Stamp Tax on Vertical Property Under Verba 28.1 TGIS – CAAD Arbitration 73/2015-T

ARBITRAL DECISION

REPORT

1. On 6 February 2015, A…, Lda, Tax Identification Number …, hereinafter referred to as the Claimant, with registered office in Portugal, requested the constitution of an arbitral tribunal and proceeded with a petition for arbitral ruling, in accordance with the provisions of article 2(1)(a) and article 10(1)(a) of Decree-Law no. 10/2011, of 20 January (Legal Regime for Tax Arbitration, hereinafter referred to only as LRTA), in which the Tax and Customs Authority is Respondent (hereinafter referred to as TCA).

2. The Claimant is represented in these proceedings by its agent, Dr. B, and the Respondent is represented by counsel, Dr. C and Dr. D.

3. The request for constitution of the arbitral tribunal was accepted by the President of the Administrative Arbitration Centre and was notified to the Respondent on 9 February 2015.

4. By means of the request for constitution of the arbitral tribunal and petition for arbitral ruling, the Claimant seeks the annulment of the following stamp duty assessment acts, relating to the year 2012, in the total amount of € 13,428.70 (thirteen thousand four hundred and twenty-eight euros and seventy cents), which fell upon the property registered under article … of the parish of …, municipality and district of Lisbon, in vertical ownership, relating to floors or units with independent use corresponding to Ground Floor D, Ground Floor E, 1st Floor D, 1st Floor E, 2nd Floor D, 2nd Floor E, 3rd Floor D, 3rd Floor E and 4th Floor.

5. Having verified the formal regularity of the petition presented, in accordance with the provisions of article 6(2)(a) of the LRTA and the Claimant not having proceeded with the appointment of an arbitrator, Dr. Jorge Carita was appointed by the President of the Deontological Council of the Administrative Arbitration Centre.

6. The Arbitrator accepted the appointment made, with the arbitral tribunal having been constituted on 17 April 2015, at the seat of the Administrative Arbitration Centre, located at Avenida Duque de Loulé, no. 72-A, in Lisbon, in accordance with the minutes of the constitution of the arbitral tribunal which were drawn up and which are attached to these proceedings.

7. Having been raised an exception by the Respondent in its reply, the tribunal considered that it should only appreciate it in the final decision, whereby it notified the parties, by order of 09.07.2015, of this preliminary decision, as well as for them to pronounce on any possible dispensation with holding the meeting of article 18 of the LRTA and possible dispensation with the presentation of pleadings. Given the silence of both parties, the arbitral tribunal thus considered it appropriate to dispense with the aforementioned meeting, as well as the mentioned pleadings, since there is no need for production of additional evidence beyond that which has already been incorporated into the proceedings through documentary means, the case having all the necessary elements for the delivery of the decision, for reasons of economy and procedural dispatch and the prohibition of useless acts.

8. The Tribunal, in compliance with the provisions of article 18(2) of the LRTA, set 16 October 2015 as the date for delivery of the arbitral decision, having warned the Claimant, through order of 15 September 2015, that it should proceed with payment of the subsequent arbitration fee, in accordance with the provisions of article 4(3) of the Regulation on Costs in Tax Arbitration Proceedings, and communicate the same payment to the Administrative Arbitration Centre.

II. The Claimant supports its petition, in summary, as follows:

The Claimant supports the petition for annulment of the stamp duty assessment act to which it was subjected, relating to floors or parts susceptible to independent use, intended for housing, of the property registered under article … in the respective register, located on …Street, no. … to …, turning onto …Street, parish of …, municipality of Lisbon, which is in vertical ownership, as being illegal, for being affected by the following defects:

a) Error concerning the assumptions for application of item 28.1 of the General Table of Stamp Duty, "in that, whether the property is registered in the property register in horizontal ownership or in vertical ownership, the taxable basis subject to Municipal Property Tax was and is always the patrimonial value of each of the units susceptible to separate leasing, as has already happened in the context of Property Contribution and Municipal Contribution. Therefore, if it was and is thus in relation to the calculation of Municipal Property Tax (…), the claimant sees no reason why the same should not happen with Stamp Duty, making it also fall on the patrimonial value of each of said units. (…) Furthermore, the legislator, with this legislative innovation, considered as a determining element of contributory capacity urban properties, with residential use of high value (luxury), considering as high value properties with patrimonial value of at least 1,000,000.00 €".

b) It further adds that: "if the legislator said nothing regarding the form of taxation of such properties under stamp duty at the rate of 1% and if it made no distinction between properties in vertical ownership and properties in horizontal ownership, intended for housing and with taxable patrimonial values lower than such € 1,000,000.00, per floor or unit susceptible to separate leasing, as in the specific case occurred and occurs, it is well known that it intended to give them the same treatment at the level of taxation under stamp duty, similar to what occurred and occurs at the level of taxation under Municipal Property Tax and previously, in Property Contribution and Municipal Contribution."

