Stamp Tax on Building Land (Verba 28.1 TGIS) – CAAD Arbitral Decision 765/2014-T

ARBITRAL DECISION

REPORT

1. On 29 November 2014, A… –…, Lda, taxpayer no. …, hereinafter referred to as the Claimant, with registered office in Portugal, requested the constitution of an arbitral tribunal and filed a request for arbitral decision, pursuant to paragraph a) of no. 1 of article 2 and paragraph a) of no. 1 of article 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority (hereinafter referred to as AT) is the Respondent.

2. The Claimant is represented, in these proceedings, by its legal representative, Dr. B, and the Respondent is represented by the legal advisor, Dr. C.

3. The request for constitution of the arbitral tribunal was accepted by the Honourable President of CAAD and was notified to the Respondent on 11 November 2014.

4. By means of the request for constitution of the arbitral tribunal and request for arbitral decision, the Claimant seeks the annulment of the act of assessment of Stamp Tax, which gave rise to collection notices nos. 2014 …, 2014 … and 2014 … relating to the year 2013, in the amount of € 30,437.70 (thirty thousand, four hundred and thirty-seven euros and seventy cents).

5. Having verified the formal regularity of the request presented, in accordance with paragraph a) of no. 2 of article 6 of RJAT, and the Claimant having not proceeded to appoint an arbitrator, the Arbitrator Dr. Jorge Carita was appointed by the President of the Deontological Council of CAAD.

6. The Arbitrator accepted the appointment made, the arbitral tribunal having been constituted on 22 January 2015, at the registered office of CAAD, located at Avenida Duque de Loulé, no. 72-A, in Lisbon, in accordance with the minutes of constitution of the arbitral tribunal which were drawn up and are attached to these proceedings.

7. There was no first meeting of the arbitral tribunal as it was dispensed with, given the request presented by the Respondent on 2 March 2015, and, after being notified for this purpose, the Claimant made no statement.

8. Indeed, no exceptions having been raised, there being no need for production of additional evidence beyond that which is already documentarily incorporated in the proceedings, no need being apparent for the parties to correct their respective procedural submissions, the process containing all the elements necessary for the issuance of the decision, for reasons of procedural economy and expedition, the prohibition of the performance of useless acts, in light of the position manifested by the parties both expressly and tacitly, the Tribunal considered it appropriate to dispense with the holding of the meeting referred to in article 18 of RJAT, as well as the submission of arguments.

9. The Tribunal, in compliance with no. 2 of article 18 of RJAT, designated 15 June 2015 for the purpose of issuing the arbitral decision, having warned the Claimant that it should proceed with payment of the subsequent arbitration fee, in accordance with no. 3 of article 4 of the Regulation on Costs in Tax Arbitration Proceedings, and communicate such payment to CAAD.

II. The Claimant Submits Its Request as Follows, in Summary:

1. The Claimant supports the request for annulment of the act of assessment of Stamp Tax to which it was subject, with respect to the land for construction of which it is the owner, located in the parish of ..., in Lisbon, registered in the respective property register under article …, as unlawful, as it suffers from the following defects:

a) Defect of nullity and/or voidability of the administrative act and of all proceedings, due to lack of notification of assessment no. 2013…. relating to Stamp Tax for the year 2013, given that, "the claimant is unaware of and was never notified of the alleged assessment notice no. 2013. …, when it should have been, having only been notified of the allegedly so-called 'collection notices' which are presented with the designation 'Document Identification', and due to lack of identification of the author of the act, since in 'administrative acts there must always be an indication of the authority that performs them, which does not occur in the present case, in which no signature appears, even if typographical or electronic, which violates art. 133, no. 1, paragraph a) of the Code of Administrative Procedure, and the provisions of no. 1 of article 135 of the same statute.

b) Error regarding the prerequisites for application of item 28.1 of the TGIS, given that, "[t]he claimant is a company whose business purpose is the construction industry, real estate and iron structures, especially building construction, acquisition, sale, subdivision of real estate, including those under horizontal property regime", which "acquires land parcels for construction, develops projects and executes construction, establishes horizontal property ownership and sells the respective fractions". Therefore, "[t]he land for construction in question is the raw material for transformation by means of building houses, which are to be sold, for residential, commercial, services use and others, depending on the project that may be approved". The property in question is still in the state of land for construction, without any building, therefore, "unsuitable for any residential use. It may have other uses, such as pasture or cultivation, but not residential."

