CAAD Arbitration 705/2014-T: Stamp Tax (IS) Verba 28.1 TGIS on Vertical Property Illegality

ARBITRAL DECISION [1]

Claimant – A…, …, Lda.

Respondent - Tax and Customs Authority

The Arbitrator, Dr. Sílvia Oliveira, appointed by the Deontological Council of the Administrative Arbitration Center (CAAD) to constitute the Arbitral Tribunal, constituted on 8 January 2015, with respect to the case identified above, decided as follows:

1. REPORT

1.1

A…, …, Lda. (hereinafter referred to as "Claimant"), with registered office at …, No. …, Lisbon, legal entity No. …, submitted a request for arbitral pronouncement and constitution of a singular arbitral tribunal, on 8 October 2014, pursuant to the provisions of Article 4º and No. 2 of Article 10º of Decree-Law No. 10/2011, of 20 January [Legal Regime of Arbitration in Tax Matters (LRAT)], in which the Tax and Customs Authority is the Respondent (hereinafter referred to as "Respondent").

1.2

The Claimant requests that the Arbitral Tribunal consider the following claims:

1.2.1

"Recognition of the illegality of the Stamp Tax (IS) assessments (item 28.1. SGIT) Nos. 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 … and 2013 …, and the consequent restoration of legality, which amount to a total of EUR 12,493.10 (…), given the serious illegality from which they suffer (…)";

1.2.2

"Order the Tax Authority to refund all amounts assessed, which amount to a total of EUR 12,493.10 (…)";

1.2.3

"Order the Tax Authority to pay compensatory interest at the legal rate, from the date of payment of the tax acts until full reimbursement of the amount assessed in the said acts".

1.3

The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD and automatically notified to the Respondent on 9 October 2014.

1.4

The Claimant did not appoint an arbitrator, therefore, pursuant to the provisions of Article 6º, No. 2, paragraph a) of the LRAT, the undersigned was appointed as arbitrator by the President of the Deontological Council of CAAD, and the appointment was accepted within the legally prescribed time and terms.

1.5

On 27 November 2014, both parties were duly notified of this appointment, and neither expressed the wish to challenge the arbitrator's appointment, in accordance with the provisions of Article 11º, No. 1, paragraphs a) and b) of the LRAT in conjunction with Articles 6º and 7º of the Deontological Code.

1.6

Thus, in accordance with the provisions of paragraph c), No. 1, Article 11º of the LRAT, the Arbitral Tribunal was constituted on 8 January 2015, and an arbitral order was issued on the same date, to notify the Respondent to, in accordance with the provisions of Article 17º, No. 1 of the LRAT, submit a response within a maximum period of 30 days and, if it so wished, request the production of additional evidence.

1.7

On 9 February 2015 the Tax and Customs Authority submitted its Response, defending itself by objection and concluding that "having considered everything, we must necessarily conclude that the tax acts in question, in substance, did not violate any legal or constitutional provision, and should therefore be maintained".

1.8

Additionally, in the Response submitted by the Respondent, there was included a request for "waiver of the arbitral hearing provided for in Article 18º of the LRAT, as well as of the submission of pleadings".

1.9

Thus, the Claimant was notified of the order of this Arbitral Tribunal, dated 10 February 2015, to comment, within 5 days, on the content of the waiver request referred to in the previous paragraph, and the Claimant has said nothing with regard to the content of that waiver request.

1.10

In these terms, by order of this Arbitral Tribunal, dated 25 February 2015, the Claimant and Respondent were notified to "in this order and successively, submit written pleadings within a period of 15 days, with the period for the Respondent beginning to run with notification of the joinder of the Claimant's pleadings".

1.11

The date of 30 March 2015 was also designated in the order referred to in the previous paragraph for the purpose of pronouncing the arbitral decision, and the Claimant was further warned that "until the date of pronouncement of the arbitral decision it should proceed with payment of the subsequent arbitral fee, in accordance with the provisions of No. 3 of Article 4º of the Regulations on Costs in Tax Arbitration Proceedings and communicate this payment to CAAD", which it did on 26 March 2015.

