Stamp Tax on Vertical Property Buildings: CAAD Rules on Clause 28.1 TGIS and Independent Units Valuation

ARBITRAL DECISION

Claimant: A… - HEIRS OF

Respondent: AT - Tax and Customs Authority

I - REPORT

Claim

A… - HEIRS OF, taxpayer number …, represented by the head of household B…, taxpayer number …, resident at … number …, …, …-… Lisbon, hereinafter referred to as Claimants, presented, on 17-12-2015, pursuant to the provisions of paragraph a) of article 1, number 1 of article 2 and article 10 of Decree-Law no. 10/2011, of 20 January, which approves the Legal Framework for Tax Arbitration (RJAT), a request for arbitral pronouncement, in which the AT - Tax and Customs Authority is the Respondent, with a view to:

• The declaration of illegality and annulment of the act of dismissal of the request for ex officio review of the acts of assessment of Stamp Duty, carried out under code 28.1 of the General Table of Stamp Duty (TGIS), affecting divisions with independent use and residential purposes of the urban property located at Av. …, numbers … to … in Lisbon, registered in the urban register with number …, of the parish of …, Lisbon;

• The consequent annulment of the same assessment acts.

• The restitution of the amounts unduly collected plus the corresponding indemnification interest.

The Claimants allege, in essence and with relevance to the resolution of the case, the following:

• The Claimants are the sole heirs of A…, whose inheritance includes the right of ownership of the urban property located at Av. …, numbers … to … in Lisbon, registered in the urban register with number …, of the parish of …, Lisbon;

• The property comprises a total of 34 floors and divisions with independent use, of which 22 are designated for residential purposes, not being constituted as horizontal property during the relevant tax period;

• The sum of the tax patrimonial values of all floors and divisions with residential designation totals 1,945,540.00 euros, but none of the floors or divisions considered individually has a tax patrimonial value equal to or exceeding 1,000,000.00 euros;

• The AT - Tax and Customs Authority assessed stamp duty on the tax patrimonial values of the floors or parts capable of independent use at the rate of 1% by application of the provisions of code 28.1 of the General Table of Stamp Duty (TGIS) for the year 2012;

• Such acts suffer from a defect of violation of law, as the tax legislator does not attach any relevance to the fact that a property is constituted as horizontal property or not, and there is nothing in law that permits the conclusion that the tax patrimonial value of a property under a regime of total ownership is obtained by the sum of values assigned individually to the parts that constitute it;

• As none of the floors capable of independent use has a value equal to or exceeding 1,000,000.00 euros, there is no ground for the application of code 28.1 of the TGIS;

• The Claimants presented a request for arbitral pronouncement through which they contested the tax assessments, and such request was judged unfounded due to expiry of time;

• The Claimants presented, on 4 August 2015, at the Finance Service of Lisbon …, a request for review of the assessment acts, under article 78, number 7 of the General Tax Law (LGT) and article 86, number 4 of the Code of Tax Procedure and Process (CPPT), requesting the annulment of the assessments in question and the consequent restitution of the tax unduly paid;

• On 15 December 2015, the Claimants had not been notified of any response to that request, and therefore it is considered dismissed under article 57, numbers 1 and 5 of the LGT;

• By dismissing the review request, the tax authority failed to comply with the duty to revoke the illegal acts and remedy the injustice of the taxation.

Response of the Respondent

In its Response, the Respondent limits itself to raising a defence by exception, as follows:

• The request for annulment of the disputed assessment acts has already been analysed in arbitral proceeding no. 465/2014-T, already concluded, in which it was concluded that the request for arbitral pronouncement was time-barred, and consequently the arbitral tribunal considered itself without jurisdiction over the claim;

• Therefore, in the present proceeding, the exception of lapse of the right of action is met;

• The exception of supervening futility of the dispute also applies, under article 277, paragraph e) of the Code of Civil Procedure;

• To the extent that the assessment acts disputed by the Claimant in the present request for arbitral pronouncement were not subject to any substantive decision, based on the lapse of the right of action, in proceeding 465/2014-T, which has become final, the exception of res judicata provided for in paragraph i) of number 1 of article 89 of the Code of Tax Procedure in Administrative Courts (CPTA) applies, which equally prevents the examination of the merits and leads to the dismissal of the Respondent;

