AIMI on Construction Land for Services: CAAD Rules on Additional Property Tax Exemption (699/2018-T)

ARBITRAL DECISION

I – REPORT

1. A..., LDA., with Tax Identification Number..., with registered office at..., no...., in..., hereinafter referred to as the "Claimant", requested the constitution of an Arbitral Tribunal, in accordance with the terms and for the purposes provided in subparagraph a) of paragraph 1 of Article 2 and in subparagraph a) of paragraph 1 of Article 10 of the Legal Regime for Arbitration in Tax Matters ("LRAT"), presenting a request for arbitral pronouncement seeking the declaration of illegality and annulment of the assessment act for the Additional Municipal Property Tax (AMPT) with number 2018..., for the year 2018, in the amount of €6,399.76.

2. The Respondent is the TAX AND CUSTOMS AUTHORITY (hereinafter referred to only as "Respondent" or "TA").

3. The request for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD on 28-12-2018.

4. The Respondent was notified of the presentation of the request for constitution of the arbitral tribunal on 03-01-2019.

5. Given that the Claimant did not proceed with the appointment of an arbitrator, pursuant to the provisions of Article 6, paragraph 2, subparagraph a), of the LRAT, the undersigned was designated as arbitrator by the President of the Deontological Board of CAAD, with the appointment being accepted within the legal timeframe and terms.

6. On 15-02-2019, the Parties were duly notified of such designation and did not manifest any intention to refuse the appointment of the arbitrator, in accordance with the provisions of Article 11, paragraph 1, subparagraphs a) and b) of the LRAT, in conjunction with Articles 6 and 7 of the Deontological Code.

7. In compliance with the provision contained in subparagraph c) of paragraph 1 of Article 11 of the LRAT, the Arbitral Tribunal was constituted on 07-03-2019.

8. The Claimant bases its request for arbitral pronouncement alleging, in summary, the following:

a) The assessment act now contested results from the improper taxation in AMPT of a land for construction allocated to services;

b) The Claimant could never legitimately construct on the land lot in question any building allocated to housing, given that it could never obtain a license for such purpose, which would always be void in accordance with Articles 68, paragraph 1, a) and 77, paragraphs 1 and 3, of the Urban Planning Regulations;

c) The subdivision permit specifies that the land lot in question is intended for the construction of a tourist unit;

d) The legislator did not intend to tax in AMPT the holder of commercial or service buildings during the construction phase, while at the same time exempting them from AMPT with respect to their already-built commercial buildings;

e) The tax-assessed value of land for construction will always be less than half of the tax-assessed value of the buildings authorized or foreseen thereon, in accordance with the provisions of Article 45 of the Municipal Property Tax Code;

f) In the present case, the tax-assessed value of the land for construction corresponds to 35% of the assessed value of the building foreseen thereon, as results from paragraph 2 of Article 45 of the MPTC in conjunction with the respective municipal zoning;

g) The location coefficient used by the TA to assess the land was the one corresponding to the zoning for services allocation, 2.1 – instead of the location coefficient of 1.6 corresponding to the housing zoning;

h) Similarly, the allocation coefficient applied in the assessment of the land lot has the value of 1.10, and not 1, which means that, also from the TA's perspective, it is, in accordance with Article 41 of the MPTC, allocated to services and not to housing;

i) The contested assessment thus unjustly affects the owner with the most precarious taxable capacity, while at the same time exempting the owner with full taxable capacity;

j) The TA has disclosed a merely mechanical and literal subsumption of land for construction – whatever its allocation or destination – to the normative provision of Article 135-B of the MPTC, which leads to incoherence and systematic insecurity;

k) Constituting the land lot in question in these proceedings an immovable asset allocated to a commercial activity, both in physical and economic terms and in the manner in which the law defines them, AMPT does not apply to its ownership;

l) Between a result of interpretation that is in accordance with the Constitution and one that is not, the one that preserves the constitutionality of the rule must prevail;

m) If it were to be understood that the rule of incidence of AMPT excludes commercial buildings capable of operation, but includes commercial buildings still in the construction phase, there would be manifest violation of the principle of vertical equality;

