Stamp Tax on Vertical Property: CAAD Ruling on Verba 28 TGIS Illegality (724/2014-T)

ARBITRAL DECISION

I. Report

1. The company A, Lda. (hereinafter "Applicant"), with the tax identification number ("NIF") …, with registered office in …, filed on 17 October 2014, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, i.e., the Legal Framework for Arbitration in Tax Matters ("RJAT"), a request for constitution of an arbitral tribunal, in order that the illegal nature of the assessments, already paid, detailed below be declared:

[TABLE REFERENCE - consisting of stamp tax assessments]

relating to Stamp Tax ("IS"), in the total amount of € 4,317.55, with the Tax and Customs Authority ("Respondent" or "ATA") being the defendant.

A) Constitution of the Arbitral Tribunal

1. Pursuant to Article 6(2)(a) and Article 11(1)(b) of the RJAT, the Ethics Council of this Centre for Administrative Arbitration ("CAAD") appointed the undersigned as sole arbitrator, who communicated acceptance of the appointment within the applicable period, and notified the parties of such appointment on 5 December 2014.

2. Thus, in accordance with Article 11(1)(c) of the RJAT, and through the communication of the President of the Ethics Council of the CAAD, the Sole Arbitral Tribunal was constituted on 23 December 2014.

B) Procedural History

1. In the request for arbitral determination, the Applicant petitioned for the declaration of illegality of the IS assessments detailed above, relating to the year 2013, by reference to an urban property, constituted in vertical ownership, situated on Rua …, registered in the property register of the parish of ..., under article ....

2. The ATA submitted a response, petitioning for the dismissal of the request for arbitral determination, on the grounds that there was no violation of law, requesting that the tax acts under examination, as they did not violate any legal or constitutional provision, be maintained in the legal order.

3. By order of 23 March 2015, the Sole Arbitral Tribunal, pursuant to Article 16(c) of the RJAT, and following the request by the ATA, decided, without opposition from the parties, that it was not necessary to conduct the meeting referred to in Article 18 of the RJAT, as a result of the simplicity of the questions at issue, and considering that it had at its disposal all the necessary elements to reach a clear and impartial decision.

4. It further decided, in accordance with Article 18(2) of the RJAT, that oral pleadings were not necessary, given that the positions of the parties were clearly defined in their respective written statements, and set 30 April 2015 as the deadline for the arbitral decision.

5. The Tribunal was properly constituted and is competent to examine the questions indicated (Article 2(1)(a) of the RJAT); the parties have legal personality and capacity and have full standing (Articles 4 and 10(2) of the RJAT and Article 1 of Order No. 112-A/2011, of 22 March). No nullities have occurred and no exceptions were raised, and therefore nothing prevents judgment on the merits.

6. The present proceedings are therefore in a position for the final decision to be rendered.

II. Question to be Decided

1. The central question to be examined and decided regarding the merits of the case, as derived from the procedural documents of the parties, is as follows: with reference to properties not constituted in the horizontal ownership regime, comprising several floors and divisions capable of independent use (and with residential purpose), what is the Taxable Patrimonial Value ("TPV") relevant for the purposes of calculating the IS to be paid, pursuant to Item No. 28 of the General Stamp Tax Table ("GSTT")?

2. That is, the present tribunal seeks to determine whether, as the Applicant alleges, the amount to be considered is the TPV attributed individually to each part capable of autonomous use, or, instead, the total value resulting from the sum of the TPVs of those autonomous fractions, as suggested by the Respondent.

III. Findings of Fact and Their Reasoning

1. Having examined the documentary evidence produced, the tribunal finds proved, and relevant to the decision of the case, the following facts:

I. The Applicant is the owner of an urban property, constituted in vertical ownership, situated on Rua …, registered in the property register of the parish of ..., under article ..., with 11 floors/divisions capable of independent use, as detailed below:

[TABLE REFERENCE - property details]

II. The Applicant received, for the fiscal year 2013, and as a result of Item No. 28 of the GSTT, the assessment notices from the ATA, relating to the 2nd instalment of IS, mentioned above, in the total amount of € 4,317.55 (which it paid on 10 October 2014).

