Stamp Tax on Building Land: CAAD Rules on Verba 28.1 TGIS Housing Allocation (698/2015-T)

ARBITRAL DECISION

I. Report

A…- CLOSED SPECIAL REAL ESTATE INVESTMENT FUND, with tax identification number…, represented by its management company B…- Real Estate Investment Fund Management Company, S.A., with registered office at Avenue…, no.…, in Lisbon, Tax ID… (hereinafter, the "Claimant"), filed a request with the Administrative Arbitration Centre (CAAD), on 24 November 2015, for the constitution of an arbitral tribunal in tax matters, pursuant to the provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Tax Arbitration, hereinafter referred to as "LFTA"), in which the Tax Authority and Customs Authority (AT) is the Respondent, with a view to declaring the illegality and consequent annulment of the following Stamp Tax ("ST") assessments relating to the year 2012, corresponding to the following documents:

i. 2013…, of 21.03.2013, in the amount of €3,740.90 (three thousand seven hundred and forty euros and ninety cents);

ii. 2013…, of 21.03.2013, in the amount of €3,740.90 (three thousand seven hundred and forty euros and ninety cents);

iii. 2013…, of 21.03.2013, in the amount of €3,740.90 (three thousand seven hundred and forty euros and ninety cents);

iv. 2013…, of 21.03.2013, in the amount of €3,364.00 (three thousand three hundred and sixty-four euros);

v. 2013…, of 21.03.2013, in the amount of €3,364.00 (three thousand three hundred and sixty-four euros); and

vi. 2013…, of 21.03.2013, in the amount of €3,364.00 (three thousand three hundred and sixty-four euros);

in a total amount of €21,314.70 (twenty-one thousand three hundred and fourteen euros and seventy cents).

The Claimant elected not to appoint an arbitrator.

The request for constitution of an arbitral tribunal was accepted by the President of CAAD on 26 November 2015 and automatically notified to the AT on 30 November 2015.

The Signatory hereto was appointed by the President of the Deontological Board of CAAD as arbitrator of a single arbitral tribunal, pursuant to Article 6 of the LFTA, having communicated acceptance of the appointment within the legal timeframe, as provided in Article 4 of the CAAD Code of Ethics.

The Parties were notified of the appointment of the Signatory on 15 January 2016, pursuant to Article 11, No. 1, subparagraphs a) and b) of the LFTA, and did not object thereto.

The single arbitral tribunal was thus regularly constituted on 1 February 2016, in accordance with Article 11, No. 1, subparagraph c) of the LFTA.

The AT was notified on 5 February 2016, by arbitral order of 4 February 2016, to submit its response within thirty (30) days.

The AT submitted its response on 9 March 2016.

By arbitral order of 13 March 2016, the Arbitral Tribunal:

a. Indicated that it was inclined to consider that the deadline for submission of the response by the AT was not met, since it was submitted only on the 33rd day following notification. This fact would warrant disregard of the AT's response, without however implying admission of the facts alleged by the Claimant, in accordance with Article 110, No. 6 of the Code of Tax Procedure and Process ("CTPP"), applicable by force of Article 29, No. 1 of the LFTA. Thus it invited the AT to make representations on this fact;

b. Invited the Claimant to attach Document 11 which it had undertaken to attach.

The Respondent responded to such order on 14 March 2016, alleging that:

1. An order was issued pursuant to Article 17 of the LFTA on 2016-02-04;

2. This fact was notified to the Respondent by electronic mail dated 2016-02-05.

3. Such notification is presumed to have been effected on Monday, 2016-02-08, the third day following the date of its preparation and dispatch.

4. The rules provided for notifications effected through electronic data transmission are contained in Article 248 of the Code of Civil Procedure, applicable ex vi of Article 29, No. 1, subparagraph e) of the LFTA, in view of the manifest absence of rules governing this matter in the latter statute.

5. Article 248 of the CCP is applicable to notification of acts carried out in the course of arbitral proceedings.

6. Accordingly, considering notification to have been effected on 08-02-2016, pursuant to the legal provisions cited and jurisprudentially settled law, the thirty-day deadline commenced on 09-02-2016, since the calculation of any deadline begins to run on the day following that on which the event generating the commencement thereof occurred, in accordance with Article 279, subparagraph b), of the Civil Code;

7. It ran until 2016-03-09, inclusive, this being the thirtieth day of the deadline.

8. The Respondent's response was submitted by means of an electronic mail message sent on 9 March 2016, therefore on the 30th day of the deadline.

