Summary
Full Decision
ARBITRAL DECISION
I. REPORT
I.1
1. On 22 December 2018, the taxpayer A..., S.A. (hereinafter referred to as "Taxpayer" or "Claimant"), Tax Identification Number..., with registered office at..., n.º..., ...-... ..., requested, pursuant to the provisions of article 2 and article 10, both of Decree-Law no. 10/2011, of 20 January, the constitution of an Arbitral Tribunal with the appointment of a sole arbitrator by the Deontological Council of the Center for Administrative Arbitration, pursuant to the provisions of article 6, n. 1 of the aforementioned decree.
2. The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and was notified to the Tax and Customs Authority (hereinafter referred to as "AT" or "Respondent") on 26 December 2018.
3. The Claimant did not proceed with the appointment of an arbitrator, therefore, under the provisions of article 5, n. 2, subparagraph b) and article 6, n. 1, of the RJAT, the undersigned was appointed by the President of the Deontological Council of CAAD to serve on this sole Arbitral Tribunal, having accepted in accordance with legal requirements.
4. The AT submitted its response on 08 April 2019.
5. By order of 10.04.2019, the holding of the meeting provided for in article 18 of the RJAT was dispensed with and it was decided that the proceedings continue with written final submissions.
6. Duly notified, neither party submitted any submissions.
7. The Claimant requests that the Arbitral Tribunal declare the illegality of the tax assessment act for the Additional Tax on Real Estate ("AIMI") with the number 2018..., issued by the Tax and Customs Authority ("AT"), for the year 2018, in the total amount of €18,150.56 and order the AT to refund this entire amount, plus compensatory interest.
II.A. The Claimant supports its request, in summary, in the following terms:
1. The Claimant is a real estate company whose corporate purpose includes "real estate development, purchase and sale of real estate, urbanizations and subdivisions, civil construction, management of real estate."
2. The Claimant was notified of the AIMI tax assessment act in question, relating to the year 2018, with reference to the real estate assets held by it.
3. The Claimant proceeded with full and timely payment of the tax assessment under analysis, in the total amount of €18,150.56.
4. The legislator intended to ensure that real estate assets used in economic activities would not be subject to AIMI taxation, recognizing that the mere holding of such real estate does not constitute (and cannot constitute) a factor demonstrating wealth, nor a sufficient indicator of the taxpaying capacity of the holders of such real estate.
5. In these terms, it is evident that the ratio legis underlying the exclusion rule enshrined in n. 2 of article 135-B of the Real Estate Tax Code, was based on the intention not to place an additional tax burden on taxpayers who, by reason of their economic activity, hold real estate for the pursuit of their corporate purpose.
6. Accordingly, it is evident that AIMI – as provided for in articles 135-A and following of the Real Estate Tax Code – could never apply to real estate held by the Claimant in the course of its activity, since the underlying principles of the taxation under analysis are not satisfied.
7. In fact, taxing such real estate would mean directly taxing an "economic activity" – something which the legislator expressly intended to avoid by creating AIMI.
8. In light of the above, it is demonstrated that the AIMI assessment sub judice, issued in respect of real estate held by the Claimant, appears manifestly illegal, due to errors in the factual and legal premises, and should therefore be promptly annulled, with all legal effects.
9. The assessment sub judice applies to real estate which, by its nature, cannot be included within the scope of objective application of the rules under analysis.
10. Given that the legislator's intention was clearly to exclude, through n. 2 of article 135-B of the Real Estate Tax Code, the application of AIMI to real estate used for economic activities, it must be understood that "land for construction" used for those same activities are equally included in that exclusion rule.
11. To understand that "land for construction" intended, according to their respective property records, for purposes of "commerce, industry, services" or "other," are subject to AIMI – as has been understood by the AT – is manifestly contrary to the spirit of the law and, furthermore, illegal.
12. Given that the legislator's intention was clearly to exclude from the scope of AIMI real estate used for economic activities, the understanding that "land for construction" used for those same purposes are not included in that exclusion rule – because there only exists, for now, an expectation (not presumptive, but realizable) of carrying out an activity on such real estate – is, in the terms already stated, contradictory to the spirit of the law and, furthermore, illegal.
13. The legal regime of AIMI, specifically articles 135-A and 135-B, both of the Real Estate Tax Code, and the resulting taxation, promote differentiated treatment and unjustified inequality among taxpayers, in manifest violation of the principle of equality enshrined in article 13 of the CRP.