1. The Tribunal's conviction concerning the facts found as proved resulted from the documents annexed to the case file and contained in the request and the unobjected statements of the parties, as specified in the points of the facts above.

2. There is no relevant factuality for the decision of the case found as not proved.

IV. Legal Analysis

A) Legal Framework

1. Given that the legal question to be decided in the present proceedings requires interpretation of the relevant legal texts, it is important first to set out the norms that comprise the applicable legal framework, as of the date of occurrence of the facts.

2. The subjection to IS of properties with residential purpose resulted from the addition of Item No. 28 to the GSTT, made by Article 4 of Law 55-A/2012, of 29 October, which established the following taxable events:

"28 – Ownership, usufruct or surface right of urban properties whose taxable patrimonial value recorded in the register, pursuant to the Municipal Property Tax Code (CIMI), is equal to or exceeding € 1,000,000.00 – on the taxable patrimonial value for IMI purposes:

28.1 – For each property with residential purpose – 1%

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

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

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

a) The taxable event occurs on 31 October 2012;

b) The taxpayer of the tax is the one mentioned in Article 2(4) of the Stamp Tax Code on the date referred to in the previous subparagraph;

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

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

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

f) The applicable rates are as follows:

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

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

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

(...)"

1. The aforementioned law also added, in the Stamp Tax Code, Article 23(7), relating to the assessment of IS: "in the case of tax due for the situations provided for in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adjustments, the rules contained in the CIMI", and Article 67(2) which provides that "to matters not regulated in this code relating to item 28 of the General Table the CIMI applies subsidiarily."

2. In this context, and having regard to the indication above, let us now examine the Municipal Property Tax Code ("IMI").

3. First, note Article 2(4) of the IMI Code which states that "for the purposes of this tax, each autonomous fraction, in the horizontal ownership regime, is deemed to constitute a property."

4. On the other hand, Article 12(3) of the IMI Code establishes that "each floor or part of a property capable of independent use is considered separately in the property register, which also specifies its respective taxable patrimonial value."

5. Thus, it is within this legal framework that it is important to decide whether, in cases where horizontal ownership of an urban property with various autonomous fractions is not constituted, the TPV, for the purposes of Item No. 28 of the GSTT, is calculated individually for each fraction capable of being used autonomously, or, alternatively, determined by the sum of the TPVs of those fractions.

B) Arguments of the Parties

1. In this regard, the Applicant, in its request, argues, in summary, as follows:

2. With respect to the assessments mentioned above, the Applicant contends that, since the property in question meets, in its view, the conditions necessary for the constitution of horizontal ownership, the determination of its respective TPV, for the purposes of applying Item No. 28 of the GSTT, should be done individually (that is, by autonomous fraction) and not, as the ATA intends, by its global TPV (which could only be accounted for through the sum of the individual TPVs).

3. This is because, in the view of the now Applicant, "the property above mentioned, even registered in the property register in vertical ownership, at the level of its taxation (…) its collections were always calculated on the patrimonial value of each of the said divisions, as if it were registered in horizontal ownership in the property register."

4. In this way, the Applicant is of the opinion that the ATA is "misinterpreting the cited norm (…), in that, whether the property is registered in the property register in horizontal ownership or vertical ownership, the taxable base subject to IMI is always the patrimonial value of each of the divisions capable of being leased separately (…)."

"Therefore, if that has been and is the case with respect to the calculation of IMI (…) it sees no reason why the same should not apply to Stamp Tax, making it also apply to the patrimonial value of each of the said divisions."

1. For the Applicant, "the legislator's intention would have aimed only at the tax increase contemplated in the norm, with respect to 'luxury units' and those 'of high patrimonial value', and never as in the present case occurs, with respect to the modest divisions that make up the property in question."

