Stamp Tax on Building Land Under Verba 28.1 TGIS: CAAD Arbitration Decision 737/2014-T

ARBITRAL DECISION

CLAIMANT: A… SA

RESPONDENT: Tax and Customs Authority

Arbitral Decision[1]

I - REPORT

A) The Parties and the Constitution of the Arbitral Tribunal

1. A..., SA, a legal entity with number …, with registered office at Avenue …, number … – …, in Lisbon, hereinafter referred to as "Claimant", comes before this tribunal, pursuant to the provisions of Articles 2, no. 1, letter a), 3, no. 1 and 10, no. 1 letter a) and no. 2, all of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT"), having filed a petition for arbitral determination and requested the constitution of a single arbitral tribunal.

In the present arbitral petition, the Claimant seeks a declaration of illegality of the Stamp Tax ("IS") assessments nos. 2014 …, 2014 … and 2014 …, relating to the 1st, 2nd and 3rd instalments of Stamp Tax assessed pursuant to item no. 28.1 of the General Table of Stamp Tax, relating to the year 2013, issued by the Tax and Customs Authority, in the total amount of €13,608.06, with issue date of 17/03/2014, each instalment being fixed at the amount of €4,536.02, with payment deadlines, respectively, in March, July and November 2014.

The impugned assessments, which are hereby fully reproduced, are contained in documents nos. 1 to 3 attached to the arbitral petition, filed on 23/10/2014.

The Claimant concludes its arbitral petition by requesting the annulment of the impugned tax assessments and the reimbursement of all amounts paid as tax, late interest and also compensatory interest.

1. The petition for constitution of the Arbitral Tribunal was presented on 23/10/2014 and was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority. The Claimant opted not to appoint an arbitrator, whereupon, pursuant to the provisions of no. 1 of Article 6 of the RJAT, the present signatory was appointed by the Ethics Council of the Administrative Arbitration Centre as arbitrator of the single Arbitral Tribunal. The appointment was accepted and the parties, notified of the acceptance, did not refuse the designation, pursuant to the provisions of letters a) and b) of no. 1 of Article 11 of the RJAT, in conjunction with the provisions of Articles 6 and 7 of the Ethics Code. Thus, in accordance with the provisions of letter c) of no. 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the single Arbitral Tribunal was constituted on 29 December 2014.

2. On 29/12/2014, an arbitral order was issued ordering the notification of the "AT", pursuant to the provisions of Article 17 of the RJAT, to submit a response within the legal deadline, pursuant to the provisions of nos. 1 and 2 of Article 17 of the RJAT. On 02/02/2015, the AT attached to the record its Response accompanied by the respective administrative file (PA) and also a petition requesting the waiver of the realisation of the meeting provided for in Article 18 of the RJAT, as well as the presentation of submissions, on the grounds that no exceptions existed and the issues under consideration were exclusively of law.

By arbitral order issued on 06/02/2015, the parties were notified to pronounce themselves on the possibility of waiving the realisation of the meeting provided for in Article 18 of the RJAT, as well as the presentation of submissions, on the grounds that no exceptional matter was invoked in the record, it appeared unnecessary any other production of evidence to be made beyond that resulting from documentary evidence attached to the record and no divergence existed concerning the matters of fact, wherefore the issue to be decided was exclusively of law, in accordance with what had already been requested by the AT. The Claimant pronounced itself, by petition, agreeing with the waiver of the realisation of the meeting and the presentation of submissions, whereupon the proceedings proceeded to final decision.

In this connection, an arbitral order was issued on 4/03/2015, in which the meeting referred to in Article 18 of the RJAT was waived, the date for issuing the arbitral decision was set within a deadline of thirty days, and within the same deadline the Claimant should effect payment of the respective subsequent fee.

