Stamp Tax on Building Land Under Verba 28.1 TGIS: Reclassification Annuls Assessment

Case No. 707/2014-T

Subject: Stamp Tax. Item 28.1 of the General Table of the Stamp Tax Code. Land for construction.

ARBITRAL DECISION

I. REPORT

1. On 8 October 2014, "A", Tax ID No. …, with registered office at … (hereinafter, the Claimant), filed an application for the constitution of an arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Regime of Tax Arbitration, as amended by Article 228 of Law No. 66-B/2012, of 31 December (hereinafter, briefly designated as LRTA), seeking the declaration of illegality and annulment of acts of assessment of Stamp Tax, carried out pursuant to item 28.1 of the General Table of the Stamp Tax Code (hereinafter, GTSRC), with reference to the year 2013 and to the urban properties registered under articles ... (current P ...) and ... (current P ...) in the urban land registry of …, municipality and district of …, both owned by the Claimant.

The respondent is AT – Tax and Customs Authority (hereinafter, the Respondent or AT).

The Claimant listed two witnesses, did not attach any documents, nor requested the production of any other evidence.

In essence and in brief summary, the Claimant alleged the following:

It is the owner of two urban properties, currently classified, for purposes of IMI (Municipal Property Tax), as "land situated within an urban area where construction is not permitted and without agricultural use", located in the Union of Parishes of …, municipality of ….

Following the general assessment officially conducted by the AT in the year 2012, those urban properties were assigned taxable patrimonial values of € 2,846,620.00 and € 3,131,440.00, and they were then classified as land for construction.

On 18 March 2014, on the basis of item 28.1 of the GTSRC, the AT proceeded to assess Stamp Tax for the year 2013 on the aforementioned urban properties – as land for construction and with taxable patrimonial values of € 2,846,620.00 and € 3,131,440.00 – in the amounts of € 28,446.20 and € 31,314.40.

Both properties were subject to revaluation, for purposes of IMI, in June 2014, and were then reclassified as "land situated within an urban area where construction is not permitted and without agricultural use", with taxable patrimonial values of € 33,270.00 (previously € 2,846,620.00) and € 32,520.00 (previously € 3,131,440.00).

In July 2014, the Claimant filed a tax appeal against the aforementioned assessments of Stamp Tax, which was rejected by the AT.

In the Claimant's view, the assessment that was conducted by the AT in 2012 on the aforementioned properties did not comply with all legal requirements, because in 2012 and 2013 those properties could no longer be described as land for construction nor could such high taxable patrimonial values be assigned to them. Such classification and the corresponding taxable patrimonial values were already in 2012 out of step with the physical, legal and economic reality of those properties, because both properties were already subject, and continue to be subject, to various encumbrances and constraints of public knowledge, which decisively influence both the classification and the determination of the taxable patrimonial value of the properties.

The Claimant did not appeal the assessment that the AT conducted on those properties in 2012, because it was exempt from IMI and Stamp Tax until the end of November 2013, and because it did not foresee the consequences of that omission.

In this respect, according to the Claimant, the AT's conduct: "- introduced inaccuracies into the registry, as to the description and classification of the properties and as to their TPV (IMI Code/Article 130, 3); - constituted error attributable to the services (Tax Code/Article 78, 1, 4, 5); - evidenced abuse of right as to the power to collect taxes, offending and exceeding the purposes of taxation (Tax Code/Article 5, Civil Code/Article 334); - perpetrated illegality in the evaluation process, within the scope of the general evaluation for IMI purposes, which are reflected in the assessment of Stamp Tax in dispute (IMI Code/Article 130, 3); - violated elementary principles of tax procedure, specifically the principles of equality, proportionality and justice, in respect of taxpayer guarantees (Tax Code/Article 55; Constitution/Article 266, 1, 2); - gravely and unjustly prejudiced the owner."

It is therefore necessary to annul the aforementioned assessments of Stamp Tax for 2013, for lack of taxable basis, since, pursuant to item 28.1 of the GTSRC, only properties with a taxable patrimonial value in excess of € 1,000,000.00 are subject to this tax (the correct TPV to be considered are, according to the Claimant, € 32,520.00 and € 33,270.00).

Moreover, it appears that the land for construction in respect of which the Stamp Tax that the AT assessed to the Claimant is levied, do not fit within the scope of item 28.1 of the GTSRC – although they are urban properties, they are not "urban properties with residential use" – and therefore the assessments in dispute are illegal insofar as they violate that rule of incidence, constituting error as to the facts and law, which renders them voidable pursuant to Article 135 of the Code of Administrative Procedure.

In another regard, the assessments of Stamp Tax in question constitute a violation of the principle of tax equality provided in Article 13 of the Constitution because, on the one hand, they are based on a rule – item 28.1 of the GTSRC – that treats taxpayers in identical situations in very different ways, with the measure of the difference not being assessed by their contributory capacity and, on the other hand, they are based on an arbitrary legal solution without any rational foundation and, finally, because the same reality is subject to double taxation.

The Claimant concludes the request for arbitral ruling by recommending that "the arguments presented should be considered well-founded" and, consequently, formulates the following requests:

"a) Annulment of the assessment of Stamp Tax for the year 2013, with respect to the tax assessed on the urban properties ... ... ..., for error in the evaluation of the TPV, respectively in the amount of € 28,466.20 and € 31,314.40;

Failing such,

b) Annulment of the assessments based on error in the qualification of the taxable fact, or, further,

c) Annulment of the assessment based on the illegality of the tax due to unconstitutionality of the rule of incidence contained in item 28.1 of the General Table of the Stamp Tax Code, in conjunction with Article 1, No. 1 of the Stamp Tax Code, for violation of the principle of tax equality provided in Article 13 of the Constitution."