2. CAUSE OF ACTION

The Claimant supports its claim, in summary, as follows:

2.1

"The Claimant is a housing corporation with registered office in Street …, No. …, Lisbon, owning a property in full ownership consisting of Ground Floor and 3 floors (…), located in Street …, No. …, Lisbon", "with 16 independent units, susceptible to independent use".

2.2

"The Claimant was, in July 2013, notified for assessment of Stamp Tax (…) relating to item 28.1. of the SGIT, because the Tax Authority (…) decided to apply such item to the Claimant's property", having understood "to sum the 16 independent units, thereby reaching a TRP superior to EUR 1,000,000.00", as in this case the value amounted to "EUR 1,249,310.00".

2.3

That is, "the TA decided to apply the present tax acts (…) despite the property being composed of 16 independent, distinct and isolated units between themselves, with separate access to a common area (…)".

2.4

"The aforementioned summation of the 16 units allowed the TA to apply the rate of 1% on the TRP of the property (…) and, consequently, the Claimant was notified to, by the end of December 2013, make payment of the following assessment acts, relating to IS 2013 (…)":

2.4.1

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-RC EA [previously U-… RC EA (…) of the parish of ...], in the total amount of EUR 781.70";

2.4.2

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-RC DC [previously U-… RC DC (…) of the parish of ...], in the total amount of EUR 417.80";

2.4.3

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-RC D [previously U-… RC D (…) of the parish of ...], in the total amount of EUR 417.80";

2.4.4

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-RC B [previously U-… RC B (…) of the parish of ...], in the total amount of EUR 417.80";

2.4.5

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-1º EA [previously U-… 1º EA (…) of the parish of ...], in the total amount of EUR 813.40";

2.4.6

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-1º D [previously U-… 1º D (…) of the parish of ...], in the total amount of EUR 813.40";

2.4.7

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-1º B [previously U-… 1º B (…) of the parish of ...], in the total amount of EUR 488.40";

2.4.8

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-1º DC [previously U-… 1º DC (…) of the parish of ...], in the total amount of EUR 488.40";

2.4.9

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-2º EA [previously U-… 2º EA, (…), of the parish of ...], in the total amount of EUR 813.40";

2.4.10

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-2º DC [previously U-… 2º DC (…) of the parish of ...], in the total amount of EUR 488.40";

2.4.11

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-2º D [previously U-… 2º D (…) of the parish of ...], in the total amount of EUR 813.40";

2.4.12

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-2º B [previously U-… 2B (…) of the parish of ...], in the total amount of EUR 488.40";

2.4.13

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-3º EA [previously U-… 3º EA (…) of the parish of ...], in the total amount of EUR 1,602.20";

2.4.14

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-3º DC [previously U-… 3º DC (…) of the parish of ...], in the total amount of EUR 1,023.20";

2.4.15

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-3º D [previously U-… 3º D (…) of the parish of ...], in the total amount of EUR 1,602.20";

2.4.16

"Assessment No. 2013 …, of 17 July 2013, relating to urban property registered in matrix U-…-3º B [previously U-… 3º B (…) of the parish of ...], in the total amount of EUR 1,023.20".

2.5

As the Claimant did not agree with the said assessment acts, it paid "such acts within the scope of coercive collection (…)" and submitted "on 29 April 2014, a Petition for Administrative Review and exercised its right of prior hearing", which was dismissed by order dated 11 July 2014", on the basis "(…) of an artificial interpretation of Article 2º No. 1 of the IMI Code", an interpretation according to which "(…) the property in question, although composed of 16 independent units, cannot cease to be viewed as a single property".

2.6

The Claimant begins by clarifying that "it does not agree with the application of such tax acts, because it is in total disagreement with the assessment criterion of the property of which it is owner", as "such criterion applies to the application of Item 28 of the General Table of Stamp Tax, as described below":

"28 – Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value registered in the matrix, in accordance with the Code of Municipal Tax on Immovable Property (IMI), is equal to or greater than EUR 1,000,000 – on the tax patrimonial value (TRP) used for IMI purposes:

28.1 – For property with residential use – 1%;

28.2 – (…)".