n) The interpretation that the TA makes of the tax base of AMPT – and of the corresponding exclusion field – completely ignores taxable capacity as a presupposition, criterion and measure of the tax, thus violating the principle of equality before the Law;

o) The TA's interpretation not only makes the intended neutrality of AMPT regarding immovable assets allocated to an economic activity impossible, but also causes an aggravated impact on economic activity, as a result of the competitive distortion caused by the taxation of only certain merchants – and therefore those with lower taxable capacity;

p) Even if it were understood that the TA's position is supported by the text, purpose and meaning of the rule of paragraph 2 of Article 135-B of the MPTC, it would always be necessary to conclude its blatant unconstitutionality and consequently the illegality of the assessment of AMPT against the Claimant based on that rule.

1. The Respondent filed a Reply, in which it presented a defense by impugnation, sustaining the lack of merit of the request for arbitral pronouncement based on the arguments summarized hereinafter:

a) Article 135-B of the MPTC provides for the incidence of AMPT on urban properties classified as "residential" and "land for construction" in accordance with subparagraphs a) and c) of paragraph 1 of Article 6 of the MPTC;

b) The property in question was, on the date of the tax event, classified as "land for construction";

c) If a building comes to exist, we will have a new tax event, a new tax-assessed value and a new legal-tax reality that will have, at the moment of verification of the new tax event, its tax treatment in accordance with that new reality;

d) The legislator made no distinction regarding land for construction on account of its allocation or the purposes pursued by its owners;

e) The thesis proposed by the Claimant directly and frontally contends with the principle of typicity enshrined in Article 130 of the Constitution;

f) AMPT establishes a particular taxation of property, in accordance with a real and objective levy, in which its passive subject is determined simply by the quality of being the holder of a certain real right over properties with the characteristics statutorily fixed;

g) In the field of property taxation, the rule of uniformity is what imposes is horizontal equality, that is, that all those who are holders of the same form of wealth be taxed in the same manner;

h) It is well understood the legislative solution of submitting to taxation all passive subjects in attention to the holding of relevant legal situations regarding properties subject to objective incidence, independent of the legal or economic structuring that such passive subjects may have;

i) For purposes of AMPT, and differently from item 28.1 (where the Respondent attempts, in vain, to support its argument), the law does not specify that only "land for construction whose building, authorized or foreseen, is for housing" is covered by the incidence, and if the letter of the law does not distinguish, it is not incumbent upon the interpreter to do so;

j) Article 135-B, paragraph 2, of the MPTC is unconstitutional when interpreted in the sense that excluded from the taxation foreseen therein are also properties classified as land for construction whose potential purpose is not residential, as it violates the constitutional principle of separation and interdependence of powers, enshrined in Articles 2 and 111 of the Constitution, constituting itself as a reference and limit to the powers of cognition of courts in the exercise of their function within the State governed by the rule of law (cf. Articles 202 and 203 of the Constitution), as well as the constitutional principle of equality (cf. Article 13 of the Constitution) and, likewise, the principle of legality formulated in Articles 103/2 and 165/1-i), all of the Constitution;

k) Any interpretation that excludes the Claimant from the scope of the subjective incidence of AMPT, given that the immovable property constitutes the substrate of its activity, is also unconstitutional as it violates the constitutional principle of separation and interdependence of powers, enshrined in Articles 2 and 111 of the Constitution, constituting itself as a reference and limit to the powers of cognition of courts in the exercise of their function within the State governed by the rule of law (cf. Articles 202 and 203 of the Constitution), as well as the constitutional principle of equality (cf. Article 13 of the Constitution) and, likewise, the principle of legality formulated in Articles 103/2 and 165/1-i), all of the Constitution.

1. In its reply, the TA requested the Tribunal to, in case of merit of the request for arbitral pronouncement, determine the notification to the Public Prosecutor of the arbitral decision, based on the provisions of Article 280, paragraph 3, of the Constitution and Article 72, paragraph 3, of the Constitutional Court Act.