c) It further argues that: "the Tax Authority, disregarding the taxable patrimonial value relating to each of the autonomous housing units of the property in the assessment of item 28 of the General Table, clearly disrespected the "ratio juris" of the provision, which can only envisage the incidence of the tax in relation to "Luxury housing units" with taxable patrimonial value equal to or greater than € 1,000,000.00".

d) Defect of violation of constitutional law, namely the principle of equality, the prevalence of material truth, good faith and confidence and legal certainty, because, on the one hand, "the TCA, acting as it did, used and uses 'double standards', (…) the TCA, with such action ended up giving, intentionally or not, relevance to form, neglecting substance, when (…) the opposite should have happened, that is, it should have valued substance, disregarding form, similar to the path it has followed on many other occasions and in other circumstances."; "Because to subject such housing to Stamp Duty, solely due to the non-existence of the legal instrument that formalized horizontal ownership, is to completely deny the principle that prevails in Tax Law of 'Prevalence of Substance over Form'";

e) It further argues that: "it is not credible that, knowing the legislator the reality of property register entries, the Law would suddenly appear and be applied to taxpayers in such circumstances (as in the cases of the challengers), clearly injuring, among so many others, the principles of legal certainty and good faith that should exist in the dealings between the Administration and private parties, enshrined, principally, in articles 59 of the General Tax Law, 7 of the Code of Administrative Procedure, provisions which had their origin in articles 22, 266 and 267 of the Constitution of the Portuguese Republic."

III. In its Reply the Respondent, invoked, in summary, the following:

For its part, the TCA comes, in its reply, to defend itself, by exception and by challenge:

a) By way of exception, the Respondent alleges that: "it is on the basis of the decision of dismissal of the official review petition, notified with acknowledgement of receipt, through letter dated 25.01.2015, originating from the Lisbon Tax Office, that the claimant requests the constitution of the present arbitral tribunal. Now, the request for constitution of the tribunal is also governed by time limits and with legal grounds. Thus, in the provisions of article 10, no. 1 letter a) of Decree-Law no. 10/2011, of 20 January, which approved the Legal Regime for Tax Arbitration, the time limit for presentation of the request for constitution of the arbitral tribunal is 90 days from the end of the time limit for voluntary payment of the tax, and equally from the notification of the decision concluding the legal time limit for decision of the hierarchical appeal." accordingly, and given that, "the now claimant did not file a hierarchical appeal (it was available from the decision dismissing the official review petition of the assessment, as per notification), whereby the dismissal of the official review petition of the assessment is not a ground for requesting the constitution of the arbitral tribunal, in accordance with the final part of the aforementioned letter a) of article 10, no. 1 of Decree-Law no. 10/2011, of 20 January."

b) Furthermore, by way of exception, and now being specific, the Respondent mentions that: "if the petition of the now claimant is analyzed on the basis of the first part of the aforementioned letter a), that is on the basis of article 102, no. 1 letter a) of the Code of Tax Procedure and Process, (…) the end of the time limit for voluntary payment of the tax obligations legally notified to the taxpayer, the request for arbitral constitution is out of time, in that, the assessments in question had as the voluntary payment time limit 30 April 2013, and the present petition was presented by the claimant on 6 February 2015, therefore well beyond the 90-day time limit."

c) By way of challenge and as regards the alleged error concerning the assumptions of the assessments, the Respondent understands that: "the now claimant is owner of a property in the regime of full or vertical ownership. From the definition of property of article 2 of the Municipal Property Tax Code, only the autonomous units of property in the regime of horizontal ownership are considered properties – no. 4 of the cited article 2 of the Municipal Property Tax Code. Therefore, being the property of which it is owner in the regime of full ownership, it does not have autonomous units, to which tax law attributes the qualification of property. Thus, the now claimant, for purposes of Municipal Property Tax and also of stamp duty, by force of the drafting of the aforementioned item [item 28.1 of the General Table of Stamp Duty], is not owner of 11 autonomous units, but rather of a single property."

d) It further adds that, "Horizontal ownership is a specific legal regime of property provided for in article 1414 and following of the Civil Code (…). Now, to claim that the interpreter and applicant of tax law should apply by analogy, to the regime of full ownership, the regime of horizontal ownership is what is abusive and illegal", because, on the one hand, "these two ownership regimes are regimes of civil law, which were imported into tax law, namely in the terms mentioned by article 2 of the Municipal Property Tax Code. And the interpreter of tax law cannot equate these two regimes, in accordance with the rule according to which the concepts of other branches of law have the meaning in tax law that is given to them in those branches of law (…)."

e) In effect, "in determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed, in accordance with article 11, no. 1 of the General Tax Law which thus refers to the Civil Code, its article 10 on the application of analogy, determines that this will only be applicable in the case of gaps in the Law. Now, tax law does not contain any gap." The Municipal Property Tax Code determines, to which the cited item refers, that in the regime of horizontal ownership the units constitute properties. The property not being subject to this regime, legally the units are parts susceptible to independent use, without there being common parts."