• There is identity of claim to the extent that, for there to be identity of claim between two actions, strict formal identity between one and the other is not necessary, it being sufficient that the fundamental objective on which the success of each depends is the same, or that the subjective right whose recognition is sought is the same;

• There is also identity of the cause of action, as it proceeds from the same specific legal facts;

• The present request for arbitral pronouncement must be considered time-barred, since the assessments disputed were made on 28-08-2013 and the request for arbitral pronouncement must be submitted within a period of 90 days from the end of the deadline for voluntary payment of the assessed tax, which period ended on 30 November 2013;

• Since in their petition the Claimants never refer to the possibility of there having been in the act of assessment of the tax the practice of any grave or notorious injustice, the possibility that the review request could rely on numbers 4 and 5 of article 78 of the LGT is excluded;

• The review request cannot be made under number 2 of article 78, as this concerns self-assessments;

• From which it follows that the review request could only be presented under number 1 of article 78, which opens two possibilities, either the review of the act by the taxpayer's initiative or by the initiative of the Tax Administration;

• However, we cannot be dealing with the review request at the taxpayer's initiative provided for in article 78, number 1, because it would have to be made within the deadline for filing a gracious complaint, which did not occur;

• The only remaining possibility to be examined would be whether the request for ex officio review of the assessments at the request of the liable subject could, by chance, be considered a request for review of the tax act by the initiative of the tax administration, which would depend on the verification of the respective requirements;

• The review of tax acts by the initiative of the tax administration may be carried out within the period of four years after assessment, or at any time if tax has not yet been paid, on the basis of error attributable to the services;

• Since it is not disputed that the said period of four years had not yet elapsed, it is found that not only do the Claimants fail to prove that there was any error attributable to the services, but effectively there was no error attributable to the Tax Administration in the assessment in question;

• The request for ex officio review cannot and cannot be a way of creating a new procedure intended to allow circumventing the legally established deadlines for contesting acts;

• The ex officio review of the tax act can only be used, by initiative of the tax administration, on the sole basis of the existence of an error attributable to the services, thus distinguishing itself from the gracious complaint, which may be founded on any illegality;

• Wherefore it was futile, and therefore not admitted by law (article 57, number 1, of the LGT) the examination of the request for review by initiative of the Claimant (article 78, number 1, of the LGT), given the time-barred nature thereof and its lack of foundation due to the non-existence of any error attributable to the services;

• In view of the foregoing, the Arbitral Tribunal cannot consider the present request as timely, as the legal prerequisites required by article 78, number 1, of the LGT are manifestly not met, and it is clear both that the deadline for the Claimants to request review of the tax act by their initiative has passed, and that there is no error attributable to the Services in the disputed assessments;

• Even if this were not the case, which is admitted only for ease of reasoning, that is, even if it were legally possible to examine the review of the tax act by the initiative of the Services, it would be bound to fail due to the non-existence and non-recognition of any error that could be attributed to it – cf. article 78, number 1, of the LGT.

• The incompetence of the tribunal is a dilatory exception of ex officio cognisance which determines the dismissal of the instance under article 576 and paragraph a) of article 577 of the Code of Civil Procedure (CPC) applicable ex vi article 29, number 1, paragraph e) of the RJAT.

Subsequent Procedural Steps

By order of 10 May 2016, the Claimants were invited to exercise the right of reply in relation to the defence by exception raised by the Respondent, which it did by motion submitted on 20-05-2016, as follows, in summary:

• The requests made in proceeding 465/2014-T and in the present case are not the same, not least because in that proceeding the revocation of a decision dismissing a request for review was not sought, as is now sought;

• Beyond the requests, the causes of action are also distinct, namely because in the present case particular relevance is assumed by the decision of the arbitral tribunal rendered in that proceeding 465/2014-T which declared the illegality of a tax act similar to the one that the tax administration insists on maintaining in the legal order;

• Contrary to what the Respondent maintains in article 24 of its response, the Claimant referred in articles 21 to 23 of its initial petition to the obvious injustice of the taxation, which is particularly grave and notorious as it was recognized by the arbitral tribunal in the said proceeding.

In exercising the right of reply to the Claimants' rejoinder to the defence by exception, the Respondent limited itself, in a Motion submitted on 30-05-2016, to reiterating the arguments put forward in its previous response.