1. The application for constitution of an arbitral tribunal was accepted and automatically notified to the AT on 15 October 2014.

2. The Claimant did not proceed to appoint an arbitrator, so, pursuant to the provisions of No. 1 of Article 6 and subparagraph a) of No. 1 of Article 11 of the LRTA, the President of the CAAD Ethics Council designated the undersigned as arbitrator of the singular Arbitral Tribunal, who communicated acceptance of the assignment within the applicable period.

3. On 27 November 2014, the parties were duly notified of such appointment and did not manifest intention to refuse the appointment of the arbitrator, pursuant to the combined provisions of Article 11, No. 1, subparagraphs b) and c), of the LRTA and Articles 6 and 7 of the CAAD Ethics Code.

4. Thus, in accordance with the provision of subparagraph c) of No. 1 of Article 11 of the LRTA, the collective Arbitral Tribunal was constituted on 16 December 2014.

5. On 2 February 2015, the Respondent, duly notified for such purpose, filed its Reply in which it specifically contested the arguments raised by the Claimant and concluded that the present action was without merit, with its consequent dismissal of the claim.

The Respondent did not attach any documents, nor request the production of any other evidence.

On the same occasion, the Respondent attached to the record the respective administrative file (hereinafter, briefly designated as AF).

In essence and also briefly, it is important to extract the most relevant arguments upon which the Respondent based its objection:

The concept of "properties with residential use", for purposes of the provision in item 28 of the GTSRC, comprises both built properties and land for construction, given, first and foremost, the literal element of the rule. The legislator does not refer to "properties intended for residential use", but has instead opted for the notion "residential use", an expression that is different and broader and whose meaning is to be found in the necessity to integrate other realities beyond those mentioned in Article 6, No. 1, subparagraph a), of the IMI Code.

The mere constitution of a right of potential construction increases the value of the property in question, which is the reason for the rule contained in Article 45 of the IMI Code that orders the separation of the two parts of the land.

Moreover, given the provisions in the Legal Regime for Urbanisation and Building and the typical content of Municipal Master Plans, it is possible to determine and ascertain the destination of land for construction, before the actual building of the property.

In another regard, the Respondent understands that the provision of item 28 of the GTSRC does not violate any constitutional requirement. Because, first of all, it is based on the value of the property and is a general and abstract rule, applicable without distinction to all cases in which the respective facts and circumstances of law are verified. Furthermore, the different valuation and taxation of a property held in horizontal property regimes compared to a property held in absolute ownership derives from the different legal effects inherent to these two forms. Furthermore, the different capacity of properties justifies different tax treatment, and has constituted a choice of the legislator, for reasons of a political and economic nature, to exclude from the scope of Stamp Tax properties intended for uses other than residential.

The Respondent concludes, in summary, that "the assessment in question constitutes a correct interpretation and application of law to the facts, does not suffer from the vice of violation of law, whether of the Constitution or of the Stamp Tax Code, and therefore, the claim should be judged without merit and the Respondent Entity should be absolved of the claim."

1. On 2 February 2015, the Respondent came before the tribunal proposing that the meeting provided for in Article 18 of the LRTA be dispensed with, as it appeared unnecessary, thus allowing the Arbitral Tribunal to immediately proceed to hear the claim.

Notified to rule on the content of that request, the Claimant came before the tribunal to manifest its adherence to that position of the AT, thus dispensing with the production of testimonial evidence.

Given the convergent positions assumed by the Parties, the meeting referred to in Article 18 of the LRTA was therefore dispensed with and there was no occasion for the production of any allegations.

II. CLARIFICATION OF ISSUES

The Arbitral Tribunal was regularly constituted and is competent.

The proceedings do not suffer from nullities.

The parties enjoy legal personality and capacity, are duly represented and are eligible.

The joinder of claims is admitted by virtue of the fact that the merits of the claims formulated by the Claimant depend essentially on the appreciation of the same circumstances of fact – rooted in the Claimant's ownership of two urban properties – and on the interpretation and application of the same principles or rules of law – in the present case, item 28.1 of the GTSRC (cf. Article 3, No. 1, of the LRTA).

There are no exceptions or other preliminary matters that prevent consideration of the merits and that require determination.

III. REASONING

III.1. FACTS

§1. ESTABLISHED FACTS

Regarding the matter of fact, it is important, first and foremost, to emphasize that the Tribunal does not have to pronounce on everything that was alleged by the parties, but rather has the duty to select the facts that are relevant for the decision and to discriminate between proven and unproven matter (cf. Article 123, No. 2, of the CPTA and Article 607, Nos. 3 and 4, of the CPC, applicable by virtue of Article 29, No. 1, subparagraphs a) and e), of the LRTA). In this way, the relevant facts for the judgment of the case are selected and defined according to their legal relevance, which is established in consideration of the various plausible solutions to the question(s) of Law.

In this respect, having regard in particular to the positions assumed by the parties, the documentary evidence produced and the administrative file attached to the record, the following facts with relevance for the decision are considered established:

1. The Claimant is a canonical legal entity that is part of the Catholic Church – fact accepted by agreement – cf. AF attached to the record (fact accepted by agreement).

2. The Claimant is the owner of the urban property, classified, for purposes of IMI, as "land situated within an urban area where construction is not permitted and without agricultural use", located in the Union of Parishes of ..., municipality and district of ..., registered in the respective land registry under article P..., with a taxable patrimonial value of € 33,270.00 – cf. AF attached to the record (fact accepted by agreement).

3. The Claimant is the owner of the urban property, classified, for purposes of IMI, as "land situated within an urban area where construction is not permitted and without agricultural use", located in the Union of Parishes of ..., municipality and district of ..., registered in the respective land registry under article P..., with a taxable patrimonial value of € 32,520.00 – cf. AF attached to the record (fact accepted by agreement).