f) Referring, in consequence, that "Being the property subject to the regime of full ownership, but being physically constituted by parts susceptible to independent use, tax law attributed relevance to this materiality, assessing these parts individually, in accordance with article 12 and consequently, in accordance with article 12, no. 3 of the Municipal Property Tax Code, each floor or part of property susceptible to independent use is considered separately in the property register, but in the same register, proceeding with the assessment of Municipal Property Tax taking into account the taxable patrimonial value of each part."

g) It further expounds that: "The unity of the urban property in vertical ownership composed of various floors or units is not, however, affected by the fact that all or part of such floors or units are susceptible to independent economic use."

h) It further adds that: "The fact that the Municipal Property Tax was calculated on the basis of 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."

i) As regards the alleged defect of violation of constitutional law – by violation of the principle of legality, tax equality and contributory capacity, the Respondent defends itself by stating, as regards the alleged violation of the principle of equality, that there is no discrimination in the taxation of properties constituted in horizontal ownership and properties in full ownership with floors or units susceptible to independent use, because "they are differentiated legal institutes."

j) It further understands that the "norms, assessment procedures, norms on property register entries, and also the norms on assessment of the parts susceptible to independent use, do not allow one to affirm that there should be an equation of the property in the regime of full ownership to the regime of vertical ownership, that is, because (…) these civil-law legal regimes are different, and tax law respects them."

k) And concludes in the sense that "to the tax acts in question, in terms of substance, did not violate, thus, any legal or constitutional principle, and should, thus, be maintained."

IV. Preliminary Examination

The Tribunal is competent and is regularly constituted, in accordance with the provisions of article 2(1)(a) and articles 5 and 6, all of the LRTA.

The parties have legal standing and capacity, show themselves to be legitimate, are regularly represented and the proceedings do not suffer from nullities.

• Preliminary Issues -

The Respondent in its Reply to the petition for arbitral ruling of the Claimant presents its defence by exception and by challenge. Now, considering that, as regards the exception, and given that it, by proceeding, impedes knowledge of the merits of the petition, it is important to know it in advance, which we propose to do immediately.

Thus,

The Respondent alleges, on the one hand, that "it is on the basis of the decision of dismissal of the official review petition, notified with acknowledgement of receipt, through letter dated 25.01.2015, originating from the Lisbon Tax Office, that the claimant requests the constitution of the present arbitral tribunal, (…) which "is not a ground for requesting the constitution of the arbitral tribunal, in accordance with the final part of the aforementioned letter a) of article 10, no. 1 of Decree-Law no. 10/2011, of 20 January.", - which we could consider as being an exception of "unsuitability of the means".

And, on the other hand, it manifests its understanding in the sense that "if the petition of the now claimant is analyzed on the basis of the first part of the aforementioned letter a), that is on the basis of article 102, no. 1 letter a) of the Code of Tax Procedure and Process, (…) the end of the time limit for voluntary payment of the tax obligations legally notified to the taxpayer, the request for arbitral constitution is out of time, in that, the assessments in question had as the voluntary payment time limit 30 April 2013, and the present petition was presented by the claimant on 6 February 2015, therefore well beyond the 90-day time limit." (timeliness of the petition)

Let us examine,

I - (Un)suitability of the Means

The Respondent considers that the procedural means appropriate to react to the decision of dismissal of the official review petition of the disputed assessments was the hierarchical appeal, and not the request for constitution of the arbitral tribunal.

Let us see whether the Respondent is right as to this aspect, having to indicate for now the facts considered as established for the appreciation of this matter.

As a matter of fact considered as established with interest for appreciating the exception in question, we have that:

A. On 3 July 2014, the Claimant, through its agent, made a request for official review of the Stamp Duty assessment relating to the year 2012, with reference to the collection notes 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 … and 2013 …, requesting its annulment. (cf. Doc. no. 1 attached to the initial petition);

B. In December 2014, the Claimant was notified of the draft decision to the effect of dismissal of the official review relating to the annulment of Stamp Duty assessments (item 28.1 of the General Table of Stamp Duty) which it presented, and should it wish to do so, to exercise the right of hearing that was available to it, under the provisions of article 60 of the General Tax Law. (cf. Doc. no. 1 attached to the initial petition);

C. And in January 2015, the Claimant was notified of the final decision relating to the review, to the effect of its dismissal. (cf. Doc. no. 1 attached to the initial petition).

Now, considering the facts given as established above described, and that the act of dismissal of a request for official review of a tax act is an administrative act in tax matters, although it does not have as its mediate object a tax assessment act, …

It will be undisputed that, in the case sub judice, this administrative act – dismissal of the review petition - involved the appreciation of the legality of the assessment act – cf. Doc no. 1 attached to the initial petition – is classifiable under letter d) of article 97 of the Code of Tax Procedure and Process.