c) Moreover, it argues that, "[i]tem 28.1 of the TGIS is applied to property with residential use", therefore "considering a land for construction as having residential use and taxing it in Stamp Tax for this reason, is a procedure that has no legal basis, is not in the genesis nor in the letter of Law no. 55-A/2012, being merely a virtual exercise, which the law does not contemplate and the Constitution also does not."

d) It further maintains that, "[t]he fact that the assessment for purposes of IMI has the coefficient of residential use, does not apply, given that the various amendments introduced to the Stamp Tax Code by Law no. 55-A/2012, mandate the application of IMI rules, 'with the necessary adaptations', which does not permit such extrapolation.", notably, because "What appears in the entry in the property register is not 'residential' or 'residential use' but rather 'land for construction'."

e) It concludes, mentioning that, "[t]he present assessment of Stamp Tax on the land for construction suffers from manifest illegality as it is not provided for in the Law, it is contrary to its spirit, and even if one could understand there to be doubts regarding this – but as evidenced above there are none – it is made on the basis of an extensive and sui generis interpretation of the Law, which results in the same illegality".

f) Defect of violation of the principles of equality, proportionality, legality and good faith, given that the claimant understands that the disputed assessment "suffers from unconstitutionality as the assessment is not made in accordance with the Law and because a legally non-existent concept is being taxed, a virtual situation rather than a real situation is being taxed (…).

g) In fact, and in support of its thesis, the Claimant further refers that, "[t]he provision of Item no. 28.1 of the General Schedule of Stamp Tax aims to tax immobilized real property, wealth, for residential purposes – 'For property with residential use'", therefore, as the Claimant is "a construction company, which acquired the land as merchandise, as raw material for the exercise of its productive activity, to build it, transform it, and sell the product of that transformation," it cannot be understood that it is subject to the scope of application of item 28.1 of TGIS, because "it is not immobilized property, wealth, but rather raw material, which is outside the scope of item no. 28.1 of the General Schedule of Stamp Tax, as well as the provision of the Law that added this rule".

h) It thus understands, the claimant, that "[t]here is, therefore, an objective exclusion, and likewise subjective, given the object of the claimant's business," further adding and concluding in the sense that "[a]part from the discrimination of taxpayers independently of the purpose for which they intend the properties, more serious still, are taxpayers with productive purposes and activities discriminated against, which was certainly not the intention of the legislator in this matter, nor, moreover, could it be, as it violates the principle on which taxes must be based, namely no. 3 of art. 104 of the Constitution of the Portuguese Republic, when determining that 'The taxation of property must contribute to equality among citizens'."

III. In Its Response the Respondent Invoked, in Summary, the Following:

1. On the other hand, AT comes to argue, in its response:

a) As to the alleged error regarding the prerequisites of the assessments, the Respondent understands that: "the notion of use of urban property is found in the part relating to the assessment of real estate, which is well understood given that the assessment of the property (purpose) incorporates value to the property, constituting a determining fact of distinction (coefficient) for purposes of assessment. As results from the expression '…value of authorized buildings', contained in art. 45, no. 2 of CIMI, the legislator opted to determine the application of the methodology for assessment of properties in general, to the assessment of land for construction, being accordingly applicable to them the coefficient of use provided for in art. 41 of CIMI."

b) The Respondent defends that: "for purposes of determining the tax patrimonial value of land for construction, the application of the coefficient of use in the assessment context is clear, therefore its consideration for purposes of application of item 28 of TGIS cannot be ignored."

c) Following this line of reasoning, the AT understands that, "the concept of 'properties with residential use', for purposes of item 28 of TGIS, comprises both built properties and land for construction, given in particular the literal element of the rule," since "the legislator does not refer to 'properties intended for residential', having opted for the notion 'residential use'. A different and broader expression whose meaning must be found in the need to integrate other realities beyond those identified in art. 6, no. 1 paragraph a) of CIMI."

d) Moreover, it refers that: "the mere constitution of a right of potential construction immediately increases the value of the property in question, hence the rule contained in art. 45 of CIMI which mandates the separation of the two parts of the property. (…) As to the value of the land adjacent to the building area, this is determined in the same manner as the value of the free land area and the excess land area for purposes of any urban property is determined."