Allegations of the Claimants

In their final arguments, the Claimants begin by reiterating all the arguments put forward in the initial petition, adding further, in relation to the defence by exception raised by the Respondent:

• With regard to the alleged res judicata, there is no alleged identity of claims, not least because in proceeding 465/2014-T the revocation of a decision dismissing a request for review of a tax act was not sought;

• The causes of action are also distinct, because in this case particular relevance is assumed by the arbitral decision rendered in that proceeding which declared the illegality of a tax act similar to that disputed in the present proceeding;

• On the other hand, contrary to what the Respondent maintains in its response, the (improperly denominated) ex officio review provided for in article 78, number 7 of the LGT does not require proof of the practice of any grave or notorious injustice, although, in this case, it is particularly grave and notorious as it has been recognized by decision of the Arbitral Tribunal concerning an identical tax act;

• In any case, the error of the AT is flagrant for the purposes of article 78, number 1 of the General Tax Law;

• In fact, it is settled case law that, although the concept of error attributable to the services referred to in the second part of number 1 of article 78 of the LGT does not encompass any and all defects, (namely defects of form or procedure) but only "errors", these include errors in factual and legal premises, and this attributability to the services is independent of the demonstration of fault of the officials involved in the issuance of the act affected by the error;

• The dismissal, tacit or express, of the review request is susceptible to judicial review, as per article 95, numbers 1 and 2 paragraph d) of the LGT;

• It is today consolidated case law that, as the tax administration may, by its initiative, proceed with ex officio review of the tax act, within the period of four years or at any time if the tax has not been paid, on the basis of error attributable to the services (as per article 78, number 1 of the LGT), the taxpayer may also, within that period of ex officio review, request that same review on that basis;

• It is today settled that the review provided for in article 78 of the LGT constitutes a power-duty of the tax administration, to which it is obliged, by force of the principles of justice, equality and legality of taxes, which the tax administration is obliged to observe in its activity (article 266, number 2 of the CRP), not to require of taxpayers anything but the tax resulting from law;

• It was the breach of that duty that required resort to arbitration, so that the assessment acts of the case are definitively purged from the legal order;

Allegations of the Respondent

The Respondent counter-alleged as follows:

• Subjection to the tax of code 28.1 of the TGIS results from two factors, namely: residential designation and the tax patrimonial value of each property equal to or exceeding 1,000,000.00 euros;

• Being the building constituted as total ownership, with parts capable of independent use, it falls within the concept of property, that is, a single unit with its tax patrimonial value determined by the sum of the parts with residential designation; and this tax patrimonial value being equal to or exceeding 1,000,000.00 euros, the tax is applicable.

II - SANITATION

The singular Arbitral Tribunal was regularly constituted on 23-02-2016, with the arbitrator designated by the Deontological Board of CAAD, with the respective legal and regulatory formalities complied with (articles 11, number 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code of CAAD).

The parties have standing and capacity to sue, are legitimized and are regularly represented, under articles 4 and 10 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

No nullities were identified in the proceeding.

The Tax and Customs Authority raises issues that may constitute obstacles to the examination of the merits of the case, which must be examined as a priority.

III – ISSUES TO BE DECIDED

A) Issues of an exceptional nature

First, the following issues that may prevent the examination of the claim must be decided:

1. Incompetence of the Tribunal;

2. Time-barred nature of the claim and consequent success of the exception of lapse of the right of action, as the legal prerequisites for filing a request for review of tax acts are not met, under article 78, number 1 of the LGT;

3. Supervening futility of the dispute (under article 277, paragraph e) of the Code of Civil Procedure);

4. Success of the exception of res judicata (under paragraph i) of number 1 of article 89 of the Code of Tax Procedure in Administrative Courts);

B) Issues on the merits

If nothing prevents the examination of the merits of the case, the substantive issues to be examined are those raised, regarding the legality of the assessment acts in the case, in the request for review of those same assessments. In that review request, the only issue raised is that of the applicability of the tax of code 28.1 of the General Table of Stamp Duty to divisions of urban property in total ownership, with residential designation and capable of independent use and as such considered in the tax property register.

