Stamp Tax on Construction Land Under Verba 28 TGIS: CAAD Arbitration Decision 686/2015-T

ARBITRAL DECISION

I. REPORT

1. The company A…, Lda. (hereinafter referred to as "Claimant"), with tax identification number …, with registered office at Street…, no…., nth floor, …-…, Porto, filed, on 19 November 2015, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, i.e., Legal Framework of Arbitration in Tax Matters ("RJAT"), a request for the constitution of an Arbitral Tribunal in order for the tax assessment act for Stamp Duty ("IS") No. 2012… to be declared illegal, pursuant to Item No. 28 of the General Table of IS ("TGIS"), relating to the year 2012, in the total amount of € 18,287.45, with the Tax and Customs Authority ("Respondent" or "AT") being the defendant.

A) Constitution of the Arbitral Tribunal

1. Pursuant to the provisions of subparagraph a) of section 2 of Article 6 and subparagraph b) of section 1 of Article 11 of the RJAT, the Ethics Council of the Administrative Arbitration Centre ("CAAD") appointed the undersigned as arbitrator of the single arbitral tribunal, who communicated acceptance of the assignment within the applicable time limit, and notified the parties of such appointment on 14 January 2016.

2. Thus, in accordance with the provision of subparagraph c) of section 1 of Article 11 of the RJAT, and by means of communication from the President of the Ethics Council of CAAD, the Single Arbitral Tribunal was constituted on 29 January 2016.

B) Procedural History

1. In the request for arbitral pronouncement, the Claimant petitioned for a declaration of illegality of the IS assessment mentioned above, which it has already paid.

2. The AT presented its response, petitioning for the dismissal of the request for arbitral pronouncement, on the grounds that no violation of law was found, requesting that the tax assessment under analysis, as it violates no legal or constitutional provision, be maintained in the legal order.

3. By ruling of 13 May 2016, the Single Arbitral Tribunal, pursuant to the provision of subparagraph c) of Article 16 of the RJAT, decided, without objection from the parties, that it was not necessary to hold the meeting referred to in Article 18 of the RJAT, as a result of the simplicity of the matters at issue, as well as considering that it had in its possession all the necessary elements to reach a clear and impartial decision.

4. It equally decided, in accordance with section 2 of Article 18 of the RJAT, that oral arguments were not necessary, since the positions of the parties were clearly defined in their respective pleadings, and set 15 June 2016 as the final deadline for issuing the arbitral decision.

5. In the context of the ruling, it equally requested the parties to submit their final arguments. In this regard, it is important to note that both the Claimant and the Respondent chose not to make any submissions.

6. The Tribunal was properly constituted and is competent to examine the matters indicated (Article 2, section 1, subparagraph a) of the RJAT), the parties have legal personality and capacity and have full standing (Articles 4 and 10, section 2 of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March). No nullities occur, and nothing prevents the merits from being judged.

7. The present case is thus in conditions for a final decision to be rendered.

II. QUESTION TO BE DECIDED

1. As a preliminary matter, the present Tribunal will seek to determine whether the Respondent is correct when stating that the present request should be declared inadmissible due to being time-barred.

2. Subsequently, and should the exception raised by the Respondent not prevail, it will still be necessary to examine and decide on the merits of the case, as is evident from the procedural documents of the parties, that is, to determine whether urban properties legally classified as building land should be covered by the concept of properties with residential use, pursuant to Item No. 28 TGIS, in the wording applicable at the date of the occurrence of the facts (2012).

3. That is, the present tribunal seeks to determine whether, as the Claimant alleges, building land is not classified as properties with residential use, thus falling outside the scope of the aforementioned item, or, conversely, as the Respondent contends, they are considered properties with residential use and, in that context, subject to IS, pursuant to Item No. 28 of the TGIS.

III. DECISION ON THE FACTS AND ITS JUSTIFICATION

1. Having examined the documentary evidence produced, the present tribunal finds proven, as relevant to the decision of the case, the following facts:

I. The Claimant is the owner of an urban property, located at Street…, no…, in the parish of…, in Porto, registered in article no. … of the respective urban property roll, with a Tax Property Value ("VPT") of € 3,657,490.

II. The Claimant, with respect to the year 2012 and as a result of the provision in Item No. 28 of the TGIS, received the AT assessment act indicated above, in the total amount of € 18,287.45, which it paid.

