Stamp Tax on Vertical Property Under Verba 28.1 TGIS – CAAD Arbitration 79/2016-T

ARBITRAL DECISION

Claimant: A…, Lda.

Respondent: Tax and Customs Authority

I. REPORT

1. A…, Lda., legal entity no.…, with registered office at Avenue…, …, …, …-… …, hereinafter referred to as "Claimant" or "A…", hereby, under the provisions of paragraph a) of article 2(1) and article 10, both of Decree-Law no. 10/2011, of January 20 (hereinafter "RJAT"), requests the establishment of an arbitral tribunal and submits the request for arbitral pronouncement following the formation of the presumption of tacit dismissal of the Request for Official Review of the Stamp Tax assessments for 2012 and 2013, issued under item 28.1 of the General Table of Stamp Tax ("GTST"), attached to the Stamp Tax Code ("STC"), relating to an urban property described in the property register under article… of the parish of… and…(former article…, of the parish of…), in which the Tax and Customs Authority is respondent (hereinafter referred to as "Respondent" or "TCA").

2. The request for establishment of an arbitral tribunal, corresponding to registration no.… was validated and accepted by the Honorable President of CAAD and was notified to the Respondent on 26/02/2016.

3. The Claimant chose not to appoint an arbitrator, and, in accordance with paragraph a) of article 6(1) and paragraph b) of article 11(1) of the RJAT, the Deontological Council appointed the undersigned as arbitrator of the singular arbitral tribunal, who accepted the appointment within the legally prescribed period.

4. The parties were duly notified of the appointment on 12/04/2016 and did not manifest any intention to object to it.

5. In accordance with paragraph c) of article 11(1) of the RJAT, the singular arbitral tribunal was constituted on 29/04/2016.

6. The Respondent was notified on 02/05/2016 to submit its reply, in accordance with article 17(1) of the RJAT.

7. The Respondent submitted its reply on 06/06/2016, alleging, by way of exception, the untimeliness of the request for arbitral pronouncement and the consequent dismissal of the case, and, by way of substantive objection, the legality of the tax acts in question, concluding for the complete lack of merit of the request and consequent dismissal thereof.

8. In that same reply, considering the strictly legal nature of the exception of untimeliness of the request for arbitral pronouncement, and the disputed question in the proceedings being exclusively of law, the Respondent, in accordance with the principles of cooperation, procedural good faith and free conduct of the process as set forth, respectively, in paragraph f) of article 16 and article 19 of the RJAT, and also with the principle of avoidance of unnecessary acts of article 130 of the Civil Procedure Code ("CPC"), requested the waiver of the submission of the Administrative File, as well as the waiver of conducting the meeting provided for in article 18 of the RJAT.

9. Considering the autonomy of the arbitral tribunal in the conduct of the process, provided in particular in paragraph c) of article 16 of the RJAT, taking into account the simplicity of the matters at issue and the fact that the process already contained all the evidence necessary for a substantive decision, for reasons of procedural economy, by order of 06/06/2016, the holding of the first meeting referred to in article 18 of the RJAT was waived, and a period of 10 days (successive period) was granted for final written submissions, in accordance with the principle of contradictory procedure.

10. The pronouncement of the arbitral decision was scheduled for September 9, 2016, and the Claimant was advised that it should proceed with payment of the subsequent arbitration fee in accordance with article 4(3) of the Regulation of Costs in Arbitration Proceedings and communicate such payment to CAAD.

11. The Representative of the Claimant submitted an application on 21/06/2016, arguing that the exception of timeliness of the request for arbitral pronouncement could not succeed and, by way of precaution and professional duty, acknowledging that the Request was not adequately formulated, requesting the possibility of rectifying the imprecision of the request, under the principles of good faith of the parties, realization of substantive justice and procedural management, and in accordance with articles 614 of the CPC, applied by analogy, pursuant to paragraph e) of article 29 of the RJAT and article 249 of the Civil Code.

12. In compliance with the principle of contradictory procedure, the undersigned issued an order giving the representative of the Respondent a period of 10 days to comment on the application submitted by the Claimant.

13. The representative of the Respondent did not comment on the application within the prescribed period.

14. Thus, on 04/07/2016, an arbitral order was issued dismissing the application for rectification of the request for arbitral pronouncement submitted by the Representative of the Claimant, considering that this power applies only for correction of mere material errors or typographical errors, or for correction of inaccuracies due to manifest omissions or oversights.

15. The Tribunal further considered that the aforementioned application suspended the period for written submissions, and a new period of 10 days (successive period) was granted for the parties to submit their final written submissions, deferring the pronouncement of the arbitral decision until October 29, 2016.

16. The distinguished Representative of the Claimant submitted written submissions on 22/09/2016, arguing for the annulment of the act of tacit dismissal of the request for official review and consequently the annulment of the Stamp Tax assessment acts for 2012 and 2013.

17. The distinguished representative of the Respondent did not submit written submissions.

II. SUMMARY OF THE CLAIMS OF THE CLAIMANT AND RESPONDENT

A. Claim of the Claimant

1. The Claimant maintains that the present request for arbitral pronouncement should be judged entirely meritorious as proven, on the basis of error in the legal premises, because, in the specific case of properties constituted in "vertical property ownership", and for the purposes of application of item 28.1 of the GTST, the individual and actual taxable patrimonial value ("TPV") of each division/floor should be relevant and not the sum of the TPVs of all divisions/floors of the property, with residential use.

