Stamp Tax on Land for Construction: Verba 28.1 TGIS Illegality and Annulment (CAAD 756/2014-T)

Process No. 756/2014-T

ARBITRAL DECISION

I. REPORT

1. On 31 October 2014, "A… S.A.", NIPC …, with registered office at Avenue …, No. …, …º A, Lisbon (hereinafter, Claimant), filed an application for establishment of an arbitral tribunal, pursuant to the combined provisions of articles 2º and 10º of Decree-Law No. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters, as amended by article 228º of Law No. 66-B/2012, of 31 December (hereinafter, briefly designated LFATM), seeking the declaration of illegality and annulment of various Stamp Tax assessment acts, issued pursuant to item 28.1 of the General Table of the Stamp Tax Code (hereinafter, GTST), with reference to the year 2013 and concerning urban properties registered under articles …, …, … and … in the urban property register of the parish of …, municipality of Portimão, district of Faro, all owned by the Claimant.

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

The Claimant submitted 12 (twelve) documents and did not request the production of any other evidence.

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

It is the owner of four urban properties, all classified, for purposes of Property Tax (IMI), as "building land", located in the parish of …, municipality of Portimão. On these plots there are no buildings or constructions whatsoever.

On 17 March 2014, based on item 28.1 of the GTST, the AT assessed Stamp Tax for the year 2013 on the aforementioned urban properties in the total amount of €33,222.84.

It is the Claimant's understanding that the aforementioned Stamp Tax assessments are vitiated by error regarding the legal prerequisites, and should therefore be annulled. Since the interpretative elements enshrined both in the LGT (General Tax Law) and in the Civil Code, namely the "circumstances in which the law was enacted" and the "specific conditions of the time in which it is applied", indicate that it was not the legislator's intention to subsume within the objective scope of application of item 28.1 of the GTST situations involving properties not yet devoted to residential purposes, namely building land.

Thus, in this specific case, the AT made an incorrect interpretation of the rule of tax incidence contained in item 28.1 of the GTST, which is why the Stamp Tax assessments in question are vitiated by a defect of violation of law, and should therefore be declared illegal and consequently annulled.

The Claimant concludes its request for arbitral pronouncement by formulating the following claims:

"a) The declaration of illegality of the Stamp Tax assessment acts No. 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 … and 2014 …, all dated 17.03.2014, in the total value of €33,222.84, relating to the 2nd and 3rd instalments of the year 2013;

b) The annulment of these acts, with all legal consequences."

1. The application for establishment of an arbitral tribunal was accepted and automatically notified to the AT on 5 November 2014.

2. The Claimant did not appoint an arbitrator, so, pursuant to the provisions of article 6º, paragraph 1, and article 11º, paragraph 1, subparagraph a), of the LFATM, the President of the CAAD Ethics Council designated the undersigned as arbitrator of the singular Arbitral Tribunal, who communicated acceptance of the appointment within the applicable timeframe.

3. On 19 December 2014, the parties were duly notified of this designation and did not manifest any intention to refuse the arbitrator's designation, in accordance with the combined provisions of article 11º, paragraph 1, subparagraphs b) and c), of the LFATM and articles 6º and 7º of the CAAD Ethics Code.

4. Thus, in accordance with the provision contained in article 11º, paragraph 1, subparagraph c), of the LFATM, the collective Arbitral Tribunal was constituted on 8 January 2015.

5. On 11 February 2015, the Respondent, duly notified for this purpose, submitted its Reply in which it specifically contested the arguments raised by the Claimant and concluded for the lack of merit of the present action, with its consequent dismissal of the claim.

The Respondent did not submit documents or request the production of any other evidence.

The Respondent did not attach to the file the administrative process as the same consisted only of the tax acts in question in this process (which in the AT's sphere exist only in electronic form), and the documents embodying them were entirely carried over to the file by the Claimant, together with the application for arbitral pronouncement.

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

The AT considers that the properties on which the contested Stamp Tax assessments fall have the legal nature of "properties with residential purpose", and therefore the assessment acts which are the subject of this process should be maintained, as they result from the correct interpretation and application of item 28.1 of the GTST, added by Law No. 55-A/2012, of 29 December.

