Stamp Tax on Construction Land Over €1M: CAAD Arbitration on Verba 28 TGIS Legality

ARBITRAL DECISION

I - Report

A - Identification of the Parties

Claimant: A..., S.A., with registered office at Street..., No...., .... ... - .... Lisbon, bearing the collective entity tax identification number NIPC:..., hereinafter referred to as the Claimant or taxpayer.

Respondent: Tax and Customs Authority, hereinafter referred to as the Respondent or AT.

The Claimant submitted a petition for the constitution of an Arbitral Tribunal in tax matters and a request for an arbitral decision, pursuant to the provisions of subparagraph a) of item 1 of Article 2 and subparagraph a) of item 1 of Article 10, both of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter abbreviated as RJAT).

The petition for the constitution of the Arbitral Tribunal was accepted by the President of CAAD, and in compliance with the provisions of subparagraph c) of item 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Tax Authority was notified on 2017-03-16.

The Claimant did not proceed to the appointment of an arbitrator, and therefore, pursuant to the provisions of item 1 of Article 6 and subparagraph b) of item 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed Rita Guerra Alves as Arbitrator, and her appointment was accepted in accordance with legal provisions.

On 2017-02-14, the parties were duly notified of this appointment, and expressed no wish to challenge the appointment of the arbitrators, in accordance with Article 11, item 1, subparagraphs a) and b) of the RJAT and Articles 6 and 7 of the Deontological Code.

The Singular Arbitral Tribunal was regularly constituted on 2017-03-16 to examine and decide the subject matter of this dispute, and the Tax and Customs Authority was automatically notified on 2017-02-14 as shown in the respective minutes.

B - REQUEST

1. The Claimant seeks a declaration of illegality of the tax assessment acts in the matter of Stamp Tax, No. 2015..., 2015... and 2015..., which established a tax payable of € 14,285.40 (fourteen thousand two hundred eighty-five euros and forty cents).

C - GROUNDS FOR CLAIM

1. To support its request for an arbitral decision, the Claimant alleged, with a view to the declaration of illegality of the tax assessment acts in the matter of Stamp Tax, the following:

• The Claimant was the owner, on the date to which the assessment in question in these proceedings refers (2014), of the property currently registered in the urban property matrix of the Union of Civil Parishes of..., ... and ..., municipality of Oeiras, district of Lisbon, under article ... and described in the ... Land Registry of Oeiras under No....

• The property, on the date of the facts, was registered in the respective matrix as construction land, designated as Plot....

• The VPT of the property as of 31.12.2014 was greater than €1,000,000.00.

• The Claimant in August of 2015 filed a Stamp Tax administrative appeal with the number ...2015....

• The appeal was rejected.

• In August 2003, the Municipal Chamber of Oeiras issued subdivision permit No.../03, which authorized the constitution of 23 plots of land, numbered 1 to 23, which includes the plot....

• The Claimant alleges that from the Subdivision Permit results the following: "plot designated in the Synthesis Plan by No..., is intended for the construction of a building intended for an Auto Silo, whose promotion and commercialization would be in autonomous fractions, as well as the construction of a Condominium Hall and Caretaker's Unit for Plots ... to ..., being for this purpose established under a Condominium regime with these plots."

• Further alleges that the caretaker's unit, "being non-residential," that is, not intended for habitation, can "only consist of a guardhouse and a sanitary installation," and the area corresponding to this unit cannot exceed 75 m².

• Further alleges that the condominium hall is a "space of common use" and should have a minimum area of 1.5 m² per unit or dwelling, as well as a sanitary installation.

• The Claimant argues that Plot... is thus intended for the construction of a property to be used for underground parking, and, in a secondary and residual manner, a condominium hall and caretaker's unit – which should constitute common areas for several plots – and thus is not authorized, under the terms of the Subdivision Permit, for the construction of a property intended for habitation for Plot....

• The Subdivision Permit was amended by a resolution of the Municipal Chamber of Oeiras in March 2005 and another in March 2011.

• The Claimant alleges that in none of the amendments made to the Subdivision Permit is the destination or designation of the buildings authorized under the Subdivision Permit for Plot... requalified, that is, none of these amendments provide that the construction authorized for Plot..., in its vast majority for parking, be changed to habitation.

• Plot... never was intended and was not intended, on 31.12.2014, for the construction of a building for habitation, and is not permitted, under the terms of the licensing approved for this plot, the construction of any property intended for habitation.