14. Pursuant to n. 2 of article 135-B of the Real Estate Tax Code, "the following are excluded from the additional municipal real estate tax: urban real estate classified as 'commercial, industrial or for services' and 'other' (...)."
15. Thus, the legislator's intention was clearly to exclude from the scope of AIMI all real estate used for economic activities.
16. Accordingly, with regard to the taxation of "land for construction," it should be understood that all "land for construction" used for economic activities are also necessarily excluded from this taxation, i.e., all "land for construction" that have a (potential) use for "commerce, industry, services" or "other."
17. To understand that "land for construction" intended, according to their respective property records, for those purposes, are subject to AIMI – as has been understood by the AT – in addition to being contrary to the spirit of the law, runs counter to the principle of equality, as enshrined in the CRP.
18. By making such a distinction, we would be distinguishing realities that cannot be distinguished for this purpose: on one hand, i) commercial, industrial, service or other real estate already built, and on the other, ii) land for construction intended for commerce, industry, services or other purposes.
19. Thus, it is demonstrated that the legal regime of AIMI, specifically article 135-B of the Real Estate Tax Code – when interpreted to include within the scope of AIMI "land for construction" intended for purposes of "commerce, industry, services" or "other" – is manifestly contrary to the principle of equality, constitutionally enshrined.
20. Thus, the application of AIMI to real estate assets held by entities engaged in real estate development (here understood to include purchase, sale, construction, promotion and leasing), could only result from the idea that such real estate, productive factors of these companies and means for the exercise of their economic activity, constitute an indication of increased taxpaying capacity – which cannot be accepted.
21. Furthermore, the application of AIMI to real estate held by these entities unduly penalizes this sector of activity to the detriment of others.
22. In fact, the imposition of this taxation has no relationship with the actual income from the activity carried out by these entities – in the limit, burdening them even if they have negative results.
23. Thus, also from this perspective, the legal regime of AIMI materializes an unjustified negative discrimination of corporate entities (companies or equivalent entities) that hold (and must hold) real estate assets as productive factors or means for the exercise of their activity, thereby verifying the material unconstitutionality of this rule, by violation of the constitutional principle of equality.
24. In light of all of the above, it is demonstrated that the legal regime of AIMI, specifically article 135-A of the Real Estate Tax Code – when interpreted to include within the subjective scope of AIMI entities that carry out real estate activity – promotes differentiated treatment and unjustified inequality among taxpayers, in manifest violation of the principle of equality, enshrined in article 13 of the CRP and of the principle of fiscal equality and taxpaying capacity, enshrined in article 104, n. 3 of the same instrument.
25. Accordingly, given that this assessment appears manifestly illegal in the terms stated above, the Claimant should be fully compensated for the amount of AIMI assessed on that basis, as it is not due.
26. In turn, and should this request be well-founded, the Claimant also requests that compensatory interest be paid for the delay in receiving the requested refund, pursuant to the provisions of articles 43 and 100 of the LGT.
II.B. In its Response, the AT invoked the following:
1. It is important to immediately draw the simple and elementary conclusion that the law clearly and unequivocally establishes the incidence of the tax on "land for construction," and this regardless of the potential use that may fall to it, since they are not included in the negative delimitation of incidence.
2. The legislator did not establish the removal of the tax incidence rule from land for construction for reasons related to its potential use.
3. Given that in the final approved version currently in force, the delimitation of incidence and exclusion of incidence was expressly established only on the basis of the types of real estate indicated in article 6 of the CIMI, it is therefore necessary to respect the legislator's choice.
4. Thus, contrary to what is alleged by the claimant, there is no illegality in the application of AIMI.
5. The taxation embodied in AIMI translates into a specific levy on assets (cf. art. 4, n. 1 of the LGT) and not on income.
6. Thus, it is well understood, then, the legislative solution of subjecting taxation to all taxpayers in consideration of the holding of relevant legal situations over the urban real estate identified in the objective scope, independent of the legal or economic structure that such taxpayers may possess.
7. It is thus concluded that the holding of real estate assets of high value, regardless of whether or not they are used for economic activity, is tendentially revelatory of high taxpaying capacity, obviously superior to what is to be presumed to exist when real estate of reduced value is held or when it does not exist.