2. By order of 11-04-2019, this Tribunal, under the principles of tribunal autonomy in conducting the process, expedition, simplification and procedural informality (Articles 19, paragraph 2, and 29, paragraph 2, of the LRAT), bearing in mind that no exceptions were raised and no additional evidence was requested, decided to waive the holding of the meeting provided for in Article 18 of the LRAT and to determine that the case would proceed with optional written submissions, to be presented by the Parties within the simultaneous period of 10 days, as provided for in Article 91, paragraph 5, of the Tax Procedure Code, applicable by virtue of the provision in Article 29, paragraph 1, subparagraph c), of the LRAT.

3. The Parties presented written submissions, in which they reiterated the arguments contained in the request for arbitral pronouncement and the reply.

II – STATEMENT OF CASE

1. No exceptions were raised.

2. The presentation of the request for arbitral pronouncement was timely.

3. The Parties have legal personality and capacity, are legitimate as to the request for arbitral pronouncement and are duly represented, in accordance with the provisions of Articles 4 and 10 of the LRAT and Article 1 of Order no. 112-A/2011, of 22 March.

4. No nullities are found, so the merits must be addressed.

III. MERITS

III.1. FACTUAL MATTER

§1. Facts found proved

1. The Tribunal considers the following facts proved:

a) The Claimant is the owner of the land for construction located at ..., denominated "Lot...", registered in the urban property matrix of the parish of ... and ... under number ... and described in the Property Registry of ... under number ... (documents nos. 2, 3 and 4, attached to the proceedings by the Claimant), with the tax-assessed value of €1,599.940;

b) The Claimant is engaged in the operation and management of hotels and tourist enterprises (document no. 5, attached to the proceedings by the Claimant);

c) The Lot... is titled by subdivision permit no. .../2000, issued on 20 April 2000, and respective amendments issued by the Municipal Council of ..., (documents nos. 6, 7 and 8, attached to the proceedings by the Claimant);

d) In accordance with what is specified in the subdivision permit, including in its amendments, the Lot ... in question in the present proceedings has a total area of 3,904 m² and is intended for the construction of a tourist unit (documents nos. 6, 7 and 8, attached to the proceedings by the Claimant);

e) The Claimant requested the President of the Municipal Council of ... to authorize it to begin the respective construction work on the hotel establishment, thus specified in the subdivision permit (document no. 9, attached to the proceedings by the Claimant);

f) In 2018, the TA assessed AMPT regarding the property better described above – assessment no. 2018..., of 30/06/2018 – resulting therefrom a value of AMPT to be paid of €6,399.76;

g) The impugned AMPT was paid in full by the Claimant on 24 September 2018 (document no. 10, attached to the proceedings by the Claimant).

§2. Facts not proved

1. With relevance to the decision, there are no essential facts that are not proved.

§3. Reasoning regarding factual matter

1. The facts found proved are based on the documents attached by the Claimant with the request for arbitral pronouncement.

III.2. LEGAL MATTER

§1. Issues to be decided and legal framework

1. The question that constitutes the thema decidendum comes down to determining whether the land for construction referred to in the proceedings, bearing in mind that it is intended for a building for purposes of "commercial, industrial or service" or considering that it constitutes the substrate of the Claimant's economic activity, is covered by the rules of objective incidence of AMPT, provided for in Article 135-B of the MPTC, whereby there must be a decision on the legality or illegality of the contested assessment.

2. In case of merit of the request for arbitral pronouncement, there must also be a decision on the request for payment of indemnity interest, formulated by the Claimant, as well as on the request for notification of the arbitral decision to the Public Prosecutor, formulated by the Respondent in its Reply.

3. Law no. 42/2016, of 28 December (State Budget Act for 2017) added to the Municipal Property Tax Code (MPTC) Chapter XV, with Articles 135-A to 135-K, which contain the legal regime of the Additional Municipal Property Tax (AMPT).

4. In Article 135-A of the MPTC the subjective incidence of AMPT is defined, providing that "the passive subjects of the additional municipal property tax are natural or legal persons who are owners, usufructuaries or superficiaries of urban properties situated in Portuguese territory" (paragraph 1), with "legal persons being equivalent to any structures or centers of collective interests without legal personality that appear in the matrices as passive subjects of the municipal property tax, as well as the undivided succession represented by the head of household" (paragraph 2).