2. Indeed, in the opinion of the Applicant "it seems evident and clear that the legislator could not have intended otherwise than to give properties in vertical ownership the same treatment it gave to properties in horizontal ownership, or valued substance, making it prevail over form."

3. And as such, from the Applicant's point of view, it cannot be accepted that for the purpose of taxation in IS, within item no. 28 of the General Table, what has always been the golden rule regarding the autonomy of parts of urban properties capable of separate lease ceases to be respected.

4. To defend its thesis, the now Applicant relies on three distinct arguments, which it considers crucial in the context of the present discussion.

5. First, the Applicant contends that its position was already the most appropriate within the framework of the Property Contribution Code and the Agricultural Industry Tax Code, "(…) already rule 8 of Article 144 of the Property Contribution Code and the Agricultural Industry Tax Code, in force until 2004, determined that: 'in the description and assessment of properties, floors and divisions capable of separate lease shall be distinguished'."

6. Parallel to this, the now Applicant also highlights what follows from Article 12(3) of the IMI Code, according to which: "each floor or part of a property capable of independent use is considered separately in the property register, which also specifies its respective TPV."

7. Finally, it contends that the subjection "of such dwellings to Stamp Tax, solely by the non-existence of the legal instrument that would formalize and formalizes horizontal ownership, is to completely deny the principle that prevails in Tax Law of the 'Prevalence of Substance over Form'."

8. In conclusion, in the Applicant's opinion, there is no doubt that, "with reference to the property identified in this petition, the taxable patrimonial value, necessarily distinguished by each of its parts capable of separate lease and with total economic autonomy between them, produces exactly the same effects, whether or not the deed of constitution of horizontal ownership is executed, both with respect to the 1% stamp tax, as well as with respect to IMI (…)."

9. The Applicant therefore petitioned that the previously mentioned assessments be annulled and the respective amount reimbursed, in the amount of € 4,317.55 (already assessed), plus compensatory interest, pursuant to and by virtue of Articles 30(e) and 43 of the General Tax Code (LGT).

10. For its part, the Respondent, after being duly notified to that effect, submitted its response in which, in summary, it alleged the following:

11. "The now applicant is the owner of a property in a regime of full or vertical ownership. From the notion of property in Article 2 of the CIMI, only autonomous fractions of property in the regime of horizontal ownership are deemed to be properties – Article 2(4) of the cited CIMI. Therefore, since the property of which it is owner is in a regime of full ownership, it does not possess autonomous fractions, to which the tax law attributes the qualification of property."

12. In this way, the Respondent contends that the Applicant is not the owner of autonomous fractions, but rather of a single property.

13. Thus, according to the Respondent, "what the now applicant seeks is for the TA to consider that, for the purposes of assessment of the present tax, there is analogy between the regime of full ownership and that of horizontal ownership, since there should be no discrimination in the legal-tax treatment of these two ownership regimes, as it would be illegal."

14. However, for the Respondent, seeking to apply the regime of horizontal ownership, by analogy, to the regime of vertical ownership is abusive and illegal.

15. Moreover, for the Respondent, "the tax law contains no gap! The CIMI, to which the said item refers, determines that in the regime of horizontal ownership the fractions constitute properties. The property not being subject to this regime, legally the fractions are parts capable of independent use without there being common parts."

16. For the Respondent, "the unity of the urban property in vertical ownership composed of various floors or divisions is not, however, affected by the fact that all or some of those floors or divisions are capable of independent economic use."

17. Therefore, in the Respondent's opinion, "such property remains only one, and the distinct parts thereof are not, thus, legally equated to autonomous fractions in the regime of horizontal ownership."

18. In the Respondent's understanding, "the fact that the IMI was calculated based on the taxable patrimonial value of each part of property with independent economic use does not equally affect the application of Item 28(1) of the General Table."

19. It concludes its response by saying that, "the patrimonial value relevant for the purposes of the incidence of the tax is, thus, the total patrimonial value of the urban property and not the patrimonial value of each of the parts that comprise it, even when capable of independent use."