2.7

According to the Claimant, "faced with such an argument, it is urgent to decode the scope of application of Item 28 of the SGIT, as described above", "especially when we are not in the presence of a property constituted in horizontal property", concluding that the "assessment acts under discussion here are not at all due, because they were applied on the Total Tax Patrimonial Value of the property (…) when in reality they should have been applied to each of the units of the same property, given that all units are independent and with independent use, whereby it should be the value of each unit that is applicable".

2.8

In these terms, according to the Claimant, "we are not faced with an asset classified as a luxury asset (…)", because "the independent units of the property owned by the Claimant range between the values of EUR 41,780.00 and EUR 160,220.00", and having each independent fraction, "for the purposes of Municipal Tax on Immovable Property (…), own Tax Patrimonial Value (…), autonomous assessments (…) and also autonomous valuations (…)".

2.9

"Faced with this factuality", the Claimant asks itself "(…) for what reason does the Respondent consider, for IMI purposes, that the Claimant's property is composed of independent units and, for the purpose of applying item 28.1 of the SGIT it does not use the same criterion?"

2.10

The Claimant further states that "(…) for the purposes of applying the principles of tax legality, equality, justice and proportionality, the value corresponding to the economic autonomy of each unit should be applied and never the Total Tax Patrimonial Value of the property".

2.11

And it concludes, requesting that "if (…) the illegality of the tax acts already identified is determined" and it be recognized "(…) the right to reimbursement of all amounts assessed within the scope of application of item 28.1 of the SGIT (…), plus compensatory interest at the legal rate from the date of its payment until full reimbursement, because", for the Claimant, "the error is attributable to the services" of the Respondent".

3. RESPONSE OF THE RESPONDENT

3.1

The Respondent responded by arguing the inadmissibility of the request for arbitral pronouncement and invoking the following arguments:

3.2

"The now Respondent is the owner (…) of an urban property (…) in full ownership regime (…), consisting of 5 floor levels and 16 parts susceptible to independent use intended for residential purposes (…)".

3.3

"The tax patrimonial value was determined separately (…) with the total tax patrimonial value in the amount of € 1,249,310.00", and it was "on this value (…) that the TA assessed (…) Stamp Tax item 28.1. of the General Table, in the wording given by article 4° of Law No. 55-A/2012, of 29 October, at the rate of 1 per cent, by reference to the year 2012", in the "global amount of € 12,493.10".

3.4

According to the Respondent, "subjection to Stamp Tax item 28.1. of the General Table (…) results from the conjunction of two factors, namely:

3.4.1

Residential use; and

3.4.2

Tax patrimonial value of the urban property (…) being equal to or greater than € 1,000,000.00".

3.5

The Respondent does not agree with the position assumed by the Claimant in the request for arbitral pronouncement because it understands that "the now respondent is the owner of a property in full or vertical ownership regime" and, "from the notion of property in Article 2° of the IMI Code, only autonomous units of property in horizontal ownership regime are deemed as properties", whereby "the property (…) being in full ownership regime, does not possess autonomous units, to which tax law attributes the qualification of property"

3.6

Thus, the Respondent argues, "the now Claimant, for IMI purposes and also for Stamp Tax (…) is not the owner of 16 autonomous units but rather of a single property".

3.7

And "to claim that the interpreter and enforcer of tax law applies, by analogy, to the full ownership regime, the horizontal ownership regime is (…) abusive and illegal" for the Respondent, and it cannot "accept that it be considered that, for the purposes of item 28.1 of the General Table (…) that the parts susceptible to independent use have the same tax regime as the autonomous units of the horizontal ownership regime".

3.8

And, the Respondent alleges that "any other interpretation would violate (…) the letter and spirit of item 28.1. of the General Table and the principle of legality of the essential elements of taxation provided for in Article 103°, No. 2, of the Constitution of the Portuguese Republic (CPR)".