• Plot... is intended exclusively for the construction of an underground parking facility, with approximately 9,782.40 m² of gross construction area, as well as the construction of an area, of approximately 320 m², intended for the condominium hall and caretaker's unit.

• The Claimant argues that with respect to Plot..., it does not meet one of the three cumulative requirements provided for in item 28.1, as it is construction land whose authorized or planned building is not for habitation.

• With respect to the expression "whose authorized or planned building is for habitation," this applies only to cases where the administrative authorization has already been issued that authorizes the respective owner to build or subdivide, and cannot even reveal for this purpose mere ownership or mere "constructive viability" under a Municipal Master Plan or Detailed Plan.

• In such terms, given that Item 28.1 of the TGIS applies to construction land "whose authorized or planned building is for habitation" and construction for habitation is not authorized or planned for Plot..., the stamp tax assessment in question in these proceedings should be considered illegal and must be annulled for violation of the provisions of Item 28.1 of the TGIS and Article 6 of the Real Estate Tax Code, and the decision rejecting the Administrative Appeal that maintained such assessment in the legal order should equally be considered illegal.

• The Claimant further maintains that Item 28.1 is manifestly unconstitutional, by violation of the principles of equality and proportionality, and therefore the assessment act in question must, consequently, be annulled.

• The Claimant concludes by alleging that the Stamp Tax assessment, which is the indirect subject matter of this request, should be declared illegal for violation of the provisions of Item 28.1 of the TGIS and Article 6 of the Real Estate Tax Code.

D - RESPONSE OF THE RESPONDENT

1. The Respondent, duly notified for this purpose, timely presented its response in which, in brief summary, alleged the following:

• Pursuant to item 2 of Article 67 of the Stamp Tax Code in the wording given by Law No. 55-A/2012, of 29 October, matters not regulated in the Code relating to Item 28.1 of the TGIS are governed subsidiarily by the provisions of the Real Estate Tax Code.

• In the absence of any definition of the concepts of urban property, construction land and residential designation for Stamp Tax purposes, item 1 of Article 6 of the Real Estate Tax Code must be considered, which provides that urban properties are divided into residential, commercial, industrial or service properties, construction land and others.

• Faced with this norm, it must be concluded that the documents included in PA1 and PA2 unequivocally demonstrate that article ... in the property matrix of the Union of Civil Parishes of..., ... and... is construction land for purposes of the application of Item 28.1 of the TGIS.

• The application of Stamp Tax to construction land implies, concretely, the actual potential for building on the land in question.

• This is because the current wording of Item 28.1 of the TGIS, compared to the previous version of the norm, now unequivocally covers construction land whose authorized or planned building is for habitation, when its property tax value is equal to or greater than €1,000,000.

• Indeed, Law No. 55-A/2012, of 29 October, amended Article 1 of the Stamp Tax Code and added Item 28 to the TGIS, which now applies also to the ownership, usufruct or right of superficies of urban properties whose property tax value contained in the matrix, in accordance with the Real Estate Tax Code, is equal to or greater than €1,000,000 based on the property tax value used for Real Estate Tax purposes.

• Thus, any illegality or incorrectness committed or detected in the assessment should have been challenged at that time, by the appropriate means provided for by law, the challenge of the property tax value in accordance with Article 76 of the Real Estate Tax Code or the complaint regarding the matrix in accordance with Article 130, item 2, paragraph a) of the same code.

• Having not been done so, all positive prerequisites – matrix, taxable value, property designation and holder of the right – on which the tax incidence depends and which served as the basis for the Stamp Tax assessment challenged were definitively incorporated into the matrix, solidifying in the Claimant's legal-fiscal sphere.

• Thus, the designation coefficient (Ca) assigned in those assessments was residential and because the first assessment suffered no challenge, it was definitively registered in the matrix as construction land with that designation.

• The notion of urban property designation is based on the part relating to the assessment of real estate in that the assessment of the real estate (purpose) incorporates value to the real estate, constituting a determining fact of distinction (coefficient) for assessment purposes.

• Thus, the determination of the VPT of construction land presupposes the determination of the value of buildings authorized or planned, for which purpose, in accordance with the provisions of Article 38 of the Real Estate Tax Code, the designation of these same buildings must be considered.

• In the case at hand, it results from the assessment rules referred to above that the VPT was determined based on the construction area intended for each of them, and given that these are construction lands whose authorized or planned building has various designations, the respective total VPT is therefore the result of the sum of the values assigned to the different areas, without prejudice to the rounding rule established in Article 38, item 2 of the Real Estate Tax Code.