4. The urban properties identified in the established facts 2 and 3 are located in the implementation area of the Urban Intervention Project of the Municipal Chamber of ..., intended for the opening of the initially named …, recently renamed Avenue …, which will connect the … and the … – cf. AF attached to the record (fact accepted by agreement).

5. The aforementioned Urban Intervention Project identifies the Operational Unit of Planning and Management (OUPGM 1) of Avenue ... and is included in the Municipal Master Plan of the Municipal Chamber of ... in force – cf. AF attached to the record (fact accepted by agreement).

6. The two urban properties identified in the established facts 2 and 3 correspond, in the aforementioned OUPGM 1, to plots 35 and 46 – cf. AF attached to the record (fact accepted by agreement).

7. On the aforementioned plots 35 and 46 are imposed urban encumbrances and constraints that already existed in the years 2012 and 2013 – cf. AF attached to the record (fact accepted by agreement).

8. The layout of the aforementioned Avenue ... will occupy a large part of the area of each of the urban properties identified in the established facts 2 and 3 – cf. AF attached to the record (fact accepted by agreement).

9. In the year 2012, the two properties mentioned in the established facts 2 and 3 were subject to the general assessment of urban properties, for purposes of IMI, within which they were then classified as "land for construction", and were assigned the following taxable patrimonial values [cf. AF attached to the record (fact accepted by agreement)]:

1. The Claimant was notified of the result of that assessment by letter dated 21.01.2013, and did not request a second assessment of the aforementioned urban properties – cf. AF attached to the record (fact accepted by agreement).

2. The aforementioned taxable patrimonial values ascertained as a result of the aforementioned assessment of the aforementioned urban properties were recorded in the respective land registries on 26.02.2013 – cf. AF attached to the record.

3. In the year 2013, the two properties mentioned in the established facts 2 and 3 had, for purposes of IMI, the classification and taxable patrimonial values referred to in the established fact 9 – cf. AF attached to the record (fact accepted by agreement).

4. In the year 2014, the two urban properties mentioned in the established facts 2 and 3 were subject to a new assessment, for purposes of IMI, and were then assigned the matrix articles, classification and taxable patrimonial values referred to in the established facts 2 and 3 – cf. AF attached to the record (fact accepted by agreement).

5. The Claimant was notified of the result of that assessment by letters dated 17.06.2014 – cf. AF attached to the record (fact accepted by agreement).

6. The two urban properties mentioned in the established facts 2 and 3 were exempt from IMI and Stamp Tax until the month of November 2013, pursuant to Article 26, No. 2, of the Concordat concluded between the Holy See and the Portuguese Republic, signed on 18 May 2004 – cf. AF attached to the record (fact accepted by agreement).

7. By order dated 19 November 2013 of the Deputy Chief of Finance of the Finance Service of ...-2, the cessation of that tax exemption was declared – cf. AF attached to the record (fact accepted by agreement).

8. The Claimant was notified of assessment No. 2014 ... of Stamp Tax, with reference to the year 2013, dated 18.03.2014, in the amount of € 28,466.20, levied on the urban property mentioned in the established fact 2, as described in the established fact 9 – cf. AF attached to the record (fact accepted by agreement).

9. The Claimant was notified of assessment No. 2014 ... of Stamp Tax, with reference to the year 2013, dated 18.03.2014, in the amount of € 31,314.40, levied on the urban property mentioned in the established fact 3, as described in the established fact 9 – cf. AF attached to the record (fact accepted by agreement).

10. The assessments of Stamp Tax mentioned in the established facts 17 and 18 resulted from the application of item 28.1 of the GTSRC to the aforementioned urban properties – cf. AF attached to the record (fact accepted by agreement).

11. On 25 July 2014, the Claimant filed, at the Finance Service of ...-2, a tax appeal against the assessments of Stamp Tax mentioned in the established facts 17 and 18 – cf. AF attached to the record (fact accepted by agreement).

12. The Claimant was notified by letter No. 6094/3182-20, of 25.08.2014, from the Finance Service of ...-2, sent by registered mail (as per postal registration No. RD … PT), of the draft decision rejecting the aforementioned tax appeal – which was filed under No. ... – and to exercise, if desired, its right to prior hearing, in written form – cf. AF attached to the record.

13. The aforementioned draft decision is hereby fully reproduced, and contains, among other things, the following (cf. AF attached to the record):

"Within the scope of the general assessment the taxpayer was notified of the result of the assessment (…).

Once the period stated in the aforementioned notification has elapsed and no request for a 2nd assessment and, subsequently, court challenge, the form of appealing possible inaccuracies, has been made, the ascertained patrimonial value was recorded in the registry on 2013-02-26.

In accordance with the wording of Law 55-A/2012, of 29.10, Article 3 provides for the amendments to the Stamp Tax Code, and the amendment relevant to the matter complained of here is the amendment to Article 67 of the Stamp Tax Code, 'Matters not regulated in this Code concerning item 28 of the General Table shall be subject, subsidiarily, to the provisions of the IMI Code'.

Indeed, urban properties that are land for construction and to which, within the scope of their respective assessment, has been assigned residential use, as is the case, shall be subject to Stamp Tax.

The fact that in the rule of incidence (item 28.1), the property with residential use has been stated, makes an appeal to the use coefficient (Article 41 of the IMI Code), which applies, without distinction, to all urban properties.

Given the foregoing, the assessment was carried out in compliance with the legal provisions governing this matter, and therefore the present appeal deserves a project of rejection."

1. The Claimant did not exercise its right to prior hearing with respect to the aforementioned draft decision of the tax appeal – cf. AF attached to the record.