3.9

The Respondent does not see "how (…) the taxation in question could have violated the principle of equality referred to by the Claimant" as, "in fact, horizontal ownership and vertical ownership are differentiated legal institutes".

3.10

And as to "the argument that the property is not entirely devoted to residential use, which would taint the application of the incidence rule of item 28.1 of the SGIT", the Respondent states that "(…) no illegality was committed, because the assessment excluded the parts devoted to commerce, thus, only the parts devoted to residential use were taxed, as the law literally requires".

3.11

Thus, the Respondent concludes that "the tax acts in question, in substance did not violate (…) any legal or constitutional provision, and should (…) be maintained".

4. PRELIMINARY ASSESSMENT

4.1

The request for arbitral pronouncement is timely as it was submitted within the period provided for in paragraph a) of No. 1 of Article 10º of the LRAT.

4.2

The parties have legal standing and capacity, are legitimate as to the request for arbitral pronouncement and are properly represented, in accordance with the provisions of Articles 4º and 10º of the LRAT and Article 1º of Ordinance No. 112-A/2011, of 22 March.

4.3

The Tribunal is competent to assess the request for arbitral pronouncement submitted by the Claimant.

4.4

No exceptions that need to be addressed have been raised.

4.5

No defects are found, therefore, the merits of the claim must now be addressed.

5. FACTUAL MATTERS

5.1

Of the facts established

5.2

The following facts are considered established as documented by the following documents filed in the proceedings:

5.2.1

The Claimant is the owner of the urban property located in Street …, No. …, Lisbon, which is registered in the urban property matrix under article U-… (previously U-…), of the parish of ... (previously …) (as per documents No. 1 and 2, attached with the claim).

5.2.2

The said urban property is not in horizontal ownership regime, consisting of Ground Floor plus three floors, with a total of 16 floors or divisions susceptible to independent use (as per document No. 2, attached with the claim).

5.2.3

The total TRP of the said urban property is EUR 1,249,310.00, which was determined on 17 February 2013, at the initiative of the Respondent, such valuation having been carried out by considering individually each of the floors with independent use (all 16 that make up the said property), to which the respective individual TRP was assigned (see summary in the next item) (as per document No. 2, attached with the claim).

5.2.4

The Claimant was notified of the following Stamp Tax assessments, dated 17 July 2013, relating to the year 2012, with payment deadline "December/2013" (single payment):

5.2.5

The Claimant submitted a petition for administrative review (case No. …2014…), on 29 April 2014, against the Stamp Tax assessment acts referred to in item 5.2.4., above, which was dismissed by order of 11 July 2014 (as per document No. 36, attached with the claim).

5.3

No other facts capable of affecting the decision on the merits of the claim were established.

5.4

Of the facts not established

5.5

Although the Claimant alleged that it paid the amounts relating to the assessments identified in item 5.2.4., above, already in the coercive collection phase (see items 15 and 16 of the claim), no evidence regarding the date of actual payment was attached hereto (the proof of payment MB, attached with document No. 38[2] of the claim, is illegible).

5.6

No other facts of relevance to the arbitral decision were found unproven.

6. LEGAL GROUNDS

6.1

In the case, the essential question to be decided is whether, with reference to properties not constituted in horizontal ownership regime (vertical ownership), composed of various floors and divisions with independent use (some of which with residential use), which is the relevant TRP.

6.2

That is, whether the relevant TRP as a criterion for tax incidence is that corresponding to the sum of the TRP attributed to the different parts or floors (global TRP) or, on the contrary, the TRP attributed to each of the residential parts or floors.

6.3

The answer to this question requires an analysis of the applicable legal rules in order to determine the correct interpretation in light of the Law and the Constitution, given that it is a matter of assessing a tax incidence assumption, carefully protected by the principle of tax legality, resulting from the provisions of Article 103°, No. 2 of the CPR.