20. The Respondent thus contends that the assessments made by it result from a correct interpretation and application of law to the facts, and therefore requests that the claim advanced be dismissed.

C) Tribunal's Assessment

1. By way of introduction, it should be noted that, in the view of the present tribunal, and having regard to the legal framework previously presented, the essential normative proposition to be taken into account for the decision of the case is that which results from Item No. 28 of the GSTT.

2. It should also be noted that, in the eyes of the arbitral tribunal, the question to be decided relates exclusively to a matter of law, namely to understand, for the purposes of applying the aforementioned item, which TPV is relevant.

3. First, it should be clarified that it is clear, from the letter of the law, that the TPV to be considered, for the purposes of applying Item No. 28 of the GSTT, can only be the one determined under the IMI Code.

4. This is indeed what the said item tells us, in its exact words, "(…) whose taxable patrimonial value recorded in the register, pursuant to the Municipal Property Tax Code (CIMI), is equal to or exceeding € 1,000,000.00."

5. Given this, note once again what follows from Article 2(4) of the IMI Code which states that "for the purposes of this tax, each autonomous fraction, in the regime of horizontal ownership, is deemed to constitute a property."

6. However, reinforced by Article 12(3) of the same Code, which establishes that "each floor or part of a property capable of independent use is considered separately in the property register, which also specifies its respective taxable patrimonial value."

7. It is concluded, thus, that, for the purposes of calculating the IMI to be paid, the TPV is considered individually, for each floor or part capable of independent use.

8. And if this is the method of determination followed for the IMI, it must necessarily be the same model also applied within Item No. 28 of the GSTT, pursuant to the terms explained above.

9. Nevertheless, and should the doubts raised still persist, the present tribunal relies on some arbitral decisions previously rendered, which have addressed the matter under examination.

10. Thus, first, let us note decision no. 50/2013-T, of 29 October, which provides as follows.

11. "Law No. 55-A/2012 says nothing about the qualification of the concepts in question, namely about the concept of 'property with residential purpose'. However, Article 67(2) of the Stamp Tax Code, added by the aforementioned Law, provides that 'to matters not regulated in this code relating to item 28 of the General Table the CIMI applies subsidiarily.'

The tax incidence norm thus refers to urban properties, the concept of which is that which results from Article 2 of the CIMI, with the determination of TPV being subject to the terms provided for in Article 38 and following articles of the same code.

Upon consultation of the CIMI, it is verified that its Article 6 only indicates the different types of urban properties, among which it mentions residential ones (…)

From this we can conclude that, in the legislator's view, what matters is not the legal-formal rigor of the concrete situation of the property but rather its normal use, the purpose for which the property is intended. We further conclude that for the legislator the situation of the property in vertical ownership or in horizontal ownership was not relevant, as no reference or distinction is made between one and the other. What is relevant is the material truth underlying its existence as an urban property and its use.

(…)

Using the criterion that the law itself introduced in Article 67(2) of the Stamp Tax Code, 'to matters not regulated in this code relating to item 28 of the General Table the Municipal Property Tax Code applies subsidiarily'" (emphasis ours).

1. That is, taking into account that registration in the property register of immovable property in vertical ownership, for the purposes of the IMI Code, follows the same registration rules as immovable property constituted in horizontal ownership, with the respective IMI, as well as the new IS, being assessed individually in relation to each of the parts, it does not seem to the present tribunal that there is any doubt that the legal criterion for defining the incidence of the new tax must be the same.

2. In this context, if the law requires, with respect to the IMI, the issuance of individualized assessment notices for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, it will require, in the same terms, with respect to the rule of incidence of Item No. 28 of the GSTT.

3. Therefore, the IS, within Item No. 28 of the GSTT, could only apply to a given fraction if it, possibly, had a TPV exceeding € 1,000,000.00.