B) THE PETITION FILED BY THE CLAIMANT

1. The Claimant files the present petition for arbitral determination seeking the illegality and consequent annulment of the acts of assessment of Stamp Tax, relating to the year 2013, with numbers 2014…, 2014 … and 2914 …, in the total amount of €13,608.06, with reference to the urban property, composed of a parcel of land intended for construction, with number …, located in …, in the Parish and Municipality of ..., registered in the property registry under item no. … and with a tax patrimonial value (VPT) of €1,360,805.75. The arbitral petition is grounded on the provisions of Article 10, nos. 1 and 2 of the RJAT. The property and the respective tax assessments being impugned are duly identified in documents nos. 1 to 4, which are hereby reproduced.

2. The Claimant seeks a declaration of illegality of the stamp tax assessments by considering, in summary, that the property in question, as land intended for construction, should not be considered as a "property with residential use", pursuant to the terms and for the purposes of the provisions of item no. 28.1 of the General Table of Stamp Tax, in the version introduced by Law no. 55-A/2012, of 29 October.

3. Thus, it considers that the impugned assessments, issued pursuant to the provisions of item no. 28.1 of the TGIS, are illegal, by breach of the provisions of Articles 2, no. 4, 23, no. 7 and 44, no. 5 of the Stamp Tax Code and the provisions of Articles 6, 41 and 45 of the IMI Code. It further alleges that the entry into force of Law 83-C/2013 of 31 December (State Budget Law for 2014) altered the wording of item no. 28.1 of the TGIS, implicitly recognizing that until 1/01/2014 there was no rule of incidence that would permit the collection of stamp tax in the case of land intended for construction.

C) - THE RESPONSE OF THE RESPONDENT

1. The Respondent alleges in its response, in summary, that the Claimant is not correct. The Tax and Customs Authority (ATA), defends in its response the legality of the assessments by understanding that the same comply with the letter of the law and that the request for declarations of illegality and its consequent annulment should be ruled as unfounded. It argues that, in the absence of any definition on the concepts of property for construction under Stamp Tax, one must resort to the provisions of Articles 6 and 67 of the CIMI, from which it extracts the existence of two types of urban properties, residential ones and land for construction. It argues that the reference to properties with residential use contained in item no. 28.1 of the TGIS should be understood broadly, encompassing both constructed properties and land for construction in which the authorized or planned constructions have that use. In defence of this position, it further invokes the rules applicable to the valuation of real estate, provided for in Articles 41 and 45 of the CIMI.

It concludes, by the unfoundedness of the arbitral petition, seeking the legality of the impugned tax acts and the acquittal of the Respondent in the petition.

D) OF THE PROCEDURAL REQUIREMENTS

1. The Arbitral Tribunal is duly constituted and is materially competent, pursuant to the provisions of Article 2, no. 1, letter a) of Decree-Law no. 10/2011, of 20 January.

2. The Parties have legal personality and capacity, are legitimate and are duly represented (Articles 4 and 10, no. 2, of DL no. 10/2011 and Article 1 of Ordinance no. 112/2011, of 22 March).

The proceedings do not suffer from nullities that would invalidate it and no exceptions were raised that would prevent the judgment of the merits of the case, wherefore the Tribunal is in a position to issue the arbitral decision.

II. ISSUE TO BE DECIDED

1. Taking into account the positions of the Parties assumed in the arguments presented, it is incumbent upon the Tribunal to decide the issue of whether it is or is not in accordance with the law in force, in the year in which the taxable event occurred that gave rise to the assessment of stamp tax (2013), to assess stamp tax pursuant to the terms provided for in item no. 28.1 contained in the General Table of Stamp Tax (TGIS), on land intended for construction, such as that described in the record.

III – FACTUAL MATTERS

A) Facts Established

1. As factual matter relevant to the decision to be issued, the Tribunal considers the following facts as established:

a) The Claimant A…, SA, is the owner of the parcel of land intended for construction (with number …), located in …, Parish and Municipality of ..., registered in the property registry under item no. ….

b) In the year 2013 the urban property described in the present record was composed of a parcel of land intended for construction, lot no. …, in which there was no building or construction whatsoever.