IV – FACTS ESTABLISHED

The following are the facts established as relevant to the decision:

• The Claimants were, at the date of the alleged tax facts, the sole heirs of A…, whose inheritance includes the right of ownership of the urban property located at Av. …, numbers … to … in Lisbon, registered in the urban register with number …, of the parish of …, Lisbon;

• The property comprises a total of 34 floors and divisions with independent use, of which 22 are designated for residential purposes, not being constituted as horizontal property during the relevant tax period;

• The sum of the tax patrimonial values of all floors and divisions with residential designation totals 1,945,540.00 euros, but none of the floors considered individually has a tax patrimonial value equal to or exceeding 1,000,000.00 euros;

• The AT - Tax and Customs Authority assessed stamp duty on the tax patrimonial values of the floors or parts capable of independent use, at the rate of 1%, by application of the provisions of code 28.1 of the General Table of Stamp Duty (TGIS) for the year 2012;

• The total amount of stamp duty assessed in all the disputed assessments is 19,455.40 euros;

• The Claimants paid this amount;

• On 1-8-2015, the Claimants filed a request for review of the assessment acts;

• The Claimants were not notified of a decision on the review request.

V - REASONING

A) – Preliminary issues

1. Incompetence of the Tribunal;

The Respondent raises the question of the incompetence of the Arbitral Tribunal, without, however, substantiating it.

As it is a question of ex officio cognisance, it must be analysed despite the lack of argumentation.

The request for pronouncement that gave rise to the present case has as its object the declaration of illegality of an act of tacit dismissal of a request for review of assessment acts.

The competence of arbitral tribunals in tax matters is established by article 1 of the RJAT, in whose number 1 it is stipulated that that competence comprises the examination of the following claims:

a) The declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account;

b) The declaration of illegality of acts of determination of taxable matter when it does not give rise to the assessment of any tax, of acts of determination of collectible matter and of acts of determination of tax patrimonial values;

Literally, this delimitation of competences does not contemplate the examination of claims for declaration of illegality of acts of dismissal arising from requests for ex officio review of tax acts, nor does it contemplate the declaration of illegality of any other tax acts of the second or third grade (gracious complaints and hierarchical appeals).

However, the case law of arbitral tribunals in tax matters has been consistent in holding that, despite not being literally provided for, it should be admitted that the competence of arbitral tribunals extends to the examination of the legality of these acts.

On the subject writes JORGE LOPES DE SOUSA, Commentary on the Legal Framework for Tax Arbitration, in NUNO VILLA-LOBOS AND MÓNICA BRITO VIEIRA, "Guide to Tax Arbitration", Almedina, Coimbra, 2013, p. 121:

"With regard to acts of dismissal of requests for review of a tax act, it does not follow from the express wording of the RJAT the possibility of them being examined by the arbitral tribunals that function in CAAD. In fact, in article 2 of the RJAT there is no express reference to these acts, unlike what happens with the legislative amendment on which the Government based itself to approve the RJAT, which refers to 'requests for review of tax acts' and 'administrative acts that involve the examination of the legality of assessment acts'. However, the formula 'declaration of illegality of acts of assessment of tax, self-assessment, withholding at source and payment on account', used in paragraph a) of number 1 of article 2 of the RJAT, in a mere declarative interpretation, does not restrict the scope of arbitral jurisdiction to cases in which an act of one of those types is directly contested, since the illegality of assessment acts can be declared jurisdictionally as a corollary of the illegality of a second-grade act, which confirms an assessment act, incorporating, with that confirmation, its illegality".

The Supreme Administrative Court has repeatedly decided that, when the act of dismissal of the request for ex officio review does not involve the examination of the legality of the first-grade act, the procedural form of reaction against that dismissal is not the ordinary appeal but the special administrative action (in this sense the rulings of the Supreme Administrative Court of 20-5-2003, proceeding no. 638/03; of 8-10-2003, proceeding no. 870/03; of 24-03-2004, proceeding no. 1588/03; and 6-11-2008, proceeding no. 357/08).

The Tribunal argues: "If the administrative act in tax matters involves the examination of the assessment act, the legality of the latter, despite not being the immediate object of the appeal, is indirectly examined by the tribunal, which justifies, for this reason, the adoption of the ordinary appeal procedure" (ruling of the SAC of 02-02-2005, proceeding no. 01171/04).

In this conformity, and to the extent that the competence of arbitral tribunals in tax matters is limited, with regard to assessment acts, self-assessment, withholding at source and payments on account, to the declaration of their illegality and its consequences, second-grade acts in which the legality of the first-grade act is not effectively examined will be outside the scope of the competence of arbitral tribunals, still according to JORGE LOPES de SOUSA, op. cit. p. 123.