III. The present initial petition was preceded by a Grace Period Claim, dismissed on 19 June 2013 (date of notification: 26 June 2013) and a Hierarchical Appeal, dismissed on 25 September 2015 (date of notification: 10 November 2015).

1. The conviction of the present tribunal regarding the facts found proven resulted from the documents attached to the record and contained in the petition and the uncontested allegations of the parties, as specified in the points on the facts of the case enumerated above.

2. There is no factual relevance for the decision of the case found not proven.

IV. ON THE LAW

A) Legal Framework

1. Given that the legal question to be decided in the present case requires interpretation of the relevant legal texts, it is important, first, to enumerate the rules that make up the relevant legal framework, as of the date of occurrence of the facts.

2. The imposition of IS on properties with residential use resulted from the addition of Item No. 28 to the TGIS, carried out by Article 4 of Law 55-A/2012, of 29 October, which typified the following taxable facts:

"28 – Ownership, usufruct or surface right of urban properties whose tax property value contained in the property roll, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000.00 – on the tax property value used for purposes of IMI:

28.1 – For property with residential use – 1%

28.2 – For property, when the taxpayers who are not individuals are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the list approved by ordinance of the Minister of Finance – 7.5%".

1. It should be noted that, with reference to the year 2012, Article 6 of that Law established the following transitional provisions:

"1 - In 2012, the following rules must be observed with reference to the assessment of stamp duty provided for in item no. 28 of the respective General Table:

a) The taxable fact occurs on 31 October 2012;

b) The taxpayer of the tax is the one mentioned in section 4 of Article 2 of the Stamp Duty Code on the date referred to in subparagraph a) above;

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

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

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

f) The applicable rates are as follows:

i) Properties with residential use assessed pursuant to the IMI Code: 0.5%;

ii) Properties with residential use not yet assessed pursuant to the IMI Code: 0.8%;

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

(...)"

1. The aforementioned law equally added, to the IS Code, section 7 of Article 23, regarding the assessment of IS: "in the case of tax due by the 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", and Article 67, section 2, which provides that "to matters not regulated in the present Code relating to item 28 of the General Table, the CIMI applies, subsidiarily".

2. Additionally, and taking into account the legislative amendment introduced by Law No. 83-C/2013, of 31 December, it is also important to transcribe the wording of Item 28.1 of the TGIS from 1 January 2014, "for residential property or for building land whose construction, authorized or planned, is for residential purposes, pursuant to the provisions of the IMI Code".

3. In this context, and taking into account the indication above, let us now turn to the Municipal Property Tax Code ("IMI").

4. In the IMI Code, the species of properties are enumerated (in Articles 2 to 6), as follows:

"Article 2 - Concept of Property

1 – For purposes of this Code, property is any fraction of territory, comprising waters, plantations, buildings and constructions of any nature incorporated or erected in it, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land on which they are located, although situated in a fraction of territory that constitutes an integral part of diverse assets or has no patrimonial nature.

2 – Buildings or constructions, even though movable by nature, are deemed to have a character of permanence when devoted to non-transitory purposes.

3 – The character of permanence is presumed when buildings or constructions are situated in the same location for a period exceeding one year.

4 – For purposes of this tax, each autonomous fraction, under the horizontal property regime, is deemed to constitute a property.

Article 3 - Rural Properties

1 – Rural properties are land situated outside an urban settlement that are not to be classified as building land, pursuant to section 3 of Article 6, provided that:

a) They are devoted to or, in the absence of concrete use, have as their normal purpose a use generating agricultural income, such as are considered for purposes of personal income tax (IRS);

b) Not having the use indicated in subparagraph a) above, they are not constructed or have only buildings or constructions of an accessory character, without economic autonomy and of reduced value.

2 – Also rural properties are land situated within an urban settlement, provided that, by force of a legally approved provision, they cannot have a use generating any income or can only have a use generating agricultural income and are, in fact, having this use.

3 – Also rural properties are:

a) Buildings and constructions directly devoted to the production of agricultural income, when situated on the land referred to in the sections above;

b) Waters and plantations in the situations referred to in section 1 of Article 2.

4 – For purposes of this Code, urban settlements are considered, in addition to those situated within legally fixed perimeters, clusters with a minimum of 10 dwellings served by public roads, with their perimeter delimited by points distanced 50 m from the axis of the roads, in the transversal direction, and 20 m from the last building, in the direction of the roads.