c) The parcel described above, in the year 2013, had as its tax patrimonial value (VPT) the amount of €1,360,805.75, as shown in the property record sheet attached to the record as document no. 5;

d) The Claimant was notified on 17 March 2014 of the assessment of stamp tax relating to the year 2013, issued by the Tax and Customs Authority, in the total amount of €13,608.06, as a result of the application of the rate of 1% made pursuant to item no. 28.1 of the General Table of Stamp Tax, payable in three instalments with payment deadlines, respectively, in March 2014, August and November 2014 - See: Documents nos. 1 to 4 attached to the Arbitral Petition.

e) The Claimant filed an administrative reclamation at the Finance Service of Lisbon …, on 19-08-2014, which was subsequently forwarded to the Finance Service of ...;

f) The administrative reclamation was ruled as unfounded;

g) On 23-10-2014, the Claimant filed the petition for constitution of the arbitral tribunal (CAAD information system) for the impugnation of the stamp tax assessments mentioned above and duly identified in the present record.

h) The Claimant paid the first two instalments of the tax, with proof attached to the record in the annex to the Arbitral Petition, declaring that it would pay the third instalment whose payment deadline would expire in November 2014.

B) Facts Not Established

1. There are no relevant facts for the decision to be considered as not established.

C) Basis for the Established Factual Matters

1. The facts established, as described above, are based on the documentary evidence that the Parties attached to the present proceedings, the documents attached to the record by the Claimant and those contained in the PA attached by the AT, and are based on the documents indicated for each of the points, whose authenticity and correspondence to reality were not questioned.

IV – MATTERS OF LAW AND DECISION

1. With the factual matters established, it is necessary to address the sole issue of law under discussion in the present record, corresponding, in summary, to the issue of illegality raised by the Claimant in the present arbitral petition.

It is incumbent to decide.

1. The issue which is the subject of the present action is whether land intended for urban construction falls within the scope of item no. 28.1 of the General Table of Stamp Tax (TGIS), in its initial wording.

On this issue there is already very abundant case-law of the CAAD, being unanimous its understanding.

Despite this, it is important to analyse the reference legal framework to properly ground the analysis of this issue.

1. The taxation under stamp tax of urban properties with residential use was introduced by Law no. 55-A/2012, of 29 October (LOE) which made several amendments to the Stamp Tax Code and added item no. 28 to the TGIS, which has the following wording:

"28 - Ownership, usufruct or right of surface of urban properties whose tax patrimonial value contained in the registry, pursuant to the Municipal Tax Code on Real Estate (CIMI), is equal to or greater than €1,000,000 – on the tax 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 resident in a country, territory or region subject to a clearly more favourable tax regime, contained in the list approved by ordinance of the Minister of Finance – 7.5%."

In the transitional provisions contained in Article 6 of that Law no. 55-A/2012, the following rules were established relating to the assessment of the tax provided for 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 of 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 letter;

c) The tax patrimonial value to be used in the assessment of the tax corresponds to what results from the rules provided for in the Municipal Tax Code on Real Estate by reference to the year 2011;

d) The assessment of the tax by the Tax and Customs Authority must be effected 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 valued pursuant to the IMI Code: 0.5%;

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

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

2 – In 2013, the assessment of stamp tax provided for in item no. 28 of the respective General Table must be levied on the same tax patrimonial value used for the purposes of assessing municipal tax on real estate to be effected in that year.

3 – The failure to deliver, in whole or in part, within the indicated deadline, of the amounts assessed as stamp tax constitutes a tax offence, punished pursuant to law."

1. In the aforementioned item 28.1 and in sub-letters i) and ii) of letter f) of no. 1 of Article 6 of Law no. 55-A/2012, the legislator used the concept of "property with residential use", which, as the parties refer, finds no reference in any other legislative diploma, wherefore the specification of the same is necessary.

The Municipal Tax Code on Real Estate (CIMI) is mentioned in several provisions of the Stamp Tax Code, introduced by Law no. 55-A/2012 and is indicated as a diploma of subsidiary application with respect to the tax provided for in the aforementioned item no. 28, as happens in Articles 2, no. 4, 3, no. 3, letter u), 5, letter u), 23, no. 7, and 46 and 67 of the CIS. However, in none of these normative provisions is a concept with that designation used, wherefore its specification continues to require the use of the rules of legal interpretation, in order to clarify the purposes of the legislator.