6.4

In the case under analysis, underlying the Request for Arbitral Pronouncement, in order to assess the legality of the Stamp Tax assessments notified to the Claimant, by reference to the year 2013, it will be relevant to answer the following disputed question:

6.4.1

Is subjection to Stamp Tax, in accordance with the provisions of item No. 28 of the SGIT, determined by the TRP corresponding to each of the parts of the property with residential use or if, on the contrary, it is determined by the global TRP of the property, which would correspond to the sum of all the TRP of the floors (with that type of use), which form part of it?

6.5

As to the answer to be given to the question formulated in the previous item, it is important to analyze the essence of item No. 28 of the SGIT, added by Article 4º of Law No. 55-A/2012, of 29 October, under which the following is established:

"28. Ownership, usufruct or right of superficies of urban properties whose TRP registered in the matrix, in accordance with the Code of Municipal Tax on Immovable Property, is equal to or greater than EUR 1,000,000 – on the TRP for IMI purposes:

28.1. – For property with residential use – 1%. (…)".

6.6

Notwithstanding the fact that Law No. 55-A/2012 (in force since 30 October 2012) did not qualify the concepts contained in the said item No. 28, in particular, the concept of "property with residential use", if the provision in Article 67º, No. 2, of the Stamp Tax Code (also added by the said Law No. 55-A/2012) is observed, it is verified that "to matters not regulated in the present Code relating to item 28 of the SGIT, the IMI Code applies, subsidiarily".

6.7

Now, from reading the IMI Code, we easily perceive that the concept of "property with residential use" refers, naturally, to the concept of "urban property", defined in accordance with Articles 2º and 4º of that Code.

6.8

In fact, in accordance with the provisions of Article 2º, No. 1 of the IMI Code, "for the purposes of this Code, property is any fraction of territory, comprising waters, plantations, buildings and constructions of any nature incorporated or based therein, 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 constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are located, although situated in a fraction of territory that constitutes an integral part of a diversified patrimony or does not have patrimonial nature" (emphasis added).

6.9

Further in accordance with No. 2 and 3 of the same article, "buildings or constructions, although moveable by nature, are deemed to have a character of permanence when devoted to non-transitory purposes", and it is presumed "the character of permanence when buildings or constructions are based in the same location for a period exceeding one year".

6.10

For IMI purposes, "each autonomous unit, in the horizontal ownership regime, is deemed to constitute a property".

6.11

In accordance with the provisions of Article 4º of the IMI Code, "urban properties are all those that should not be classified as rural (…)".

6.12

Among the various categories of "urban properties" referred to in Article 6º of the IMI Code, "residential urban properties" are expressly mentioned [No. 1, paragraph a)], with No. 2 of the same article adding that these "are buildings or constructions licensed for such purpose or, in the absence of a license, that have as their normal destination each of these purposes".

6.13

If it is true that No. 4 of Article 2º of the IMI Code states that "for the purposes of this tax, each autonomous unit, in the horizontal ownership regime, is deemed to constitute a property", it is also true that there is nothing in the law that points to discrimination between properties in horizontal and vertical ownership as to their identification as "residential urban properties".

6.14

Thus, it can be concluded that autonomous parts of properties in vertical ownership, with residential use, should be considered as "residential urban properties".

6.15

As sustained in various Arbitral Decisions, in particular the one issued in Case 88/2013-T, "in the eyes of the legislator, what matters is not the juridical-formal rigor of the concrete situation of the property but rather its normal use, the purpose it is intended for".

6.16

Whereby, "it must thus be concluded that for the legislator it is irrelevant whether the property is constituted in vertical ownership or horizontal ownership, what is relevant is only the material truth underlying its existence as an urban property and its use" (emphasis added).

6.17

In fact, in the interpretation of the legal text, it makes no sense to distinguish what the law itself does not distinguish (ubi lex non distinguit nec nos distinguere debemus) for to distinguish, in this context, between properties constituted in horizontal ownership and properties constituted in full ownership would be an "innovation" without associated legal support.