5. Article 135-B defines the objective incidence of AMPT, in the following terms:

"(...)

1 - The additional municipal property tax applies to the sum of the tax-assessed values of urban properties situated in Portuguese territory of which the passive subject is the holder.

2 - Excluded from the additional municipal property tax are urban properties classified as "commercial, industrial or for services" and "others" in accordance with subparagraphs b) and d) of paragraph 1 of Article 6 of this Code.

(...)".

1. Article 6 of the MPTC provides as follows:

"(...)

1 - Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Land for construction;

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 ends.

3 - Land for construction is understood to be land situated within or outside an urban agglomeration, for which a license or authorization has been granted, prior notice admitted or favorable prior information issued for a subdivision or construction operation, and also those that have been thus declared in the title of acquisition, excepting land on which the competent entities forbid any of those operations, namely those located in green areas, protected areas or those that, in accordance with municipal land use plans, are allocated to public spaces, infrastructure or facilities.

4 - The provision of subparagraph d) of paragraph 1 covers land situated within an urban agglomeration that are not land for construction nor are covered by the provision of paragraph 2 of Article 3 and also buildings and constructions licensed or, in the absence of a license, that have as their normal purpose other ends than those referred to in paragraph 2 and also those of the exception of paragraph 3".

1. The first issue that needs to be analyzed and decided is therefore the one that concerns whether land for construction whose potential building is for commerce, industry or services is, or is not, subject to AMPT.

2. The arbitral jurisprudence reveals a significant divergence as to the answer to be given to this question.

3. A portion of the arbitral jurisprudence, based on a literal interpretation of the relevant normative provisions, understands that land for construction of buildings for commerce, industry or services are subject to AMPT, since they are not covered by the exclusion of incidence provided for in paragraph 2 of Article 135-B of the MPTC (reference is made, in this sense, and by way of example, to the arbitral decisions rendered in cases nos. 654/2017-T, 664/2017-T, 667/2017-T, 676/2017-T, 678/2017-T, 682/2017-T, 683/2017-T, 684/2017-T, 685/2017-T, 690/2017-T, 692/2017-T, 401/2018-T and 574/2018-T).

4. Another portion of the arbitral jurisprudence, based on an extensive interpretation of the provision contained in paragraph 2 of Article 135-B of the MPTC, sustains the exclusion of AMPT incidence on land for construction of buildings for commerce, industry or services (reference is made, in this sense, and by way of example, to the arbitral decisions rendered in cases nos. 668/2017-T, 669/2017-T, 675/2017-T, 677/2017-T, 679/2017-T, 681/2017-T, 686/2017-T, 687/2017-T, 688/2017-T, 694/2017-T, 8/2018-T and 517/2018-T).

5. It is important to understand the reasons behind this controversy, which, note, did not arise with AMPT.

§2. Historical antecedents

1. During the validity of item 28.1 of the General Tariff of Stamp Tax, in the wording given to it by Law no. 55-A/2012, of 29 October, the question arose as to whether land for construction with tax-assessed value equal to or greater than €1,000,000 were or were not subsumed in the category of "property with residential allocation".

2. At the time, some doctrine understood that the concept of "property with residential allocation", for purposes of the provision in item no. 28.1 of the GTST, comprised both built properties and land for construction, and that residential allocation, for purposes of application of item 28, did not necessarily imply the existence of buildings or constructions, whereby it would apply to land for construction with that allocation.

3. This doctrine further argued that property allocation is a coefficient that contributes to the assessment and determination of the tax-assessed value of land for construction.

4. However, jurisprudence tended toward a different interpretation, with emphasis on the judgment of the Supreme Administrative Court of 23/04/2014, which, based on the distinction between "residential urban properties" and "land for construction", understood that these could not be considered for purposes of incidence of item 28.1 of the GTST.

5. This jurisprudence came to be challenged at the moment when the legislator decided to give force of law to the understanding that sustained the subjection to item 28 of the GTST of land for construction with residential allocation and, through Law no. 83-C/2013, of 31 December, gave new wording to item 28.1 of the GTST.