Law no. 83-C/2013, of 31 December (State Budget Law for 2014), amended that item no. 28.1, giving it the following wording:

"28.1 - For residential property or for land intended for construction whose building, authorized or planned, is for residential purposes, pursuant to the provisions of the IMI Code – 1%"

Such formulation naturally applies only from 1 January 2014, but it must be said in advance that it has in no way helped to clarify the qualification of the concept in question. However, there is no doubt that it helped to clarify, even if implicitly, that the previous version did not contemplate the taxation of this type of property, that is, land intended for construction.

1. It is important, however, to verify the possible contribution to be drawn from the concepts used in the CIMI, in its Articles 3 to 6.

Thus, according to Article 2 of the CIMI, "real estate" is understood as:

"1 – For the purposes of this Code, real estate is any portion of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or standing thereon, with a character of permanence, provided that it forms part of the patrimony of a natural person or legal entity and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above mentioned, endowed with economic autonomy in relation to the land where they are located, although situated in a portion of territory that constitutes an integral part of a diverse patrimony or does not have a patrimonial nature.

2 – Buildings or constructions, although moveable 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 constructions are standing at the same location for a period exceeding one year.

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

Article 3 further provides that "rural real estate" is understood as:

"1 – Rural real estate are lands situated outside an urban agglomeration which are not to be classified as land intended for construction, pursuant to no. 3 of Article 6, provided that:

a) They are devoted or, in the absence of concrete dedication, have as their normal purpose an use generating agricultural income, as these are considered for the purposes of tax on natural persons' income (IRS);

b) Not having the dedication indicated in the preceding letter, they are not constructed or have only buildings or constructions of an accessory character, without economic autonomy and of reduced value.

2 – Rural real estate also includes lands situated within an urban agglomeration, provided that, by virtue of legally approved provision, they cannot have use generating any income or can only have use generating agricultural income and are in fact having this dedication.

3 – Rural real estate also includes:

a) Buildings and constructions 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 the purposes of this Code, urban agglomerations are considered, besides those situated within legally fixed perimeters, nuclei with a minimum of 10 dwelling units served by public use streets, with their perimeter delimited by points distanced 50 m from the axis of the streets, in the transversal direction, and 20 m from the last building, in the direction of the streets."

Article 4 qualifies as urban real estate "all those that should not be classified as rural, without prejudice to the provisions of the following article."

And Article 6 indicates the types of "urban real estate", in the following terms:

"1 – Urban real estate is divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Land for construction; (underlined by us)

d) Other.

2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of license, which have as their normal purpose each of these purposes.

3 – Land intended for construction are lands situated within or outside an urban agglomeration, for which a license or authorization has been granted, admitted prior communication or issued a favourable prior information of a lot division or construction operation, and also those that have been declared as such in the acquisition title, excepting lands in which the competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land-use planning, are devoted to spaces, infrastructure or public facilities. (Wording of Law no. 64-A/08, of 31-12)

4 – Those falling within the provision of letter d) of no. 1 include lands situated within an urban agglomeration which are not land for construction nor are covered by the provision of no. 2 of Article 3 and also buildings and constructions licensed or, in the absence of license, which have as their normal purpose other purposes than those referred to in no. 2 and also those of the exception in no. 3."

1. In light of the legal framework set out above, and taking into account the rules on the interpretation of legal norms, namely those resulting from Article 11 of the General Tax Law[2] (LGT), it is necessary to conclude that the general principles applicable to the interpretation of legal norms, to which no. 1 of Article 11 of the LGT refers, are established in Article 9 of the Civil Code, which establishes the following:

"1. Interpretation should not be confined to the letter of the law, but should reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was made and the specific conditions of the time in which it is applied.

1. The interpreter cannot, however, consider the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

2. 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 adequate terms."