8. It therefore does not appear that the incidence of AIMI on real estate owned by companies that exercise their activity in the real estate sector, namely land for construction acquired with the intent to promote buildings intended for sale, is discriminatory or that these companies should merit more favorable treatment than that granted to the general body of urban real estate owners.
9. The AT, in its capacity as a body of the Public Administration, does not have the competence to decide on the non-application of rules regarding which doubts about legality or constitutionality are raised, which in turn determines the lack of legal support for the request for compensatory interest.
10. Should a finding of illegality of the challenged act be made, compensatory interest is not due pursuant to article 43 of the LGT.
II. CLARIFICATION
The Tribunal is competent and properly constituted, pursuant to articles 2, n. 1, subparagraph a), 5 and 6, all of the RJAT.
The parties have legal standing and capacity.
The parties are legitimate and duly represented, pursuant to articles 4 and 10 of the RJAT and article 1 of Order no. 112-A/2011, of 22 March.
The proceedings are proper.
There are no other preliminary matters to be addressed nor defects that invalidate the proceedings.
It is now necessary to address the merits of the request.
III. THEMA DECIDENDUM
The central issue to be decided, as presented by the Claimant, is whether the land for construction referred to in the proceedings, as the substrate of the Claimant's economic activity or in view of its potential buildability for purposes of "commercial, industrial or services," are covered by the rules of objective scope of AIMI, provided for in art. 135-B of the CIMI.
IV. FACTUAL MATTERS
IV.1. Proven Facts
Before addressing the issues, it is necessary to present the factual matters relevant to their understanding and decision, which, having examined the documentary evidence, the tax administrative proceedings attached, and taking into account the facts alleged, is established as follows:
1. The Claimant is a real estate company whose corporate purpose includes "real estate development, purchase and sale of real estate, urbanizations and subdivisions, civil construction, management of real estate."
2. On 01.01.2018, the claimant owned the land for construction registered in the urban property record of the parish of..., municipality of..., under articles..., ..., ... and ..., respectively with the taxpaying patrimonial value (VPT) of €1,174,709.35, €1,220,997.93, €1,272,041.13 and €869,891.88.
3. This land for construction is all intended for the purpose of "services."
4. The Claimant was notified of the AIMI tax assessment act no. 2018..., dated 30.06.2018, relating to the year 2018, with reference to the land for construction held by it.
5. The Claimant proceeded with payment on 18.09.2018, of the tax assessment under analysis, in the total amount of €18,150.56.
IV.2. Unproven Facts
There are no essential unproven facts, since all facts relevant to addressing the request were considered proven.
IV.3. Reasoning of the Factual Matters
The proven facts comprise undisputed matters and those documentarily demonstrated in the proceedings.
The facts contained in numbers 1 to 5 are considered established by the documents submitted by the Claimant (docs. 1 to 3 of the petition for constitution of the Tribunal) and by the position assumed by the parties.
V. The Law
V.1. Errors in Factual and Legal Premises
The Claimant begins by invoking the illegality of the AIMI additional assessment because in its view the AIMI additional cannot apply to real estate held by the claimant in the course of its economic activity.
Further, the Claimant alleges that it is contrary to the spirit of the law to exempt from taxation real estate intended for commerce, industry and services and not exempt land for construction intended for the same purposes.
The AIMI additional was created by the State Budget Law for 2017 (Law no. 42/2016 of 28 December), and came into force on 01.01.2017. Law no. 42/2016 of 28 December added to the CIMI Chapter XV composed of articles 135-A to 135-K.
This tax was created for financial reasons and reasons of an axiological nature. On the one hand, the legislator intended to increase tax revenues due to the financial rescue program in effect since 2011 and therefore AIMI revenue is allocated to financing Social Security (art. 1, n. 2 of the CIMI). On the other hand, in a context of crisis in compliance with the provisions of art. 103, n. 1 and 104, n. 3 of the CRP, the legislator intended to impose a greater fiscal burden on citizens who reveal higher indices of wealth. (In this sense, see José Pires, The Additional Tax on Municipal Real Estate and Personal Wealth Taxation, Almedina, 2017, p. 10)
Art. 135-A of the CIMI provides as follows:
1 - The passive subjects of the additional municipal real estate tax are natural or legal persons who are owners, usufructuaries or superficiaries of urban real estate located in Portuguese territory.
(...)
Having regard to the aforementioned rule, the Claimant, a legal person (limited company) is a passive subject of AIMI.