4. And, it may further be said that this was indeed the understanding adopted by the ATA.

5. Indeed, the ATA also issued individualized assessment notices, relating to each of the fractions capable of autonomous use, demonstrating that, in its opinion, the aforementioned fractions, despite not being legally constituted in horizontal ownership, would be, for all purposes, independent of one another.

6. However, the ATA overlooked that it could not, by virtue of the framework previously set out, proceed to sum the individual TPVs of the previously mentioned fractions, seeking to reach a value that would fall within the tax base of Item No. 28 of the GSTT.

7. This when the legislator itself established a different rule within the IMI Code which, as previously stated, is the Code applicable to matters not regulated in the Stamp Tax Code, with respect to Item No. 28 of the GSTT.

8. In summary, the criterion established by the ATA, of considering the value of the sum of the individual TPVs attributed to the parts, floors or divisions with independent use, taking advantage of the fact that the property is not constituted in the regime of horizontal ownership, does not find, in the eyes of the present tribunal, legal support, being, in particular, contrary to the criterion applicable in the context of IMI and, by referral (in the terms mentioned above), in the context of IS.

9. In this context, the present tribunal considers that the criterion defended by the ATA violates the principles of legality and fiscal equality, and also that of the prevalence of material truth over legal-formal reality.

10. Parallel to this, note that Article 12(3) of the IMI Code makes no distinction as to the regime of properties in horizontal or vertical ownership.

11. Thus, and since if the property were in the regime of horizontal ownership, none of its residential fractions would be subject to the incidence of the new tax, the ATA cannot treat materially equal situations differently.

12. In this respect, see what was said on this matter in the Arbitral Decision rendered in Proceeding No. 132/2013-T, of 16 December, the understanding of which the present tribunal adopts.

"Indeed, it makes no sense to distinguish in law what the law itself does not distinguish (ubi lex non distinguit nec nos distinguere debemus).

Moreover, distinguishing, in this context, between properties constituted in horizontal ownership and in full ownership would be an "innovation" without associated legal support, especially since, as has been stated here, nothing indicates, either in item no. 28, or in the provisions of the CIMI, a justification for such particular differentiation.

Note, by way of example, what Article 12(3) of the CIMI states: each floor or part of a property capable of independent use is considered separately in the property register, which also specifies its respective taxable patrimonial value.

The uniform criterion that is required is, thus, that which determines that the incidence of the norm in question only takes place when any of the parts, floors or divisions with independent use of a property in horizontal or full ownership with residential purpose possesses a TPV exceeding € 1,000,000.00.

To establish as the reference value for the incidence of the new tax the global TPV of the property in question, as the now respondent intended, does not find support in the applicable legislation, which is the CIMI, given the referral made by the cited Article 67(2) of the Stamp Tax Code.

(…)

Furthermore, admitting the differentiation of treatment could produce results incomprehensible from the legal point of view and contrary to the objectives that the legislator said it had for adding item no. 28. By way of example, suppose the following hypothesis, which seems plausible in light of the interpretation made by the now respondent: a citizen who is the owner of a property constituted in full ownership intended for residential use, with the global value of the autonomous units equal to or exceeding € 1,000,000.00 and the TPV of each one below € 1,000,000.00, is subject to annual taxation of 1% of that value (as occurred in the situation under examination); already another citizen who holds a property with the exact same characteristics as the previous one but which has been constituted in horizontal ownership, with equally the global value of the autonomous fractions equal to or exceeding € 1,000,000.00 and the TPV of each one below € 1,000,000.00, will not be subject to taxation pursuant to the aforementioned item no. 28.

On the other hand, one might ask: if such fractions have the same owner, why does it not make sense to aggregate, for taxation purposes, their respective TPVs? The answer can be illustrated by another hypothesis: a citizen who is the owner of a property in horizontal ownership, in which each of its 20 fractions has a TPV below € 1,000,000.00, would be subject to taxation if – if such aggregation were admitted – the global TPV exceeded that value; already another citizen with identical 20 fractions distributed across 5, 10 or 20 properties would not be subject to any taxation pursuant to said item no. 28.