However, the Supreme Administrative Court has also repeatedly stated that, in case of a silent act of failure to decide on a request for review of a tax act, the appropriate procedural remedy is the ordinary appeal, which opens the way for the examination of the legality of the first-grade act. In this sense the rulings of the SAC of 02-02-2005, proceeding no. 01171/04; of 02-07-2014, proceeding no. 01950/13; and of 08-07-2009, proceeding no. 0306/09).

On this doctrinal understanding, it is stated in the ruling of 02-05-2005: "Thus, by failing to rule on the claim of the appellant, the appealed authority dismissed it, that is, did not recognize, in the assessment act in question, the illegalities that the appellant attributed to it. What is at issue is, then, mediately, the legality of the tax assessment act: examining the appealed act – whether the claim of the appellant, that that act be reviewed, deserved, or not, to be dismissed (even presumptively) – implies investigating the legality of the assessment."

It is concluded thus that this Tribunal is competent to examine the legality of the act of tacit dismissal of the official review request, that is, to examine the claim, since that examination implies, in an indirect manner, examining the legality of the first-grade assessment acts.

The alleged exception of incompetence of the Tribunal does not therefore succeed.

1. Time-barred nature of the claim and consequent success of the exception of lapse of the right of action, as the legal prerequisites for filing a request for review of tax acts are not met, under article 78, number 1 of the LGT;

The request for review of tax acts is subject to the periods established in article 78 of the LGT.

As it concerns the examination of an act of tacit dismissal of a request for ex officio review, if it is found that the request was presented outside the deadline and that, as such, it could never have been granted, then it must be considered that the dismissal is legal, due to the time-barred nature of the request, which entails that the same request could not reopen the contentious channel of appeal.

This is the issue that must be analysed.

The facts to be taken into account are:

• The request for review of the tax acts in question was presented by the Claimants on 4 August 2015.

• The disputed assessments were issued on 28 August 2013

Article 78, number 1 of the LGT provides:

1 - The review of tax acts by the entity that carried them out may be carried out by the initiative of the liable subject, within the deadline for filing a gracious complaint and on the basis of any illegality, or, by the initiative of the tax administration, within the period of four years after assessment or at any time if the tax has not yet been paid, on the basis of error attributable to the services.

It is settled case law that the review of tax acts by the Tax Administration may be requested by liable subjects within a period of four years. Citing the Supreme Administrative Court, in the ruling of 04-05-2016 proceeding no. 407/15:

"It is today consolidated case law that, the AT being able, by its initiative, to proceed with ex officio review of the tax act, within the period of four years after assessment or at any time if the tax has not been paid, on the basis of error attributable to the services (article 78, number 1, of the General Tax Law), the taxpayer may also, within that period of ex officio review, request that same review on that basis."

Arbitral case law has echoed this same doctrine, an example of which is the recent decision rendered in proceeding 27/2016-T of 29-06-2016, in which it is stated, on an issue exactly equal to the one we have under examination:

"Under number 1 of article 78 of the LGT, the review of the tax act by the initiative of the tax administration may be made within the period of four years after assessment or at any time if the tax has not been paid, on the basis of error attributable to the services. This is the applicable period and not the three-year period provided for in number 4 of the same article which refers to the review of taxable matter and not illegalities arising from the applicable legal regime.

Now, if the disputed assessments were issued on 28 August 2013 and the request for review of them was presented on 4 August 2015, it must be concluded that the four-year period provided for in the second part of number 1 of article 78 of the LGT has not been exhausted.

Furthermore, in order to benefit from the four-year period provided for in the second part of number 1 of article 78 of the LGT, the request had to be formulated on the basis of error attributable to the services.

The "error attributable to the services" to which article 78, number 1, in fine, of the LGT refers comprises not only the oversight, the material error or the factual error, but also error of law, and this attributability to the services is independent of the demonstration of fault of the officials involved in the issuance of the assessment affected by the error (SAC, ruling of 14-03-2012, proceeding no. 01007/11).

Now, an error of law is precisely the defect that the Claimants attribute to the disputed assessments, an error that they sought to have remedied through the request for review of those assessments.

The presentation of the request for review of the assessments was, therefore, timely, and therefore the exception of time-barred nature (lapse of the right of action) based on the time-barred nature of the review request does not succeed.