Thus, and in the sequence of this classification, it will not be amiss to refer to Jorge Lopes de Sousa[1] when he mentions that "There are acts in tax matters that are challenged through special administrative action, as results from letters p) and no. 2 of article 97 CTPP.

From these norms it results that special administrative action is the appropriate procedural means when the act to be challenged is one of total or partial dismissal of revocation of exemptions or other tax benefits, when dependent on recognition by the tax authority, and other administrative acts relating to tax questions that do not involve the appreciation of the legality of an assessment act.

From this article it clearly results that, in cases where the act to be challenged is an assessment act or an act that involves the appreciation of the legality of an assessment act (act of dismissal of administrative claim or hierarchical appeal filed from the decision that appreciates it or act of appreciation of a request for official review in accordance with article 78 of the General Tax Law) the appropriate means is the challenge proceedings."

This means that, having the order that delivered the decision of dismissal of the request for official review of the stamp duty assessments here challenged appreciated the legality of the tax assessment act, the means that the taxpayer had available to react against that same decision was through judicial challenge, in accordance with the provisions of article 102 letter e) combined with letter e) of article 97, both of the Code of Tax Procedure and Process, applicable by force of article 29 of the LRTA.

This being equally the sense of the Decision of the Central Administrative Court of the North, delivered in case no. 00558/12.1BECBR, of 30.04.2015 which this tribunal accompanies and adheres to, according to which:

"I. From the interpretation of letter a) of article 102 of the CTPP the time limit for challenge is 90 days after the end of the time limit for voluntary payment of the tax obligations legally notified to the taxpayer.

II. It follows from no. 1 of article 78 of the General Tax Law that the taxpayer may request from the administration the review of tax acts, within the administrative claim time limit and on the ground of any illegality.

III. It is established and settled case law of the Supreme Administrative Court, as the tax authority can, on its own initiative, proceed with official review of the tax act, within the time limit of four years after the assessment or at any time if the tax has not yet been paid, on the ground of error attributable to the services (article 78 of the General Tax Law) the taxpayer can also, within that official review time limit, request that same review with those grounds.

IV. It follows from no. 1 of article 78 of the General Tax Law that in the face of express or tacit dismissal of the request for official review, which injures rights and legally protected interests, opens the contentious avenue in accordance with letter d) of no. 1 and 2 of article 95 of the General Tax Law."

Thus, adhering to this jurisprudence, applicable to the case at hand, we conclude that the respondent's claim regarding the invoked "unsuitability of the means" is not well-founded, whereby, the same is dismissed.

II – Timeliness of the Petition

The Respondent understands that the request for constitution of the present arbitral tribunal is out of time, in that, "the assessments in question had as the voluntary payment time limit 30 April 2013, and the present petition was presented by the claimant on 6 February 2015, therefore well beyond the 90-day time limit."

Let us see whether the Respondent is right,

Article 10 of the LRTA provides that: "The request for constitution of an arbitral tribunal is presented:

a) Within the time limit of 90 days, counted from the facts provided for in no. 1 and 2 of article 102 of the Code of Tax Procedure and Process, as to acts susceptible to autonomous challenge and, equally, from the notification of the decision or the end of the legal time limit for decision of the hierarchical appeal."

This legal provision clearly refers to the provisions of article 102 of the Code of Tax Procedure and Process, which provides in letter e) of its no. 1 that: "The challenge shall be presented within the time limit of 3 months counted from the following facts: e) notification of the remaining acts that may be subject to autonomous challenge in accordance with this Code."

Now, combining those provisions with the teachings of Jorge Lopes de Sousa[2], as to this matter, in the sense that: "As regards administrative acts that involve the appreciation of the legality of assessment acts (such as decisions of hierarchical appeals filed against decisions of administrative claims and decisions that rule on the merits of requests for review of the tax act), the appropriate procedural means is judicial challenge proceedings [article 97, no. 1, letter d) of the CTPP], whereby the time limit of 90 days will be applicable [article 102, no. 1 letter e) of the CTPP].", we are of the belief that the Respondent will also not be right regarding the exception of timeliness of the petition.

In truth, and considering that it is in this letter e) of article 102 of the Code of Tax Procedure and Process that the act of dismissal of the request for official review can be classified, the time limit of 90 days for presenting the request for constitution of the arbitral tribunal, in respect of the provisions of article 10 of the LRTA and article 102 of the Code of Tax Procedure and Process, should be counted from the notification of the act of dismissal of the review petition and, not from the end of the time limit for voluntary payment of the assessments.

Thus, having in view that the Claimant was notified of the act of dismissal of the review petition on 25 January 2015 and that it presented the request for constitution of the arbitral tribunal on 6 February 2015, with only 12 days passing, it is not the same out of time, as it does not exceed the 90-day time limit legally provided for, the exception invoked by the Respondent being equally dismissed.

Thus, it is concluded that the exceptions invoked by the Respondent are dismissed, whereby in consequence the merits of the petition will be appreciated.