6. With the entry into force of Law no. 83-C/2013, of 31 December, item 28.1 of the GTST came to cover land for construction "whose building, authorized or foreseen, is for housing, in accordance with the provisions of the Municipal Property Tax Code".

7. This legislative amendment had important significance: although the classification of urban properties contained in paragraph 1 of Article 6 of the MPTC remained unchanged, it came to recognize legal-tax relevance, in the context of Stamp Tax, to the allocation of the authorized or foreseen building for each land.

8. In other words, the legislator came to assert that, from a legal-tax point of view, land for construction are not all the same.

9. Land for construction came to be the object of differentiated treatment, in the context of Stamp Tax, depending on the allocation of the authorized or foreseen building.

10. Thus, and although the wording of Article 6 of the MPTC was not altered, doctrine and jurisprudence came to reference the potential allocation of the building of land for construction, as happens, in particular, in the Judgment of the Constitutional Court no. 378/2018, rendered in the context of Case no. 156/2016, in which it was decided "not to judge unconstitutional the rule contained in Item 28.1 of the General Tariff of Stamp Tax, approved by Law no. 55-A/2012, of 29 October, and amended by Law no. 83-C/2013, of 31 December, insofar as it imposes annual taxation on the ownership of land for construction whose building, authorized or foreseen, is for housing, whose tax-assessed value is equal to or greater than €1,000,000.00".

11. This means that the Constitutional Court itself recognizes that, in the legal-tax domain, land for construction are not all the same.

12. Taking Article 6 of the MPTC as a basis, the classification of urban properties as "land for construction" [subparagraph c)] intersects with the classification of urban properties as "residential" [subparagraph a)].

13. That is, the classification of an urban property as land for construction does not exclude the legal-tax relevance of the classifications in Article 6 that have as their underlying material criterion the allocation of urban properties – subparagraph a): "residential"; subparagraph b): "commercial, industrial or for services"; subparagraph d) "others".

14. The legislative and jurisprudential evolution of which we have taken note allows the identification of the transition from an understanding that clearly distinguished between "land for construction" and residential properties, to another that combines the classification "land for construction" with the allocation of the respective potential building, with the legal-tax consequences set out above in the case of being faced with land for construction of housing.

15. The entry into force of AMPT, and the repeal of item 28 of the GTST, did not erase the aforementioned legislative and jurisprudential evolution, which, while not assuming decisive relevance in the present case, shows why the doubts surrounding "land for construction" and the possible legal relevance of the allocation of the respective potential building maintain their acuity.

§3. On the illegality of the assessment due to error in interpretation of applicable rules

1. The AMPT legislator, in paragraph 2 of Article 135-B, decided to exclude from this tax urban properties classified as "commercial, industrial or for services" and "others" in accordance with subparagraphs b) and d) of paragraph 1 of Article 6 of this Code.

2. In this manner, the legislator subjects to AMPT properties intended for housing and excludes AMPT incidence regarding properties intended for commerce, industry or services and other activities.

3. In a merely literal interpretation of the provision, one would say that, given that no reference is made to "land for construction" in the provision that excludes AMPT incidence (paragraph 2 of Article 135-B), then they would be subject to AMPT by virtue of the provision in paragraph 1 of Article 135-B.

4. In another interpretive path, one may sustain that if the legislator decided to exclude AMPT incidence from urban properties intended for commerce, industry or services or other activities, then land for construction of buildings with any of these allocations are also excluded from AMPT.

5. We are faced with two distinct interpretive senses for the provision contained in paragraph 2 of Article 135-B of the MPTC, whereby the interpreter must seek the sense that proves to be systemically more coherent and more in conformity with the Constitution.

6. On this question, this Tribunal subscribes to the reasoning contained in arbitral decision no. 686/2017-T, when it states the following:

"[...]

Given that the tax event chosen as an index of taxable capacity is the ownership of immovable property of value considered elevated, it will not be coherent not to apply the tax to buildings intended for commerce, industry or services and to apply it to the land intended for their construction, whose value is incorporated in the value of the buildings.