Pursuant to art. 135-B of the CIMI:
1 - The additional municipal real estate tax applies to the sum of the taxpaying patrimonial values of the urban real estate located in Portuguese territory of which the passive subject is the owner.
(...)
Having regard to the factuality proven above, the Claimant is the owner of four parcels of land for construction.
Art. 135-B, n. 2 of the CIMI provides as follows:
2 - The following are excluded from the additional municipal real estate tax: urban real estate classified as "commercial, industrial or for services" and "other," in accordance with subparagraphs b) and d) of n. 1 of article 6 of this Code.
The CIMI distinguishes rural real estate from urban real estate (arts. 3 and 4 of the CIMI). Urban real estate, according to art. 6 of the CIMI, is divided into:
a) Residential;
b) Commercial, industrial or for services;
c) Land for construction;
d) Other.
The exclusion from taxation provided for in art. 135-B, n. 2 of the CIMI applies, by express reference, only to real estate indicated in art. 6, n. 1, subparagraph b) and d) of the CIMI. The legal rule is unequivocal in indicating the real estate whose exclusion from taxation it intended to include and does not include land for construction therein.
Given the above, with respect to hermeneutical rules, we should resort, by reference from art. 11, n. 1 of the LGT, to the provisions of the Civil Code. Art. 9, n. 1 of the C.C. provides as follows:
1. Interpretation must not be limited to the wording of the law, but should reconstruct the legislative thought from the texts, taking especially into account the unity of the legal system, the circumstances in which the law was enacted and the specific conditions of the time in which it is applied.
Thus the wording naturally assumes itself as the starting point of interpretation, with an immediately negative function, namely that it cannot "be considered as comprised among the possible meanings of the law that legislative thought (spirit, meaning) which does not have in the wording of the law a minimum of verbal correspondence, even if imperfectly expressed." Also, as OLIVEIRA ASCENSÃO states, "the wording is not only the starting point, it is also an irremovable element of all interpretation. That is, the text also functions as a limit to the search for the spirit."
Applying the above to the case under analysis, it is important to consider the literal element. The wording of the law indicates without room for doubt the real estate excluded from taxation, and does not include land for construction therein, regardless of whether it is used in an activity or has a future use for services.
Pursuant to art. 9, n. 3 of the C.C., the interpreter must presume that the legislator enshrined the most accurate solution.
It is true that the legislative concern to "avoid the impact of this tax on economic activity" was announced in the Proposal for the State Budget Law for 2017 and was implemented through the exclusion from the scope of incidence of "urban real estate classified as 'industrial,' as well as urban real estate licensed for tourism activity, the latter provided that its destination is duly declared and proven" and the deduction from the taxpaying amount of "€600,000.00, when the passive subject is a legal person with agricultural, industrial or commercial activity, for real estate directly used for its operation."
However, the legislator not only did not remove the incidence of AIMI from land for construction, even those intended for services, but also made no reference to the use of such real estate in the activities of the passive subjects. Therefore, it does not appear that there exist the errors in factual or legal premises invoked by the Claimant.
With respect to the use of real estate in an economic activity of the Claimant, as stated in arbitral decision no. 420/2018-T, of 05.01.2019, whose reasoning we hereby adopt:
"The wording of article 135-B of the CIMI that came to be approved does not remove the incidence of AIMI on real estate used for housing and land for construction used by legal persons in the course of their economic activity.
The legislative concern to 'avoid the impact of this tax on economic activity' was announced in the Proposal for the State Budget Law for 2017 and was implemented, to some extent, through the exclusion from the scope of incidence of 'urban real estate classified as 'industrial,' as well as urban real estate licensed for tourism activity, the latter provided that its destination is duly declared and proven' and the deduction from the taxpaying amount of '€600,000.00, when the passive subject is a legal person with agricultural, industrial or commercial activity, for real estate directly used for its operation.'
However, it was not on the basis of the activity to which the real estate is used that the exclusion of incidence came to be defined, because in the wording that came to be approved, non-incidence was defined only on the basis of the types of real estate indicated in article 6 of the CIMI, without any reference to use for the operation of legal persons.
These are distinct concepts: the use of real estate, which presupposes an application, and the purpose for which it is intended, the 'normal purpose,' underlying the classifications of real estate, referred to in n. 2 of article 6 of the CIMI.