• Therefore, in accordance with the documents submitted in the proceedings, on the date to which the impugned assessment refers, the VPT of article... in question resulted from the sum of the value assigned to the areas of the various designations.

• The Respondent maintains that the assessment in question embodies a correct interpretation and application of Item 28.1 of the TGIS, in the wording of Law No. 83-C/2013, of 31 December, which expressly prescribes as an objective element of incidence construction land whose authorized or planned building is for habitation with a VPT equal to or greater than €1,000,000.

• Regarding the alleged violation of the principle of equality - from the perspective of contributive capacity, the Respondent argues that the assessment act in question violates the constitutional principle of equality enshrined in Article 13 of the Constitution in the aspect of contributive capacity.

• In conclusion, given the ratio of Item 28.1 of the TGIS, the nature and structure of the tax, as well as the manifestation of wealth or income that the legislator intended to capture, the assessment challenged in these proceedings does not incur the alleged violation of Item 28.1 of the TGIS, in the wording given by Law No. 83-C/2013, of 31 December, nor does it constitute a violation of the principle of equality enshrined in Article 13 of the Constitution in all its aspects.

• Therefore, we conclude that the tax acts in question did not violate any legal principle and should thus be maintained.

E - FACTUAL FOUNDATION

1. For the examination of the questions submitted for decision, it is necessary to describe the relevant factual matter, based on the documentary evidence submitted by the parties and the non-challenge of the tax administrative proceedings.

2. Thus, regarding relevant matters of fact, this tribunal establishes as certain the following facts:

3. The Claimant is the owner of the urban property corresponding to construction land, located on the property registered under article... in the property matrix of the Union of Civil Parishes of..., ... and..., municipality of Oeiras, with a property value of €1,428,540.00;

4. The VPT, the basis of the impugned assessment, corresponds to €1,428,540.00 determined on 22.03.2012, according to Assessment Sheet No....;

5. The Property Tax Value, as of the date, for purposes of the assessments (31.12.2014) is greater than €1,000,000.00 (one million Euros).

6. The plot in question, which constituted construction land, designated as "Plot...", was the subject of a subdivision process, issued on 11.08.2003 by the Municipal Chamber of Oeiras, whose Subdivision Permit No.../03 authorizes the constitution of 23 plots of land, which includes "Plot...".

7. Based on Subdivision Permit No.../03, authorization was given for the construction of an underground parking facility.

8. Two additional amendments were made to Subdivision Permit No.../03, which maintained the authorization of Plot... for the construction of underground parking.

9. The construction land, "Plot...", since Subdivision Permit No.../03, was never designated for any purpose other than the construction of underground parking, and was not designated for or possess a designation for the construction of residential buildings;

10. It appears from the Land Registry Certificate that Plot... is construction land for underground parking and with changes in the area of implantation and gross construction area;

11. The Claimant was notified of the following Stamp Tax assessment acts:

• No. 2015..., of 2014, referring to the first installment of stamp tax, on the real estate ... ..., ...-U-..., with a collection of €14,285.40 and a tax payable of €4,761.80.

• No. 2015..., of 2014, referring to the second installment of stamp tax, on the real estate ... ..., ...-U-..., with a collection of €14,285.40 and a tax payable of €4,761.80.

• No. 2015..., of 2014, referring to the third installment of stamp tax, on the real estate ... ..., ...-U-..., with a collection of €14,285.40 and a tax payable of €4,761.80.

1. The Claimant filed an administrative appeal with No. ...2015... on 13 August 2015, which was rejected by official letter... of 29/09/2016 and of which the Claimant was notified.

F - FACTS NOT PROVEN

1. Of the facts with relevance to the decision of the case, contained in the challenge, all subject to concrete analysis, those not contained in the factuality described above were not proven.

G - ISSUES FOR DECISION

1. Given the positions of the parties, adopted in the arguments presented by each, the central question constitutes the following, which must therefore be examined and decided:

A) Declaration of illegality of the tax assessment acts in the matter of Stamp Tax, of the years 2014, No. 2015..., 2015... and 2015..., which established a tax payable of €14,285.40 (fourteen thousand two hundred eighty-five euros and forty cents).