Thus, in a perspective that keeps in mind the unity of the legal system (Article 9, paragraph 1, of the Civil Code), which has decisive interpretive value, required by the principle of the evaluative or axiological coherence of the legal order [BAPTISTA MACHADO, Introduction to the Right and Legitimizing Discourse, page 191], one should interpret extensively the exclusion provided for in paragraph 2 of Article 135-B of the MPTC regarding urban properties classified as "for services" as expressing a legislative intention to also exclude from taxation land intended for the construction of those properties.

In any case, if a literal interpretation of this rule is adopted, with the sense that all land for construction is covered by AMPT incidence, it will be materially unconstitutional, being incompatible with the principle of equality (Article 13 of the Constitution), as it considers the tax event the ownership of land for construction of properties intended for commerce, industry and services and not the ownership of the properties constructed thereon, as it constitutes an unjustified underprivileged treatment of taxpayers found in the first situation, as it is necessarily lesser the taxable capacity indicated by immovable property in that situation, which must be present, and with increase, in the second.

[...]".

1. Thus, in an interpretation in conformity with the Constitution, which takes into account the criterion of taxable capacity, underlying the principle of equality, enshrined in Article 13 of the Constitution, and having regard to the unity of the legal system (Article 9, paragraph 1, of the Civil Code), the exclusion provided for in paragraph 2 of Article 135-B of the MPTC regarding urban properties classified as commerce, industry and services should be interpreted extensively, as expressing an objective legislative intention to also exclude from taxation land intended for the construction of those properties.

2. In the present case, there is a AMPT assessment concerning land for construction of a hotel establishment, that is, land for construction intended for a commercial activity.

3. By the foregoing, the total assessment of AMPT impugned is illegal, since the land for construction whose tax-assessed value was considered in the assessment is intended for a commercial activity.

4. The TA understands that Article 135-B, paragraph 2, of the MPTC is unconstitutional when interpreted in the sense that the exclusion from taxation foreseen therein also covers properties classified as land for construction whose potential purpose is not residential, as it understands that such interpretation violates the constitutional principle of separation and interdependence of powers (Articles 2 and 111 of the Constitution), the constitutional principle of equality (Article 13 of the Constitution) and the principle of legality [Articles 103/2 and 165/1-i) of the Constitution].

5. However, in accordance with Article 204 of the Constitution, courts have the power and duty to, in the concrete cases submitted to judgment, disapply rules that infringe the Constitution or the principles contained therein (successive concrete review of constitutionality), whereby such disapplication in no way conflicts with the principle of separation and interdependence of powers.

6. But given that it is possible to adopt a normative interpretation compatible with the Constitution, the court should accept it, thus taking advantage of the rule in question and avoiding a judgment of unconstitutionality regarding it, which would lead to its disapplication.

7. It was precisely an interpretation in conformity with the Constitution that was adopted by this tribunal in the present case, which led to the extensive interpretation of Article 135-B, paragraph 2, of the MPTC.

8. The rule contained in Article 135-B, paragraph 2, of the MPTC was not judged unconstitutional by this tribunal, nor was it disapplied in the present case.

9. Contrary to what the TA sustains, instead of violating the principle of equality, the interpretation adopted makes it possible to make compatible the rule of Article 135-B, paragraph 2, of the MPTC with this constitutional principle, insofar as it avoids the unjustifiedly underprivileged treatment of owners of land for construction intended for commerce, industry and services relative to owners of built properties with the same allocation, bearing in mind that the taxable capacity indicated by immovable property of the former is necessarily lesser than that of the latter.

10. Nor is it seen how the principle of legality can be violated, given that the rule contained in Article 135-B, paragraph 2, of the MPTC is applied, interpreted in conformity with the Constitution and taking into account the unity of the legal system (Article 9, paragraph 1, of the Civil Code).

11. Concluding for the illegality of the total AMPT assessment impugned, it is unnecessary to analyze the question regarding the alleged unconstitutionality of Article 135-B of the MPTC for subjecting to AMPT urban properties that constitute the substrate of the economic activity developed by their respective owners.