The Claimant did not attach, within the determined timeframe, Document 11 which it had undertaken to attach.

The Parties possess legal personality and capacity and are legitimately constituted (Articles 4 and 10, No. 2 of the LFTA and Article 1 of Ordinance No. 112-A/2011, of 22 March).

The proceedings do not suffer from defects that would invalidate them.

II. Claimant's Request

The Claimant submitted a request for an arbitral pronouncement with a view to declaring the illegality and consequent annulment of the ST assessment acts relating to the year 2012, identified above, following the decision dismissing the request for official review lodged against the same, the reimbursement of the amounts of tax paid pursuant to such assessment acts, and the payment of compensatory interest.

To support its request, it alleges, succinctly, that:

i. The Claimant is the owner of the properties registered in the tax roll under the articles…, of the parish of… and… of the parish of…;

ii. Such properties are described as "land for construction".

iii. The assessments in question result from the application of Article 1, No. 1 of the ST Code, combined with item 28.1 of the respective General Table ("GTST") (and not 2.28, as the Claimant apparently refers to by mistake) and with Article 6 of Law No. 55-A/2012, of 29 October;

iv. Properties registered in the tax roll as land for construction cannot be subsumed within the concept of properties with residential use, thus the item 28.1 of the GTST cannot be applied, and consequently the assessments in question lack legal basis.

v. The Claimant submitted a request for official review of such assessments, which was dismissed by order notified to the Claimant on 26 August 2015.

vi. The Claimant appeals from such dismissal order to the arbitral tribunal.

vii. For the assessments in question, regard should be had to the wording of item 28.1 of the GTST in force in 2012, which provides that the tax is applicable to properties with residential use of value equal to or greater than €1,000,000.00.

viii. The concept of properties with residential use is not defined in the ST Code, in the Real Estate Tax Code ("RETC") nor in any other statute;

ix. Thus reference must be made to the general rules of interpretation, pursuant to Article 11, No. 1 of the General Tax Law ("GTL") and Article 9, No. 1 of the Civil Code.

x. The expression "residential use" necessarily implies a residential use, referring to urban properties that have (or may have) an effective use for residential purposes, whether because they are licensed for such purpose or because that is their normal destination.

xi. Item 28.1 of the GTST should cover only properties that are actually dedicated to residential purposes, that is, properties that already have residential use, or properties that, although they do not have such use, meet all the conditions necessary for such use.

xii. There being no preamble in Law No. 52-A/2012 (which introduced this item 28.1) that would permit the conclusion of the principles that lay at its origin, regard must be had to the statements of the Secretary of State for Tax Affairs at the time of discussion of this proposal.

xiii. From those statements it results that the legislator's intention was to tax properties destined for housing, specifically "houses", whose taxable property value exceeds the limit provided for in the item.

xiv. From the foregoing it results that item 28.1 of the GTST cannot be applicable to the Claimant's properties.

xv. From Article 6, No. 3 of the RETC it follows that land for construction comprises all that to which:

• a licence or authorisation for subdivision or construction has been granted;

• prior notice of subdivision or construction has been admitted or prior favourable information of subdivision or construction has been issued;

• have been declared as such in their respective acquisition title.

xvi. From these requirements it is concluded that land for construction does not yet include any construction that may confer on them real residential use.

xvii. There exists merely an expectation or potentiality that they may be subject to construction works, following which a new number should be registered in the tax roll, one that is dedicated to residential purposes (or other purposes).

xviii. Such expectation or potentiality is wholly insufficient for it to be classified within the scope of application of item 28.1 of the GTST.

xix. Consequently, the assessments in question are manifestly illegal and must be annulled.

xx. Subsidiarily, the taxation provided for in item 28.1 is contrary to the principle of equality, enshrined in Article 13 of the Constitution of the Portuguese Republic and, in parallel, contrary to the principle of tax equality and contributive capacity contained in Article 104, No. 3 thereof.

xxi. The provision in question, not subjecting to taxation urban properties that are not dedicated to housing, differentiates taxpayers without regard to their respective contributive capacity.