1. Supervening futility of the dispute (under article 277, paragraph e) of the Code of Civil Procedure)

The Respondent states that the exception of supervening futility of the dispute applies, which it justifies as follows: "the continuation of the proceedings of the present case is futile, since the Claimant cannot formulate the same request, by virtue of its time-barred nature, and moreover the decision has already become final.

As is well known, supervening futility of the dispute presupposes an occurrence verified after the commencement of the proceedings and that renders the instance unnecessary.

The Respondent does not formulate arguments that justify, nor do we for our part discern that there would be grounds for considering the existence, in the case of the present case, of supervening futility of the dispute.

It is concluded that the exception of supervening futility of the dispute does not succeed.

1. Success of the exception of res judicata (under paragraph i) of number 1 of article 89 of the Code of Tax Procedure in Administrative Courts)

Under article 580 of the Code of Civil Procedure, the exception of res judicata presupposes the repetition of a cause.

And under article 581, number 1, a cause is repeated when an action is proposed identical to another in respect of the parties, the claim and the cause of action.

There is identity of parties when the parties are the same from the point of view of their legal character (number 2 of article 581 CPC). There is identity of claim when in one and the other cause the same legal effect is sought (number 3 of article 581 CPC). And there is identity of cause of action when the claim put forward in the two actions proceeds from the same legal fact (number 4 of article 581 CPC).

We consider that while it is evident that there is identity as to the parties in the two cases under examination, and even accepting that there is identity of cause of action, there is no identity of claim. The claim in proceeding 465/2014-T was the annulment of the disputed assessments, whereas in the present case it is the annulment of the act of tacit dismissal of the request for review of the same assessments.

But moreover, and most importantly, no substantive decision having been rendered in proceeding 465/2014-T, res judicata did not form as to the claim. In fact, under article 621 of the CPC, "the judgment constitutes res judicata in the precise limits and terms in which it judges". If the arbitral decision rendered in proceeding 465/2014-T did not examine the claim, res judicata could not have formed as to it.

The exception of res judicata does not therefore succeed, and nothing prevents the examination of the merits of the case.

B) Issue on the merits

The issue on the merits that must be examined and decided is whether the tax of code 28.1 of the General Table of Stamp Duty applies to divisions of urban property in total ownership, with residential designation capable of independent use and as such considered in the tax property register.

On this same issue the Supreme Administrative Court has already ruled several times, establishing the doctrine that, where a property is constituted as vertical property, the applicability of the IS must be determined, not by the tax patrimonial value resulting from the sum of the tax patrimonial value of all divisions or floors capable of independent use (individualized in the tax register), but by the tax patrimonial value assigned to each of those floors or divisions intended for residential purposes.

The basis of this doctrine may be found in one of the first rulings that the Supreme Court rendered on this matter, on 09-09-2015, in proceeding no. 47/15. In this ruling, which we take as the basis of our decision in the present case, the SAC states:

«The concept of "urban property with residential designation" was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the IMI Code, to which number 2 of article 67 of the Stamp Duty Code (also introduced by that Law) refers subsidiarily. And it is a concept which, probably because of its imprecision – a fact all the more serious as it is by virtue of it that the scope of objective application of the new taxation is determined –, had a short life, as it was abandoned when Law no. 83-C/2013, of 31 December, on the State Budget for 2014, came into force, which gave new wording to that code 28 of the General Table, and which now determines its scope of objective application through the use of concepts that are legally defined in article 6 of the IMI Code.

Nothing unequivocal follows from the letter of the law, moreover, as it itself, by using a concept that it did not define and which was also not defined in the statute to which it referred subsidiarily, unnecessarily lent itself to ambiguities, in a matter – of tax applicability – in which certainty and legal security should also be paramount concerns of the legislator."

And the Tribunal continues:

"(...) The present subject matter is, from the outset by virtue of article 67, number 2 of the Stamp Duty Code, subject to the rules of the IMI Code, – 'to matters not regulated in this code concerning code 28 of the General Table the IMI Code applies subsidiarily'.

As such, and as has been mentioned so many times, in the understanding of this tribunal, the mechanism for determining the tax patrimonial value relevant for the purposes of the said code is that established in the IMI Code.

Now, article 12, number 3 of the IMI Code establishes that 'each floor or part of property capable of independent use is considered separately in the tax registration, which also distinguishes the respective tax patrimonial value'.

With the legislator downgrading, in the terms previously mentioned, any prior constitution of horizontal or vertical property.