6.18

In fact, nothing indicates, neither in item No. 28 of the SGIT, nor in the provisions of the IMI Code, a justification for that particular differentiation.[3]

6.19

In fact, it can be stated that it is today a settled understanding that tax laws are interpreted like any others, and it is necessary to determine their true meaning in accordance with techniques and interpretive elements generally accepted by doctrine [see Article 9º of the Civil Code and Article 11º of the General Tax Law (GTL)].[4]

6.20

On the other hand, it is necessary to take into account that the incidence rules of taxes must be interpreted in their exact terms, without resorting to analogy, making certainty and security prevail in their application.[5]

6.21

In these terms, the uniform criterion that is imposed is the one that determines that the incidence of the provision in question (item 28 of the SGIT) only takes place when some of the parts, floors or divisions with independent use of a property in horizontal (or full) ownership, with residential use, has a TRP greater than EUR 1,000,000.00 (emphasis added).

6.22

Thus "if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, it clearly established a criterion, which must be unique and unequivocal, for the definition of the rule of incidence of item 28.1. of the SGIT" [6], whereby setting as the reference value for the incidence of the new tax the global TRP of the property in question, as the Respondent claims, finds no basis in the applicable legislation.[7]

6.23

Finally, it will be important to inquire what the ratio legis underlying the rule of item 28 of the SGIT is and, in obedience to the provision of Article 9º of the Civil Code[8], what circumstances the rule was enacted in and what were the specific conditions of the time in which it is applied.

6.24

In fact, the legislator intended to introduce a principle of taxation on the wealth externalized in the ownership, usufruct or right of superficies of luxury urban properties with residential use, having considered, as a determining element of contributory capacity, urban properties, with residential use, of high value (luxury), that is, of value equal to or greater than EUR 1,000,000.00, on which would pass (and did pass) to be subject to a special rate of Stamp Tax.

6.25

And we understand that this is what can be concluded from the analysis of the discussion of Bill No. 96/XII in the Parliament[9], and no invocation of a different interpretative ratio from the one presented here is perceived.[10]

6.26

In fact, the justification for the measure designated as "special tax on the highest-value residential urban properties" is based on the invocation of the principles of social equity and fiscal justice, calling upon the holders of high-value properties intended for residential purposes to contribute in a more intense manner, thus making the new special tax apply to "homes valued at equal to or greater than 1 million euros".

6.27

Now, if such logic seems to make sense when applied to a "residential unit" (whether it be a house, an autonomous unit, a part of a property with independent use or an autonomous unit) whenever the same represents, on the part of its holder, above-average contributory capacity (and, in that measure, capable of determining a special contribution to ensure fair distribution of the tax burden), it would make no sense if applied "unit by unit" to, through the summation of their TRP (because held by the same individual), determine such value equal to or greater than one million euros.

6.28

It further follows that admitting differentiation of treatment could produce results incomprehensible and discriminatory from a legal point of view, as contrary to the objectives (of promoting social equity and fiscal justice) which the legislator claimed to have when adding item No. 28.

6.29

In fact, the existence of a property in vertical or horizontal ownership cannot, by itself, be an indicator of contributory capacity, it following from the law that one and the other must receive the same fiscal treatment in obedience to the principles of justice, fiscal equality and material truth.

6.30

Conversely, the existence in each property of independent residential units, in horizontal or vertical ownership regime, may be capable of triggering the incidence of the new tax if the TRP of each of the parts or units is equal to or greater than the limit defined by law, that is, EUR 1,000,000.00.

6.31

In this manner, it is illegal and unconstitutional to consider that the reference value for the assessment of the tax is that corresponding to the summation of the TRP attributed to each part or division, first and foremost because we would be faced with a clear violation of the principle of equality and proportionality in tax matters.

6.32

The tax legislator cannot treat equal situations differently, depending on whether we are dealing with a property in horizontal or vertical ownership.

6.33

Now, if the property under analysis were in horizontal ownership regime, it was clear that none of the residential units that compose it would be subject to incidence of the new tax, because none of them would exceed, individually considered, the limit of EUR 1,000,000.00 defined by law (see item 5.2.4. above as to the TRP of each of the floors).