The concept of "properties with residential purpose", for purposes of the provision in item 28 of the GTST, comprises both developed properties and building land, taking into account, from the outset, the literal element of the rule. The legislator does not refer to "properties intended for residential use", but has instead opted for the notion of "residential purpose", an expression that is different and broader, and whose meaning must be found in the need to integrate other realities beyond those mentioned in article 6º, paragraph 1, subparagraph a), of the Property Tax Code (CIMI).

The mere constitution of a right of potential construction increases the value of the property in question, the rationale behind the provision contained in article 45º of the CIMI, which mandates the separation of the two parts of the land.

Moreover, in view of the provisions of the Legal Framework for Urbanization and Building and the typical content of Municipal Master Plans, it is possible to ascertain and determine the purpose of the land for construction before the actual development of the property.

In another respect, the Respondent asserts that item 28 of the GTST applies to the value of the property and is a general and abstract rule, applicable uniformly to all cases in which the respective factual and legal prerequisites are met. Furthermore, the different valuation and taxation of a property held in condominium ownership as opposed to a property in sole ownership stems from the different legal effects inherent to these two figures. Additionally, the different capacity of properties supports different tax treatment, and constituted a choice of the legislator, for reasons of a political and economic nature, to exclude from Stamp Tax incidence properties intended for purposes other than residential.

The Respondent concludes, that "the assessments in dispute embody a correct interpretation and application of the law to the facts, and are not vitiated by any defect of violation of law, either of the Constitution or of the Tax Code, and accordingly, the pretension advanced should be judged to lack merit and the Respondent Entity should be absolved of the claim".

1. On 11 February 2015, the Respondent proposed that the meeting provided for in article 18º of the LFATM be dispensed with, as the same appeared unnecessary, thus enabling the Arbitral Tribunal to immediately decide on the claim.

Notified to pronounce on the content of this motion, the Claimant came forward to manifest its agreement with that position of the AT.

Given the convergent positions assumed by the Parties, the meeting referred to in article 18º of the LFATM was therefore dispensed with and no evidence was produced.

II. CLARIFICATION OF PROCEDURAL MATTERS

The Arbitral Tribunal was regularly constituted and is competent.

The process is not affected by any procedural defects.

The parties have legal capacity and standing, are properly represented and are legitimate.

The joinder of claims is admitted in view of the verification that the merit of the claims formulated by the Claimant depends essentially on the assessment of the same factual circumstances – based on the Claimant's ownership of two urban properties – and on the interpretation and application of the same legal principles or rules – in this case, of item 28.1 of the GTST (cf. article 3º, paragraph 1, of the LFATM).

There are no exceptions or other preliminary questions that prevent the examination of the merits of which account must be taken.

III. GROUNDS

III.1. FACTUAL MATTERS

§1. PROVEN FACTS

With respect to the factual matters, it is important first to note that the Tribunal does not have to pronounce on everything that was alleged by the parties; rather, it is its duty to select the facts that matter for the decision and to distinguish proven facts from unproven ones (cf. article 123º, paragraph 2, of the Code of Administrative Procedure (CPPT) and article 607º, paragraphs 3 and 4, of the Code of Civil Procedure (CPC), applicable by virtue of article 29º, paragraph 1, subparagraphs a) and e), of the LFATM). Thus, the facts relevant to the judgment of the case are chosen and defined according to their legal relevance, which is established in light of the various plausible solutions to the legal question(s).

In this respect, taking into account the positions assumed by the parties and the documentary evidence produced, the following facts are considered proven and relevant to the decision:

1. The Claimant is the owner of the following urban properties, all classified, for purposes of Property Tax, as "building land", located in …, Lots A1, A2, B and K, parish of …, municipality of Portimão, district of Faro, with the patrimonial tax values indicated below [cf. documents No. 9 to 12 attached to the initial petition (factuality accepted by agreement)]:

1. On the aforementioned urban properties there are no buildings or constructions whatsoever – factuality accepted by agreement.

2. The Claimant was notified of the Stamp Tax assessments for the year 2013 relating to the urban properties identified in proven fact 1., and was specifically notified of the following assessments relating to the second and third instalments of Stamp Tax [cf. documents No. 1 to 8 attached to the initial petition (factuality accepted by agreement)]:

1. The aforementioned Stamp Tax assessments resulted from the application of item 28.1 of the GTST to the urban properties identified in proven fact 1. [cf. documents No. 1 to 8 attached to the initial petition (factuality accepted by agreement)].