xxii. It does not effectively penalise all owners who have high-value real estate assets: if an owner has only a single urban property and it has a taxable property value exceeding €1,000,000.00, it will be subject to special taxation; by contrast, if an owner holds multiple urban properties of individual value below €1,000,000.00, but which in total amount to a much higher value, it will not be subject to special taxation.

xxiii. Item 28.1 of the GTST should thus be disapplied as manifestly unconstitutional.

xxiv. Arbitral jurisprudence has already largely embraced its argumentation.

xxv. Reimbursement should be made of the amounts of ST paid pursuant to the assessments in question, in the amount of €21,314.70;

xxvi. The Respondent should further be ordered to pay compensatory interest, for an unduly paid tax obligation by the Claimant, pursuant to Article 43 of the GTL, with all the respective requirements met.

III. Response of the Respondent

As a preliminary matter, it should be noted that, in view of the content of the arbitral order of 13 March and the response thereto by the Respondent, the Arbitral Tribunal considers, pursuant to Article 248 of the Code of Civil Procedure, applicable ex vi of Article 29, No. 1, subparagraph e) of the LFTA, that the Respondent's Response was submitted within the deadline, on the thirtieth day, accepting in full the argumentation of the Respondent.

In its response, the Respondent alleges that:

i. It is the understanding of the AT that the properties on which the disputed assessments fall have the legal nature of properties with residential use, and therefore the assessment acts that are the subject of the present request for arbitral pronouncement should be maintained, as they embody a correct interpretation of Item 28 of the GTST, added by Law No. 55-A/2012, of 29 October.

ii. In the absence of any definition of the concepts of urban property, land for construction, and residential use, in relation to ST, recourse must be made to the RETC, in search of a definition that would permit ascertaining any subjection to ST, in accordance with Article 67, No. 2 of the ST Code in the wording given by Law No. 55-A/2012, of 29 October.

iii. Under the terms of that legal provision, to matters not regulated in the Code, relating to item No. 28 of the GTST, the provisions of the RETC apply subsidiarily.

iv. Article 2, No. 1 of the RETC provides that "property is any parcel of territory, including waters, plantations, buildings and structures of any kind incorporated therein or erected thereon, with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or structures, in the circumstances above, endowed with economic autonomy in relation to the land on which they are located, although situated on a parcel of territory that forms an integral part of a different patrimony or does not have patrimonial nature".

v. In turn, Article 6, No. 1 of the RETC provides concerning the species of existing urban properties, including within this concept land for construction, that is "land situated within or outside an urban agglomeration, for which a licence or authorisation has been granted, prior notice has been admitted or prior favourable information has been issued for a subdivision or construction operation, and also those which have been declared as such in the respective acquisition title, with the exception of land on which the competent entities prohibit any of those operations."

vi. The notion of dedication of the urban property finds its basis in the part relating to the valuation of immovables, in that the valuation of the immovable (purpose) incorporates value to the immovable, constituting a determining distinguishing factor (coefficient) for purposes of valuation.

vii. As results from the expression "…value of the authorized buildings", contained in Article 45, No. 2 of the RETC, the legislator chose to determine the application of the methodology of valuation of properties in general, to the valuation of land for construction, and thus is applicable to them the dedication coefficient provided for in Article 41 of the RETC.

viii. Thus, for purposes of determination of the taxable property value of land for construction, the application of the dedication coefficient in relation to valuation is clear, and therefore its consideration for purposes of application of item 28 of the GTST cannot be ignored, in that:

a. In the application of law to concrete cases it is important to determine the exact meaning and scope of the norm, so that the rule contained therein is revealed, an indispensable condition for it to be capable of being applied, in accordance with Article 9 of the Civil Code, ex vi Article 11 of the GTL;

b. Article 67, No. 2 of the ST Code orders the application of the provisions of the RETC subsidiarily;

c. The dedication of the immovable (aptitude or purpose) is a coefficient that contributes to the valuation of the immovable, in the determination of the taxable property value, applicable to land for construction;

d. Item 28 itself of the GTST refers to the expression "properties with residential use", appealing to a classification that overlaps the species provided for in No. 1 of Article 6 of the RETC.

ix. The AT understands that the concept of "properties with residential use", for purposes of the provision of item 28 of the GTST, comprises both built properties and land for construction, clearly having regard to the literal element of the norm.