Article 4 - Urban Properties

Urban properties are all those that should not be classified as rural, without prejudice to the provision of the following article.

Article 5 - Mixed Properties

1 – Whenever a property has rural and urban parts it is classified, in its entirety, according to the main part.

2 – If neither of the parts can be classified as main, the property is deemed mixed.

Article 6 - Species of Urban Properties

1 – Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Building land;

d) Others.

2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal purpose each of these purposes.

3 – Building land is considered land situated within or outside an urban settlement, for which a license or authorization has been granted, prior notification 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 land where the competent entities prohibit any of those operations, namely those located in green spaces, protected areas or which, in accordance with municipal land management plans, are devoted to spaces, infrastructure or public facilities.

4 – Included in the provision of subparagraph d) of section 1 are land situated within an urban settlement that are not building land nor are covered by the provision of section 2 of Article 3 and also buildings and constructions licensed or, in the absence of a license, that have as their normal purpose purposes other than those referred to in section 2 and also those in the exception of section 3".

1. In parallel, and since it is one of the issues raised by the Respondent, it is necessary to highlight what is stated in Article 45 of the IMI Code.

"Article 45 - Tax Property Value of Building Land

1 - The tax property value of building land is the sum of the value of the area of the building site to be constructed, which is situated within the perimeter of fixation of the building to the ground, measured by the outer part, added to the value of the land adjacent to the site.

2 - The value of the site area varies between 15% and 45% of the value of authorized or planned buildings.

3 - In fixing the percentage of the value of the land of the site, the characteristics referred to in section 3 of Article 42 are taken into account.

4 - The value of the area adjacent to the construction is calculated pursuant to section 4 of Article 40.

5 - When the document proving constructive viability referred to in Article 37 only makes reference to the PDM indices, the expert appraisers must estimate, on a reasoned basis, the respective construction area, taking into account, in particular, the average construction areas of the surrounding area".

1. Finally, note also the rules on the interpretation of laws, fundamental for understanding the scope of the concept of property with residential use.

2. Article 11 of the General Tax Law ("LGT") establishes the essential rules for the interpretation of tax laws as follows:

"Article 11 - Interpretation

1. In determining the meaning of tax rules and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

2. Whenever tax rules employ terms peculiar to other branches of law, they must be interpreted in the same sense as they have there, unless otherwise directly provided by law.

3. If doubt persists about the meaning of the rules of incidence to be applied, the economic substance of the tax facts should be considered.

4. Gaps resulting from tax rules covered by the legislative reserve of the Assembly of the Republic are not susceptible to analogy integration".

5. The general principles for the interpretation of laws, to which section 1 of Article 11 of the LGT refers, are set out in Article 9 of the Civil Code, which establishes the following:

"Article 9 - Interpretation of Law

1. Interpretation must not be limited to the letter of the law, but must reconstruct from the texts the legislative intent, taking into account above all the unity of the legal system, the circumstances in which the law was drawn up and the specific conditions of the time in which it is applied.

2. However, the interpreter cannot consider the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

3. In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most correct solutions and knew how to express its intent in adequate terms".

4. Thus, it is within this legal framework that it is important to decide whether urban properties classified as building land are or are not included in the concept of property with residential use, pursuant to Item No. 28 of the TGIS.

B) Arguments of the Parties

1. The Claimant began by explaining that "it received on 05/12/2012 the notification of the assessment of Stamp Duty, relating to the year 2012 (…). Aggrieved, the APAR filed, on 27/05/2013, a grace period claim of the aforementioned assessment (…) dismissed by ruling of 19/06/2013, notified on 26/06/2013.

From that ruling dismissing the claim, the APAR filed, on 18/07/2013, a hierarchical appeal (…) also dismissed by ruling of 25/09/2015, notified on 10/11/2015".

1. The Claimant states that "in the administrative proceedings the AT presented the understanding that the new item introduced by Law No. 55-A/2012 would be applicable to building land (…) because «the fact that in the rule of incidence (Item No. 28.1 of the TGIS) property with residential use was posited instead of residential property, appeals to the coefficient of use… which applies indistinctly to all urban properties»".

2. However, the Claimant draws attention to the fact that this understanding has been "repeatedly refuted, as erroneous, not only by decisions of administrative and tax courts (…) but by successive decisions rendered in arbitral proceedings (…)".