2. The aforementioned tax appeal was rejected by order issued by the Chief of the Finance Service of ...-2, dated 23.09.2014, with the decision being justified by reference to the respective draft decision – cf. AF attached to the record.

3. That decision rejecting the tax appeal was notified to the Claimant by letter No. 6668/3182-20, of 22.09.2014, from the Finance Service of ...-2, sent by registered mail (as per postal registration No. RD … PT), with proof of receipt – cf. AF attached to the record.

4. The Claimant was notified of the decision rejecting the tax appeal on 26.09.2014 – cf. AF attached to the record.

5. On 8 October 2014, the Claimant filed the application for constitution of an arbitral tribunal that gave rise to the present proceedings – cf. CAAD case management system.

§2. UNPROVEN FACTS

With relevance to the appreciation and decision of the case, there are no facts that have not been proven.

§3. REASONING ON THE FACTS

Regarding the proven matter of fact, the Tribunal's conviction was based on the statements made in the pleadings, whose correspondence to reality was not called into question, and on the administrative file attached to the record, as set forth in the references made in relation to the various points.

III.2. LAW

§1. Before we proceed to the appreciation and decision of the question that constitutes the thema decidendum of the present arbitral proceedings, it is important that we previously analyse the following two aspects: the definition of the object of these proceedings and the order of consideration of the vices pointed out to the impugned tax acts.

Let us proceed accordingly.

§1.1. As proven above, on 25 July 2014, the Claimant filed, at the Finance Service of ...-2, a tax appeal against the assessments of Stamp Tax at issue in these proceedings (cf. established fact 20), which was rejected by order issued by the Chief of the Finance Service of ...-2, dated 23.09.2014 (cf. established fact 24), with the Claimant being notified of that decision of rejection on 26.09.2014 (cf. established fact 26).

In the present situation we have, therefore, two distinct levels of acts: the acts of assessment of Stamp Tax, which are first-instance acts, and the act rejecting the tax appeal, which constitutes a second-instance act.

In the request for arbitral ruling, the Claimant, in addition to referring to that tax appeal, also states the following: "Should the requested ruling result in the declaration of illegality of the tax acts, the rejection issued by the AT as a consequence of the tax appeal should be annulled."

From the perspective of these proceedings and, more specifically, of their object, we verify, in fact, that the act rejecting the aforementioned tax appeal constitutes its immediate object, with its mediate object being the aforementioned acts of assessment of Stamp Tax. However, "the real object of the challenge is the assessment act and not the act that decided the appeal, so it is the vices of the former and not of the latter order that are truly at issue" (cf. judgment of the Supreme Administrative Court of 16/11/2011, case 0156/11). Because, as is explained in the judgment of the Supreme Administrative Court of 28/10/2009, issued in case No. 0595/09, "in cases in which the tax appeal is expressly rejected, the object of the proceedings for judicial review is, formally and directly, the act of rejection, which maintained the assessment that was the object of the appeal, but the real object of the challenge, the act whose legality is to be determined, is the assessment act that was maintained by the act rejecting the appeal."

In this regard, it is also important to state that, although subparagraph a) of No. 1 of Article 2 of the LRTA makes express reference only to the competence of arbitral tribunals to declare the illegality of assessment acts, this competence extends to second and third-degree acts that assess the legality of those primary acts, namely acts rejecting tax appeals and acts rejecting hierarchical appeals filed against decisions of such appeals.

This conclusion is reached from subparagraph a) of No. 1 of Article 10 of the LRTA, which makes express reference to No. 2 of Article 102 of the CPTA (which deals with the rejection of tax appeal) and to the decision on hierarchical appeal (cf., in this sense, Jorge Lopes de Sousa, "Commentary to the Legal Regime of Tax Arbitration", in Guide to Tax Arbitration, Coord. Nuno Villa-Lobos and Mónica Brito Vieira, Coimbra, Almedina, 2013, p. 121).

Having stated this, let us now proceed to the analysis of the second aspect mentioned above.

§1.2. Article 124 of the CPTA, applicable by virtue of Article 29, No. 1, subparagraph a), of the LRTA, provides as follows:

Article 124

Order of consideration of vices of the decision

1. In the decision, the tribunal shall prioritarily appreciate the vices that lead to the declaration of non-existence or nullity of the impugned act and, thereafter, the vices alleged that lead to its annulment.

2. In the aforementioned groups, the appreciation of the vices is made in the following order:

a) In the first group, that of vices whose merit would determine, according to the prudent judgment of the court, more stable or effective protection of the offended interests;

b) In the second group, that indicated by the party challenging, whenever it establishes a relationship of subsidiarity among them and no other vices are alleged by the Public Prosecutor or, in the other cases, that fixed in the preceding subparagraph.

This legal provision establishes a priority for the consideration of vices whose merit would determine, according to the prudent judgment of the court, more stable or effective protection of the offended interests.

Reverting to the case at hand, it is clear that none of the vices invoked by the Claimant can be considered as arising from situations that could determine the nullity of the impugned tax acts, in light of the legal criteria that characterize them.

On the other hand, we note that the Claimant established a relationship of subsidiarity between the vices invoked by it against the assessments of Stamp Tax at issue in these proceedings.

In this respect, the vices attributed to the impugned tax acts will be considered in the order of priority that the Claimant itself established, namely: error in the classification of the properties and in the evaluation of the taxable patrimonial value; error in the qualification of the taxable fact; and violation of the constitutional principle of equality.

§1.2.1. The Claimant challenges the assessments of Stamp Tax at issue in these proceedings, beginning by invoking the existence of "error in the classification of the properties and in the evaluation of the TPV", alleging, in summary, that the assessment conducted by the AT in 2012 on the aforementioned urban properties, for purposes of IMI, did not comply with all legal requirements, because in 2012 and 2013 those properties could no longer be described as land for construction nor could such high taxable patrimonial values be assigned to them.