x. The legislator does not refer to "properties destined for housing", 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, No. 1, subparagraph a) of the RETC.

xi. The mere constitution of a right of potential construction immediately increases the value of the immovable in question, hence the rule contained in Article 45 of the RETC which orders the separation of the two parts of the land.

xii. With regard to the legal regime of urbanization and construction (LRUC), it should be noted that the same has as its presupposition buildings already constructed.

xiii. One cannot ignore that the licence permit for the undertaking of urbanistic operations should contain, among other elements, the number of lots and the indication of the area of location, purpose, implantation area, construction area, number of storeys, number of dwelling units of each of the lots, with specification of the dwelling units intended for housing at controlled costs, when envisaged, pursuant to subparagraph a) of Article 77 of the LRUC;

xiv. Neither can one ignore that Article 77 of the LRUC contains mandatory specifications, starting with the permits for subdivision operation or urbanization works, and for construction works.

xv. Municipal Master Plans also establish the strategy of municipal development, municipal policy for territorial planning and urbanism and other urban policies. It integrates and articulates the guidance established by territorial management instruments of national and regional scope and establishes the model of spatial organisation of the municipal territory.

xvi. In these terms, well before the actual construction of the property, it is possible to ascertain and determine the dedication of the land for construction.

xvii. The provision in question is constitutional, noting, among others, that it is a general and abstract norm, applicable indistinctly to all cases in which the factual and legal requirements are met, and which seeks to achieve maximum efficacy as to the objective to be achieved, with the minimum of injury to other interests considered relevant.

xviii. It must be concluded, necessarily, that the AT's correct interpretation of the norm and consequent correctness of the assessments in question, with no error imputable to the services that could determine the payment of compensatory interest.

xix. Additionally, and even if compensatory interest were considered to be owed, its payment would be classifiable under No. 3, subparagraph c) of Article 43 of the GTL, which provides that in situations of revision of the tax act at the initiative of the taxpayer, compensatory interest is owed only from one year after the submission of the request for revision.

IV. Questions to be Decided

Having regard to the facts and matters of law contained in the request for arbitral pronouncement submitted by the Claimant and the response of the Respondent, the questions to be decided by the Arbitral Tribunal are:

1. Whether land for construction should be considered, for purposes of subjection to ST, under item 28.1 of the GTST, in the wording of Law No. 55-A/2012, of 29 October, as properties with residential use;

2. In the event that the answer to the foregoing question is affirmative, to determine whether item 28.1 of the GTST is unconstitutional, as violating Article 13 of the CRP, that is, the principle of tax equality and contributive capacity.

V. Factual Matters

With relevance to the assessment of the Claimant's request, the following facts are taken as proven, based on the documents attached to the proceedings, and not disputed by the Respondent:

1. The Claimant is the owner of the properties registered in the tax roll under the articles…, of the parish of… and… of the parish of…;

2. Such properties are described in the tax roll as land for construction.

3. The property registered under article… has a taxable property value of €1,062,183.00 (one million sixty-two thousand one hundred and eighty-three euros).

4. The property registered under article… has a taxable property value of €1,181,188.93 (one million one hundred and eighty-one thousand, one hundred and eighty-eight euros and ninety-three cents).

5. The Claimant was notified of the following Stamp Tax assessment acts relating to the year 2012, corresponding to the following documents:

• 2013…, of 21.03.2013, in the amount of €3,740.90 (three thousand seven hundred and forty euros and ninety cents);

• 2013…, of 21.03.2013, in the amount of €3,740.90 (three thousand seven hundred and forty euros and ninety cents);

• 2013…, of 21.03.2013, in the amount of €3,740.90 (three thousand seven hundred and forty euros and ninety cents);

• 2013…, of 21.03.2013, in the amount of €3,364.00 (three thousand three hundred and sixty-four euros);

• 2013…, of 21.03.2013, in the amount of €3,364.00 (three thousand three hundred and sixty-four euros); and

• 2013…, of 21.03.2013, in the amount of €3,364.00 (three thousand three hundred and sixty-four euros);

in a total amount of €21,314.70 (twenty-one thousand three hundred and fourteen euros and seventy cents).

1. The Claimant proceeded to pay the tax. Although the Claimant did not attach to the case file the payment proof document which it undertook to attach, the payment is assumed from the administrative proceeding, which never contests the payment, nor from the response of the Respondent, which assumes the same.