3. Indeed, in the words of the Claimant, "Item No. 28.1 of the TGIS, in the wording that was in force until 31/12/2013, must be interpreted to apply exclusively to properties immediately intended for residential purposes, since only these reveal the contributory capacity that the legislator intended to reach.

In that light, the application of Item No. 28.1 of the TGIS, in the wording that was in force until 31/12/2013, to building land of companies that intend them for the construction of residential buildings, in the development of their own activity is clearly to be rejected".

1. The Claimant further reserves that "it does not ignore that Article 194 of Law No. 83-C/2013, of 31 December, amended item no. 28.1 of the TGIS, broadening the incidence of the tax (…) however, the legislator, which did not grant, nor could grant, express retroactive effect to that amendment, did not dare, unlike what the AT sustains in the decision of the hierarchical appeal, to give it a declarative character".

2. Being thus clear, in its opinion, that such rule cannot be applied to the assessment in question, since it dates back to 2012.

3. The Claimant concludes its request by seeking the annulment of "the above identified act of assessment of stamp duty, relating to the year 2012 (…) with all legal consequences".

4. Finally, the Claimant also listed a witness for the proceedings, B…, with tax residence in Building…, …, no. … –…, …-… Porto.

5. For its part, the Respondent, after being duly notified to that effect, presented its response in which it began by raising the time-barred nature of the initial petition submitted, considering that the present tribunal should refrain from examining the request.

6. "In summary, resulting, clearly and unequivocally from the learned initial request, the direct challenge of the IS assessment act, the request formulated (leading to the declaration of illegality of the act and, consequently, to its annulment) must be declared inadmissible, as time-barred and, consequently, the Defendant Entity should be absolved of the instance (…) which is hereby requested".

7. Nevertheless, anticipating that its request may not be heeded, the Respondent proposes to analyze the issue actually raised by the Claimant.

8. Thus, in the opinion of the former, the concept of property with residential use, for purposes of the provision in item no. 28 of the TGIS, comprises both constructed properties and building land, starting with attention to the literal element of the rule.

9. The Respondent reserves that "the legislator does not refer to «properties intended for residential purposes», having opted for the notion «residential use» – an expression different and broader, whose meaning must be found in the need to integrate other realities beyond those identified in Article 6, section 1, subparagraph a) of the CIMI".

10. Developing, next, an extensive rationale which, in its opinion, allows for building land to be classified as property with residential use, supporting itself, in particular, on Article 45 of the IMI Code.

11. "The mere establishment of a right of potential construction immediately increases the value of the immovable property in question, hence the rule contained in art. 45 of the CIMI which requires the separation of the two parts of the land.

On one side, the part of the land where the building to be constructed will be located is considered, and on the other the area of free land (…)."

1. In this sense, in the opinion of the Respondent, "long before the effective construction of the property, it is possible to determine and identify the use of the land for construction".

2. In this regard, the Respondent concludes that, "although this has been the understanding of the AT, no doubt should remain for the year now in question, i.e., 2014, given that, with Law No. 83-C/2013 of 31-12-2013, the wording of that provision was amended, now expressly including building land as an objective element of the incidence of the rule, so that necessarily there is a lack of any attempt to invoke any interpretative issue of the wording of the Law.

Such issue that, in the view of the AT and in light of all the foregoing, does not exist, thus there is no sustenance for the alleged illegality that the Claimant seeks to impute to the assessments sub judice, the Respondent Entity having acted in strict compliance with the law, to which it is rigorously bound, subsuming the taxable fact to the express normative provision".

C) Appraisal of the Tribunal

1. As a preliminary matter, the present Tribunal will undertake to determine whether the exception invoked by the Respondent may be applied, and thus consider the present request time-barred and, accordingly, absolve the Respondent.

2. The Respondent relies on the fact that the Claimant seeks to challenge, with the initial petition submitted, the assessment act itself and not the administrative decision that dismissed the request for annulment of the aforementioned act.

3. Indeed, "the now Claimant in arbitration administratively challenged the tax assessment act. The tax administration dismissed/denied the revision of the act in the dimension that had been requested of it. However, notwithstanding the fact that it made reference to and identified these circumstances, the Claimant did not formulate/specify to the Tribunal any request aimed at the annulment of what was decided in that connection".

4. In that sense, such fact not having occurred, "there is a lack of support which could establish the timeliness of the request and, consequently, the possibility of the Tribunal examining the request formulated regarding the assessment act".