2. On 31 October 2014, the Claimant submitted the application for establishment of an arbitral tribunal that gave rise to the present process – cf. CAAD case management computer system.

§2. UNPROVEN FACTS

With respect to the factual matters relevant to the assessment and decision of the case, there are no facts that were not proven.

§3. REASONING REGARDING FACTUAL MATTERS

With respect to the proven factual matters, the Tribunal's conviction was based on the statements made in the pleadings, whose adherence to reality was not challenged, and on the documents attached to the file, as referenced in relation to the various points.

III.2. LEGAL MATTERS

The question to be assessed and decided in this process is whether item 28.1 of the GTST – in the version introduced by Law No. 55-A/2012, of 29 October and therefore in force in 2013 – has or does not have applicability to building land.

This same question has already been addressed in multiple decisions, both arbitral (among others, see those rendered in proceedings No. 48/2013-T, 53/2013-T, 288/2013-T and 310/2013-T, all available at www.caad.pt) and judicial (among others, see judgments of the Administrative Court of Appeal rendered in proceedings No. 048/14, 01870/13, 0270/14, 0272/14 and 0676/14, all available at www.dgsi.pt), which established jurisprudence to the effect that building land cannot be considered, for purposes of the tax incidence rule in Stamp Tax contained in item 28.1 of the GTST (in the version of Law No. 55-A/2012, of 29 October), as urban properties with residential purpose.

This is jurisprudence that we also adopt here, as we fully agree with it; therefore, in essence, we shall limit ourselves to reproducing what was said on the question in the arbitral decision rendered in proceedings No. 53/2013-T, to whose legal grounds we adhere without any reservations:

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

28 – Ownership, usufruct or right of superficies of urban properties whose patrimonial tax value recorded in the register, in accordance with the Property Tax Code (CIMI), is equal to or greater than €1,000,000 – calculated on the patrimonial tax value used for purposes of Property Tax:

28.1 – Per property with residential purpose – 1%;

28.2 – Per property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, appearing on the list approved by order of the Minister of Finance – 7.5%.

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

1 – In 2012, the following rules shall be observed with reference to the assessment of the 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 is the one mentioned in paragraph 4 of article 2º of the Stamp Tax Code on the date referred to in subparagraph a);

c) The patrimonial tax value to be used in assessing the tax corresponds to that which results from the rules provided for in the Property Tax Code with reference to the year 2011;

d) Assessment of the tax by the Tax and Customs Authority shall be made by the end of November 2012;

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

f) The applicable rates are as follows:

i) Properties with residential purpose evaluated in accordance with the Property Tax Code: 0.5%;

ii) Properties with residential purpose not yet evaluated in accordance with the Property Tax 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 favorable tax regime appearing on the list approved by order of the Minister of Finance: 7.5%.

2 – In 2013, the assessment of the Stamp Tax provided for in item No. 28 of the respective General Table shall be based on the same patrimonial tax value used for purposes of the assessment of Property Tax to be made in that year.

3 – The failure to pay, in whole or in part, within the prescribed period, of the amounts assessed as Stamp Tax constitutes a tax violation, punished in accordance with the law.

In item 28.1 aforementioned and in subparagraphs i) and ii) of subparagraph f) of paragraph 1 of article 6º of Law No. 55-A/2012, a concept was used that is not employed in any other tax legislation in these precise terms, namely "property with residential purpose". Specifically in the CIMI, which in various provisions of the Tax Code introduced by that Law is indicated as a law of subsidiary application with respect to the tax provided for in item No. 28 [articles 2º, paragraph 4, 3º, paragraph 3, subparagraph u), 5º, subparagraph u), 23º, paragraph 7, 46º and 67º of the Tax Code], a concept thus defined is not employed.

(…)

In the CIMI, the species of properties are enumerated in its articles 3º to 6º as follows:

Article 2º

Concept of Property

1 - For purposes of this Code, property means any parcel of land, including waters, plantations, buildings and constructions of any nature incorporated or situated thereon, with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the foregoing circumstances, endowed with economic autonomy in relation to the land on which they are located, although situated on a parcel of land that constitutes an integral part of a different patrimony or does not have a patrimonial nature.

2 - Buildings or constructions, even if movable by nature, are considered to have a character of permanence when devoted to non-transitory purposes.