2. The tax in question was assessed under item 28.1 of the GTST.

3. The Claimant submitted a request for official review of those assessments, requesting their annulment.

4. The request for official review was dismissed, the Claimant having been notified of such dismissal on 26 August 2015.

The conviction concerning the facts taken as proven was based on the documentary evidence submitted by the Parties, whose authenticity and correspondence to reality were not questioned.

There are no other facts, with relevance to the proceedings, that are not considered proven.

VI. Matters of Law

The question at issue here and identified in IV.1 above has already been subject to consideration by the Supreme Administrative Court (SAC) on several occasions (see, by way of example, the Judgments of 24 September and 9 July 2014, respectively, case nos. 01533/13 and 0676/14, and the Judgment of 15 April 2015, case 01481/14) and by arbitral jurisprudence (namely, and by way of merely exemplificative reference, in the course of case nos. 42/2013-T, of 18/10/2013; 48/2013-T, of 09/10/2013; 49/2013-T, of 18/09/2013; 53/2013-T, of 02/10/2013; 75/2013-T, of 01/11/2013; 144/2013-T, of 12/12/2013; 158/2013-T, of 10/02/2014; 308/2013-T, of 28/04/2014; 310/2013-T, of 22/04/2014, 202/2014-T, of 16/10/2014; 486/2015-T of 18/12/2015 and 111/2015-T, of 28/09/2015).

The jurisprudence cited decided, in all cases, against the understanding of the Respondent, decisions which, as is indicated herein, this Arbitral Tribunal supports, as will be detailed.

For the assessment of the matter in question it is important, first of all, to analyse Article 4 of Law No. 55-A/2012, of 29 October, which added to the GTST, annexed to the ST Code, item no. 28, with the following wording:

"28 — Ownership, usufruct or surface right of urban properties whose taxable property value recorded in the tax roll, pursuant to the Real Estate Tax Code (RETC), is equal to or greater than € 1 000 000 — on the taxable property value used for purposes of real estate tax:

28.1 — Per property with residential use — 1 %;

28.2 — Per property, where the taxable persons who are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, contained in the list approved by order of the Minister of Finance — 7.5 %."

The legislative text in question introduced a concept not used in any other tax provision – that of property with residential use – nor did it define the same. To understand its content, the concepts of property contained in the RETC (Articles 2 to 6) should thus be examined – pursuant to Article 67, No. 2 of the ST Code, according to which, to matters not regulated in the ST Code relating to item No. 28 of the GTST, the provisions of the RETC apply subsidiarily.

And such interpretation must always be carried out pursuant to the provisions of Article 11 of the General Tax Law (GTL) and Article 9 of the Civil Code, to which it refers.

Article 11 of the GTL provides that:

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

1. Whenever tax norms employ terms specific to other branches of law, these must be interpreted in the same sense as that which they have therein, unless otherwise directly results from the law.

2. If doubt persists regarding the meaning of the applicable tax norms, regard must be had to the economic substance of the tax facts.

3. Gaps resulting from tax norms covered by the legislative reserve of the Assembly of the Republic are not susceptible to analogic integration."

In turn, Article 9 of the Civil Code provides that:

"1. Interpretation should not be confined to the letter of the law, but should reconstruct from the texts the legislative thought, having regard especially to 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.

1. However, the interpreter cannot take into account legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

2. In establishing the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and was able to express his thought in adequate terms."

From the analysis of the concepts contained in the indicated articles of the RETC (Articles 2 to 6), it is apparent that there is no correspondence with any of them and that established in item 28.1 of the GTST (property with residential use). In fact, the RETC clearly differentiates residential properties from land for construction. The former are classified based on their respective municipal licence or, in the absence thereof, their normal use; the latter are defined based on their legal potentiality.

Licencing or normal use of a property whose destination is housing naturally refer to built properties that meet the requirements necessary for such licencing or use.

Land for construction – independently of the potentiality of construction, or of the moment when that potentiality is assessed, contrary to what the Respondent refers to – will have no aptitude to be licenced for housing, or to have this purpose defined as its normal destination.

Now, if the tax norm in question does not itself define the concept of residential use, it is not possible to extract, pursuant to the aforementioned provisions, and without more, that within its scope falls any future potentiality of a building that may be constructed on land for construction – it includes only actual residential construction.