In fact, for the legislator, what matters is the material truth underlying its existence as urban property and its use.

It should be noted that the ATA itself seems to agree with the criterion set out, which is why the assessments that it itself issues are very clear in their essential elements, from which results that the value of applicability is the one corresponding to the tax patrimonial value of each of the floors and the assessments are individualized.

Therefore, if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same way as it establishes for properties in horizontal ownership, it clearly established the criterion, which must be unique and unambiguous, for the definition of the rule of applicability of the new tax.

Thus, stamp duty would only apply (within the scope of Code 28 of the TGIS) if one of the parts, floors or divisions with independent use had a tax patrimonial value exceeding €1,000,000.00.

The ATA cannot consider as the value of reference for the applicability of the new tax the total value of the property, when the legislator itself established a different rule with respect to the IMI (and, as previously mentioned, this is the code applicable to matters not regulated regarding Code 28 of the TGIS).

In conclusion, the current legal regime does not impose the obligation to constitute horizontal property, and therefore the action of the ATA translates into an arbitrary and illegal discrimination.

In fact, the ATA cannot distinguish where the legislator itself understood not to, under penalty of violating the coherence of the tax system, as well as the principle of tax legality provided for in article 103 of the Constitution of the Portuguese Republic, and also the principles of justice, equality and tax proportionality.

In the case in question, the property(ies) in question was (were), at the relevant date of the facts, constituted in total ownership and had [...] divisions with independent use, as results from the documents [...]."

"Given that none of these divisions has tax patrimonial value equal to or exceeding €1,000,000.00, as results from the documents attached to the case, it is concluded that the legal prerequisite of applicability is not met."

We consider that the case law of the Supreme Administrative Court rests on correct foundations, and therefore we understand that we should apply it to the case before us, without any modification.

Within the scope of the Municipal Tax on Real Property (IMI), the legislator clearly established, in article 12, number 2 of the IMI Code, that parts of property with independent use are valued separately, with that value taken as the basis for the assessment of tax.

Within the scope of Stamp Duty, article 13, number 1 of its respective code provides that "the value of real property is the tax patrimonial value shown in the register under the IMI Code".

Therefore, it seems clear that the legislator intended that the tax patrimonial value of the parts with independent use be considered.

The AT - Tax and Customs Authority seems to conform its action to this understanding, by issuing acts of assessment of Stamp Duty individualized in relation to each part.

Moreover, according to article 9, number 1 of the Civil Code, interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative thought, having especially in mind 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. Now, the subjective element of the interpretation, to be drawn from the historical elements that are well known in this matter, and which are partially reproduced in the ruling of the SAC cited, clearly indicates the intention of the legislator to subject to taxation residential housing of high value.

In accordance with all the interpretative elements mentioned, it must be considered that, where a property in total ownership formed by parts capable of independent use is involved, stamp duty applies (within the scope of Code 28 of the TGIS) only if one of the parts, floors or divisions with independent use has a tax patrimonial value equal to or exceeding 1,000,000.00 euros.

For all the foregoing, it must be concluded that the stamp duty assessments impugned are illegal, for violation of tax law, in that they apply to independent parts of properties in total ownership, but taking as a basis the tax patrimonial value of the sum of the same parts and when none of those parts has a tax patrimonial value equal to or exceeding 1,000,000.00 euros.

VII - DECISION

For the reasons set out above, it is decided:

• To declare the illegality of and annul the silent act impugned, of tacit dismissal of the request for review filed by the Claimants of the assessments of Stamp Duty on the divisions with residential designation of the property registered in the tax register with number …, of the parish of …, Lisbon, for the year 2012;

• To declare the illegality of and annul the assessments of Stamp Duty on the divisions with residential designation of the urban property registered in the tax register with number …, of the parish of …, Lisbon, for the year 2012;

• To condemn the Respondent AT – Tax and Customs Authority to refund the tax unduly paid, plus the respective indemnification interest, under article 43 of the LGT.

Value of the economic interest of the proceeding: The value of the economic interest of the proceeding is fixed at 19,455.40 euros.

Costs: Under article 22, number 4, of the RJAT, the amount of costs is fixed at 1,224.00 euros, under the Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

This arbitral decision shall be registered and the parties shall be notified thereof.

Lisbon, Administrative Arbitration Center, 27 September 2016

The Arbitrator

(Nina Aguiar)