V. Factual Matters

With interest for the decision, the following facts are considered as proven:

A. The Claimant is the owner of the property located at …Street, no. … to …, turning onto …Street, parish of …, municipality and district of Lisbon, registered in the urban property register under article …. (cf. Doc. no. 11 attached to the initial petition);

B. The property comprises a total of six floors and eleven units with independent use, of which only nine are intended for housing, whose taxable patrimonial value (TPV), determined under the Municipal Property Tax Code, varies between € 64,870.00 and € 165,180.00. (cf. Doc. no. 11 attached to the initial petition);

C. The property in question is in the regime of vertical or full ownership. (Doc. no. 11 attached to the initial petition);

D. The sum of the TPV of the aforementioned autonomous units intended for housing amounts to € 1,295,270.00 (one million, two hundred and ninety-five thousand, two hundred and seventy euros), each of them individually having a TPV lower than € 1,000,000.00 (one million euros) (Doc. no. 11 attached to the initial petition);

E. Property register entry no. … separately identifies each of the autonomous units with independent use, with the respective TPV also being discriminated, resulting from the general assessment (cf. Doc. no. 11 attached to the initial petition);

F. The Claimant was notified of the Stamp Duty assessment acts relating to the year 2012, made under item no. 28.1 of the General Table of Stamp Duty, on the floors and units with independent use intended for housing, in the overall amount of € 12,952.70 (cf. Docs. no. 2 to 10 attached to the initial petition);

G. On 30 April 2014, the Claimant proceeded with payment, in the coercive collection phase, of the collection notes 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 … and 2013 …, in the overall amount of € 13,428.70 (cf. Docs. no. 12 to 19 attached to the initial petition).

H. On 3 July 2014, the Claimant, through its agent, made a request for official review of the Stamp Duty assessment relating to the year 2012, with reference to the collection notes 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 …, 2013 … and 2013 …, requesting its annulment. (cf. Doc. no. 1 attached to the initial petition);

I. In December 2014, the Claimant was notified of the draft decision to the effect of dismissal of the official review relating to the annulment of Stamp Duty assessments (item 28.1 of the General Table of Stamp Duty) which it presented, and should it wish to do so, to exercise the right of hearing that was available to it, under the provisions of article 60 of the General Tax Law. (cf. Doc. no. 1 attached to the initial petition);

J. And in January 2015, the Claimant was notified of the final decision relating to the review, to the effect of its dismissal. (cf. Doc. no. 1 attached to the initial petition).

VI. Justification of Factual Matters

For the conviction of the Arbitral Tribunal, regarding the facts proven, the documents attached to the proceedings were relevant, as well as the administrative file, all analysed and weighed in conjunction with the pleadings, from which results agreement regarding the factuality presented by the Claimant in the petition for arbitral ruling.

VII. Facts Considered as Not Proven

There are no facts considered as not proven, because all facts relevant for the appreciation of the petition were considered as proven.

VIII. Legal Grounds

• On the Disputed Issues -

In the present case, there are three disputed questions of law:

1. to know whether the subjection to stamp duty, in accordance with what is provided in item no. 28 of the General Table of Stamp Duty, relating to the year 2012, is determined by the TPV corresponding to each of the parts of the property with residential use, or whether, instead, it is determined by the overall TPV of the property, which would correspond to the sum of all the TPVs of the floors that compose it - Incidence of item 28.1 of the General Table of Stamp Duty;

2. to know whether the provision in item no. 28 of the General Table of Stamp Duty is unconstitutional by violation of the principle of equality, as well as of the provision in article 104, no. 3, of the Constitution of the Portuguese Republic, in the interpretation that the TCA makes of it.

3. to know whether the Claimant, should the previous questions proceed, is entitled to compensatory interest.

Let us examine,

I – On the Incidence of Item 28.1 of the General Table of Stamp Duty

1. Law no. 55-A/2012, of 19 October (which hereinafter we will designate as Law no. 55-A/2012 or simply Law), amended, among others, several articles of the Stamp Duty Code, more specifically 12 of its articles.

2. The fundamental amendment, which conditions all the others, is contained in article 4 of Law no. 55-A/2012, which adds to the General Table of Stamp Duty (GTSD), annexed to the Stamp Duty Code (SDC), a new item, no. 28, with the following wording:

"28. Ownership, usufruct or right of surface of urban properties whose taxable patrimonial value contained in the property register, in accordance with the Municipal Property Tax Code, is equal to or greater than (euro) 1,000,000 - on the taxable patrimonial value used for the purpose of Municipal Property Tax:

28.1 For property with residential use ----------------------------------------- 1%

28.2 For 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, contained in the list approved by order of the Minister of Finance ----------------------------------------------------------------- 7.5%"

1. Thus, in accordance with the aforementioned item, and in that which matters to us here, only the ownership, usufruct, or right of surface of:

a) "urban properties,

b) with residential use,

c) and whose taxable patrimonial value contained in the property register, in accordance with the Municipal Property Tax Code, is equal to or greater than (euro) 1,000,000;" (emphasis added)

is subject to Stamp Duty.