3. Thus, it is necessary to determine the meaning and scope of the concept of "property with residential use", a fundamental task for the interpretation and correct application of the provision contained in items 28 and 28.1 of the TGIS. As is clear from the above, the CIMI, in the classification of real estate that it adopts, does not use the concept of "property with residential use". Nor is this concept found, with this terminology, in any other diploma.

Following the reasoning already pursued in previous arbitral decisions, namely in those issued in cases nos. 53/2013-T, 144/2013-T, 306/2014-T, and 328/2014-T; 589/2014-T; 500/2014-T and 602/2014-T, among many others, it should be understood that in the absence of exact terminological correspondence of the concept of "property with residential use" with any other used in other diplomas, several interpretative hypotheses may be ventured. 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 it that the "legislative intent" must be reconstructed, as required by no. 1 of Article 9 of the Civil Code, applicable by virtue of the provisions of Article 11, no. 1 of the LGT.

1. The concept closest to the literal meaning of this expression used is manifestly that of "residential properties", defined in no. 2 of Article 6 of the CIMI as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of license, which have as their normal purpose residential purposes. If it were to be understood that the expression "property with residential use" coincides with that of "residential properties", it is evident that the assessments would be marred by error concerning the factual and legal assumptions, since the property with respect to which Stamp Tax was assessed pursuant to the aforementioned item no. 28.1 is a parcel of land intended for construction, without any building or construction thereon at the time the taxable event occurred, as required by that no. 2 of Article 6 to fulfil that concept of "residential properties".

Therefore, if "property with residential use" means "residential property", the assessments whose declaration of illegality is petitioned are illegal, because there is no building or construction whatsoever.

However, the non-coincidence of the terms of the expression used in item no. 28.1 of the TGIS with that which results from no. 2 of Article 6 of the CIMI, points to the sense that it was not intended to use the same concept. Therefore, the AT is not correct in what it alleges in this matter in its response.

1. Furthermore, a more in-depth interpretation of the meaning to be given to the concept in question leads to the conclusion that "dedication", in this context, means "action of destining something to a determined use". And, if we take into account the objectives defined in the statement of principles issued in the Parliament on the intent of the legislator to introduce taxation on "luxury homes", there is no doubt that the purpose or ratio legis underlying it is to tax the "use" of the property considered in the fullness of the degree of comfort it provides. Baptista Machado refers to this purpose as follows:[3] "when, as a rule, norms (legislative formulations) have 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. For, among the possible meanings, some will correspond to the most natural and direct meaning of the expressions used, whereas others will fit into the verbal framework of the norm only in a forced, contrived manner. Now, in the absence of other elements that would lead to 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 in particular to their legal-technical meaning, on the assumption (not always exact) that the legislator knew how to express its intent correctly".

2. The relevance of the text of the law is especially stressed in the matter of interpretation of tax incidence norms, and in this context Stamp Tax appears as a tax of difficult texture and confused identity, with the interpreter frequently encountering successive difficulties, wherefore the guiding thread must be, in the first place, the principle of the unity of the legal system, attempting to impose some coherence of application. In this line of thought, we cannot do without resorting to the Explanatory Memorandum of the Bill no. 96/XII/2.ª, on which Law no. 55-A/2012 was based. In this explanatory memorandum, the Government's concern to strengthen the principle of social equity in austerity is evident, ensuring an effective distribution of the sacrifices necessary to comply with the adjustment program and its commitment to ensuring that the distribution of these sacrifices will be made by all and not only by those who live on the income of their work.

3. In this context, in the absence of other interpretative coordinates, the text of the legal provision must be the principal 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 adequate terms. Now, taking into account the meaning of the words "dedication" and "to dedicate", which are "to destine" or "to apply", the formula used in that item no. 28.1 of the TGIS, manifestly encompasses properties which are already being used as residential, not being able to encompass properties which, although not yet applied to residential purposes, may eventually be destined for these, as happens with land intended for residential construction.