H - LEGAL MATTERS

1. Given the positions assumed by the parties in their submitted briefs, the central question to be decided by this Arbitral Tribunal will consist of determining whether the Stamp Tax assessment act, No. 2015..., 2015... and 2015..., which established a tax payable of €14,285.40, on the property registered under article... in the property matrix of the Union of Civil Parishes of..., ... and..., municipality of Oeiras, with a property value of €1,428,540.00, was based on the erroneous interpretation and application of Item 28.1 of the TGIS and Article 6, item 1, subparagraph f), i) of the aforementioned Law No. 55-A/2012, of 29 October.

2. Given the factual matter established as proven, we will then determine the applicable law, giving priority, in compliance with the provisions of subparagraph a) of item 2 of Article 124 of the Tax Procedural Code, to the analysis of the defects of the assessment act, whose merit determines a more stable and effective protection of the Claimant's interests.

3. We will thus proceed to analyze the defects due to error regarding the prerequisites of the right to assess, concerning the issue of the classification of construction land within the scope of application of Article 28, item 1 of the TGIS, introduced by the Framework of Law No. 55-A/2012, of 29 October.

4. With the amendment of the framework regarding the subjection to stamp tax of properties with residential designation, through the addition of Item 28 of the General Stamp Tax Table, made by Article 4 of Law 55-A/2012, of 29/10, the following taxable facts were typified, through the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose property tax value contained in the matrix, in accordance with the Real Estate Tax Code, is equal to or greater than €1,000,000 – on the property tax value used for Real Estate Tax purposes:

28.1 – For each residential property or for construction land whose authorized or planned building is for habitation, in accordance with the provisions of the Real Estate Tax Code;

28.2 – For each property, when the taxpayers who are not individuals are residents of a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance – 7.5%."

And the transitional provisions contained in Article 6 of Law No. 55-A/2012, which established the rules relating to the assessment of the tax provided for in that Item:

"1 – In 2012, the following rules must be observed with reference to the assessment of stamp tax provided for in Item No. 28 of the respective General Table:

The taxable event occurs on 31 October 2012;

The taxpayer of the tax is the one mentioned in item 4 of Article 2 of the Stamp Tax Code on the date referred to in the preceding subparagraph;

The property tax value to be used in the assessment of the tax corresponds to what results from the rules provided for in the Real Estate Tax Code with reference to the year 2011;

The assessment of the tax by the Tax and Customs Authority must be carried out by the end of November 2012;

The tax must be paid in a single installment by taxpayers by 20 December 2012;

The applicable rates are the following:

i) Properties with residential designation assessed in accordance with the Real Estate Tax Code: 0.5%;

ii) Properties with residential designation not yet assessed in accordance with the Real Estate Tax Code: 0.8%;

iii) Urban properties when the taxpayers who are not individuals are residents of a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance: 7.5%.

2 – In 2013, the assessment of stamp tax provided for in Item No. 28 of the respective General Table must apply to the same property tax value used for the purposes of assessing real estate tax to be carried out in that year.

3 – The failure to deliver, in whole or in part, within the specified timeframe, the amounts assessed as stamp tax constitutes a tax infraction, punished in accordance with the law."

1. On the interpretation of this legal provision, Decision 53/2013-T has already ruled as follows: "In Item 28.1 and in subparagraphs i) and ii) of subparagraph f) of item 1 of Article 6 of Law 55-A/2012, a concept was used that is not used in any other tax legislation in these precise terms, which is that of 'property with residential designation.' Specifically, in the Real Estate Tax Code, which in several norms of the Stamp Tax Code introduced by that Law is indicated as the diploma of subsidiary application regarding the tax provided for in that Item No. 28 [Articles 2, item 4, 3, item 3, subparagraph u), 5, subparagraph u), 23, item 7, and 46 and 67 of the Stamp Tax Code], a concept defined in those terms is not used."

2. Thus, regarding Item 28, item 1 of the TGIS, introduced by the Framework of Law No. 55-A/2012, of 29 October, for its application to construction land, the verification of three cumulative requirements is necessary, respectively:

i. Ownership, usufruct or right of superficies of urban properties;

ii. The VPT of the urban property is equal to or greater than €1,000,000;

iii. And the construction land whose authorized or planned building is for habitation.

1. From the proven facts, it is beyond doubt that the first two requirements are met.

2. However, regarding the third requirement, and as stipulated in the said legal provision, the construction land must be authorized for construction or building, an authorization that is effected by means of a Subdivision Permit.

3. Item 28.1 requires that this authorization be issued for the building/construction of an urban property for habitation.