And contrary to what the Respondent alleges, one cannot interpret the norm in the sense of affirming that the legislator's choice with the expression "residential use" was to overlap the species contained in Article 6 of the RETC. The rules according to which the interpreter must proceed in the activity of interpretation of legal norms, as detailed above, afford no legal support to such interpretation.

Had that been the legislator's option, it would certainly have expressly indicated the same. Now, presuming that the legislator was able to express his thought adequately, we find, by contrast, an express reference to the concepts contained in the RETC (which the Respondent itself acknowledges), and not to other realities not contained therein.

Additionally, this Arbitral Tribunal also does not agree with the Respondent's understanding, according to which the meaning of residential use should be extracted from Article 45 of the RETC. Article 45 of the RETC refers to the rules applicable in determining the taxable property value of land for construction, establishing that this is what results from the value of the building implantation area to be constructed added to the land adjacent to the implantation. In establishing the value of that area, a percentage, varying between 15% and 45%, of the value of the authorized or envisaged buildings is considered. The Respondent states that in that value setting coefficients applicable in determining the taxable property value are used, namely the "residential" dedication coefficient, and that such should also be a determining element for purposes of application of item 28.1 of the GTST in question.

As a particularly clarifying point on this matter, cite the provision in the Judgment of the SAC of 9 July 2014, with which full agreement is expressed:

"The fact that it may be considered that in determining the taxable property value of urban properties classified as land for construction regard should be had to the dedication that the authorized or envisaged construction for it will have for determination of the respective value of the implantation area (cf. Nos. 1 and 2 of Article 45 of the RETC) does not determine that land for construction may be classified as 'properties with residential use', in that residential use always appears in the Real Estate Tax Code referred to 'buildings' or 'structures', existing, authorized or envisaged, in that only these can be inhabited, which is not the case with land for construction, which does not have, in itself, conditions for such, not being capable of being used for housing unless and until a construction authorized and envisaged for it is erected thereon (but in that case they would no longer be 'land for construction' but another species of urban property – 'residential', 'commercial, industrial or for services' or 'other' – Article 6 of the RETC).

It would be strange, moreover, that the determination of the scope of the tax incidence norm of item No. 28 of the General Table of Stamp Tax were, after all, found in the norms for determination of the taxable property value of the Real Estate Tax Code, and that the terminological imprecision of the legislator in drafting that rule were, in fact, clarified and finally explained through an indirect and equivocal reference to the dedication coefficient established by the legislator in relation to built properties (Article 41 of the Real Estate Tax Code)."

It should also be noted that Law No. 83-C/2013, of 31 December, altered the wording of the provision in question, with item 28.1 of the GTST now providing: "per residential property or per land for construction whose authorized or envisaged construction is for housing".

It is the understanding of this Arbitral Tribunal that the new norm applies only prospectively (from 1 January 2014), and that one could not – if such were the case – draw from the same any interpretive character of the wording previously in force and now at issue. If there had been an intention to confer interpretive nature to the norm, such would have been expressly indicated by the legislator.

The jurisprudential practice has been unanimous, consistent and settled regarding the understanding to be given to the provision in question, and therefore, in truth, nor did a norm exist that needed authentic interpretation. Thus, the legislator, with the amendment introduced in 2013, merely clearly included a new reality subject to item 28.1 of the GTST, beyond the manifestly residential properties (land for construction, not contained in the previous wording).

Finally, and in order to reinforce the understanding that has been outlined, reconstruction of the legislative thought that presided over the approval of the wording of item 28.1 of the GTST in 2012 is sought. On one hand, from the statement of reasons contained in the Bill No. 96/XII – 2nd, of 21/09/2012 (which gave rise to the already cited Law No. 55-A/2012), no element emerges that would permit clarifying the concept of property with residential use.

On the other hand, and as contained in the Journal of the Assembly of the Republic, Series I, no. 9/XII, 2nd legislative session, of 11 October 2012, the Secretary of State for Tax Affairs presented this legislative innovation in the following terms:

"This proposal has three essential pillars: the creation of special taxation on urban properties of value exceeding 1 million euros; the increase in taxation on returns on capital and on capital gains on securities; and the strengthening of rules to combat tax fraud and evasion.