5. Taking into consideration the argument raised by the Respondent, the present tribunal nonetheless understands that the request in question is timely.

6. Indeed, in the eyes of the present tribunal, the Respondent may be confusing the concepts of claim and procedural means of challenge.

7. In this sense, the procedural means of challenge (in this case, the request for arbitral pronouncement), is clearly timely, as will be shown below, considering that the direct object of the same is the express dismissal of the Hierarchical Appeal mentioned above.

8. And, even if the clarity of the request formulated by the Claimant could be questioned, in particular what it seeks to challenge, the present Tribunal, refrained, pursuant to the celerity and informality that should characterize its decisions, from inviting the Claimant to clarify its request, since it was understood that the same was perfectly perceptible.

9. In fact, and notwithstanding the arbitral decisions listed by the Respondent, the present tribunal recalls the principle of the prevalence of substance over form, a hallmark of the Portuguese tax legal order.

10. And, as a result of the autonomy conferred on it, pursuant to Article 16, section 1, subparagraph c), the Tribunal understands that the objective of the Claimant was to challenge the administrative act that dismissed the request initially made to the AT, of annulling the assessment in question.

11. All the more so, although, as previously mentioned, such request is not taxatively contained in the Claimant's initial petition, it is undisputed to conclude, even as a matter of chronology, that its objective could only have been to challenge the dismissal of the AT (note that the initial petition is submitted only after the express dismissal of the Hierarchical Appeal). Therefore, the arbitral tribunal considered it not relevant to determine, with the Claimant, the nature of the request (which it could have done, if it deemed necessary, pursuant to Article 590, section 3 of the Code of Civil Procedure).

12. In that sense, and given that the ruling dismissing the Hierarchical Appeal filed was notified to the Claimant on 10 November 2015, the initial petition, submitted on 19 November 2015, is, naturally, timely.

13. Pursuant to Article 10, section 1, subparagraph a) of the RJAT, the request for constitution of an arbitral tribunal is filed "within 90 days, counted from the facts provided for in sections 1 and 2 of Article 102 of the Code of Tax Procedure and Process, regarding acts susceptible to autonomous challenge and, as well, from the notification of the decision or the expiration of the legal term for decision of the hierarchical appeal (…)".

14. Taking into account the foregoing, it is now necessary to examine, for purposes of the application of Item No. 28 of the TGIS, in its wording in 2012, whether the concept of property with residential use includes, or does not include, building land.

15. In this regard, the present tribunal will follow closely the Arbitral Decision concerning case No. 42/2013-T, of 18 October (a decision which it hereby commends for its relevance, detail and proximity to the present discussion).

16. As an introduction, it should be noted that the IMI Code does not resort, in the classification of urban properties, to the concept of property with residential use (in fact, this concept is not found in any other legal instrument).

17. In this way, it is necessary to undertake, on the basis of the legal framework set out above, an interpretation of the concept of property with residential use.

18. In this regard, and to support the present decision, we transcribe below part of the Arbitral Decision No. 42/2013-T, of 18 October, where it was decided as follows:

"From a literal interpretation of the rule of incidence in question it appears that the legislator intended to include within the scope of application of the rule urban properties that have a «residential use».

The expression «residential use» does not appear to be capable of any other meaning than that of residential use, that is, urban properties that have an actual use for residential purposes, whether because they are licensed for such purposes, or because they have such normal purpose.

And we cannot confuse an «residential use» which implies an actual devotion of an urban property to that purpose, with the expectation, or potentiality, of an urban property being able to have a «residential use».

Building land, not being constructed, do not, by themselves, satisfy any condition to be considered as properties with residential use, since, on the one hand, they do not possess a license for residential use, and, on the other hand, they are not habitable (because they are simply not constructed).

So it does not appear sufficient to be classified in the objective rule of incidence in question that there be an expectation of an urban property coming to have a residential use, or the potentiality of coming to have a residential use".

1. Now, in the case of building land, in fact, there is nothing more than the mere expectation (or, possibly, potentiality) of the same, and only after construction, of coming to have residential use.

2. However, only when such use is realized is it possible to consider that the urban property falls within the scope of Item No. 28 of the TGIS.

3. Indeed, the concept of residential use must undoubtedly be reduced to something that is susceptible of being inhabited, even though, as stated above, it is not legally recognized as such.