e) Concluding, in the sense that: "(…) well before the actual building of the property, it is possible to determine and ascertain the use of the land for construction," by the legal framework for urbanization and building and by Municipal Master Plans, "the use of the land for construction", therefore, the Claimant's thesis as to the illegality of the disputed Stamp Tax assessment is lacking in merit.

f) With regard to the alleged defect of violation of constitutional law, the Respondent defends itself by referring that: "the Constitution of the Republic requires that what is necessarily equal be treated equally and as different what is essentially different, not preventing differentiation of treatment, but only arbitrary, unreasonable discriminations, that is, distinctions of treatment that have no justification and sufficient material basis."

g) It adds, the respondent, that "[i]tem 28.1 of TGIS applies to the ownership, usufruct or right of superficies of urban properties with residential use, whose tax patrimonial value listed in the property register, in accordance with CIMI, is equal to or greater than € 1,000,000.00, that is, applies to the value of the property", being therefore "a general and abstract rule, applicable uniformly to all cases in which the factual and legal prerequisites are met."

h) It further states that, "the taxation in respect of stamp tax follows the criterion of adequacy, applying itself uniformly to all holders of properties with residential use of value greater than € 1,000,000.00, inciding on the wealth embodied and manifested in the value of properties, (…) the measure implemented seeks to achieve maximum effectiveness as to the objective to be achieved, with minimum injury to the other interests considered relevant."

i) Concluding, thus, in the sense that "the assessment in question embodies a correct interpretation and application of the law to the facts, not suffering from the defect of violation of law, whether of the CRP or of the CIS".

IV. Case Management

1. The Tribunal is competent and is regularly constituted, in accordance with paragraph a) of no. 1 of article 2 and articles 5 and 6, all of RJAT.

2. The parties have legal personality and capacity, show themselves to be legitimate, and are regularly represented.

3. No nullities, exceptions or preliminary issues exist that prevent the Tribunal from examining the merits of the claim.

V. Facts

1. With relevance to the decision, the following facts are deemed proven:

• The Claimant is the owner of land for construction located in the parish of ..., district and municipality of Lisbon, registered in the respective property register under article …. (cf. Doc. no. 1 attached with the initial petition);

• The land for construction was assessed as such, in 2011, and a tax patrimonial value (VPT) of € 3,043,770.00 (three million, forty-three thousand, seven hundred and seventy euros) was determined (cf. Doc. no. 1 attached with the initial petition);

• In carrying out that property assessment, AT decided to apply a coefficient of use, which was, in this case, "residential", provided for in article 41 of the IMI Code. (cf. Doc. no. 1 attached with the initial petition);

• The Claimant was notified of the collection notices relating to the act of assessment of Stamp Tax relating to the year 2013, carried out under item no. 28.1 of the General Schedule of Stamp Tax, in the amount of € 30,437.70 (thirty thousand, four hundred and thirty-seven euros and seventy cents) (cf. Docs. no. 3, 4 and 5 attached with the initial petition);

VI. Basis for the Facts

1. For the conviction of the Arbitral Tribunal, regarding the proven facts, the documents attached to the proceedings were relevant, as well as the administrative file, everything analyzed and weighed in conjunction with the pleadings, from which there is agreement as to the factuality presented by the Claimant in the request for arbitral decision.

VII. Facts Deemed Not Proven

1. There are no facts deemed not proven, because all facts relevant to the examination of the claim were deemed proven.

VIII. Legal Grounds

1. In the present case, there are three disputed legal issues:

1. whether the act of assessment of Stamp Tax, for the year 2013, here disputed is null;

2. whether, in the year 2013, land for construction is subject to stamp tax, in accordance with what item no. 28 of TGIS provides;

3. whether the provision in item no. 28 of TGIS is unconstitutional due to violation of the principle of equality, as well as of the provision in article 104, no. 3, of the CRP, due to violation of the principle of contributive capacity, in the interpretation that AT makes of it.