4. As such, the authorization by means of a Subdivision Permit is intended for the building/construction of an urban property with a residential purpose or nature.

5. In such terms, it falls to this Tribunal to determine whether the Subdivision Permit which authorized the building/construction of a parking facility encompasses the concept of urban property (construction land) for habitation.

6. Let us see:

7. Regarding the concept of property, it is necessary for this to resort to the concept of property used by the Real Estate Tax Code, in which the species of properties are enumerated as provided in its Articles 2 to 6, which are transcribed below for better understanding:

"Article 2

Concept of Property

1 – For purposes of this Code, property is every fraction of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or resting thereon, with a character of permanence, provided it forms part of the patrimony of an individual or collective person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are located, although situated in a fraction of territory that constitutes an integral part of a different patrimony or does not have a patrimonial nature.

2 – Buildings or constructions, although movable by nature, are deemed to have a character of permanence when assigned to non-transitory purposes.

3 – The character of permanence is presumed when buildings or constructions are resting on the same location for a period exceeding one year.

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

Article 3

Rural Properties

1 – Rural properties are lands situated outside an urban agglomeration that are not to be classified as construction land, in accordance with item 3 of Article 6, provided that:

a) They are assigned or, in the absence of concrete assignment, have as their normal destination a use generating agricultural income, such as are considered for purposes of income tax on individuals;

b) Not having the assignment indicated in the preceding subparagraph, they are not built or have 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 a legally approved provision, they cannot have a use generating any income or can only have a use generating agricultural income and are, in fact, having this assignment.

3 – Rural properties are also:

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

b) Waters and plantations in the situations referred to in item 1 of Article 2.

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

Article 4

Urban Properties

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

Article 5

Mixed Properties

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

2 – If neither of the parts can be classified as principal, the property is deemed mixed.

Article 6

Species of Urban Properties

1 – Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Construction land;

d) Others.

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

3 – Construction land is considered the land situated within or outside an urban agglomeration, for which a license or authorization has been granted, or where prior communication has been submitted or favorable prior information has been issued for a subdivision or construction operation, and also those that have thus been declared in the acquisition title, except for lands where the competent entities prohibit any of those operations, specifically those located in green areas, protected areas or which, in accordance with municipal territorial planning, are assigned to spaces, infrastructure or public facilities. (Wording of Law No. 64-A/08, of 31-12)

4 – Encompassed in the provision of subparagraph d) of item 1 are lands situated within an urban agglomeration that are not construction land nor are covered by the provision of item 2 of Article 3, and also buildings and constructions licensed or, in the absence of a license, that have as their normal destination other purposes than those referred to in item 2, and also those in the exception of item 3."

1. Let us examine, regarding the interpretation of Tax Norms, for the case sub judice, the provisions of Article 11 of the General Tax Law:

"Article 11

Interpretation

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

Whenever, in tax norms, terms peculiar to other branches of law are employed, they should be interpreted in the same sense they have there, unless otherwise directly results from the law.

Persisting doubt about the meaning of the incidence norms to apply, account must be taken of the economic substance of the taxable facts.

Lacunae resulting from tax norms covered by the reserve of law of the Assembly of the Republic are not susceptible to analogical integration."

1. To this provision, it is also necessary to resort to the general principles of interpretation of laws, as provided in Article 9 of the Civil Code by reference from item 1 of Article 11 of the General Tax Law, which establishes the following:

"Article 9

Interpretation of Law

Interpretation should not be confined to the letter of the law, but should reconstitute from the texts the legislative thinking, taking especially into account 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.

However, the interpretation cannot consider legislative thinking that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

In fixing the meaning and scope of the law, the interpreter shall presume that the legislator established the most correct solutions and knew how to express its thinking in adequate terms."

1. In light of the legal foundation already expounded, and given the legal provisions enumerated, the following interpretations of the concept of "property with residential designation" emerge. The concept of "property with residential designation" as referring to residential properties, and the concept of "property with residential designation" as a concept distinct from "residential properties."

2. In the provisions of Articles 2 to 6 of the Real Estate Tax Code above transcribed, the legislator does not use, in the classification of properties, the concept of "property with residential designation." Equally, this concept is not found, with this terminology, in any other legal provision.

3. The lack of exact terminological correspondence of the concept of "property with residential designation" with any other concept used in other provisions can give rise to various interpretative hypotheses.