The manner in which the Claimant invokes and subsequently develops this issue throughout its initial pleading leads us to conclude that it intends to attack, although indirectly (that is, without such constituting the object of these proceedings), the acts of fixing the taxable patrimonial values of the aforementioned urban properties, at the time of the assessment, for purposes of IMI, to which they were officially subject in 2012.

We advance forthwith that such an intention of the Claimant must fail, as will be demonstrated through a brief excursus through the legal regime of the general assessment of urban properties that on 1 December 2011 had not yet been covered by the assessment procedure of the IMI Code, instituted by Law No. 64-A/2011, of 30 November, which added Articles 15-A to 15-P to Decree-Law No. 287/2003, of 12 November.

In the legal regime of the general assessment, the initiative for the assessment of urban properties is always with the AT (cf. Article 15-C, No. 1, of Decree-Law No. 287/2003), and this is one of the most important innovations instituted by this regime.

The assessment is conducted pursuant to the IMI Code, using for such purpose the formula of its Article 38 and all its respective coefficients. The assessment is conducted by a local expert, designated pursuant to Article 63 of the IMI Code. The determination of the taxable patrimonial value is conducted on the basis of information that the AT has regarding each property, and it is not mandatory that the property be surveyed by the assessing expert (cf. Article 15-D, No. 3, of Decree-Law No. 287/2003).

Once the acts of assessment are concluded, the ascertained taxable patrimonial value is notified to the respective taxpayer and to the municipal chamber of the area where the assessed property is located (cf. Article 15-E of Decree-Law No. 287/2003).

If the taxpayer, the municipal chamber or the chief of finance does not agree with the result of the general assessment of urban property, they may, respectively, request or promote a second assessment, within 30 days of the date the taxpayer is considered notified (cf. Article 15-F, No. 1, of Decree-Law No. 287/2003). This second assessment consists only of the correction of any errors made in the first assessment, since in the work to be carried out the independent expert is bound to apply again the formula and coefficients provided for in the IMI Code and used in the first assessment (cf. Article 15-F, No. 2, of Decree-Law No. 287/2003).

The decision of the second assessment is subject to court challenge, pursuant to the provisions set forth in the CPTA, on the grounds indicated in Article 77 of the IMI Code (cf. Article 15-G of Decree-Law No. 287/2003).

The taxable patrimonial value becomes final as soon as the notification of the second assessment is made – or, in case of court challenge, as soon as the respective decision becomes final – or, if such has not been requested or promoted, after the 30-day period for requesting it has elapsed. Thus, as soon as the decision of the second assessment has effect, or after the elapse of the respective period without it having been requested or promoted, the AT services proceed to record in the land registry the taxable patrimonial value that resulted from it (cf. Article 15-H of Decree-Law No. 287/2003).

Applying this legal regime to the specific case, we have that it was proven that in the year 2012, the urban properties in question were subject to the aforementioned general assessment, for purposes of IMI, within which they were then classified as "land for construction", and were assigned the following taxable patrimonial values: matrix article ... - € 2,846,620.00 and matrix article ... - € 3,131,440.00 (cf. established fact 9). Furthermore, the Claimant was notified of the result of that assessment by letter dated 21.01.2013, and did not request a second assessment of the aforementioned urban properties (cf. established fact 10). For that reason, the aforementioned taxable patrimonial values resulting from that assessment became final, and therefore the AT services proceeded to record them in the land registry on 26.02.2013 (cf. established fact 11).

Thus, it is abundantly clear that this is not the manner and, much less, the time for the Claimant to react against the result of that official assessment, for purposes of IMI, to which the aforementioned urban properties were subject in 2012. In fact, the Claimant should have requested from the respective chief of finance, within the period provided in Article 15-F, No. 1, of Decree-Law No. 287/2003, the conducting of a second assessment and, if it also did not agree with the result thereof, could have filed a court challenge. Not having done so, the fault is its own (sibi imputat), and anything that the Claimant alleges to justify its inaction appears impertinent.

Without need for further consideration, the alleged vice of error in the classification of the properties and in the evaluation of the taxable patrimonial value is therefore judged to be without merit.

Having stated this, let us proceed to appreciate the second vice directed by the Claimant against the assessments of Stamp Tax at issue in these proceedings, which leads us, concurrently and from now on, to enter into the appreciation of the question to be decided.

§2. The question to be appreciated and decided in these proceedings is, fundamentally, whether item 28.1 of the GTSRC – in the wording introduced by Law No. 55-A/2012, of 29 October and, therefore, in force in 2013 – is or is not applicable to land for construction.

This same question has already been the subject of treatment in numerous decisions both arbitral (inter alia, see those issued in case Nos. 48/2013-T, 53/2013-T, 288/2013-T and 310/2013-T, all available at www.caad.pt) and judicial (inter alia, see judgments of the Supreme Administrative Court issued in case Nos. 048/14, 01870/13, 0270/14, 0272/14 and 0676/14, all available at www.dgsi.pt), which have established jurisprudence to the effect that land for construction cannot be considered, for purposes of the rule of incidence of Stamp Tax contained in item 28.1 of the GTSRC (in the wording of Law No. 55-A/2012, of 29 October), as urban properties with residential use.