Let us proceed,

I – On the Nullity of the Act of Assessment of Stamp Tax

1. The Claimant, in its initial petition, invokes the nullity of the act of assessment of Stamp Tax relating to the year 2013 affecting the land for construction of which it is the owner, with a tax patrimonial value set at € 3,043,770.00 (three million forty-three thousand, seven hundred and seventy euros), arguing that "[t]he claimant is unaware of and was never notified of the alleged assessment notice no. 2013. …, when it should have been, having only been notified of the allegedly so-called 'collection notices' which are presented with the designation 'Document Identification'", further adding that "[t]he taxation documents of which the claimant was notified and which are the subject of the proceedings, present the defect of lack of identification of the author of the act", given that it understands that "[i]n administrative acts there must always be an indication of the authority that performs them, which does not occur in the present case, in which no signature appears, even if typographical or electronic, which violates art. 133, no. 1, paragraph a) of the Code of Administrative Procedure, determining the nullity of acts, which is here invoked. And the voidability of such acts is invoked subsidiarily, in accordance with art. 135 of the same Code of Administrative Procedure, entailing, in any case, their invalidity."

2. In its response, the respondent offered no counter-argument as to this aspect, having done so, however, previously, in the context of examination of the claim formulated in the objection presented by the claimant, which is an integral part of the administrative file attached to the proceedings. In fact, the Respondent maintains as to the invoked nullity of the administrative act, due to lack of notification of the act of assessment of Stamp Tax relating to the year 2013, and the nullity and, subsidiarily, voidability of the act due to lack of mention of its author, that "[a]s to the alleged lack of mention of the author of the act in the assessment notified, it should be noted that the assessment always comes signed by the Director General of the Tax and Customs Authority, even if with typographical signature, tax period, property in question, amount payable and all other requirements required by law. The document submitted by the claimant is a different matter, which constitutes a collection notice, with the payment reference, time limit for the same and the amount to be paid, among other details."

Let us proceed,

1. Now, no. 1 of article 36 of the Code of Tax Procedure and Process (CPPT) provides that "Acts in tax matters that affect the rights and legitimate interests of taxpayers only produce effects in relation to them when validly notified to them."

2. No. 4 of article 38 of CPPT provides that "notifications relating to assessments of periodic taxes made within the periods provided for in law are carried out by simple postal means."

3. In a note to this legal provision, Jorge Lopes de Sousa clarifies, in Code of Tax Procedure and Process, Annotated and Commented, Vol. I, 6th Edition, 2011, page 376 that "[t]he primary characteristic of periodic taxes is that they have an underlying tax fact of a permanent nature, so this concept includes, in addition to the Municipal Tax on Real Property (and previously, Municipal Tax) (…), [it also includes here, Stamp Tax, provided for in item 28.1 of TGIS]. However, in view of the rule of no. 1 of this article, which provides for the mandatory use of registered mail with return receipt for acts likely to alter the tax situation of taxpayers, it must be concluded that this no. 4 only refers to cases in which the act of assessment does not involve an alteration of the tax situation of taxpayers, which was the case with Municipal Tax and currently occurs with Municipal Tax on Real Property, as they are, as a rule, assessed ex officio, on the basis of already existing elements (art. 18 of CCA and 113, no. 1 of CIMI). In fact, it is with respect to Municipal Tax and Municipal Tax on Real Property that it is provided that, if the assessment is carried out within the normal period, a collection notice (art. 22 of CCA) or collection document (art. 119 of CIMI) be sent to taxpayers, only providing for notification of the assessment in cases in which it is carried out outside the normal period or is additional (no. 2 of art. 23 of CCA and 120, no. 2 of CIMI)."

4. Now, considering the provision in no. 2 of article 67 of the Stamp Tax Code, introduced by Law no. 55-A/2012, of 29 October, according to which: "To matters not regulated in this Code relating to item no. 28 of the General Schedule, the provisions of CIMI apply, subsidiarily.", we will be forced to conclude that articles 119 and 120 of CIMI, referred to above, will also apply here.

5. Accordingly, and the Claimant not having denied that it was notified of the collection notices of the disputed Tax, we must conclude that as to this aspect it is not correct, therefore the invoked nullity of the act and the proceedings is not well-founded, due to lack of notification of the assessment.

6. Given that the Claimant further argues the nullity of the act, "due to lack of mention of the author of the assessment act", we will advance, from the outset, that here too the Claimant is not correct, given that the collection notices, attached as Docs. no. 3, 4 and 5 perfectly identify their author, mentioning from the outset, the entity from which they come, that is, from the "Tax and Customs Authority – Finance Service of Lisbon – … – ".

II – Classification of Land for Construction within the Scope of Item 28.1 of TGIS

1. Law no. 55-A/2012, of 29 October (which we will hereinafter refer to as Law no. 55-A/2012, of 29.10 or simply Law), carried out amendments to, among others, various articles of the Stamp Tax Code, more precisely 12 of its articles. We will not pronounce on all of them, but only on those we consider to have greater relevance for the analysis of the case before us.