1. The logic of taxation of wealth and fortune prevails, with greater or lesser intensity, in the framework of this statute, a conclusion that results from the general increase in the tax burden, in financial logic, exclusively directed to tax situations that would produce immediate revenue.

2. The taxation of capital income is increased, the list of manifestations of fortune is expanded, the taxation of income obtained in Portugal by entities domiciled in tax havens is increased, and finally, to all this is added the taxation of housing properties, of value greater than € 1,000,000.00.

3. And if the legislator includes in this statute housing properties, setting a value above which they would start to be taxed by another tax, this could only mean that it considered that whoever was the owner of property of that value would thereby express an element indicative of additional means of fortune that could be called upon to participate in the collective effort of supplementary fiscal revenue collection.

4. In truth, the legislator in introducing this legislative innovation, considered as a determining element of contributory capacity urban properties, with residential use, of high value (luxury), more precisely, of value equal to or greater than € 1,000,000.00, on which a special rate of stamp duty began to apply, intending to introduce a principle of taxation on wealth displayed in the ownership, usufruct or right of surface of urban luxury properties with residential use. For this reason, the criterion was the application of the new rate to urban properties with residential use, whose TPV is equal to or greater than € 1,000,000.00.

5. This same conclusion is drawn from the analysis of the discussion of law proposal no. 96/XII in the National Assembly, available for consultation in the Journal of the National Assembly, Series I, no. 9/XII/2, of 11 October 2012.

6. The justification of the measure designated as "special rate on the highest value residential urban properties" is based on the invocation of the principles of social equity and fiscal justice, calling to contribute in a more intense way the holders of properties of high value intended for housing, making the new special rate apply to "houses of value equal to or greater than 1 million euros."

7. In effect, the legislator clearly considered that this value, when attributed to a housing unit (house or autonomous unit) reflected a contributory capacity above the average and, as such, capable of determining a special contribution to ensure fair distribution of the fiscal effort.

8. Also following these considerations inspiring the legislative innovation under review, it must be concluded that the existence of a property in vertical or horizontal ownership cannot be, by itself, an indicator of contributory capacity.

9. On the contrary, from the law it follows that both must receive the same fiscal treatment, in obedience to the principles of justice, fiscal equality and material truth.

10. In effect, the existence in each property of independent housing units, in the regime of horizontal or vertical ownership, may be capable of triggering the incidence of the new tax, but only if the TPV of each of the parts or units is equal to or greater than the limit defined by law: € 1,000,000.00.

11. It does not seem reasonable that one could frame in the normative provision, urban properties as a whole, that is, constituted by independent units, with separate TPV assessments.

12. As referred to, the introduction of Law no. 55-A/2012, of 19 October, intended to tax in fact, wealth.

13. Now, the property in question belongs to the Claimant, and is composed of 6 floors and 9 units with independent use, all with residential use.

14. It is the understanding of the TCA that the sum of the TPV relating to those 9 units with independent use that have residential use, totalling an overall TPV of € 1,295,270.00 (one million, two hundred and ninety-five thousand, two hundred and seventy euros), in the year 2012, gives rise to incidence of stamp duty, which is why it proceeded with the assessment of the Stamp Duty challenged in the present proceedings.

15. Thus, from the point of view of the TCA, for a property in vertical ownership (or not constituted in the regime of horizontal ownership) the criterion for determining the incidence of stamp duty is the overall TPV of the floors and units even if with independent use, intended for housing.

16. Let us see whether the TCA's thesis convinces,

17. Law 55-A/2012, of 29 October came into force the day following its publication, that is, on 30 October 2012.

18. However, it says nothing regarding the qualification of the concepts involved, namely, as to the concept of "property with residential use", which matters here.

19. However, article 67, no. 2 of the Stamp Duty Code, added by the aforementioned Law, provides that "to matters not regulated in the present code relating to item 28 of the General Table the Municipal Property Tax Code applies subsidiarily."

20. Thus, we have that the rule of incidence refers to urban properties, whose concept is that which results from the provisions of article 2 of the Municipal Property Tax Code, with the determination of TPV being in accordance with the provisions of article 38 and following of the same code.

21. Consulting the Municipal Property Tax Code, it is found that its article 6 only indicates the different types of urban properties, among which it mentions housing properties (see letter a) of no. 1), clarifying in no. 2 of the same article that "housing, commercial, industrial or for service purposes are buildings or constructions licensed for such purpose or, in the absence of licence, which have as their normal purpose each of these uses."

22. From this we can conclude that, in the view of the legislator, what matters is not the formal-legal rigour of the specific situation of the property, but rather, its normal use, the purpose to which the property is intended.

23. Moreover, we observe that, for the legislator, the situation of the property in vertical or horizontal ownership did not matter, as no reference or distinction is made between the one and the other. What does matter is the material truth underlying its existence as an urban property and its use.