This is jurisprudence that is also accepted here, because we agree with it completely, and therefore, in essence, we will limit ourselves to reproducing what was said on the question in the arbitral decision issued in case No. 53/2013-T, to whose grounds of law we adhere without any reservations:

"Law No. 55-A/2012, of 29 October, made several amendments to the Stamp Tax Code and added to the GTSRC item 28, with the following wording:

28 – Property, usufruct or surface right of urban properties whose taxable patrimonial value recorded in the registry, pursuant to the Code of Municipal Tax on Real Property (IMI Code), is equal to or greater than € 1,000,000 – based on the taxable patrimonial value used for IMI purposes:

28.1 – For property with residential use – 1%;

28.2 – For property, when the taxpayers who are not natural persons are residents of a country, territory or region subject to a clearly more favourable tax regime, listed in the list approved by order of the Finance Minister – 7.5%.

In the transitional provisions contained in Article 6 of that Law No. 55-A/2012, the following rules were established concerning the assessment of tax retained in that item:

1 – In 2012, the following rules must be observed by reference to the assessment of Stamp Tax provided for in item No. 28 of the respective General Table:

a) The taxable event occurs on 31 October 2012;

b) The taxpayer on the tax is the one mentioned in No. 4 of Article 2 of the Stamp Tax Code on the date referred to in the preceding subparagraph;

c) The taxable patrimonial value to be used in the assessment of the tax corresponds to that resulting from the rules provided in the Code of Municipal Tax on Real Property by reference to the year 2011;

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

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

f) The applicable rates are the following:

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

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

iii) Urban properties when the taxpayers who are not natural persons are residents of a country, territory or region subject to a clearly more favourable tax regime, listed in the list approved by order of the Finance Minister: 7.5%.

2 – In 2013, the assessment of Stamp Tax provided for in item No. 28 of the respective General Table must be based on the same taxable patrimonial value used for the purposes of assessment of municipal tax on real property to be conducted in that year.

3 – Failure to remit, in whole or in part, within the indicated period, the sums assessed as Stamp Tax constitutes a tax infraction, punished in accordance with law.

In the aforementioned item 28.1 and in the sub-items i) and ii) of subparagraph f) of No. 1 of Article 6 of Law No. 55-A/2012, a concept was used that is not employed in any other tax legislation in these precise terms, which is that of "property with residential use". Specifically in the IMI Code, which in various provisions of the Stamp Tax Code introduced by that Law is indicated as a subsidiary diploma with respect to the tax provided for in that item No. 28 [Articles 2, No. 4, 3, No. 3, subparagraph u), 5, subparagraph u), 23, No. 7, 46 and 67 of the Stamp Tax Code], a concept defined in those terms is not used.

(…)

In the IMI Code the types of properties are enumerated in its Articles 3 to 6 in the following terms:

Article 2

Concept of Property

1 - For purposes of this Code, property is any portion of territory, encompassing waters, plantations, buildings and structures of any nature incorporated into or resting on it, with a character of permanence, provided that it forms part of the heritage of a natural or legal person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or structures, under the aforementioned circumstances, endowed with economic autonomy in relation to the land on which they are situated, although located in a portion of territory that constitutes an integral part of different heritage or does not have a patrimonial nature.

2 - Buildings or structures, although movable by nature, are deemed to have a character of permanence when devoted to non-transitory purposes.

3 - The character of permanence is presumed when buildings or structures have been resting in the same location for a period exceeding one year.

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

Article 3

Rural Properties

1 - Rural properties are lands situated outside an urban area that are not to be classified as land for construction, pursuant to No. 3 of Article 6, provided that:

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

b) Not having the devotion indicated in the preceding subparagraph, are not constructed or have only buildings or structures of an ancillary character, without economic autonomy and of reduced value.

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

3 - Also rural properties are:

a) Buildings and structures directly devoted to the production of agricultural income, when situated on the lands referred to in the preceding numbers;

b) Waters and plantations in the situations to which No. 1 of Article 2 refers.

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

Article 4

Urban Properties

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

Article 5

Mixed Properties

1 - Whenever a property has rural and urban parts it is classified, in its entirety, in accordance with the principal part.

2 - If none of the parts can be classified as principal, the property is deemed to be mixed.

Article 6

Types of Urban Properties

1 - Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Land for construction;

d) Other.

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

3 - Land for construction is deemed to be lands situated within or outside an urban area for which a license or authorization has been granted, an advance notice was admitted or favourable prior information was issued for a subdivision or construction operation, and also those that have been declared as such in the acquisition deed, except lands in which the competent entities prohibit any such operations, specifically those located in green areas, protected areas or which, in accordance with municipal land use plans, are devoted to public spaces, infrastructure or equipment.

4 - Provided for in subparagraph d) of No. 1 are lands situated within an urban area that are not land for construction nor are covered by the provision of No. 2 of Article 3 and also buildings and structures licensed or, in the absence of a license, that have as their normal destination purposes other than those referred to in No. 2 and also those of the exception of No. 3.

(…)

Article 11 of the General Tax Code establishes the essential rules for the interpretation of tax laws in the following terms:

Article 11

Interpretation

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

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

3 - If doubt persists as to the meaning of applicable rules of incidence, the economic substance of the taxable facts must be taken into account.

4 - Gaps resulting from tax rules covered by the reservation of law of the Parliament are not subject to analogical interpretation.

The general principles for the interpretation of laws, to which No. 1 of Article 11 of the Tax Code refers, are established in Article 9 of the Civil Code, which provides as follows:

Article 9

Interpretation of Law

1 - The interpretation should not be confined to the letter of the law, but should reconstruct from the texts the legislative intent, having particularly in account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

2 - The interpreter cannot, however, take into account the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

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

(…)

As can be seen from the provisions of the IMI Code transcribed, the concept of "property with residential use" is not used in the classification of properties. Neither is this concept, with this terminology, found in any other statute.

Thus, in the absence of exact terminological correspondence of the concept of "property with residential use" with any other used in other statutes, various interpretative hypotheses can be put forward.