2. Thus, in the scope of application rule provided for in article 1 of CIS, the legislator determined that, in addition to acts, contracts, documents, titles, papers and other facts provided for in the General Schedule, including gratuitous transfers of property, stamp tax would also apply to "legal situations", now also provided for in TGIS.

3. The new wording of no. 4 of article 2, came to determine that for these "legal situations", the passive subjects of the tax are those referred to in article 8 of CIMI, that is, in most cases, the tax is owed by the owner of the property on 31 December of the year to which the tax relates.

4. In these "legal situations", the tax constitutes a charge of the passive subject provided for in no. 4 of article 2 of CIS, that is, the above-identified owner of the property (general rule), by remission for application of the rule of article 8 of CIMI.

5. In these "legal situations", the application of the principle of territoriality makes the tax due whenever the properties are located in national territory, in accordance with the amendment to article 4 of CIS of its no. 6, by Law no. 55-A/2012.

6. As to the arising of the tax obligation, for these new "legal situations" it is considered constituted "… at the moment and in accordance with the rules provided for in CIMI, with the necessary adaptations" (See paragraph u) of article 5 of CIS, added by Law no. 55-A/2012, of 29 October), which refers us to the rules provided for in articles 9 and 10 of CIMI.

7. Now, the fundamental amendment, which conditions all others, is contained in article 4 of Law no. 55–A/2012, which adds to the General Schedule of Stamp Tax (TGIS), attached to the Stamp Tax Code (CIS), a new item, no. 28, with the following wording:

"28. Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value listed in the property register, in accordance with the Code of Municipal Tax on Real Property (CIMI), is equal to or greater than (euro) 1,000,000 - on the tax patrimonial value used for purposes of IMI:

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

28.2 For property, when the passive subjects that are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the schedule approved by ordinance of the Minister of Finance ----------------------------------------------------------------- 7.5%"

1. Thus, in accordance with the aforementioned item, and to the extent relevant here, only the ownership, usufruct, right of superficies of:

a) "urban properties,

b) with residential use,

c) and whose tax patrimonial value listed in the property register, in accordance with the Code of Municipal Tax on Real Property (CIMI), is equal to or greater than (euro) 1,000,000;" (underlining ours)

are subject to Stamp Tax.

1. In fact, the greatest difficulty that the taxpayer has encountered, given the amendments introduced by Law no. 55-A/2012, of 29.10, expressed in the case before us, has been manifested in the interpretation of the expression "property with residential use".

2. A concept which determines, or not, the application of land for construction to item 28.1 of TGIS, the assessment of which is here being contested.

3. Now, the obstacle arises from the non-existence of a definition of the concept "property with residential use" in tax legislation, namely in the IMI Code, to which CIS refers, as subsidiary law, in conformity with its article 67, introduced by Law no. 55-A/2012, 29.10.

4. In fact, CIMI provides, in articles 2 to 6, regarding: the concept of property (article 2), defines what should be understood as rural properties (article 3), what should be understood as urban properties (article 4); what should be understood as mixed properties (article 5) and lists the species of urban properties (article 6), to whose wording we refer.

5. However, none of the legal norms above identified admit the concept of "property with residential use", therefore, and in accordance with the essential rules of legal hermeneutics and interpretation of tax laws, we must first resort to the letter of the law, presuming that the legislator expressed itself appropriately, and then to its systematic integration with the norms contained in CIMI, however without overlooking the intention or spirit of the legislator.

6. Thus, the question arises: what did the legislator intend when drafting item 28.1 of TGIS, when indicating as a prerequisite for its application "property with residential use". Did the legislator intend to encompass in this concept land for construction – the matter which concerns us here –?

7. Did it intend to interpret the expression "property with residential use" in the sense that the Respondent makes, namely that "[t]he concept of 'properties with residential use', for purposes of item 28 of TGIS, comprises both built properties and land for construction, given in particular the literal element of the rule", given that "[t]he legislator does not refer to 'properties intended for residential', having opted for the notion of 'residential use'. A different and broader expression whose meaning must be found in the need to integrate other realities beyond those identified in art. 6, no. 1 paragraph a) of CIMI."?

