. 1, 3, 5, 7, 9, 11, 13, 15, 17 and 19 of the Request for Constitution of Arbitral Tribunal)
- The Claimant was notified to proceed with payment of the second instalments of the Stamp Duty assessment acts, relating to the year 2014, carried out under item no. 28.1 of the General Stamp Duty Table, corresponding to the following amounts and collection notices:
Floor/division | Collection notice | Amount to pay
1st | 2015… | € 818.90
2nd | 2015… | € 818.90
3rd | 2015… | € 818.90
4th | 2015… | € 818.90
5th | 2015… | € 827.00
6th | 2015… | € 827.00
7th | 2015… | € 811.73
8th | 2015… | € 835.13
9th | 2015… | € 835.13
Port./10th | 2015… | € 204.23
Total: | | € 7,615.82
(as per Docs. 2, 4, 6, 8, 10, 12, 14, 16, 18 and 20 of the Request for Constitution of Arbitral Tribunal)
- The Claimant was notified to proceed with payment of the third instalments of the Stamp Duty assessment acts, relating to the year 2014, carried out under item no. 28.1 of the General Stamp Duty Table, corresponding to the following amounts and collection notices:
Floor/division | Collection notice | Amount to pay
1st | 2015… | € 818.90
2nd | 2015… | € 818.90
3rd | 2015… | € 818.90
4th | 2015… | € 818.90
5th | 2015… | € 827.00
6th | 2015… | € 827.00
7th | 2015… | € 811.73
8th | 2015… | € 835.13
9th | 2015… | € 835.13
Port./10th | 2015… | € 204.23
Total: | | € 7,615.82
III.2. FACTS NOT PROVEN
As stated, with regard to the factual matter taken as established, the tribunal is not required to pronounce on everything alleged by the parties, but rather has the duty to select the facts that matter for the decision and discriminate between proven and unproven matters, as provided in article 123, no. 2 of the TPPC applicable ex vi article 29, no. 1, paragraphs a) and e) of the LRTA. Thus, the facts pertinent to the judgment of the case were, as stated above, chosen and delineated according to their legal relevance, and there is no other factuality alleged that is relevant to the correct composition of the procedural dispute.
IV. MATTERS OF LAW
Given the positions of the parties as set out in the pleadings submitted, the central issue to be resolved by the present arbitral tribunal is to examine the legality of the Stamp Duty assessment acts issued on the housing-allocated part of the property described above.
As the Claimant has imputed various defects to the challenged tax acts, the order of examination of these must be determined, and the order provided in article 124 of the TPPC must be observed, applicable by virtue of article 29, no. 1, paragraph a) of the Legal Regime for Tax Arbitration[1].
The merit of any of the defects invoked by the Claimant will lead to the annulment of the tax assessment acts for Stamp Duty and, consequently, of the collection notices of the instalments into which their assessment was divided. The defect of violation of law due to error as to the presuppositions will be examined first, insofar as it is the one that will lead to the "most stable or effective protection of the injured interests" in that its possible merit will prevent the renewal of the acts, which does not occur with the annulment resulting from the other defects.
In accordance, this tribunal will first examine the defect of violation of law.
Defect of Violation of Law
The issue to be decided is whether the Stamp Duty tax assessment acts that applied to the value of the above-described property, allocated to housing, are or are not illegal due to a defect of violation of law, through erroneous interpretation and application of Item 28.1 of the GSTD.
Thus, it should be noted first that it was Law no. 55-A of 29 October that amended article 1 of the Stamp Duty Code, adding to the GSTD Item 28, which provides that:
"28 – Ownership, usufruct or right of superficies of urban properties whose patrimonial tax value contained in the roll, pursuant to the Property Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the patrimonial tax value used for the purpose of Property Tax:
28-1 – For property with housing allocation - 1%;
28-2 – For property, when the persons liable are not natural persons and are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance – 7.5%."
Thus, with the entry into force of Item 28.1, properties with housing allocation with a patrimonial tax value equal to or greater than € 1,000,000.00 became subject to Stamp Duty at the rate of 1%.
It may thus be said that there are three requirements for the incidence of Item 28.1 of the GSTD, namely (1) that the property is a building; (2) that such property has housing allocation; and (3) that the patrimonial tax value (PTV) contained in the roll and used for the purposes of Property Tax assessment is equal to or greater than € 1,000,000.00.