3 - The character of permanence is presumed when the buildings or constructions have been located in the same place for a period exceeding one year.

4 - For purposes of this tax, each autonomous unit, in the condominium ownership regime, is considered to constitute a property.

Article 3º

Rural Properties

1 - Rural properties are lands situated outside an urban agglomeration that are not to be classified as building land, in accordance with paragraph 3 of article 6º, provided that:

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

b) Not having the purpose indicated in the foregoing subparagraph, they are not developed or contain only buildings or constructions of an accessory character, without economic autonomy and of reduced value.

2 - Rural properties are also lands situated within an urban agglomeration, provided that, by virtue of legally approved provision, they cannot have a use generating any income or can only have a use generating agricultural income and are in fact being devoted to this purpose.

3 - The following are also rural properties:

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

b) Waters and plantations in the situations to which paragraph 1 of article 2º refers.

4 - For purposes of this Code, urban agglomerations are considered, in addition to those situated within legally fixed perimeters, nuclei with a minimum of 10 dwellings served by public roads, with their perimeter delimited by points distant 50 m from the axis of the roads, in the transverse sense, and 20 m from the last building, in the sense of the roads.

Article 4º

Urban Properties

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

Article 5º

Mixed Properties

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

2 - If neither of the parts can be classified as main, the property is treated as mixed.

Article 6º

Species of Urban Properties

1 - Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Building land;

d) Others.

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

3 - Building land is considered land situated inside or outside an urban agglomeration for which a license or authorization has been granted, an advance notice admitted, or a favorable preliminary information issued concerning a subdivision or construction operation, and also land that has been thus declared in the acquisition title, except for land where the competent authorities forbid any of those operations, namely those located in green areas, protected areas, or which, in accordance with municipal territorial planning plans, are devoted to public spaces, infrastructure or facilities.

4 - Included in the provision of subparagraph d) of paragraph 1 are lands situated within an urban agglomeration that are not building land nor are covered by the provision of paragraph 2 of article 3º and also buildings and constructions licensed or, in the absence of a license, that have as their normal destination purposes other than those referred to in paragraph 2 and also those of the exception in paragraph 3.

(…)

Article 11º of the General Tax Law establishes the essential rules for interpretation of tax laws as follows:

Article 11º

Interpretation

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

2 - Whenever tax rules employ terms peculiar to other branches of law, such terms shall be interpreted in the same sense as they have therein, unless a different meaning results directly from the law.

3 - If doubt persists as to the meaning of the applicable tax incidence rules, regard shall be had to the economic substance of the tax facts.

4 - Gaps resulting from tax rules covered by the legislative reserve of the National Assembly are not susceptible to analogy-based completion.

The general principles of interpretation of laws, to which paragraph 1 of article 11º of the General Tax Law refers, are established in article 9º of the Civil Code, which provides as follows:

Article 9º

Interpretation of Law

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

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

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

(…)

As can be seen from the provisions of the CIMI transcribed, the concept of "property with residential purpose" is not used in the classification of properties. Nor is this concept, with this terminology, found in any other law.

Thus, given the lack of exact terminological correspondence between the concept of "property with residential purpose" and any other concept used in other laws, various interpretative hypotheses may be advanced.

The starting point for interpretation of that expression "properties with residential purpose" is, naturally, the text of the law, and it is on the basis thereof that "legislative intent" must be reconstructed, as required by paragraph 1 of article 9º of the Civil Code, applicable by virtue of the provision of article 11º, paragraph 1, of the General Tax Law.

(…)

The concept most closely approximating the literal tenor of this expression used is manifestly that of "residential properties", defined in paragraph 2 of article 6º of the CIMI as comprising "buildings or constructions" licensed for residential purposes or, in the absence of a license, that have as their normal destination residential purposes.

If it is understood that the expression "property with residential purpose" coincides with that of "residential properties", it is manifest that the assessments are vitiated by error regarding factual and legal prerequisites, since all properties for which Stamp Tax was assessed under the aforementioned item No. 28.1 are building land, without any building or construction, required to fulfill that concept of "residential properties".

For this reason, if one adopts the interpretation that "property with residential purpose" means "residential property", the assessments whose declaration of illegality is sought would be illegal, because there is in none of the lands any building or construction.