4. Furthermore, it is still necessary to clarify when a property can be considered as dedicated to a residential purpose, namely whether it is when that purpose is fixed for it in a subdivision license or by an act of authorization or similar, or when the effective attribution of that purpose is materialized. The comparison of item no. 28.1 of the TGIS with no. 2 of Article 6 of the CIMI, which defines the concept of residential properties, points to the sense that an "actual dedication"[4] is necessary. Thus, a building or construction licensed for residential purposes or, even without license, but which has residential purposes as its normal use, is, in light of the provision in no. 2 of Article 6 of the CIMI, a residential property, because it is the legislator itself who considers as such "buildings or constructions licensed for such purpose or, in the absence of license, which have as their normal purpose each of these purposes".

5. For this reason, on the assumption that the legislator of Law no. 55-A/2012 knew how to express its intent in adequate terms if it intended to also refer to properties (land for construction) merely licensed for residential purposes or which have residential purposes as their normal use, it certainly would not have used the expression "property with residential use". And, for this reason, the legislator re-evaluated the situation and introduced a new version of the law, to enter into force from 01-01-2014, now including lands in these circumstances. This very much demonstrates that that was not the situation that resulted from the version of the law until the end of 2013.

6. In these terms, it should be presumed that the use of a different expression by the legislator was intended to achieve a different reality, wherefore "property with residential use" cannot be a property merely licensed for residential purposes or destined for that purpose, having to be a property which already has actual dedication to that purpose. Note that in the case of the present record, the property in question is characterized as land for construction, and, from the Certificate attached to the record by the Claimant as document no. 2, it is possible to extract that the property has no building whatsoever. For this very reason, the only possible meaning for the expression "dedication" is that of "actual dedication". See that Article 3 of the CIMI, with respect to rural properties, makes reference to those which "are devoted or, in the absence of concrete dedication, have as their normal purpose an use generating agricultural income", which demonstrates that the dedication is concrete, actual. As is also clear from the end part of this text, a property may have as its purpose a determined use and be or not be devoted to it, which demonstrates the requirement of actual dedication.

7. In the case in question there is no building or construction whatsoever and, taking into account the content of the documents attached to the record as document, it is not even certain that one may come to exist, wherefore we cannot consider that the property in question has actual dedication for residential purposes. Furthermore, the legislative intention not to extend the scope of incidence to lands for construction was expressly referred to by the Government when presenting to the Plenary of Parliament Bill 96-XII by saying, through the voice of the State Secretary for Tax Affairs, namely: "First, the Government proposes the creation of a special rate to tax high-value residential urban properties. It is the first time that in Portugal a special taxation on high-value properties intended for residential purposes has been created. This rate will be 0.5% to 0.8%, in 2012, and 1%, in 2013, and will apply to homes with a value equal to or exceeding €1 million. With the creation of this additional rate, the tax burden required of these owners will be significantly increased in 2012 and 2013." (underlined by us).

8. The express reference to "homes" as the target of the incidence of the new tax leaves no room for doubt about the legislative intention. On the other hand, no reference is found in the discussion of that Bill to "land for construction". As regards Article 45 of the CIMI, it has no relationship with the classification of properties, only indicating the factors to be considered in the valuation of land for construction. What is considered there, in making reference to the "building to be constructed", is the consideration of the purpose of the land, which, as has been seen, is something which, in the context of the CIMI, does not imply dedication and occurs before it. Wherefore, the invocation by the AT in its response of the rules applicable for purposes of valuation of this type of property does not apply to the purpose relevant to the issue to be decided in the present record. The same applies to the Judgment of the Court of Appeal South invoked there, which does refer to the issue of the valuation regime of the tax patrimonial value of land for construction, in no way relevant to the decision under consideration in the present record.

9. Finally, it is important to note that Law no. 83-C/2013, of 31 December, also contradicts the position here defended by the ATA, for it did not come to clarify the logical element underlying the initial wording of item no. 28.1, but rather came to confirm, indirectly, the interpretation that it did not encompass land for construction. Indeed, if the original wording of item no. 28.1 under analysis, in speaking of "property with residential use", intended to encompass buildings and constructions constituting "residential properties" and land for construction for which residential construction was authorized or planned, then it would naturally be necessary to attribute to the new wording an interpretative nature, similar to what it does in other provisions contained therein, such as for example Article 177, no. 7, with respect to letters a) and b) of no. 3 of Article 17-A of the IRS Code.