24. In effect, the subjection to stamp duty contained in item no. 28.1 of the General Table of Stamp Duty is determined by the combination of three facts, namely:

a) being before an urban property;

b) residential use and

c) the TPV contained in the property register equal to or greater than € 1,000,000.00.

1. Now, dealing with a property with the characteristics above described, the subjection to stamp duty shall be determined, not by the TPV of the property "as a whole", but by the TPV attributed to each of the floors or units with independent use, intended for housing.

2. Thus, the understanding of the TCA that the sum of the TPVs of the various units or divisions with independent use intended for housing, resulting in an overall TPV equal to or greater than € 1,000,000, legitimates the incidence of stamp duty, under item 28 of the General Table of Stamp Duty, in the standard regime, is manifestly illegal!

3. Thus, there being no, in this way, a single unit or division with independent use, intended for housing, with TPV equal to or greater than € 1,000,000, the TCA could never have subjected the Claimant to stamp duty, under item 28 of the General Table of Stamp Duty, of the year 2012, which is now challenged, as it is the same illegal, and therefore unacceptable and in breach, among others, of the principle of tax legality, as well as the principle of equality, provided for in article 13 of the Constitution of the Portuguese Republic.

II – On Violation of Constitutional Law

1. In accordance with other arbitral decisions delivered in the context of the matter that occupies us here, and which we adhere to, for we agree with the same, we have that the constitutional principle of fiscal equality, as a specific expression of the general structuring principle of equality (article 13 of the Constitution of the Portuguese Republic), is not limited to the rule of universality of taxes, according to which these affect all those who have contributory capacity, also determining that all must be bound by the payment of taxes on the basis of the same criterion - the rule of uniformity of taxes.

2. According to this rule, what is equal should be taxed equally, and what is unequal should be taxed unequally, in the measure of that inequality.

3. The tax legislator cannot treat equal situations differently. Now, if the property were in the regime of horizontal ownership, none of its housing units would suffer incidence of the new tax.

4. For this very reason, article 12, no. 3 of the Municipal Property Tax Code states that "each floor or part of property susceptible to independent use is considered separately in the property register which also discriminates the respective taxable patrimonial value."

5. In consequence, the discrimination that occurs, and that is being operated by the TCA in the specific case, reflects an arbitrary and illegal discrimination. Nothing in the law imposes the obligation of constitution of horizontal ownership.

6. On the other hand, it is known that many of the properties existing in vertical ownership are old, with undeniable social utility, as in many cases they accommodate residents with modest and more accessible rents, factors that must necessarily be taken into account. And, certainly, taking into account all this social and economic reality, the tax legislator itself in the Municipal Property Tax Code treated the two situations (horizontal and vertical ownership) in an equitable way, applying the same criteria.

7. The TCA cannot distinguish where the legislator itself understood it should not do so, under penalty of violating the coherence of the fiscal system, as well as the principle of tax legality, provided for in article 103, no. 2 of the Constitution of the Portuguese Republic, and also the principles of justice, equality, security and legal certainty and fiscal proportionality.

8. Nevertheless, it must be stated that the constitutional principles are here invoked only as support for an interpretation in accordance with the Constitution of the Portuguese Republic, since the operation of assessment of Stamp Duty carried out by the TCA, in the situation of the case, is not in accordance with item 28 of the General Table of Stamp Duty and no. 7 of article 23 of the Stamp Duty Code.

9. Following this reasoning, and transcribing what has already been approved in the Decision of the Administrative Arbitration Centre in case no. 30/2014 T which we adhere to in its entirety:

"The question does not, in our view, require to be placed at the level of violation of the Constitution of the Portuguese Republic, it being sufficient, in fulfilment of the provision in no. 7 of article 23 of the Stamp Duty Code, to carry out a reading, "with the necessary adaptations of the rules of the Municipal Property Tax Code" which will be to consider that the expression "each urban property" comprises not only the units in horizontal ownership (which are urban properties ope legis) as well as "the floors or parts of property susceptible to independent use" (no. 3 of article 12 of the Municipal Property Tax Code).

That is, at the level of interpretation of the tax norms, the rule very proper that is found in no. 3 of article 11 of the General Tax Law may be used: "if doubt persists as to the meaning of the norms of incidence to be applied, account shall be taken of the economic substance of the tax facts".

Now, if for example for the floors which make up the autonomous units of urban housing properties, in horizontal ownership, (albeit they are by definition and "ope legis" urban properties) the TPVs are not added to determine the threshold of TPV eligible for subjection to Stamp Duty (1,000,000.00 euros) of item 28 of the General Table of Stamp Duty (operation of determination of taxable matter), why is it that for the "parts of property or floors" of properties in vertical ownership such should occur?

In both cases the same contributory capacity of taxpayers is manifested (their level of wealth at the level of real property). It is the same "economic substance" analysed from different angles.