For the realization of the first two requirements, it is important to consider the concept of property with housing allocation.
Now, the Stamp Duty Code does not define the concept of "property," nor does it define "property with housing allocation." Indeed, it is article 1, no. 6 of the Stamp Duty Code itself that provides that "For purposes of this Code, the concept of property is that defined in the Property Tax Code (IMI)."
According to article 2, no. 1 of the Property Tax Code, property is:
"any portion of territory, including water, plants, buildings and constructions of any kind incorporated or based on it, 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, as well as water, plants, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are located, although situated in a portion of territory that constitutes an integral part of a different patrimony or has no patrimonial nature."
In turn, properties with housing allocation would be urban properties "(…) that have as their normal purpose each of these uses," pursuant to articles 4 and 6, no. 2 of the Property Tax Code.
In the present case, we are dealing with an urban property, in full or vertical property ownership. Taking into account the concept of property established by the legislature – the one cited above – there is no doubt that the property now in analysis, owned by the Claimant, is literally covered by item 28.1 of the GSTD.
Nevertheless, it is a property composed of floors or divisions capable of independent use, also with housing allocation, as can be seen from the Urban Property Certificate attached as Doc. 21 with the Request for Constitution of Arbitral Tribunal.
It should be noted, however, that the law does not distinguish at any point between property in vertical ownership and property in horizontal ownership. In fact, article 2, no. 4 of the Property Tax Code merely provides that "for purposes of this tax, each autonomous unit, under the regime of horizontal property ownership, is regarded as constituting property." What the provision determines is that autonomous units are regarded as property. This does not, however, imply that only autonomous units are regarded as residential properties whose patrimonial tax value, for the purposes of Item 28.1, is equal to or greater than € 1,000,000.00.
It thus remains to determine whether the PTV relevant in this case, for the purposes of the incidence of Item 28.1 of the GSTD, will be the "global" PTV of the property or the PTV of each of the floors or divisions capable of independent use, individually considered.
Now, as follows from Item 28.1 of the GSTD itself and, likewise, from no. 1 of article 6 of Law no. 55-A/2012 of 29 October, Stamp Duty will apply to the PTV used for the purposes of Property Tax.
Articles 38 et seq. of the Property Tax Code define the manner of determining PTV for the purposes of that tax, in accordance with the provision of no. 1 of article 7 of that same Code.
Moreover, no. 3 of article 12 of the Property Tax Code provides that:
"Each floor or part of property capable of independent use is considered separately in the property roll entry, which also discriminates its respective patrimonial tax value."
Thus, for the purposes of Property Tax assessment, each part of the property capable of independent use is assigned an individual PTV, being discriminated in the property roll of the property in full or vertical ownership. It is then on that separately considered PTV that Property Tax will be assessed and collected, that is, in relation to each floor, part or division of the property with independent use. Note that there are as many assessments as there are floors or independent divisions.
In this regard, it should be noted that in the decision made in the context of arbitral process no. 194/2014-T, it was written that
"the Property Tax Code enshrines, both with regard to the property roll entry and discrimination of the respective patrimonial tax value, and with regard to the assessment of the tax, the autonomization of the parts of urban property capable of independent use and the segregation/individualization of the PTV relating to each floor or part of property capable of independent use.
Thus, to each property, according to the concepts defined by article 2 of the CIMI corresponds a single entry in the roll (…) but, according to no. 3 of article 12 of the same Code, referring to the concept of property roll (…) 'each floor or part of property capable of independent use is considered separately in the property roll entry, which also discriminates its respective patrimonial tax value' (…).
That is, the rule is autonomization, the characterization as "property" of each part of a building, provided that it is functionally and economically independent, capable of independent use, according to the concept of property defined in no. 1 of article 2 of the CIMI (…)".
In summary, for the purposes of Property Tax, the PTV to be considered will be the PTV of each of the floors, parts or divisions of the property capable of independent use.
And thus, if Item 28 of the GSTD itself refers to the terms of the Property Tax Code, the same rules and principles must necessarily be applicable for the purposes of Stamp Duty. The same conclusion would be reached by virtue of the provision of no. 2 of article 67 of the Stamp Duty Code, pursuant to which "Matters not regulated in this Code relating to item no. 28 of the General Table shall be governed, as a subsidiary matter, by the Property Tax Code."