The starting point of the interpretation of that expression "properties with residential use" is, naturally, the text of the law, and it is on the basis of this that the "legislative intent" must be reconstructed, as required by No. 1 of Article 9 of the Civil Code, applicable by force of Article 11, No. 1, of the Tax Code.

(…)

The concept closest to the literal meaning of this expression used is clearly that of "residential properties", defined in No. 2 of Article 6 of the IMI Code as encompassing "buildings or structures" licensed for residential purposes or, in the absence of a license, that have as their normal destination residential purposes.

If it is understood that the expression "property with residential use" coincides with that of "residential properties", it is clear that the assessments will suffer from error as to the facts and law, since all properties with respect to which Stamp Tax was assessed pursuant to the aforementioned item No. 28.1 are land for construction, without any building or structure, required to meet that concept of "residential properties".

For this reason, if the interpretation is adopted that "property with residential use" means "residential property", the assessments whose declaration of illegality is requested will be illegal, because there is no building or structure on any of the lands.

However, the non-coincidence of the terms of the expression used in item No. 28.1 of the GTSRC with that extracted from No. 2 of Article 6 of the IMI Code suggests that it was not intended to use the same concept.

(…)

The word "use", in this context of use of a property, has the meaning of "action of designating something for a particular use" [Dictionary of Contemporary Portuguese Language of the Academy of Sciences of Lisbon, Volume I, page 102].

"When, as is usually the case, rules (legislative formulas) bear more than one meaning, then the positive function of the text is expressed in giving stronger support to or more strongly suggesting one of the possible meanings. This is because, among the possible meanings, some will correspond to the most natural and direct meaning of the expressions used, while others will only fit within the verbal framework of the rule in a forced, artificial manner. Now, in the absence of other elements that induce the choice of the less immediate meaning of the text, the interpreter should opt in principle for that meaning which best and most immediately corresponds to the natural meaning of the verbal expressions used, and specifically to their technical-legal meaning, assuming (not always accurate) that the legislator knew how to correctly express its intent" [Baptista Machado, Introduction to Law and Legitimizing Discourse, page 182].

The relevance of the text of the law is especially emphasized in the interpretation of rules of incidence of Stamp Tax, which come down to an amalgam, under a common designation, of an incongruous set of taxes of completely different natures (on income, on spending, on property, on acts, etc.), which leaves little room for application of the principal interpretative criterion, which is the unity of the legal system, which demands its overall coherence.

The recognized lack of coherence of Stamp Tax is particularly evident in the case of this item No. 28.1, hastily included outside the General State Budget, by a tax legislator without perceptible overall fiscal orientation, which is successively implementing tax increase rules according to the setbacks in budget execution, the impositions of international institutional creditors (represented by the "troika") and the scrutiny of the Constitutional Court.

(…)

In this context, not existing sure interpretative elements that allow detection of legislative coherence in the solution adopted in the aforementioned item No. 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretative purposes in light of No. 3 of Article 9 of the Civil Code), the text of the legal provision must be the primary element of interpretation, in accordance with the presumption, imposed by the same No. 3 of Article 9, that the legislator knew how to express its intent in appropriate terms.

In light of those meanings of the words "use" and "to use", which are "to give a destination" or "to apply", the formula used in that item No. 28.1 of the GTSRC clearly encompasses properties that are already applied to residential purposes, and therefore it is necessary to inquire whether it also encompasses properties that, although not yet applied to residential purposes, are destined for such and those whose destination is unknown.

In light of the literal meaning of item No. 28.1, it is to be excluded from the scope of the Stamp Tax provided for therein lands for construction (…) that have not yet had any type of use defined, since they are not yet applied or destined for residential purposes [as occurs in the present case]. That is, land for construction that have no defined use cannot be considered properties with residential use, since they do not yet have any use or other destination than construction of an unknown type. An interpretation to the effect that item No. 28.1 refers to properties whose use is unknown has no minimum verbal correspondence in the letter of that rule, and therefore a hypothetical legislative intent of that type cannot be taken into account by the interpreter of the law, in light of the prohibition contained in No. 2 of Article 9 of the Civil Code.

But this is not sufficient to clarify the situation of those lands for construction which, while not yet applied to residential purposes, already have a determined destination, specifically in the construction license (…).

Therefore, it is necessary to clarify when a property can be understood to be devoted to a residential purpose, specifically whether it is when such destination is fixed in a licensing act or similar, or only when the actual assignment of that destination is implemented.

From the outset, the comparison of item No. 28.1 of the GTSRC with No. 2 of Article 6 of the IMI Code, which defines the concept of residential properties, clearly suggests that an actual devotion is necessary.

In fact, a building or structure licensed for residential use or, even without a license, but having residential use as its normal destination, is, in light of No. 2 of that Article 6, a residential property.

For this reason, on the assumption that the legislator of Law No. 55-A/2012 knew how to express its intent in appropriate terms (as Article 9, No. 3, of the Civil Code requires be presumed), if it intended to refer to those properties already licensed for residential use or having residential use as their normal destination, it would certainly have used the concept of "residential properties", which would express perfectly and clearly its intent, in light of the definition given by that No. 2 of Article 6 of the IMI Code.

Consequently, it must be presumed that the use of a different expression is intended to refer to a different reality, and therefore, in good hermeneutics, "property with residential use" cannot be a property merely licensed for residential use or intended for such (that is, it will not be sufficient that it be a "residential property"), having to be a property that already has actual devotion to such purpose.

That this is the meaning of the expression "use", in the same context of classification of properties that the IMI Code makes, is confirmed by Article 3 where, with respect to rural properties, there is reference to those "devoted or, in the absence of concrete devotion, have as their normal destination a use generating agricultural income", which evidences that devotion is concrete, actual. In fact, as can be seen from the final part of this text, a property may have as its destination a particular use and be or not devoted to it, which evidences that devotion is, at the level of the connection of a property to a particular use, something more intense than mere destination and may or may not occur, downstream of this and not upstream.