8. Or, rather, and as the Claimant refers, that "[u]rban properties with residential use are, therefore, those which, under the respective construction process referred to in arts. 62 and following of the Legal Framework for Buildings (RJEU, approved by art. 1 of Decree-Law no. 555/99, of 16.12) have been licensed or, according to their physical characteristics, have as their normal purpose residential use."?

Let us proceed,

1. For clarity in exposition, and as to the matter of the concept of "properties with residential use" we recall what was endorsed in the arbitral decision handed down in case no. 53/2013-T, with which we agree, according to which: "The concept most proximate to the literal tenor of this expression used is manifestly that of 'residential properties', defined in no. 2 of article 6 of CIMI as encompassing 'the buildings or constructions' licensed for residential purposes or, in the absence of a license, having as their normal purpose residential purposes. (…) However, the non-coincidence of the terms of the expression used in item no. 28.1 of TGIS with that extracted from no. 2 of article 6 of CIMI, points toward the sense that it was not intended to use the same concept."

2. Furthermore, and in this logical sequence, the position taken in the Court of Appeal (STA) Decision handed down in rec. no. 317/14, which we follow, in the sense that: "[r]esidential use" always appears in the IMI Code referred to "buildings" or "constructions", existing, authorized or planned, given that only these can be inhabited, which is not the case with land for construction, which do not, in themselves, have conditions for such, not being susceptible to being used for residential purposes unless and until a building authorized and planned for them is built on them (but in that case they would no longer be "land for construction" but another species of urban properties – "residential", "commercial, industrial or for services" or "others" – article 6 of CIMI)".

3. Accordingly, following this path, with which we fully agree, it appears that the Respondent's thesis as to the possible connection of the concept of "residential use" to land for construction, without any building capable of being inhabited, would be lacking in merit.

4. In fact, this amendment – to which the legislator does not attribute interpretive character – reinforces the unequivocal character, for the future, that land for construction whose building, authorized or planned, is for residential purposes are encompassed within the scope of item 28 of TGIS (provided that the respective tax patrimonial value is equal to or greater than € 1,000,000.00), saying nothing or clarifying anything as to situations prior to this legislative amendment, notably the one before us, and it must therefore be concluded that in the year 2013, land for construction were not included in the provision of item 28 of TGIS.

5. Moreover, the Respondent further invokes, in support of its position, that "[t]he notion of use of urban property is found in the part relating to the assessment of real estate, which is well understood given that the assessment of the property (purpose) incorporates value to the property, constituting a determining fact of distinction (coefficient) for purposes of assessment." In particular, because "[a]s results from the expression '---value of authorized buildings', contained in art. 45, no. 2 of CIMI, the legislator opted to determine the application of the methodology for assessment of properties in general, to the assessment of land for construction, being accordingly applicable to them the coefficient of use provided for in art. 41 of CIMI".

6. Concluding, in the sense that: "[…]for purposes of determining the tax patrimonial value of land for construction, the application of the coefficient of use in the assessment context is clear, therefore its consideration for purposes of application of item 28 of TGIS cannot be ignored."

7. Now, the truth is that we also do not here consider it appropriate to admit and accept the legitimacy or legality of the assessment of stamp tax on land for construction in the terms alleged by the Respondent, given that, and as referred in the arbitral decision handed down in case no. 53/2013-T, to which we fully adhere, "With regard to article 45 of CIMI, it has no relation to the classification of properties, merely indicating the factors to be considered in the assessment of land for construction."

8. On this matter, case no. 158/2013-T of CAAD has already pronounced, with which we agree and adhere, in the sense that: "It is true that CIMI determines the application, to the assessment of land for construction, of the methodology for assessment applicable to constructed buildings, incorporating into the property value the estimated value of the building to be constructed; and that this value is determined, in turn, by the type of use provided for the properties to be built. Put in simpler terms, the law (CIMI) says that to determine the tax patrimonial value of land for construction, one incorporates into this a part of the estimated value of the buildings to be constructed; and to estimate the value of the buildings to be constructed, one takes into account the use provided for the same."

9. It further states, in that decision, that "Contrary to what the AT maintains, it results precisely from the letter of these provisions the inapplicability of the concept of 'use' to land for construction. The use that is taken into account, for purposes of assessment, even of land for construction, is always and only the use of the buildings to be constructed. The use provided for the buildings to be constructed influences the tax patrimonial value of the land for construction, but nothing more."