4. The text of the law is the starting point for the interpretation of the expression "properties with residential designation," as it is on the basis of it that the "legislative thinking" must be reconstituted, as required by item 1 of Article 9 of the Civil Code, applicable by virtue of the provisions of Article 11, item 1 of the General Tax Law, already transcribed.

5. Thus, on the interpretation of the concept of "property with residential designation," it is important to cite Decision 53/2013-T, which has ruled on this matter. And in that Decision, two interpretative hypotheses of the concept of "property with residential designation" are equally sustained, respectively in the same sense as the present decision, as to the concept of "property with residential designation" as referring to residential properties, and as to the concept of "property with residential designation" as a concept distinct from "residential properties."

6. Decision 53/2013-T writes, on the concept of "property with residential designation" as referring to residential properties:

"The concept most closely corresponding to the literal tenor of this expression used is manifestly that of 'residential properties,' defined in item 2 of Article 6 of the Real Estate Tax Code as encompassing '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 designation' coincides with that of 'residential properties,' it is manifest that the assessments will suffer from error regarding the facts and legal prerequisites, as all properties for which Stamp Tax was assessed under the said Item 28.1 are construction land, without any building or construction, required to meet that concept of 'residential properties.'

For this reason, if the interpretation is adopted that 'property with residential designation' means 'residential property,' the assessments whose declaration of illegality is sought will be illegal, as there is no building or construction in any of the lands.

However, the non-coincidence of the terms of the expression used in Item 28.1 of the TGIS with that extracted from item 2 of Article 6 of the Real Estate Tax Code, points in the direction that it was not intended to use the same concept."

1. On the interpretation of the second hypothesis: Concept of "property with residential designation" as a concept distinct from "residential properties," we return to cite Decision 53/2013-T:

"The word 'designation' (afetação), in this context of use of a property, has the meaning of 'the action of destining something to a determined use.'

'When, as is the rule, norms (legislative formulas) behave more than one meaning, then the positive function of the text is translated into giving stronger support to or suggesting more strongly one of the possible meanings. As among the possible meanings, some will correspond to the most natural and direct meaning of the expressions used, while others can only fit within the verbal framework of the norm in a forced, contrived manner. Now, in the absence of other elements that induce the choice of the less immediate meaning of the text, the interpreter should opt in principle for that meaning that better and more immediately corresponds to the natural meaning of the verbal expressions used, and in particular to their technical-legal meaning, in the assumption (not always exact) that the legislator knew how to express their thinking correctly.'

The relevance of the text of the law is especially emphasized in the matter of interpretation of norms of incidence of Stamp Tax, which boil down to a hodgepodge, 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 little appreciable margin for application of the primary 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 28.1, hurriedly included at the margin of the General State Budget, by a fiscal legislator without perceivable overall fiscal orientation, who is successively implementing norms of fiscal burden increase as the vicissitudes of budget execution demand, the impositions of international institutional creditors (represented by the 'troika'), and the scrutiny of the Constitutional Court.

In fact, although in the 'Statement of Reasons' of Proposal for Law No. 96/XII/2nd, on which Law No. 55-A/2012 was based, reference is made to the laudable concern of the Government to 'strengthen the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary for compliance with the adjustment program' and to its commitment 'to ensure that the distribution of these sacrifices is made by all and not just by those who live from the income of their work,' it is manifest, on the one hand, that these reasons for equity, certainly existing, did not start to be worth in mid-2012, already existing at the beginning of the year, when the General State Budget came into effect, and, on the other hand, that the scope of Item 28.1, in taxing additionally properties with residential designation and not also properties that do not have it, leaves to be perceived that the concerns of social equity and the proclaimed intention of distribution of sacrifices by all, affects much more some than properly all.

In this context, not existing sure interpretative elements that allow detecting legislative coherence in the solution adopted in the said Item 28.1 or the correctness or incorrectness of the adopted solution (relevant for interpretative purposes in light of item 3 of Article 9 of the Civil Code), the tenor of the legal text must be the primordial element of interpretation, in compliance with the presumption, imposed by the same item 3 of Article 9, that the legislator knew how to express its thinking in adequate terms.

In light of those meanings of the words 'designation' and 'to designate' (afetar), which are 'to give purpose' or 'to apply,' the formula used in that Item 28.1 of the TGIS, manifestly encompasses properties that are already applied to residential purposes, so it is necessary to inquire whether it also encompasses properties that, although not yet applied to residential purposes, are destined for these and those whose purpose is unknown.