Moreover, the text of the law in adopting the formula "property with residential use", rather than "urban properties of residential use" (…), points strongly toward the requirement that the residential use be already concretized, since only then will the property have that use.

With respect to Article 45 of the IMI Code, it has no relationship with the classification of properties, only indicating the factors to be considered in the evaluation of land for construction. What is weighed there, in making reference to the "building to be constructed", is the consideration of the destination of the land, which, as has been seen, is something that, in the context of the IMI Code, does not imply devotion and occurs before it.

The correctness of this interpretation to the effect that only properties that are actually devoted to residential use are within the scope of item No. 28.1 of the GTSRC is also confirmed by the ratio legis perceivable in the restriction of the scope of application of the rule to properties with residential use, in the context of the "circumstances in which the law was elaborated and the specific conditions of the time in which it is applied", which Article 9, No. 1, of the Civil Code also elevates to interpretative elements.

From the outset, the limitation of taxation in Stamp Tax to "properties with residential use" makes it perceivable that it was not intended to encompass within the scope of the tax properties devoted to services, industry or commerce, that is, properties devoted to economic activity (…)

For this reason, it is to be concluded that the available interpretative elements, including the "circumstances in which the law was elaborated and the specific conditions of the time in which it is applied", clearly point toward the intention not to encompass within the scope of item No. 28.1 situations of properties that are not yet devoted to residential use, specifically land for construction held by entities."

This line of argumentation is reinforced by "the amendment introduced to item 28.1 by Law No. 83-C/2013, of 31 December [State Budget Law for 2014], which, without having an interpretative character, came to subject to tax expressly 'land whose building, authorized or provided for, is for residential purposes', thereby expressly assuming that this reality would not have been subject to taxation before this amendment" (arbitral decision of 22.04.2014, case No. 310/2013-T).

Also from the same perspective, it is important to bring to attention the intervention of the Secretary of State for Tax Affairs in Parliament, upon the presentation and discussion of the bill that gave rise to Law No. 55-A/2012, of 29 October (Bill No. 96/XII - 2nd), who then stated the following (DAR I Series No. 9/XII/2, of 11.10.2012, p. 32):

"… the Government proposes the creation of a special rate on residential urban properties of higher value. This is the first time that a special taxation on properties of high value intended for residential use has been created in Portugal. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to properties worth equal to or greater than 1 million euros. With the creation of this additional rate the tax burden required of these property owners will be significantly increased in 2012 and 2013." (underlining ours)

From these words spoken by that government official with direct responsibility for the area of taxes is extracted, with perfect clarity, that the reality intended to be taxed that was taken into account by the Government and approved by the deputies in Parliament was, after all, "residential (urban) properties", in common language "houses", and not other realities" (judgment of the Supreme Administrative Court of 09.04.2014, case No. 048/14).

Having stated this, reverting to the case at hand, we verify that all urban properties owned by the Claimant are land for construction, on which no buildings or structures are erected (cf. established facts 1 and 2).

For this reason, having regard to what has been transcribed and stated above, we are not dealing with properties with residential use, and therefore on those same urban properties the Stamp Tax provided for in item 28.1 of the GTSRC does not apply.

Consequently, it is necessary to conclude that the assessments of Stamp Tax at issue in these proceedings suffer from the vice of violation of law, due to error as to the law, which leads inevitably to the declaration of their illegality and consequent annulment.

§3. What has just been explained necessarily implies that the act rejecting the tax appeal filed by the Claimant against the assessments of Stamp Tax that are the object of these proceedings equally suffers from the vice of violation of law, due to error as to the law, which also leads to the declaration of its illegality and consequent annulment (cf. Article 135 of the CPA).

§4. The aforementioned Article 124 of the CPTA, in establishing an order for the consideration of vices, presupposes that, having judged well-founded a vice that ensures effective protection of the rights of those challenging, it is not necessary to consider the remaining ones, for, if it were always necessary to appreciate all the vices attributed to the impugned act, the order of their consideration would be irrelevant.

In this respect, since from the above it results the declaration of illegality, with its consequent annulment, of the assessments of Stamp Tax that are the object of this proceeding, due to a vice that prevents the renewal of those acts, the consideration of the remaining vices attributed to them by the Claimant is rendered moot, specifically the alleged unconstitutionality of the rule of incidence contained in item 28.1 of the GTSRC.

IV. DECISION

Having considered the above, this Arbitral Tribunal decides:

a) To judge well-founded the claim for declaration of illegality of the following assessments of Stamp Tax, due to error as to the law, with their consequent annulment:

• assessment No. 2014 ..., dated 18.03.2014, in the amount of € 28,466.20; and

• assessment No. 2014 ..., dated 18.03.2014, in the amount of € 31,314.40.

b) To declare the illegality of the act rejecting the tax appeal filed against the acts of assessment of Stamp Tax referred to in the preceding subparagraph, with its consequent annulment;

c) To order the Tax and Customs Authority to pay the costs of the present proceedings.

VALUE OF THE CASE:

In accordance with the provisions of Articles 306, No. 2, of the CPC, 97-A, No. 1, subparagraph a), of the CPTA and 3, No. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 59,780.60 (fifty-nine thousand seven hundred eighty euros and sixty cents).

COSTS:

Pursuant to Article 22, No. 4, of the LRTA, the amount of costs is fixed at € 2,142.00 (two thousand one hundred forty-two euros), in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Lisbon, 23 March 2015.

The Arbitrator,

(Ricardo Rodrigues Pereira)