If this line of reasoning makes sense – thus justifying the non-aggregation of TPVs of fractions of properties in horizontal ownership – no plausible reason is seen why the same should not be applied to the autonomous units of properties in full ownership.

Observing, now, the case under examination, it is found that the TPVs of the floors (autonomous units) of the property with residential purpose vary between (…), with the result that each of them is below € 1,000,000.00.

From this it is concluded, as a result of what has been stated, that the IS referred to in item no. 28 of the GSTT cannot apply to them, and that, therefore, the acts of assessment impugned by the applicant are illegal" (emphasis ours).

1. A final point that is worth highlighting (notwithstanding that the previous framework is sufficient to recognize the illegality of the assessment acts carried out by the ATA) is based on the understanding advocated both by the legislator and by the government itself, at the time of the addition of Item No. 28 to the GSTT.

2. In this regard, let us focus now on the arbitral decision rendered in Proceeding No. 48/2013-T, of 9 October, which extensively analyzes the objectives underlying the addition of the aforementioned item.

3. "Law No. 55-A/2012, of 29/10, has no preamble, from which it is not possible to extract the legislator's intention.

This law of the Assembly of the Republic originated from bill no. 96/XII (2nd), which, in its statement of grounds speaks of the introduction of fiscal measures inserted in a broader set of measures to combat budgetary deficit.

In the statement of grounds of the aforementioned bill, it is said that, 'these measures are essential to reinforce the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary to comply with the adjustment program. The Government is strongly committed to ensuring that the distribution of these sacrifices will be made by all and not only by those who live from the income of their work. In accordance with this objective, this diploma broadens the taxation of capital and property, equitably covering a broad set of sectors of Portuguese society.'

In that statement of grounds it is also stated that, in addition to the increased taxation of capital income and equity gains, a rate is created under the stamp tax affecting urban properties with residential purpose whose taxable patrimonial value is equal to or exceeding one million euros.

That is, in such statement of grounds, it is also not clarified what is understood by urban properties with residential purpose.

In his intervention in the Assembly of the Republic, in the presentation and discussion of the aforementioned bill, the Secretary of State for Tax Affairs stated as follows:

'The Government has chosen as a priority principle of its fiscal policy social equity. This is even more important in times of austerity as a way to ensure fair distribution of fiscal burden.

In the demanding period that the country is going through, during which it is obliged to comply with the program of economic and financial assistance, it becomes even more pressing to assert the principle of equity. It cannot always be the same – employees and pensioners – who bear the fiscal burdens.

For the fiscal system to be more just, it is decisive to promote the broadening of the tax base requiring increased effort from taxpayers with higher incomes and thus protecting Portuguese families with lower incomes.

For the fiscal system to promote more equality, it is fundamental that the effort of budgetary consolidation be distributed among all types of income, covering with special emphasis capital income and properties of high value. This matter, it may be recalled, was extensively addressed in the Constitutional Court's decision.

Finally, for the fiscal system to be more equitable, it is crucial that all be called to contribute according to their contributive capacity, giving the tax administration reinforced powers to monitor and control situations of fraud and tax evasion.

In this sense, the Government presents today a set of measures that effectively reinforce a just and equitable distribution of the effort of adjustment among a broad and comprehensive set of sectors of Portuguese society.

This proposal has three essential pillars: the creation of special taxation on urban properties of value exceeding 1 million euros; the increased taxation on capital income and equity gains; and the reinforcement of the rules to combat fraud and tax evasion.

First, the Government proposes the creation of a special rate on the highest value residential urban properties. It is the first time in Portugal that special taxation is created on high-value properties intended for residential use. This rate will be 0.5% to 0.8% in 2012, and 1% in 2013, and will apply to houses with value equal to or exceeding 1 million euros. With the creation of this additional rate, the fiscal effort required of these property owners will be significantly increased in 2012 and 2013'."