Had the final wording of the Budget maintained the legislative intention to remove incidence from real estate directly used for the operation of legal persons, it would certainly have maintained the reference to this use that appeared in the proposal and that clearly expressed this legislative choice.
Thus, given that this reference to the use of real estate has been removed, there is no legal support for concluding that residential real estate and land for construction used in the activities of legal persons do not matter for AIMI incidence.
Therefore, it must be concluded that the use of real estate in the economic activities of legal persons does not remove taxation in AIMI (apart from cases where it concerns real estate that previously was exempt or not subject to taxation in IMI, which are not counted for purposes of AIMI, pursuant to n. 3 of article 135-B of the CIMI).
The holding of real estate assets of high value, regardless of whether or not they are used for economic activity, is tendentially revelatory of high taxpaying capacity, superior to that which is to be presumed to exist when real estate of reduced value is held or when it does not exist, so that, in principle, there is justification for the limitation of taxation to the first situations."
As for the exclusion from taxation of real estate classified as commercial, industrial or for services and the non-exclusion from taxation of land for construction that has as its normal purpose one of these uses, citing Arbitral Decision no. 664/2017 of 26.06.2018:
"Given that the legislator defined an exclusion clause by express and precise reference to certain types of urban real estate, which are immediately identifiable in the context of the law, it is not possible to perform an extensive interpretation so as to include therein other typologies that the legislator manifestly did not wish to consider. Nor is it even possible to reach such an interpretive result based on mere considerations of a pragmatic or teleological identity nature.
Even if it were justified, from a tax policy perspective, to grant land for construction intended for buildings for commercial, industrial or service purposes the same status that came to be attributed to real estate classified as 'commercial, industrial or for services,' the fact is that this was not the legislative choice, which limited itself to excluding from the scope of incidence of the tax these types of real estate and not those others that potentially might be used for these same purposes."
In conclusion, resorting to the interpretive rules enshrined in art. 9, n. 1, n. 2 and n. 3 of the CC, under articles 6, n. 1 and 135-B, n. 1 and n. 2 of the CIMI, land for construction, even if used for economic activity and intended for services, is included within the scope of objective application of AIMI.
In line with the decisions previously rendered in CAAD (proceedings no. 664/2017 of 26.06.2018, no. 420/2018 of 15.01.2019, no. 502/2018 of 29/03/2019, no. 506/2018 of 29/04/2018, no. 535/2018 of 17/04/2019, no. 559/2018 of 23.04.2019, no. 420/2018 of 15.01.2019 and no. 574/2018 of 17/04/2019), I decide that there are no defects invoked in this part by the Claimant.
V.2. Unconstitutionality
The Claimant invokes the unconstitutionality of articles 135-A and 135-B of AIMI with respect to the violation of the principle of equality (art. 13) and taxpaying capacity (104, n. 3 of the CRP).
It is incumbent upon the Courts to carry out diffuse and concrete review of the constitutionality of rules in all situations in which there is no, as is not the case here, declaration of unconstitutionality with mandatory general force of the cited AIMI rules.
However, the Constitutional Court (hereinafter only TC) in Decision no. 299/2019 of 21.05.2019 assessed the constitutionality of art. 135-B of AIMI for alleged violation of the principles of equality and taxpaying capacity and to whose reasoning we hereby adhere, as we agree and as it is fully applicable to the case at hand.
It is thus necessary to analyze each of the constitutional rules invoked by the Claimant separately.
Beginning with the principle of equality, the Claimant alleges violation of the principle of equality (art. 13 of the CRP) by arguing that land for construction intended for commerce, industry and services is being discriminated against compared to urban real estate intended for the same purpose.
The principle of fiscal equality is not expressly enshrined in the current Constitution, resulting from the general principle of equality provided for in article 13 of the CRP.
According to the TC (Decisions no. 232/2003, 96/2005, 99/2010, 255/2012 and 294/2014 TC) and some legal scholars (see Ana Paula Dourado, Tax Law, Almedina, 2015, p. 197), the principle of equality encompasses in its content, fundamentally, two aspects: a) prohibition of discrimination; b) obligation of differentiation.
The prohibition of discrimination imposes equal treatment for equal situations and the prohibition of equal treatment for manifestly unequal situations, so as to prevent any intolerable discrimination. It thus implies a negative sense (not to introduce inequalities in what should be equal nor equality in what should be unequal) and a positive sense (to treat equally what should be equal and prevent others from treating unequally what should be equal).