10. For all that has been set out, it is the understanding of this Tribunal that item 28.1 does not apply to land for construction, even if such land shows potential for the construction of residential units. It is important to note that on this same issue several arbitral decisions have already been issued, among which the following stand out: those issued in arbitral cases nos. 42/2013 T, 48/2013-T, 53/2013-T, 144/2013-T, 180/2013-T and 189/2013-T, 306/2014-T; 500/2014-T, 589/2014-T, 602/2014-T, among others.

11. The Supreme Administrative Court has also ruled on this issue, namely in Judgments issued on 9 and 23 April 2014 (in which the reporter was Isabel Marques da Silva) and 9 May 2014 (in which the reporter was Dulce Neto). In this connection, the Judgment of the STA of 9 April 2014 (to which express reference is made to arbitral decision no. 144/2013-T) concludes that "inasmuch as the legislator has not defined the concept of 'properties (urban) with residential use', and resulting from Article 6 of the IMI Code - subsidiarily applicable to Stamp Tax provided for in the new item no. 28 of the General Table - a clear distinction between 'residential urban properties' and 'land for construction', these cannot be considered, for purposes of the incidence of Stamp Tax (Item 28.1 of the TGIS, in the wording of Law no. 55-A/2012, of 29 October), as urban properties with residential use."

12. In accordance with the above, if the letter of the law – of Item 28.1 of the TGIS – (grammatical element) does not present itself sufficiently clear to, without hesitation, specify the concept of "property with residential use", the logical element ("the systematic element and 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"), to which no. 1 of Article 9 of the Civil Code points, allows to conclude, as has been concluded in several arbitral decisions and, moreover, by the Supreme Administrative Court in the above-cited Judgments, that, resulting from Article 6 of the IMI Code a clear distinction between urban properties that are "residential" and "land for construction", these cannot be considered as "property with residential use" for purposes of the provision in item no. 28.1 of the General Table of Stamp Tax, in its original wording, as given to it by Law no. 55-A/2012, of 29 October", which justifies the annulment of the impugned assessment, for error in the assumptions on which its issuance was based.

13. As a consequence of all that has been set out, it results that the impugned assessment is illegal, suffers from a vice of violation of law due to error concerning the factual and legal assumptions underlying it, embodied in violation of the provision in item no. 28.1 of the TGIS, wherefore it should be subject to annulment, pursuant to Article 135 of the Code of Administrative Procedure.

Regarding the request for compensatory interest:

1. All the requirements are therefore present for, with the annulment of the impugned assessments, all amounts paid by the Claimant concerning them to be reimbursed, both those referenced and proven in the record and those that have meanwhile occurred in compliance with the impugned and annulled assessments by the present arbitral decision, such reimbursement being essential to the restoration of the "situation that would have existed if the tax act which is the subject of the arbitral decision had not been performed", as is required by letter b) of no. 1 of Article 24 of the RJAT.

2. As regards the request for payment of compensatory interest, it is clear that the tax arbitral process was conceived as an alternative means to the process of judicial impugnation (see the legislative authorization granted to the Government by Article 124, no. 2 (first part) of Law no. 3-B/2010, of 28 April (State Budget Law for 2010). Thus, although Article 2, no. 1, letter a) of the RJAT uses the expression "declaration of illegality" as delimiting the jurisdiction of the arbitral tribunals operating in CAAD, it should be understood to comprise all the powers that in a process of judicial impugnation are attributed to the tax tribunals, such as that of examining errors attributable to the services. All the more so, since among the grounds for judicial impugnation are counted, precisely, the "erroneous qualification and quantification of income, profits, patrimonial values and other tax facts" (see Article 99, letter a), of the CPPT), regardless of its authorship.