1. Next, it is necessary to gather the conclusions that allow, without margin for doubt, a decision on the matter under discussion (that is, whether, for the purposes of applying Item No. 28 of the GSTT, in cases where a property with various autonomous fractions, capable of independent use, is not constituted in horizontal ownership, the TPV relevant is determined by the sum of the individual TPVs, or, alternatively, is considered individually).

2. In this sense, it should be noted, first, that the present subject matter is, by virtue of Article 67(2) of the Stamp Tax Code, subject to the norms of the IMI Code, "to matters not regulated in this code relating to item 28 of the General Table the CIMI applies subsidiarily."

3. Thus, and as has been mentioned so many times, in the view of the present tribunal, the mechanism for determining the TPV relevant for the purposes of the aforementioned item is the one established in the IMI Code.

4. Now, Article 12(3) of the IMI Code establishes that "each floor or part of a property capable of independent use is considered separately in the property register, which also specifies its respective taxable patrimonial value."

5. The legislator devaluing, in the terms previously mentioned, any prior constitution of horizontal or vertical ownership.

6. Indeed, for the legislator, what is relevant is the material truth underlying its existence as an urban property and its use.

7. It should be noted that the ATA itself seems to agree with the criterion set forth, which is why the assessments it itself issues are very clear in their essential elements, from which it follows that the value of incidence corresponds to the TPV of each of the floors and the individualized assessments.

8. Therefore, 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 the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of the new tax.

9. Thus, there would only be place for the incidence of IS (within Item No. 28 of the GSTT) if any of the parts, floors or divisions with independent use presented a TPV exceeding € 1,000,000.00.

10. The ATA cannot consider as the reference value for the incidence of the new tax the total value of the property, when the legislator itself established a different rule in the context of IMI (and, as previously mentioned, this is the code applicable to matters not regulated with respect to Item No. 28 of the GSTT).

11. In conclusion, the current legal regime does not impose an obligation to constitute horizontal ownership, with the result that the actions of the ATA amount to arbitrary and illegal discrimination.

12. Indeed, the ATA cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the fiscal system, as well as the principle of fiscal legality provided for in Article 103 of the Constitution of the Portuguese Republic, and further the principles of fiscal justice, equality and proportionality.

13. In the case at hand, the property in question was, as of the relevant date of the facts, constituted in full ownership and had 11 fractions with independent use, as results from the documents attached by the Applicant.

14. Given that none of these fractions has a patrimonial value equal to or exceeding € 1,000,000.00, as results from the documents joined to the case file, it is concluded that the legal presupposition for tax incidence was not met.

V. Decision

1. The Arbitral Tribunal therefore decides:

A) To find the request for arbitral determination well-founded and, in consequence, to declare illegal and to annul the IS assessments mentioned above, with reference to the fiscal year 2013, from which resulted tax to be paid in the amount of € 4,317.55 (which should now be reimbursed), relating to the taxation of urban properties with TPV equal to or exceeding € 1,000,000, pursuant to the provisions of Item No. 28 of the GSTT;

B) To condemn the Respondent, pursuant to Article 43(1) of the General Tax Code and Articles 61(2) and (5) of the Tax Procedure Code (CPPT), to payment of compensatory interest, at the rate resulting from Article 43(4) of the General Tax Code, calculated on the amount paid in excess (i.e. € 4,317.55), from the day on which the aforementioned assessment notices were paid and until the full reimbursement of the aforementioned amount; and

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

VI. Value of the Proceedings

1. The value of the proceedings is set at € 4,317.55, pursuant to Article 97-A(1)(a) of the CPPT, applicable by virtue of Article 29(1)(a) and (b) of the RJAT and Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings ("RCPAT").

VII. Costs

1. In accordance with Article 22(4) of the RJAT, the amount of the arbitration fee is set at € 612, pursuant to Table I of the aforementioned Regulation, to be borne by the Respondent, given the full merit of the request.

Notify.

Lisbon, CAAD, 29 April 2015

The Arbitrator

(Sérgio Santos Pereira)