The prohibition of discrimination imposes equal treatment for equal situations and the prohibition of equal treatment for manifestly unequal situations, so as to prevent any intolerable discrimination. It thus implies, on the one hand, a requirement for equal treatment of taxpayers in the same circumstances and on the other hand a requirement for differentiated treatment of taxpayers in different circumstances.
In the case at hand, land for construction intended for commerce, industry or services and urban real estate intended for the same use are distinct factual realities. Therefore, it does not appear to us that their distinct tax treatment can constitute a violation of the principle of equality in the positive sense. As these are distinct factual situations, the principle of equality in the negative sense prohibits them from being treated in the same way.
The Constitutional Court Decision no. 299/2019, to which reasoning we adhere, analyzed this issue and concluded:
"The legislator's recognition that land for construction represents a patrimonial position of its holder and its own market value makes it impossible to invoke the purpose and corresponding value of the building that may be constructed on it: land for construction and built real estate are not economically equivalent or assimilable realities, in the area of taxation of urban real estate. This was stated by the Court, highlighting the pronouncement of the Plenary in the aforementioned Decision no. 378/2018, doctrine entirely transposable to the AIMI rule reviewed here:
'[It is] clear that, for the purpose of applying the Stamp Duty Code, as well as for the purpose of applying the CIMI, a parcel of land for construction is not equal to an urban building, whether for housing or for other purposes (...). But, precisely because this is so, it is not possible to apply retroactively, even if for the purpose of mere analysis or legal construction, tax criteria that only apply after construction of the building, not before it.
As noted, what is relevant for the purpose of applying the rule of item 28.1 is the legal and patrimonial situation existing at the date of the tax payment obligation, and therefore it is by reference to the concrete tax fact existing on that date that the existence, or lack thereof, of a rational or reasonable basis should be evaluated to justify the legal and tax consequences that immediately emerge from it.
The legally relevant transformations that the object of property may undergo in the course of time, from that moment on, arising in particular from the eventuality of a building being constructed on land for construction of lower value, constitute hypotheses of verification and uncertain content, even considering the existence of a licensing for those purposes, which may be altered or not even used. They cannot, therefore, be decisively relevant in the evaluation of the constitutionality of rules, or segments thereof, which, by virtue of their occurrence will cease to be applicable.'
Also within the scope of incidence of AIMI, even if guided by a personal viewpoint, one cannot fail to recognize that land for construction are assets distinct from already constructed urban real estate and used for a specific purpose through licensing or normal use. In truth, grounding the reason for the non-taxation of urban real estate, commercial, industrial, for services or other, in the purpose of promoting the proper functioning of economic activities – which implies the creation of incentives for the reallocation of resources to productive purposes, so as to increase economic growth -, land for construction can only contribute to this objective potentially, in a hypothetical and conditional future, since even if a construction right has been formed, nothing prevents the change of will of its holder regarding the purpose to be given to the real estate. Furthermore, what is relevant for the purposes of annual taxation in AIMI is the taxpaying patrimonial value of the real estate existing and recorded in the property record, since one cannot tax a future and eventual taxpaying capacity, but only current and effective taxpaying capacity. Land for construction constitutes an economic asset with patrimonial value, in itself revelatory of the taxpaying capacity of its holder, and therefore it is constitutionally legitimated its inclusion in the patrimonial wealth globally subject to AIMI, regardless of what may be effectively implanted thereon.
In this manner, as these are distinct factual realities (land for construction and urban real estate even if intended for the same purpose), their distinct treatment does not appear to us to be arbitrary, and therefore articles 135-A and 135-B of AIMI are not contrary to the principle of equality.
The claimant understands that the holding of such real estate does not reveal an increased indication of its taxpaying capacity, and therefore the principle of taxpaying capacity (art. 104, n. 3 of the CRP) is violated.
The principle of taxpaying capacity is a corollary of the principle of equality (art. 13 of the CRP), which is also reflected in art. 104, n. 3 of the CRP, applicable to the taxation of assets.
As a prerequisite and criterion of taxation, the principle of taxpaying capacity is particularly imbued with "the idea of generality or universality, in terms of which all citizens are bound to comply with the duty to pay taxes, and of uniformity, requiring that such duty be measured by a single criterion - the criterion of taxpaying capacity. In Tax Law, Casalta Nabais, Almedina, 5th Ed., p. 151
Those who reveal greater taxpaying capacity should pay more; those who reveal lesser taxpaying capacity should pay less. Taxpaying capacity is revealed through income, assets and consumption.