First, the Government proposes the creation of a special rate to tax residential urban properties of higher value. It is the first time that in Portugal special taxation is created on high-value properties destined for housing. This rate will be 0.5% to 0.8%, in 2012, and 1%, in 2013, and will apply to houses of value equal to or greater than 1 million euros." (emphasis supplied).

From the foregoing it results that it is not possible, and by force of the legal provisions cited, to infer that within the expression "properties with residential use" land for construction may be subsumed. On the contrary.

Concluding that land for construction is not subject to item 28.1 of the GTST, the order dismissing the request for official review submitted by the Claimant cannot be maintained and, consequently, neither can the tax assessments discussed therein be maintained.

Given the foregoing conclusion, the assessment of the subsidiary question raised by the Claimant is rendered moot.

Having verified the illegality of the assessments in question and the Claimant having paid the tax thereunder, the latter is entitled, in accordance with Articles 24, No. 1, subparagraph b) of the LFTA and 100 of the GTL, to reimbursement of the unduly paid tax, in the amount of €21,314.70 (twenty-one thousand three hundred and fourteen euros and seventy cents).

VII. Compensatory Interest

As to compensatory interest, Article 43 of the GTL stipulates that "compensatory interest is owed when it is determined, in administrative reclamation or judicial challenge, that there was error imputable to the services resulting in payment of the tax obligation in an amount greater than legally owed". As to the existence, in the case, of error imputable to the services, such error is considered verified, in that the allegation of the illegality of the assessment proceeds.

The Respondent alleges, however, that only the provision of subparagraph c) of No. 3 of Article 43 would be applicable to the case, which provides that compensatory interest is owed when revision of the tax act at the initiative of the taxpayer is carried out more than one year after the request therefor, except if the delay is not imputable to the tax authority.

The Respondent also cites jurisprudence of the SAC which embraces such argumentation. And on this point, the Arbitral Tribunal also embraces the position of the Respondent. The Claimant could have used the gracious or judicial remedies at its disposal to contest the legality of the tax assessments notified to it, but did not do so. Only about two years thereafter, with the legal deadlines for such purposes already having elapsed, did it submit a request for official review. And such request, without prejudice to the way in which it is decided, receives a final response before the one-year deadline contained in that subparagraph c) of No. 3 of Article 43 of the GTL has elapsed. Consequently, the Claimant is not entitled to compensatory interest on the amount of unduly paid tax.

VIII. Decision

On these grounds, and based on the grounds set forth, the Arbitral Tribunal decides:

A. To uphold the request for arbitral pronouncement, with the consequent annulment of the Stamp Tax ("ST") assessment acts relating to the year 2012, corresponding to documents no. 2013…, of 21.03.2013, in the amount of €3,740.90 (three thousand seven hundred and forty euros and ninety cents); 2013…, of 21.03.2013, in the amount of €3,740.90 (three thousand seven hundred and forty euros and ninety cents); 2013…, of 21.03.2013, in the amount of €3,740.90 (three thousand seven hundred and forty euros and ninety cents); 2013…, of 21.03.2013, in the amount of €3,364.00 (three thousand three hundred and sixty-four euros); 2013…, of 21.03.2013, in the amount of €3,364.00 (three thousand three hundred and sixty-four euros); and 2013…, of 21.03.2013, in the amount of €3,364.00 (three thousand three hundred and sixty-four euros), in a total amount of €21,314.70 (twenty-one thousand three hundred and fourteen euros and seventy cents).

B. To order the Respondent, pursuant to subparagraph b) of No. 1 of Article 24 of the LFTA, to restore the situation that would exist if the annulled assessment acts had not been carried out, adopting the acts and operations necessary for such purpose, through the restitution of the amounts of unduly paid tax.

C. To dismiss the request for compensatory interest submitted by the Claimant.

Value of the case: €21,314.70 (twenty-one thousand three hundred and fourteen euros and seventy cents)

Costs: Pursuant to Article 22, No. 4 of the LFTA, and pursuant to Table I annexed to the Rules of Costs in Tax Arbitration Proceedings, the costs are fixed in the amount of €1,224.00 (one thousand two hundred and twenty-four euros), to be borne by the Respondent.

Lisbon, 8 April 2016

The Arbitrator

Ana Pedrosa Augusto