Thus, if pursuant to article 11 of the LGT the interpretation of tax laws must be carried out taking into account general principles of interpretation; and if one must proceed from the assumption that the legislature "enshrined the most appropriate solutions and knew how to express its thought in adequate terms" (cf. article 9 of the Civil Code), only those floors or divisions capable of independent use, with housing allocation, whose PTV is less than € 1,000,000.00 are covered by the incidence rule of Item 28.1 of the GSTD.
The material truth is, therefore, the determining criterion of contributive capacity, with the mere legal-formal reality of the property being irrelevant. Indeed, and as stated above, the legislature did not distinguish between properties in horizontal ownership and properties in vertical ownership. Consequently, the Respondent cannot distinguish where the legislature itself understood not to do so, under pain of violating the principle of fiscal legality, provided for in article 103 of the CRP, and also the principles of justice, equality and fiscal proportionality.
Recalling what the arbitral tribunal constituted in the context of process no. 50/2013-T said:
"(…) considering that the entry in the roll of immovable property in vertical ownership, constituted by different parts, floors or divisions with independent use, pursuant to the CIMI, follows the same rules for the entry of immovable property constituted in horizontal ownership, with the respective Property Tax, as well as the new Stamp Duty, being assessed individually in relation to each of the parts, there is no doubt that the legal criterion for defining the incidence of the new tax must be the same. (…)
Thus, if the legal criterion requires the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, it clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of the new tax.
Thus, there would be cause for the incidence of the new stamp duty only if one of the parts, floors or divisions with independent use presented a PTV greater than € 1,000,000.00.
The criterion sought by the AT, of considering the value of the sum of the PTVs attributed to the parts, floors or divisions with independent use, on the argument that the property is not constituted in horizontal ownership, finds no legal support and is contrary to the criterion that is applicable for Property Tax purposes and, by referral, for Stamp Duty purposes.
(…)
Thus, the adoption of the criterion defended by the AT violates the principles of fiscal legality and equality, as well as the prevalence of material truth over legal-formal reality.
The tax legislature (…) makes no distinction regarding the regime of properties that are in horizontal or vertical ownership, if the property were in horizontal ownership, none of its residential units would suffer incidence of the new tax, so the AT cannot treat equal situations differently."
This interpretation – that the PTV relevant for the purposes of Item 28.1 of the GSTD is that which is attributed to each of the floors or divisions capable of independent use and not the sum of all such values – is the interpretation that results, moreover, from the ratio of Item 28.1 and, consequently, from the reasons that determined the taxation, as Stamp Duty, of urban residential properties of value equal to or greater than € 1,000,000.00.
Indeed, in the explanatory statement of bill no. 96/XII (2nd) that led to Law no. 55-A/2012 of 29/10 which, in turn, introduced item 28 to the GSTD, it is stated that:
"these measures are fundamental to reinforce the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary to comply with the adjustment program. The Government is strongly committed to ensuring that the distribution of these sacrifices will be made by all and not only by those who live on the income from their work. In accordance with this objective, this act extends the taxation of capital and property, equitably covering a broad range of sectors of Portuguese society".
In turn, in the presentation and discussion of the said bill in the Assembly of the Republic, in his intervention, the Secretary of State for Tax Affairs stated the following:
"The Government chose social equity as the priority principle of its fiscal policy. This is even more important in times of rigor as a way to ensure fair distribution of the fiscal burden.
In the demanding period the country is going through, during which it is obliged to comply with the economic and financial assistance program, it becomes even more pressing to affirm the principle of equity. It cannot always be the same - employees and pensioners, to bear the fiscal burden.
For the tax system to be more just, it is crucial to promote the expansion of the tax base by requiring greater effort from taxpayers with higher incomes and thus protecting Portuguese families with lower incomes.
For the tax system to promote more equality, it is fundamental that the effort of budgetary consolidation be shared by all types of income, covering with special emphasis capital income and high-value properties. This matter, it should be recalled, was extensively addressed in the Constitutional Court's decision.
Finally, for the tax system to be more equitable, it is crucial that all be called upon to contribute according to their contributive capacity, giving the tax administration strengthened powers to monitor and investigate situations of fraud and tax evasion.