6.34

It is thus, for this very reason, that Article 12º, No. 3 of the IMI Code provides that "each floor or part of a property susceptible to independent use is considered separately in the property registration, which also discriminates the respective TRP" so as not to generate situations of violation of the principles of social equity and fiscal justice.

6.35

In fact, the constitution of horizontal property implies merely a juridical alteration of the property, not even requiring a new valuation, whereby the material truth is what must be imposed as the criterion determining contributory capacity and not the mere juridical-formal reality of the property.

6.36

As a consequence, the discrimination operated by the Respondent translates into arbitrary and illegal discrimination, since the law does not impose the obligation of constitution of horizontal property.

6.37

And, having in mind all the social and economic reality (sometimes present in many of the properties existing in vertical ownership), the tax legislator itself in the IMI Code treated the two situations (horizontal and vertical ownership) in an equitable manner, applying the same criteria.

6.38

In fact, let it be reiterated that the Respondent cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the tax system and the principles of tax legality (Article 103°, No. 2 of the CPR), justice, equality and proportionality of taxation, included therein.

6.39

Analyzing the situation sub judice, it is verified that the TRP of the floors (autonomous units) with residential use varies between EUR 109,680.00 and EUR 121,610.00, whereby, in any one of them, individually considered, the said TRP is less than EUR 1,000,000.00, as already referred to in item 6.33., above)

6.40

Thus, in light of the above, and in response to the first of the questions above posed (see item 6.4.1.), it is concluded that Stamp Tax as referred to in item No. 28 of the SGIT cannot apply to the floors with residential use (of the property identified in the proceedings), and therefore the assessment acts subject to the Request for Arbitral Pronouncement submitted by the Claimant are illegal [11].

6.41

As a consequence of all that has been referred to above in the previous items, it can be concluded that the interpretation made by the Respondent is not in accordance with the Law and the Constitution, because it violates the principle of equality (Article 13º of the CPR) and does not contribute to equality between citizens (Article 104°, No. 3, of the CPR) [12].

6.42

In this context, it is concluded that item No. 28 of the SGIT, by opening the possibility of taxing in a differentiated manner the ownership of immovable property of equal value, held by different persons, on grounds that may contravene, without any justification, in particular, the principle of contributory capacity, cannot but be considered unconstitutional, given the violation of the principle of equality.

6.43

Finally, as to the claim presented by the Claimant to be refunded the amount "assessed (…) plus compensatory interest at the legal rate from the date of its payment until full reimbursement, because the error is attributable to the services of the TA", it is important to state that, in accordance with the provisions of paragraph b), of No. 1, of Article 24º of the LRAT, and in accordance with what is established therein, "the arbitral decision on the merits of the claim from which no appeal or challenge is available binds the tax administration from the end of the period provided for appeal or challenge, and the latter must restore the situation that would exist if the tax act subject of the arbitral decision had not been practiced, adopting the acts and operations necessary for this effect"[13] (emphasis added).

6.44

In fact, in accordance with the provisions of Article 100º of the GTL, applicable to the case by virtue of the provision in paragraph a), of No. 1, of Article 29º of the LRAT, "the tax administration is obliged, in case of total or partial merit of claims or administrative appeals, or of judicial proceedings in favor of the taxpayer, to the immediate and full restoration of the situation that would exist if the illegality had not been committed, including the payment of compensatory interest, in the terms and conditions provided for by law" (emphasis added).

6.45

Thus, as to the compensatory interest claimed by the Claimant, it appears that, in light of what is established in Article 61º of the Code of Tax Procedure and Process (CTPP) and the requirements for the right to compensatory interest being met (that is, the existence of error attributable to the services, resulting in payment of the tax debt in an amount greater than legally due, as provided for in No. 1, Article 43º of the GTL), the Claimant is entitled to compensatory interest at the legal rate, calculated on the amounts paid relating to the Stamp Tax assessments, dated 17 July 2013 (and relating to the year 2012), which will be counted in accordance with the provision in No. 3 of Article 61º referred to above, that is, from the date of payment of the undue tax until the date of issuance of the respective credit note.