However, the non-coincidence of the terms of the expression used in item No. 28.1 of the GTST with that extracted from paragraph 2 of article 6º of the CIMI points to the conclusion that it was not intended to use the same concept.

(…)

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

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

The relevance of the text of the law is especially emphasized in the interpretation of rules of incidence of Stamp Tax, which are reduced to an amalgam, under a common denomination, of an incongruous set of taxes of completely distinct natures (on income, on expenditure, on patrimony, on acts, etc.), which leaves no appreciable margin for application of the primordial interpretative criterion, which is the unity of the legal system, which demands its overall coherence.

The recognized lack of coherence of Stamp Tax is particularly exuberant in the case of this item No. 28.1, hastily included on the margins of the General State Budget, by a tax legislator without perceptible overall fiscal orientation, who is successively implementing norms of fiscal aggravation as the budgetary execution reverses, as international institutional creditors impose (represented by the "troika"), and as the Constitutional Court's review imposes.

(…)

In this context, given the absence of secure interpretative elements that would allow detection of legislative coherence in the solution adopted in item No. 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretative purposes in light of paragraph 3 of article 9º of the Civil Code), the tenor of the legal text must be the primary element of interpretation, in accordance with the presumption, imposed by the same paragraph 3 of article 9º, that the legislator knew how to express its intent in appropriate terms.

In light of those meanings of the words "purpose" and "to purpose", which are "to assign a destination" or "to apply", the formula used in item No. 28.1 of the GTST manifestly encompasses properties that are already applied to residential purposes, and therefore it is important to inquire whether it also encompasses properties that, although not yet applied to residential purposes, are destined for these purposes, and those whose destination is unknown.

In light of the literal tenor of item No. 28.1, it is necessary to exclude from the scope of Stamp Tax incidence provided therein building land (…) that does not yet have any type of use defined, since it is not yet applied nor destined for residential purposes [as is the case in the matter sub judice]. That is, building land that does not have a defined use cannot be considered properties with residential purpose, since they do not yet have any purpose nor any destination other than construction of an unknown type. An interpretation to the effect that item No. 28.1 refers to properties whose purpose is unknown has not the slightest verbal correspondence in the letter of that rule, and therefore a hypothetical legislative intent of that type cannot be considered by the interpreter of the law, in light of the prohibition contained in paragraph 2 of article 9º of the Civil Code.

But this is insufficient to clarify the situation of those building lands that, although not yet applied to residential purposes, already have a determined destination, namely in the subdivision license (…).

For this reason, it is necessary to clarify when it can be understood that a property is devoted to a residential purpose, specifically whether it is when this destination is assigned to it in a licensing act or similar, or only when the actual attribution of that destination is concretized.

From the outset, the comparison of item No. 28.1 of the GTST with paragraph 2 of article 6º of the CIMI, which defines the concept of residential properties, points manifestly to the necessity of an actual purpose.

In truth, a building or construction licensed for residential purposes, or even without a license but that has as its normal destination residential purposes, is, in light of paragraph 2 of that article 6º, a residential property.

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

Consequently, it must be presumed that the use of a different expression is intended to refer to a different reality, and therefore, in proper hermeneutics, "property with residential purpose" cannot be a property merely licensed for residential use or destined for that purpose (that is, it will not suffice for it to be a "residential property"), but must be a property that already has actual purpose devoted to that end.

This is confirmed to be the meaning of the expression "purpose", in the same context of classification of properties used by the CIMI, by article 3º, which, concerning rural properties, makes reference to those that "are devoted or, in the absence of concrete purpose, have as their normal destination a use generating agricultural income", which shows that purpose is concrete, actual. In truth, as can be seen from the latter part of this text, a property may have as its destination a determined use and either be or not be devoted to it, which shows that purpose is, at the level of connection of a property to a determined use, something more intense than mere destination and which may or may not occur downstream of this, not upstream.

Moreover, the text of the law, by adopting the formula "property with residential purpose", instead of "urban properties of residential purpose", (…), points strongly to the effect that it is required that the residential purpose already be concretized, since only thus will the property have that purpose.

With respect to article 45º of the CIMI, it has no relation to the classification of properties, merely indicating the factors to be considered in the evaluation of building land. What is considered therein, in making reference to the "building to be constructed", is the consideration of the destination of the land, which, as has been seen, is something that, in the context of the CIMI, does not imply purpose and occurs before it.