In this sense, the Government presents today a set of measures that effectively reinforce a fair and equitable distribution of the adjustment burden by a broad and comprehensive set of sectors of Portuguese society.
This proposal has three essential pillars: the creation of special taxation on urban properties worth more than 1 million euros; the increase in taxation on capital income and on equity capital gains; and the strengthening of rules to combat fraud and tax evasion.
In the first place, the Government proposes the creation of a special rate on the highest value urban residential properties. It is the first time in Portugal that special taxation on high-value properties intended for housing has been created. This rate will be 0.5% to 0.8% in 2012, and 1% in 2013, and will apply to homes valued at € 1 million or more. With the creation of this additional tax, the fiscal effort required of these owners will be significantly increased in 2012 and 2013".
In their interventions during the discussion of such bill, deputies Pedro Filipe Soares of the BE and Paulo Sá of the PCP speak of the taxation of luxury real estate property, with references made to earlier bills on the same subject that were not approved." (emphasis ours)
The ratio legis was thus to create a tax that would apply to, in the words of the Secretary of State, "homes valued at € 1 million or more."
Moreover, the fact is that the Respondent issued assessment acts for each division capable of independent use and with housing allocation, as it would do if the property were constituted in horizontal ownership. However, in an apparently contradictory action, for the purposes of the incidence of Stamp Duty, it considered the global PTV of the property, instead of considering the PTV of each unit.
Thus, in that none of the floors, parts or divisions of the property, with independent use, has a patrimonial value equal to or greater than € 1,000,000.00 (cf. as results from the documents attached to the proceedings), it is concluded that the legal requirement for the incidence of Stamp Duty provided for in Item 28 of the GSTD is not met. There is thus a defect of violation of law, and the taxation in question is improper, verifying the illegality of the Stamp Duty assessment acts in question.
In summary, it is thus concluded that the Stamp Duty assessments are illegal due to a defect of violation of law, by error as to the legal presuppositions, which justifies their annulment pursuant to article 135 of the Administrative Procedure Code, applicable pursuant to article 29, no. 1, paragraph d) of the Legal Regime for Tax Arbitration and article 2, paragraph c) of the LGT.
The request for arbitral ruling thus fully succeeds.
Unconstitutionality of the Provision in Item no. 28 of the GSTD
As already previously decided in the arbitral context in Process no. 91/2012-T: "The total merit of the defects of violation of law prejudices the examination of defects of form and procedural defects, as follows from the order of examination of defects provided in no. 2 of article 124 of the TPPC, subsidiarily applicable by virtue of the provision in paragraph a) of no. 1 of article 29 of the Legal Regime for Tax Arbitration."
In truth, the establishment of an order for the examination of defects is only justified if the possible merit of the defects examined with priority renders unnecessary the examination of the remaining ones, for if it were always necessary to examine all defects, the order of their examination would be irrelevant.
By all the above, as the defects of violation of law succeed, the examination of the defect of unconstitutionality is prejudiced.
V. DECISION
For all the above reasons, this arbitral tribunal decides as follows:
a) To find the request for arbitral ruling to have merit;
b) To declare the illegality of the assessment acts, relating to the year 2014, underlying the collection notices nos. 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; 2015…; and 2015….
c) To annul the Stamp Duty assessment referred to above;
VI. VALUE OF THE PROCESS
The value of the process is set at € 22,847.50, pursuant to article 97-A, no. 1, a) of the Tax Procedure and Process Code, applicable by virtue of paragraphs a) and b) of no. 1 of article 29 of the Legal Regime for Tax Arbitration and no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.
VII. COSTS
The arbitration fee is set at € 1,224.00 pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Respondent, since the request fully succeeded, pursuant to articles 12, no. 2, and 22, no. 4, both of the Legal Regime for Tax Arbitration, and article 4, no. 4 of the cited Regulation. The Claimant must be refunded € 918.00 inasmuch as it was the amount paid based on the initial value of the request.
Notification ordered.
Lisbon
21 June 2016
The Arbitrator
(Carla Castelo Trindade)
Text prepared by computer, pursuant to article 138, number 5 of the Civil Procedure Code (CPC), applicable by referral of article 29, no. 1, paragraph e) of the Tax Arbitration Legal Regime.
The wording of this decision is governed by the old spelling.