10. Further mentioning that: "From the norm relating to the determination of the value of properties that determines that in the value of land for construction the estimated value of the buildings to be built is incorporated, which, in turn, is influenced by the future use of the same buildings, one cannot infer that the use in question is a use of the properties themselves, and this for two reasons: The first, because this interpretation would be contrary to the very literality of the provisions that mandate taking into account, in the assessment of land for construction, the use of the properties to be built; And the second, because the way in which the law mandates the valuation of a particular patrimonial reality cannot be determinative of the nature or legal qualification of that same patrimonial reality, in view, above all, of the principle of typicality of tax scope provisions. The fact that the law mandates applying to one patrimonial reality the same valuation methodology that is applied to another different reality does not cause the first reality to share the nature of the second. Thus, if it is true that the value of the authorized or planned buildings influences the actual value of construction land, and for this reason that value must be reflected in the tax patrimonial value of the same land, it does not follow that land comes to have residential use when the construction of residential properties authorized and planned for it is provided, extracting this distinction clearly from the very provisions governing the assessment of CIMI."

11. Accordingly, what matters for purposes of application of item no. 28.1 of TGIS is that the property is urban, that it has a VPT equal to or greater than € 1,000,000.00, and that it is actually used for residential purposes, which is not the case with the land for construction, the assessment of which is being contested in these proceedings.

12. This is what results from the jurisprudence of the arbitral tribunals[1] and superior tax tribunals[2] which have been interpreting item no. 28.1 of TGIS and its prerequisites for application, and with which we fully agree.

13. It is worth noting, finally, the position of the Supreme Administrative Court, the summary of one of whose Decisions is referenced here and which has been the guidance in the various decisions handed down in that Venerable Court, as to the illegality of stamp tax under item 28.1 of TGIS on land for construction:

"Not having the legislator defined the concept of 'properties (urban) with residential use', and resulting from article 6 of the Code of Municipal Tax on Real Property (with subsidiary application to Stamp Tax provided for in the new item no. 28 of the General Schedule) a clear distinction between 'urban residential properties' and 'land for construction', the latter cannot be considered, for purposes of application of Stamp Tax (Item 28.1 of TGIS, as amended by Law no. 55-A/2012, of 29 October), as urban properties with residential use."

1. Accordingly, the AT could never subject the claimant to stamp tax, under item 28 of TGIS, for the year 2013, which is now being contested, and therefore, it should be annulled, as illegal.

B - On the Violation of Constitutional Law

1. The logic of taxation of wealth and fortune prevails, with greater or lesser intensity, within the framework of Law no. 55-A/2012, 29.10, a conclusion that results from the generalized increase in tax burden, in the financial logic, exclusively directed at tax situations that would produce immediate revenue.

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

3. And if the legislator includes in this statute properties for residential use, setting a value above which they would be taxed by another tax, this could only mean that he considered that whoever was the owner of a property of that value, such expressed an element indicative of additional means of fortune, which could be called upon to participate in the collective effort of collecting supplementary tax revenue.

4. In fact, when the legislator introduced this legislative innovation, he considered as the determining element of contributive capacity urban properties, with residential use, of high value (luxury), more precisely, of value equal to or greater than € 1,000,000.00, on which a special rate of stamp tax came to apply, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of superficies of luxury urban properties with residential use. For this reason, the criterion was for application of the new rate to urban properties with residential use, whose VPT is equal to or greater than € 1,000,000.00.

5. This is concluded from the analysis of the discussion of legislative proposal no. 96/XII in the National Assembly, available for consultation in the Journal of the National Assembly, I series, no. 9/XII/2, of 11 October 2012.

6. The basis for the measure designated as "special rate on high-value residential urban properties" rests on the invocation of the principles of social equity and fiscal justice, calling upon those holding high-value properties intended for residential use to contribute in a more intense manner, implementing the new special rate on "houses of value equal to or greater than 1 million euros."

7. In fact, the legislator clearly considered that this value, when attributed to a residential use (house, autonomous fraction or apartment with independent use) reflected contributive capacity above the average and, as such, susceptible of determining a special contribution to guarantee fair distribution of the fiscal effort.

8. Also following these considerations that inspired the legislative innovation under examination, it must be concluded that the mere existence of land for construction cannot, by itself, be an indicator of contributive capacity.

9. In fact, land for construction belonging to a company such as the Claimant does not reflect wealth susceptible of taxation, in the context of Stamp Tax, given its indexing as an asset, as merchandise or raw material.