The correctness of this interpretation to the effect that only properties that are actually devoted to residential purposes fall within the scope of incidence of item No. 28.1 of the GTST is also confirmed by the perceivable ratio legis of the restriction of the field of application of the rule to properties with residential purpose, in the context of the "circumstances in which the law was enacted and the specific conditions of the time in which it is applied", which article 9º, paragraph 1, of the Civil Code also elevates to interpretative elements.

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

For this reason, it may be concluded that the available interpretative elements, including the "circumstances in which the law was enacted and the specific conditions of the time in which it is applied", point clearly to the conclusion that it was not intended to encompass within the scope of incidence of item No. 28.1 situations involving properties not yet devoted to residential purposes, namely building land held by companies."

This line of argument is reinforced by "the amendment introduced to item 28.1 by Law No. 83-C/2013, of 31 December [State Budget Law for 2014], which, although not having interpretative character, came to subject to the tax expressly "land whose building, authorized or envisaged, is for residential purposes", thus expressly assuming that this reality would not be subject to taxation before this amendment" (arbitral decision of 22.04.2014, proceedings No. 310/2013-T).

Still from the same perspective, it is important to note the intervention of the Secretary of State for Tax Affairs, in the National Assembly, when presenting and discussing the bill proposal that gave rise to Law No. 55-A/2012, of 29 October (Bill Proposal No. 96/XII – 2nd), which then stated the following (Parliamentary Records I Series No. 9/XII/2, of 11.10.2012, p. 32):

"… the Government proposes the creation of a special rate on residential urban properties of higher value. It is the first time that in Portugal a special taxation is created on properties of high value destined for residential purposes. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and shall apply to properties valued at equal to or greater than 1 million euros. With the creation of this additional rate the fiscal burden required of these owners will be significantly increased in 2012 and 2013." (emphasis ours)

From these words pronounced by that member of Government with direct responsibility for the tax area, it is extracted with crystal clarity that the reality subject to taxation which was had in view by the Government and approved by members of the National Assembly was, after all, "residential (urban) properties", in common parlance "homes", and not other realities" (judgment of the Administrative Court of Appeal of 09.04.2014, proceedings No. 048/14).

Having said this, returning to the case at bar, we find that all urban properties owned by the Claimant are building land, on which no buildings or constructions are erected (cf. proven facts 1. and 2.).

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

Consequently, it is necessary to conclude that the Stamp Tax assessments in question in this process are vitiated by a defect of violation of law, due to error regarding the legal prerequisites, which ineluctably leads to the declaration of their illegality and consequent annulment.

IV. DECISION

On the grounds set forth above, this Arbitral Tribunal decides:

a) To uphold the claim for declaration of illegality of the following Stamp Tax assessments, due to error regarding the legal prerequisites, with their consequent annulment:

• Assessment No. 2014 …, dated 17.03.2014, in the amount of €4,456.06;

• Assessment No. 2014 …, dated 17.03.2014, in the amount of €4,856.06;

• Assessment No. 2014 …, dated 17.03.2014, in the amount of €3,804.60;

• Assessment No. 2014 …, dated 17.03.2014, in the amount of €3,494.70;

• Assessment No. 2014 …, dated 17.03.2014, in the amount of €4,456.06;

• Assessment No. 2014 …, dated 17.03.2014, in the amount of €4,856.06;

• Assessment No. 2014 …, dated 17.03.2014, in the amount of €3,804.60; and

• Assessment No. 2014 …, dated 17.03.2014, in the amount of €3,494.70.

b) To order the Tax and Customs Authority to pay the costs of the present process.

VALUE OF THE PROCESS:

In accordance with the provision of articles 306º, paragraph 2, of the Code of Civil Procedure, 97º-A, paragraph 1, subparagraph a), of the Code of Administrative Procedure, and 3º, paragraph 2, of the Rules of Costs in Tax Arbitration Proceedings, the value of the process is fixed at €33,222.84 (thirty-three thousand two hundred twenty-two euros and eighty-four cents).

COSTS:

In accordance with article 22º, paragraph 4, of the LFATM, the amount of costs is fixed at €1,836.00 (one thousand eight hundred thirty-six euros), in accordance with Table I attached to the Rules of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Lisbon, 20 March 2015.

The Arbitrator,

(Ricardo Rodrigues Pereira)