In the case at hand (AIMI), taxpaying capacity is revealed by the assets of the passive subject. Taxation of assets has constitutional support in art. 104, n. 3, and should contribute to the equality of citizens. AIMI is a general tax on real estate assets of legal persons.
Now, with respect to legal persons, all taxpaying values of subject real estate are taxed, without minimum limit nor any deduction. Thus there is no discrimination in the negative sense among legal persons.
Moreover, taxation of the income of legal persons does not preclude taxation of their real estate assets. AIMI applies to the taxpaying patrimonial value of the passive subject and not to its income, and therefore there is no additional burden on its taxable income by this means.
Citing the Constitutional Court Decision no. 299/2019, as we agree with it:
In truth, the choice of the tax fact of AIMI falls on relevant economic reality, because the ownership of an urban real estate asset constitutes, in itself, a manifestation of wealth - and a wealth capable of being determined, since it is socially and legally attributed a market value -, revealing special economic strength, superior to that of the generality of citizens, which enhances negotiating position in legal commerce in general, especially the capacity to secure means of financing. It expresses an affluence, which is in no way contradicted by the manner in which it was obtained (it remains unchanged should the ownership of rights over urban real estate be acquired through an onerous or gratuitous act), or by its use in an economic activity, which may or may not generate profit: as SÉRGIO VASQUES emphasizes, '[W]hen one taxes the substance of assets one is not taxing income a second time, one is taxing something different' ('Taxpaying Capacity, Income and Assets,' Taxation - Journal of Tax Law and Management, no. 23, Coimbra, 2005, p. 39).
(...)
In accordance with the scope, structure and nature of the rule reviewed, the economic premise considered by the legislator in AIMI is that the economic strength revealed by the holding of rights over a patrimonial portfolio composed of urban real estate property (residential) and/or land for construction persists, manifesting, in the categories of assets targeted by the legislator – residential real estate and land for construction -, the taxpaying capacity of the taxpayer, independently of the object – especially, of the corporate object - to which the subject dedicates itself, that is, even if the chosen activity is the economic exploitation of urban real estate.
The Constitution of the Portuguese Republic does not require any positive discrimination of companies dedicated to real estate activity."
The real estate assets of the passive subject are revelatory of its taxpaying capacity. Therefore, articles 135-A and 135-B of AIMI are not contrary to the principle of taxpaying capacity.
V.3 Compensatory Interest
The assessment of the Respondent's condemnation to payment of compensatory interest is prejudiced by the solution reached above.
Maintaining the tax assessment reviewed, in consequence, the request for compensatory interest should also be judged as unwarranted.
V.4 Notification to the Public Prosecutor's Office
The Respondent requested, by reference to the provisions of article 280, n. 3 of the CRP and article 72, n. 3 of the Constitutional Court Law, notification of this arbitral decision to the Public Prosecutor's Office.
Since this Tribunal did not refuse to apply any rule on the grounds of unconstitutionality, it appears to us to be unnecessary to send it, and therefore it should not be ordered (art. 130 of the CPC ex vi art. 29, n. 1, subparagraph e) of the CPC).
III. DECISION
In light of all that has been stated, it is decided:
a) To judge entirely unwarranted the request for declaration of illegality of the assessment for the Additional Tax on Real Estate ("AIMI") with the number 2018... (2018);
b) To maintain entirely the tax assessment that is the subject of these proceedings;
c) To condemn the Claimant to payment of the costs of the proceedings, as follows.
The case value is fixed at €18,150.56 pursuant to article 97-A, n. 1, a), of the CPPT, applicable by virtue of subparagraph a) of n. 1 of article 29 of the RJAT and n. 2 of article 3 of the Regulations for Costs in Tax Arbitration Proceedings.
The arbitration fee is fixed at €1,224.00, in accordance with Table I of the Regulations for Costs in Tax Arbitration Proceedings, to be paid in full by the Claimant, since the request was entirely unwarranted, pursuant to articles 12, n. 2, and 22, n. 4, both of the RJAT, and article 4, n. 4, of the cited Regulations.
Notification shall be made.
Lisbon, 9 July 2019
The Arbitrator
(André Festas da Silva)
Frequently Asked Questions
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