4. In this way, even though building land may result in the future, very probably, in a property with residential use, while it remains as such (that is, legally classified as building land), it cannot, as of the date of the facts, in the understanding of the present tribunal, be included within the scope of incidence of Item No. 28 of the TGIS.

5. In parallel, the AT demonstrated, as described above, that, in its opinion, it is by force of Article 45 of the IMI Code that building land is classified as property with residential use.

6. In this context, and for its relevance to the present decision, let us turn once more to the Arbitral Decision No. 42/2013, of 18 October.

7. As set out in the arbitral decision previously mentioned, "Article 45 of the CIMI is intended for the valuation of building land, considering as one of its elements the authorized or possible purpose, based on urban planning constraints.

Once again we are only in the field of potentialities, of expectations, and that is not sufficient to alter the nature of the property, which continues to be considered as building land, nor to sustain that the property in question now has a «residential use» for purposes of the objective incidence of item 28.1 of the TGIS".

1. Indeed, it is the opinion of the present tribunal that, as of the date of the facts, the concept property with residential use, referred to in Item No. 28 of the TGIS, is reduced, exclusively, to the concept of urban property residential, pursuant to Article 6, section 1, subparagraph a) of the IMI Code.

2. In other words, in the understanding of the present tribunal, in line with the understanding expressed by the Claimant and in Decision No. 42/2013-T, of 18 October, the AT cannot resort to Article 45 of the IMI Code to establish a relationship between building land and property with residential use.

3. In that sense, the present tribunal concludes that, since the urban property under discussion is building land, it cannot be included within the scope of Item No. 28 of the TGIS.

4. Finally, and notwithstanding the framework undertaken so far being, from the point of view of the present tribunal, sufficient to recognize the illegality of the assessment act carried out by the AT, it is important to note that, if any doubts existed, the recent amendment to the wording of Item No. 28 of the TGIS would certainly dispel them.

5. Indeed, Law No. 83-C/2013, of 31 December, which entered into force on 1 January 2014, amended the text of item no. 28 of the TGIS to "residential property or building land whose construction, authorized or planned, is for residential purposes, pursuant to the provisions of the IMI Code (…)".

6. Now, in the understanding of the present tribunal, such an amendment occurred, naturally, because the legislator will have perceived that there was a need, verified only from 2014 onwards, to broaden the aforementioned item to building land, as referred to above.

7. In these terms, it becomes clear that until that date (2014), the wording of the aforementioned item left outside its scope of application properties legally classified as building land (otherwise, there would have been no need to amend the wording of the aforementioned item).

8. Thus, and on the basis of the reasons enumerated above, the present tribunal understands that building land cannot, as of the date of the facts, be covered by the concept of property with residential use, as referred to in the text of Item No. 28 of the TGIS, and concludes that the legal prerequisite of incidence is not met.

V. DECISION

1. On these grounds, this Arbitral Tribunal decides:

A) To render judgment in favor of the request for arbitral pronouncement and, in consequence, to declare illegal the express dismissal of the Hierarchical Appeal previously mentioned and consequently to annul the IS assessment act referred to above, with reference to 2012, from which resulted tax payable in the amount of € 18,287.45, relating to the taxation of building land, pursuant to the provision of Item No. 28 of the TGIS;

B) To condemn the Respondent, pursuant to Article 43, section 1 of the LGT and Articles 61, sections 2 and 5 of the Code of Tax Procedure and Process ("CPPT"), to return the tax paid, plus compensatory interest at the rate resulting from section 4 of Article 43 of the LGT, calculated on the amount paid from the day the aforementioned assessment was paid until the full reimbursement of the amount referred to; and

C) To condemn the Respondent in the costs of the proceedings.

VI. VALUE OF THE CASE

1. The value of the case is set at € 18,287.45, pursuant to Article 97-A, section 1, subparagraph a), of the CPPT, applicable by force of subparagraphs a) and b) of section 1 of Article 29 of the RJAT and section 2 of Article 3 of the Regulations on Costs in Tax Arbitration Proceedings ("RCPAT").

VII. COSTS

1. In accordance with the provision of Article 22, section 4, of the RJAT, the value of the arbitration fee is set at € 1,224, pursuant to Table I of the aforementioned Regulation, chargeable to the Respondent, given the complete success of the request.

Let it be notified.

Lisbon, CAAD, 1 June 2016

The Arbitrator

(Sérgio Santos Pereira)