6.46

In these terms, in the situation under analysis, and as a consequence of the illegality of the assessment acts already identified above, there must be reimbursement, by virtue of the rules previously referred to, of the amounts paid by the Claimant, plus the respective compensatory interest, as a way of achieving the restoration of the situation that would exist if the illegality had not been committed.

7. DECISION

7.1

In accordance with the provisions of Article 22º, No. 4, of the LRAT, "the arbitral decision issued by the arbitral tribunal includes the fixing of the amount and distribution among the parties of the costs directly resulting from the arbitral proceedings".

7.2

In this context, the basic rule regarding responsibility for process costs is that the party that has caused them should be condemned, and it is understood that the losing party causes the costs of the proceedings, in the proportion in which it is defeated [Article 527º, No. 1 and 2 of the Code of Civil Procedure (CCP)].

7.3

In the case under analysis, having regard to the above, the principle of proportionality requires that full responsibility for costs be attributed to the Respondent.

7.4

In these terms, having regard to the analysis carried out, this Arbitral Tribunal decided:

7.4.1

To judge favorably the request for arbitral pronouncement submitted by the Claimant and to condemn the Respondent as to the request for declaration of illegality of the Stamp Tax assessments dated 17 July 2013 (relating to the year 2012 and identified in these proceedings), with the consequent annulment of the respective tax acts;

7.4.2

To judge favorably the request to condemn the Respondent to refund the amounts unduly paid by the Claimant, plus compensatory interest at the legal rate, counted in accordance with legal terms;

7.4.3

To condemn the Respondent to payment of the costs of these proceedings.

Value of the case: Having regard to the provisions of Articles 306°, No. 2 of the CCP, Article 97°-A, No. 1 of the CTPP and Article 3°, No. 2 of the Regulations on Costs in Tax Arbitration Proceedings, the value of the case is fixed at EUR 12,493.10.

Costs of proceedings: In accordance with the provisions of Table I of the Regulations on Costs of Tax Arbitration Proceedings, the value of the Arbitral Proceeding costs is fixed at EUR 918.00, to be borne by the Respondent, in accordance with Article 22°, No. 4 of the LRAT.

Notify.

Lisbon, 30 March 2015

The Arbitrator

Sílvia Oliveira

[1] The wording of the present decision is governed by the orthography prior to the 1990 Orthographic Agreement, except as regards the transcriptions made.

[2] This document concerns assessments relating to the year 2013, which are not the subject matter of the claim, whereby its content was not considered in the analysis of the request for arbitral pronouncement.

[3] In this context, note the provision in Article 12°, No. 3, of the IMI Code, in stating that "each floor or part of a property susceptible to independent use is considered separately in the property registration, which also discriminates the respective TRP".

[4] In this sense, see AC TCAS Case 07648/14, of 10 July 2014.

[5] Cfr. AC TCAS Case 5320/12, of 2 October 2012, AC TCAS Case 7073/13, of 12 December 2013 and AC TCAS 2912/09, of 27 March 2014.

[6] See Arbitral Decision No. 50/2013-T (CAAD), of 29 October 2013.

[7] Which is the IMI Code, given the referral made by the cited Article 67°, No. 2, of the Stamp Tax Code.

[8] According to which the interpretation of the legal rule must not be confined to the letter of the law, but must reconstruct legislative intent, from the texts and other elements of interpretation, taking into account the unity of the legal system.

[9] Available for consultation in the Diary of Parliament, Series I, No. 9/XII/2, of 11 October 2012.

[10] As already referred to in various Arbitral Decisions issued by CAAD (see Case No. 48/2013-T and Case No. 50/2013-T).

[11] In this sense, see Arbitral Decision No. 368/2014-T, of 18 December 2014, issued by the undersigned.

[12] In this sense, see the Arbitral Decision identified in the previous note.

[13] In this sense, see Arbitral Decision 27/2013-T, of 10 September 2013, regarding the "reimbursement of the total amount paid and compensatory interest".