§4. On the request for reimbursement of amount paid and indemnity interest

1. The Claimant requests that this Tribunal determine the reimbursement of amounts improperly borne, and condemn the Respondent to the payment of indemnity interest.

2. In accordance with the provision in subparagraph b) of paragraph 1 of Article 24 of the LRAT, "[t]he arbitral decision on the merits of the claim for which no recourse or impugnation may be available binds the tax administration from the end of the period provided for recourse or impugnation, and the latter must, in the exact terms of the merits of the arbitral decision in favor of the taxpayer and until the end of the period provided for the spontaneous execution of judgments of tax courts [...] [r]eestablish the situation that would exist if the tax act object of the arbitral decision had not been carried out, adopting the acts and operations necessary for such purpose".

3. This norm of the LRAT is coherent with the provision contained in Article 100 of the General Tax Act, the text of which is as follows:

"The tax administration is obliged, in case of total or partial merit of complaints or administrative appeals, or of judicial proceedings in favor of the taxpayer, to the immediate and full reestablishment of the situation that would exist if the illegality had not been committed, including the payment of indemnity interest, in the terms and conditions provided for in the law."

1. As regards the possibility of the arbitral tribunal recognizing the right to indemnity interest, paragraph 5 of Article 24 of the LRAT provides that "payment of interest, regardless of its nature, is due in accordance with the terms provided for in the general tax law and the Tax Procedure and Process Code".

2. And, in accordance with paragraph 1 of Article 43 of the GTA, "[i]ndemnity interest is due when it is determined, in a gracious claim or judicial impugnation, that there has been an error attributable to the services that results in payment of the tax debt in an amount greater than legally due".

3. Given the total merit of the request for arbitral pronouncement, the Claimant is recognized the right to reimbursement of the amount improperly paid, as such reimbursement is essential for the reestablishment of the situation that would exist if the tax act object of the present arbitral decision had not been carried out.

4. This Tribunal also recognizes that the illegality of the assessment in question in these proceedings resulted from an error attributable to the Tax Administration Services, reflected in the incorrect interpretation and application of the law, whereby the Claimant is recognized the right to indemnity interest, in accordance with Articles 43, paragraph 1, of the GTA and 61 of the TPPC, on the amount to be reimbursed.

5. Indemnity interest is due from the date of payment until full reimbursement, by application of the supplementary legal rate, in accordance with Articles 43, paragraph 4, and 35, paragraph 10, of the GTA, Article 61 of the TPPC, Article 559 of the Civil Code and Order no. 291/2003, of 8 April.

§5. On other requests formulated in the proceedings

1. The TA requested the Tribunal to, in case of merit of the request for arbitral pronouncement, determine the notification to the Public Prosecutor of the arbitral decision, based on the provision in Article 280, paragraph 3, of the Constitution and Article 72, paragraph 3, of the Constitutional Court Act.

2. It so happens that in the present arbitral decision, no rule is refused application, whereby Article 280, paragraph 3, of the Constitution nor Article 72, paragraph 3, of the Constitutional Court Act are not applicable, whereby the TA's request for notification of the arbitral decision to the Public Prosecutor for the purposes provided for in those articles is rejected.

IV – DECISION

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

a) To judge as having merit the request for arbitral pronouncement;

b) To declare illegal and annul in their entirety, with all legal consequences, the AMPT assessment no. 2018..., for the year 2018;

c) To judge as having merit the request for reimbursement of the amount improperly paid, increased by indemnity interest, at the legal rate, counted from the date of payment until full reimbursement, all in accordance with what shall be ascertained in the execution of judgment, condemning the Tax and Customs Authority to effect such reimbursement increased by interest;

d) To condemn the Respondent to the payment of the costs of the present proceedings.

V - CASE VALUE

In accordance with the provision in Article 306, paragraph 2, of the Code of Civil Procedure and 97-A, paragraph 1, subparagraph a), of the Tax Procedure Code and 3, paragraph 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €6,399.76.

VI – COSTS

In accordance with Article 22, paragraph 4, of the LRAT, the amount of costs is fixed at €612.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Lisbon, 27/05/2019

The Arbitrator

(Paulo Nogueira da Costa)