Items 28 and 28.1 of the General Table of Stamp Duty, as norms of incidence of Stamp Duty, in the reading that is advocated in this decision, are not, on this occasion, affected by any non-conformity with the text of the fundamental law.(…)

In truth it is the aforementioned norm, in its literality, namely the final part of item 28 of the General Table of Stamp Duty, combined with no. 7 of article 23 of the Stamp Duty Code, that allows one to conclude, with the "necessary adaptations of the rules of the Municipal Property Tax Code" that the TCA should not add the TPVs of the floors or parts of property above identified to find a new TPV relating to those which are intended for housing purposes, separated from the TPV of those which are intended for other purposes.»

1. Given the foregoing, the unequal taxation of the present claimant, compared with a situation in which the property were in horizontal ownership of identical characteristics, is manifestly illegal for considering as the reference value the one corresponding to the sum of the TPVs attributed to each part or division, because it is a clear violation, among others, of the principle of equality and proportionality in tax matters, nothing legitimating the interpretation that the TCA makes of the applicable legal norms.

2. Finally, mention should be made of the case law of the Administrative Arbitration Centre, delivered on the topic "Stamp Duty – Item 28, vertical ownership", in cases no. 428/2014-T, no. 206/2014-T, no. 30/2014-T, no. 181/2013-T, no. 132/2013-T, no. 50/2013-T, no. 248/2013-T of the Administrative Arbitration Centre, among others, whose legal justification this tribunal adheres to in its entirety, as regards the matter of incidence of item 28.1 of the General Table of Stamp Duty.

3. In light of the foregoing, there being no, in this way, a single unit or division with independent use, intended for housing, with TPV equal to or greater than € 1,000,000, are the Stamp Duty assessment acts relating to the year 2012, in the amount of € 12,952.70 annulled, for violation of the provision in item 28.1 of the General Table of Stamp Duty and article 13 of the Constitution of the Portuguese Republic.

III – On Compensatory Interest

1. The Claimant petitions, finally, that it be recognized the right to compensatory interest.

2. Articles 43(1) of the General Tax Law and article 61 of the Code of Tax Procedure and Process provide that compensatory interest is due when it is determined in an administrative claim or judicial challenge that there was error attributable to the services from which results the payment of a tax debt in an amount greater than that legally due.

3. Error attributable to the administration is considered to exist when the error is not attributable to the taxpayer and is based on erroneous assumptions of fact that are not the responsibility of the taxpayer.

4. Now, resulting from the tax acts challenged the obligation to payment of tax greater than that which would be due, compensatory interest is due in accordance with the legally provided terms, the legislator presuming, in these cases, where annulment of the assessment occurs, that a prejudice occurred in the sphere of the taxpayer in virtue of having been deprived of the sum of money that it had to deliver to the State by virtue of an illegal assessment. Consequently, the taxpayer is entitled to this compensation, independently of any allegation or proof of the prejudice suffered.

5. In the present case, it will be unquestionable that, following the establishment of the illegality of the assessment acts, there will be a refund of the tax by force of the provisions of article 43(1) of the General Tax Law and article 100 of the General Tax Law, necessarily passing through the restoration of the "situation that would exist if the tax act that was subject of the arbitral decision had not been performed".

6. Similarly, it is understood that it will be free of doubt that the illegality of the act is attributable to the Tax Authority, which autonomously performed it in an illegal manner.

7. As regards the concept of "error", it has been understood that only in cases of annulments based on defects concerning the tax legal relationship will there be a right to compensatory interest, such right not being recognized in the case of annulments due to procedural or formal defects.

8. Thus, being before a defect of violation of substantive law, which is embodied in error concerning the assumptions of law, attributable to the Tax Authority, the Claimant is entitled to compensatory interest, in accordance with articles 43(1) of the General Tax Law and article 61 of the Code of Tax Procedure and Process, calculated on the amount of € 13,428.70, which it paid, in the coercive collection phase, counted from 30.04.2014 until full refund of the aforementioned amount.

DECISION

In accordance with the foregoing, it is decided:

1. To consider dismissed the exception of "untimeliness of the petition" invoked by the Respondent.

2. To annul all Stamp Duty assessment acts challenged by the Claimant, relating to the year 2012.

3. To order the Tax and Customs Authority to reimburse the Claimant of the amount that it paid, plus compensatory interest, calculated at the legal rate, from 30.04.2014 until full refund.

Value of the Case

The value of the case is fixed at € 13,428.70 (thirteen thousand four hundred and twenty-eight euros and seventy cents) in accordance with article 97-A, no. 1, a), of the Code of Tax Procedure and Process, applicable by force of letters a) and b) of no. 1 of article 29 of the Legal Regime for Tax Arbitration and no. 2 of article 3 of the Regulation on Costs in Tax Arbitration Proceedings.

Costs

Costs to be borne by the Respondent in accordance with article 22, no. 2 of the Legal Regime for Tax Arbitration, article 4 of the Regulation on Costs in Tax Arbitration Proceedings, and Table I annexed thereto, which are fixed in the amount of € 918.00.

Let notification be made.

Lisbon, 9 October 2015

The Arbitrator

(Jorge Carita)