10. Moreover, and now within the scope of the constitutional principle of fiscal equality, we would always say that, as a specific expression of the general structuring principle of equality (article 13 of CRP), it is not limited to the rule of universality of taxes, according to which these apply to all those who have contributive capacity, also determining that all must be bound to payment of taxes on the basis of the same criterion - the rule of uniformity of taxes.

11. According to this rule, what is equal must be taxed equally, and what is unequal must be taxed unequally, to the extent of that inequality.

12. The tax legislator cannot treat equal situations differently.

13. Now, the jurisprudence of the Constitutional Court has recognized the principle of contributive capacity as an expression of fiscal equality, extracting from it the precise technical requirements for the legal conformity of taxes with the aforementioned principle (cf. Decision no. 106/2013, of 20.02.2013).

14. Thus, with regard to item 28.1 of TGIS, the legislator established as criteria for determining the objective scope of that tax: (i) the qualification of the property – urban property with residential use – and (ii) the tax patrimonial value – equal to or greater than € 1,000,000.00 –.

15. As to the first criterion, independently of the qualification of the property, the legislator appears to have considered that should not be encompassed within the scope of item 28 of TGIS: the ownership, usufruct and right of superficies over rural properties and over urban properties intended for commerce, industry and services, given that it appears to have – unjustifiably – weighed that these do not constitute a manifestation of real estate wealth that should be subject to tax.

16. As to the second criterion, independently of the tax patrimonial value, the tax legislator opted to tax, only, for purposes of item 28.1 of TGIS, urban properties with tax patrimonial value equal to or greater than € 1,000,000.00, given that it appears to have – unjustifiably – understood that only these constitute a manifestation of real estate wealth that should be subject to tax.

17. Therefore, they do not apply to land for construction sui generis, without any building constructed on it.

18. In fact, if the legislator included in the scope of item 28 of TGIS, properties for residential use, setting a value above which they would be taxed by another tax, this could only mean that he considered that whoever was the owner of a property of that value, such expressed an element indicative of additional means of fortune, which could be called upon to participate in the collective effort of collecting supplementary tax revenue.

19. Thus, when the legislator introduced this legislative innovation, he considered as the determining element of contributive capacity urban properties, with residential use, of high value (luxury), more precisely, of value equal to or greater than € 1,000,000.00, on which a special rate of stamp tax came to apply, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of superficies of luxury urban properties with residential use.

20. In these terms, one can only conclude that the stamp tax objectively delimited as it is in item 28.1 of TGIS, in the wording provided for the year 2013, violates the principle of contributive capacity as a corollary and expression of the principle of fiscal equality enshrined in articles 13, 103, no. 1 and 104, no. 1 and no. 3, all of the CRP;

21. In light of the above, the act of assessment of Stamp Tax relating to the year 2013, contested, in the amount of € 30,437.70 (thirty thousand, four hundred and thirty-seven euros and seventy cents) is null, due to violation of the provision in item 28.1 of TGIS, the principle of contributive capacity and the principle of taxation on wealth.

DECISION

In accordance with the above, it is decided:

1. Annul the act of assessment of Stamp Tax contested by the Claimant, relating to the year 2013, in the amount of € 30,437.70.

Value of the Case

The value of the case is set at € 30,437.70 (thirty thousand, four hundred and thirty-seven euros and seventy cents) in accordance with art. 97-A, no. 1, a), of CPPT, applicable by force of paragraphs a) and b) of no. 1 of art. 29 of RJAT and no. 2 of art. 3 of the Regulation on Costs in Tax Arbitration Proceedings.

Costs

Costs charged to the Respondent in accordance with article 22, no. 2 of RJAT, article 4 of RCPAT, and Table I attached to the latter, which are set at the amount of € 1,836.00.

Notice to the parties.

Lisbon, 12 June 2015

The Arbitrator

(Jorge Carita)

[1] Decisions of CAAD handed down in cases no. 50/2013-T, no. 132/2013-T, no. 181/2013-T, no. 183/2013-T, no. 185/2013-T, no. 248/2013-T, among others.

[2] Decisions of STA handed down in cases no. 046/14, of 14.05.2014; no. 0271/14, of 14.05.2014; no. 0395/14, of 28.05.2014, 01871/13, of 14.05.2014, 055/14, of 14.05.2014, among others.