In light of the literal tenor of Item 28.1, it is necessary to exclude from the scope of the Stamp Tax application set forth there properties of some claimants that still have no defined type of use, as they are not yet applied nor destined to residential purposes. That is, construction land that does not have a defined use cannot be considered properties with residential designation, as they do not yet have any designation nor any purpose other than construction of unknown type. An interpretation in the sense that Item 28.1 refers to properties whose designation is unknown does not have the minimum of verbal correspondence in the letter of that norm, so a hypothetical legislative thinking of that type cannot be considered by the law interpreter, in light of the prohibition contained in item 2 of Article 9 of the Civil Code.

But this is not sufficient to clarify the situation of those construction lands that, although not yet applied to residential purposes, already have a determined purpose, specifically in the subdivision license, which is the case of the properties referred to in subparagraphs z) to dd) of the factual matter established.

For this reason, it will be necessary to clarify when it can be understood that a property is designated for a residential purpose, specifically whether it is when this purpose is fixed in a licensing act or similar, or only when the effective assignment of this purpose is concretized.

From the start, the comparison of Item 28.1 of the TGIS with item 2 of Article 6 of the Real Estate Tax Code, which defines the concept of residential properties, manifestly points in the direction that an effective designation is necessary.

In fact, a building or construction licensed for habitation or, even without a license, but that has habitation as its normal purpose, is, in light of item 2 of that Article 6, a residential property.

For this reason, in the assumption that the legislator of Law No. 55-A/2012 knew how to express their thinking in adequate terms (as Article 9, item 3 of the Civil Code requires to be presumed), if they intended to refer to these properties already licensed for habitation or that have habitation as their normal purpose, they would certainly have used the concept of 'residential properties,' which would express perfectly and clearly their thinking, in light of the definition given by that item 2 of Article 6 of the Real Estate Tax Code.

Consequently, it must be presumed that the use of a different expression is aimed at a different reality, so, in good hermeneutics, 'property with residential designation' cannot be a property merely licensed for habitation or destined for that purpose (that is, it will not be sufficient that it be a 'residential property'), having to be a property that already has effective designation for that purpose.

That this is the meaning of the expression 'designation' (afetação), in the same context of property classification made by the Real Estate Tax Code, is confirmed by Article 3, in which, regarding rural properties, reference is made to those 'that are designated or, in the absence of concrete designation, have as their normal purpose a use generating agricultural income,' which shows that designation is concrete, effective. In fact, as is seen from the final part of this text, a property can have as its purpose a determined use and be or not be designated for it, which shows that designation is, at the level of the connection of a property to a determined use, something more intense than mere purpose and which can or cannot occur, downstream of this and not upstream.

For the rest, the text of the law in adopting the formula 'property with residential designation,' instead of 'urban properties of residential designation,' which appears in the said 'Statement of Reasons,' points strongly in the direction that it is required that residential designation already be concretized, as only thus will the property be with that designation.

Regarding Article 45 of the Real Estate Tax Code, it has no relationship with the classification of properties, only indicating the factors to be considered in the assessment of construction land. What is considered there, in making reference to the 'building to be constructed,' is the consideration of the purpose of the land, which, as has been seen, is something that, in the context of the Real Estate Tax Code, does not imply designation and occurs before this.

The correctness of this interpretation in the sense that only properties that are effectively designated for habitation are encompassed in the scope of Item 28.1 of the TGIS is also confirmed by the perceivable ratio legis of the restriction of the field of application of the norm to properties with residential designation, in the context of the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied,' which Article 9, item 1 of the Civil Code also establishes as interpretative elements.

From the start, the limitation of taxation in Stamp Tax to 'properties with residential designation' leaves it to be perceived that it was not intended to encompass in the scope of the tax application properties with designation for services, industry or commerce, that is, properties designated for economic activity, which is understood in a context where, as is notorious, the economy is in a recessionary spiral, publicly proclaimed at the highest level, with unemployment rates reaching maximum historical levels, with an avalanche of business closures derived from economic unsustainability.

Keeping in mind this situation and being known and public that the revitalization of economic activity and the increase in exports are the exits from the crisis, it is understood that legislative measures were not taken that would hinder economic activity, specifically the aggravation of the tax burden that hinders it and affects competitiveness in international terms.

For this reason, it is to be concluded that the available interpretative elements, including the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied,' clearly point in the direction that it was not intended to encompass in the scope of Item 28.1 situations of properties that are not yet designated for habitation, in particular construction lands held by companies."