3. Moreover, the aforementioned letter b) of no. 1 of Article 24 of the RJAT provides that the arbitral decision on the merits of the claim of which no appeal or impugnation may be made binds the tax administration from the end of the deadline set for appeal or impugnation, the latter having, in the precise terms of the success of the arbitral decision in favour of the taxpayer and until the end of the deadline set for the voluntary execution of the judgments of the tax judicial tribunals, to "restore the situation that would have existed if the tax act which is the subject of the arbitral decision had not been performed, adopting the acts and operations necessary for this purpose".

4. Equally, Article 100 of the LGT, applicable to the tax arbitral process by virtue of the provision of letter a) of no. 1 of Article 29 of the RJAT, establishes that "The tax administration is obliged, in case of full or partial success of administrative reclamations or appeals, or of judicial proceedings in favour of the taxpayer, to effect the immediate and complete restoration of the situation that would have existed if the illegality had not been committed, comprising the payment of compensatory interest, pursuant to the terms and conditions provided for in the law."

5. Now, it results, furthermore, from the provision of no. 1 of Article 43 of the LGT, that "Compensatory interest is due when it is determined, in administrative reclamation or judicial impugnation, that there was error attributable to the services as a result of which the tax debt was paid in an amount higher than that legally due."

6. As to error attributable to the services, it may consist of error concerning factual assumptions, which occurs whenever there is "a divergence between reality and the factual matter used as an assumption in the performance of the act", or error concerning legal assumptions, when "in the performance of the act an incorrect interpretation or application of the legal norms was made, such as the norms of objective and subjective incidence (…)" and "it is demonstrated when the administrative reclamation or judicial impugnation of that same assessment proceeds and the error is not attributable to the taxpayer".

7. In the case in question, it is manifest that, with the declaration of illegality of the acts of assessment of Stamp Tax, for having been demonstrated the incorrect application of the norm of objective incidence contained in item 28.1 of the TGIS, which justifies its annulment, it must be recognized that the Claimant has the right to compensatory interest on the amounts wrongfully paid, from the date of payment of each of the instalments of the tax, as is provided for in no. 5 of Article 61 of the CPPT, since such illegality is exclusively attributable to the Tax Administration, which performed those tax acts without the necessary legal support.

8. It does not appear that there are other relevant issues raised by the parties.

V - DECISION

In light of the foregoing, this Arbitral Tribunal decides:

a) To find the petition for arbitral determination wholly well-founded, with the consequent annulment of the impugned tax assessments and identified in the present record and respective late interest processed with respect to the 1st instalment of tax, for suffering from the vice of violation of law due to error concerning the factual and legal assumptions underlying them, with respect to the tax year 2013;

b) To condemn the Respondent to reimburse the Claimant of all amounts paid with reference to Stamp Tax assessed with respect to the year 2013, on the property identified in the present record, plus compensatory interest at the legal rate until complete payment;

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

Value of the proceedings: In accordance with the provisions of Article 315, nos. 2 and 2 of the CPC, Article 97-A, no. 1, letter a) of the CPPT and Article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at €13,608.06.

Costs: Pursuant to the provisions of no. 4 of Article 22 of the RJAT and pursuant to the Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €918.00, to be borne by the Respondent Tax and Customs Authority.

Register and notify.

Lisbon, 2 April 2015

Arbitrator,

(Maria do Rosário Anjos)

[1] The present decision is drawn up in accordance with former orthography.

[2] Article 11 of the LGT provides, regarding the interpretation of tax norms, that:

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

1. Whenever, in fiscal norms, terms proper to other branches of law are used, these must be interpreted in the same sense as they have therein, unless otherwise directly derived from the law.

2. Should doubt persist about the meaning of the norms of incidence to apply, account should be taken of the economic substance of the tax facts.

3. Gaps resulting from tax norms covered by the reserve of law of the Parliament are not susceptible to analogical integration."

[3] In this sense, see BAPTISTA MACHADO, J. Introduction to Law and the Legitimizing Discourse, latest ed. Almedina, page 182 et seq.

[4] In this sense, see arbitral decisions issued in cases nos. 53/2013-T, 144/2013-T, 178/2013-T, 285/2014-T, among others.