1. It results from the foregoing that the application of the framework to the situation of the Claimant, regarding the urban property corresponding to construction land, with a subdivision permit that authorizes and entitles the construction of underground parking thereon, is clearly outside the scope of application of Item 28.1 of the TGIS.

2. For which reason, an underground parking facility is neither nor has a residential designation, and as such is not included in Item 28.1, by the subsidiary application of the Real Estate Tax Code and Real Estate Tax Code and in the interpretation set forth above.

3. Before the foregoing, in the present case, the construction land for underground parking is not covered by the Stamp Tax provided for in Item 28.1 of the TGIS.

4. In this manner, the assessment sub judice, whose declaration of illegality is sought, suffers from a defect by violation of that Item 28.1, by error regarding the legal prerequisites.

5. In the terms set forth above, a decision is rendered on the illegality of the assessments.

6. Let us turn next to the alleged invocations that constitute the subject of the foundation of the Claimant, regarding unconstitutionality, by violation of the principles of equality and proportionality.

7. Pursuant to Articles 608, item 2, 663, item 2 and 679 of the Code of Civil Procedure by application of Article 29 of the Legal Framework for Tax Arbitration, this Arbitral Tribunal is not obliged to examine all arguments alleged in the initial petition by the Claimant nor in the response made by the Respondent, when the decision is rendered moot by the solution already given and which translates into the illegality of the assessments.

8. Before the foregoing, having been determined that the assessments in question are illegal, the examination of the alleged unconstitutionality, by violation of the principles of equality and proportionality, is rendered moot.

9. In conclusion, this tribunal decides on the declaration of illegality of the assessments sub judice, as they suffer from a defect by violation of that Item 28.1, by error regarding the legal prerequisites, which justifies the declaration of their illegality and annulment.

I - COMPENSATORY INTEREST

1. The Claimant further petitions for the payment of compensatory interest.

2. Before the foregoing, the Stamp Tax assessment, in the part covered by the annulment, results from errors of fact and law attributable solely to the tax administration, in that the Claimant fulfilled its obligation to declare.

3. In fact, it was demonstrated that the Claimant paid the tax challenged in the part in excess of what is due. In this manner, and by virtue of the provisions of Articles 61 of the Tax Procedural Code and 43 of the General Tax Law, the Claimant has the right to compensatory interest owed, interest that must be accounted for from the date of payment of the undue tax (annulled) until the date of issuance of the respective credit note, whose payment period is counted from the date of the beginning of the period for voluntary compliance with this decision (Article 61, items 2 to 5 of the Tax Procedural Code), all at the rate determined in accordance with the provisions of item 4 of Article 43 of the General Tax Law.

4. Given all the foregoing and the invoked legal norms, a decision is rendered granting the request of the Claimant.

J - DECISION

Given all the foregoing, this Arbitral Tribunal decides:

That it grants the request for declaration of illegality of the tax assessment acts in the matter of Stamp Tax, No. 2013..., No. 2013... and No. 2013..., which established a tax payable of €14,285.40 (fourteen thousand two hundred eighty-five euros and forty cents).

To condemn the Respondent to return to the Claimant this amount improperly assessed and paid, plus the payment of compensatory interest already accrued for the period between the date of payment of the tax and its return, as well as the payment of accruing compensatory interest as from the date of notification of the decision until full and complete payment, all in accordance with items 2 to 5 of Article 61 of the Tax Procedural Code, at the legal rate determined in accordance with the provisions of item 4 of Article 43 of the General Tax Law, until full reimbursement.

The value of the case is fixed at €14,285.40 (fourteen thousand two hundred eighty-five euros and forty cents), corresponding to the value of the assessment given the economic value of the case as assessed by the value of the assessments of tax challenged, and in accordance with this, the costs are fixed at the respective amount of €918.00 (nine hundred eighteen euros), to be borne by the Respondent, in accordance with Article 12, item 2 of the Legal Framework for Tax Arbitration, Article 4 of the Tax Arbitration Procedural Regulations and Table I attached thereto. – item 10 of Article 35, and items 1, 4 and 5 of Article 43 of the General Tax Law, Articles 5, item 1, paragraph a) of the Tax Procedural Code, 97-A, item 1, paragraph a) of the Code of Civil Procedure and 559 of the Code of Civil Procedure).

Let notification be made.

Lisbon, 16 May 2017.

The Arbitrator

Rita Guerra Alves