2. The Claimant further supports its request on the principle of equality, arising from the fact that the Claimant obtained a favorable arbitral decision[1] regarding the Stamp Tax assessments for the year 2014, a case with the same factual and legal subject matter.

3. Consequently, the Claimant petitions for the annulment of the tacit dismissal of the Request for Official Review and, consequently, of the Stamp Tax assessments for 2012 and 2013, issued under item 28.1 of the GTST, attached to the STC, with reimbursement of the tax paid, plus compensatory interest at the legal rate, from the date of payment of the tax until its actual reimbursement, for all legal purposes.

4. In response to the exception of untimeliness alleged by the Respondent, the Claimant argued for the lack of merit of the same by considering that the submission of the Request for Arbitral Pronouncement followed the failure of the Tax Authority to respond in a timely/legal manner to the Request for Official Review submitted and the consequent formation of the tacit dismissal of such request.

5. Therefore, according to the Claimant, the present Request for Arbitral Pronouncement should be judged meritorious as proven, annulling, consequently, the Stamp Tax assessments for 2012 and 2013, given that it should be considered, in the case of properties constituted in "vertical property ownership", for the purposes of application of item 28.1 of the GTST, the individual and actual TPV of each division/floor with residential use of the property.

B. Claim of the Respondent

1. The Respondent, in turn, alleges, by way of exception, the untimeliness of the request for arbitral pronouncement, considering that the Claimant's request for arbitral pronouncement concerns the declaration of illegality of the Stamp Tax assessment acts for 2012 and 2013, and that, having been submitted on 11.02.2016, would be untimely, and the Respondent should be dismissed from the case.

2. Without conceding, by way of substantive objection, the Respondent maintains that, for purposes of item 28.1 of the GTST, the patrimonial value relevant for the purposes of the incidence of the tax is the total patrimonial value of the urban property and not the patrimonial value of each of the parts that compose it, even when susceptible of independent use. Concluding thus for the legality of the impugned assessments, the Claimant's claim should be considered as lacking in merit and the Respondent absolved.

3. The Respondent did not submit written submissions.

III. CASE MANAGEMENT

1. The arbitral tribunal is regularly constituted.

2. The Tribunal is materially competent, under paragraph a) of article 2(1) of the RJAT, to judge the request for annulment of the tacit act of dismissal of the request for official review[2] of the Stamp Tax assessment acts under item 28.1 of the GTST attached to the STC and concerning compensatory interest.

3. The Claimant combines requests with regard to the Stamp Tax assessments for 2012 and 2013, which, under article 104 of the Tax Procedure and Process Code and article 3(1) of the RJAT, is admissible given the identity of the factual circumstances and the application of the same legal principles and rules.

4. The parties have legal standing and capacity, are legitimate and are legally represented (articles 3, 6, and 15 of the Tax Procedure and Process Code, pursuant to paragraph a) of article 29(1) of the RJAT).

5. A preliminary issue was alleged by the Respondent – the untimeliness of the request for arbitral pronouncement – which will be analyzed in the decision-making section, after determining the facts given as proven.

6. No nullities are verified, nor were any other exceptions or preliminary issues alleged by the parties that should be analyzed immediately.

IV. FACTUAL MATTERS

A. Facts Given as Proven

1. With relevance to the decision of the case, the following facts are given as proven.

2. The Claimant is the owner of the urban property corresponding to article number…, of the parish of… and…(former article…, of the parish of…).

3. In accordance with the respective property record, the property is constituted in "complete ownership with floors or divisions susceptible of independent use".

4. The property is described in the register as being composed of two individual dwellings, both for residential purposes and of independent use:

a) Dwelling with 3 floors and 12 divisions, also composed of a caretaker's house, two swimming pools, machinery house and kennels;

b) Dwelling composed of 2 floors.

1. At the time of the assessments, the dwellings had the following TPVs:

1. In view of the residential use of the property and the total TPVs in 2012 and 2013, the TCA notified the Claimant of the Stamp Tax assessments by reference to the year 2012 and 2013 in accordance with item 28.1 of the GTST, as described below:

1. However, because it disagreed with the Stamp Tax assessments notified, the Claimant submitted on 23/07/2015 to the Tax Office of…-… a Request for Official Review of the tax acts.

2. On 16/11/2015, the arbitral decision in case no. 463/2015-T[3] was issued, concerning the Stamp Tax assessments for the year 2014.

3. However, the Request for Official Review of the assessments for the years 2012 and 2013 did not receive an express decision until 23/11/2015, nor on any subsequent date.

4. On February 11, 2016, the Claimant submitted the present Request for establishment of arbitral tribunal / Request for Arbitral Pronouncement.

B. Justification of the Factual Matters Proven and Not Proven

1. The determination of the factual matters was made on the basis of the information submitted to the proceedings and which was not contested by the Parties.

2. There are no facts with relevance to the decision that have not been given as proven.

V. QUESTIONS TO BE DECIDED

1. The preliminary issue that must be analyzed is the untimeliness of the Request for Arbitral Pronouncement, alleged by the Respondent, which is a dilatory exception that prevents knowledge of the merits of the case and results in dismissal of the case.

2. Should the exception not succeed, it will be necessary to address the merits of the case, that is, to decide whether, in the case of urban properties in complete ownership, for the purpose of item 28.1 of the GTST, the total taxable patrimonial value of the urban property should be relevant or whether, conversely, the TPV attributed to each floor or division with independent use that comprise it should be relevant.

VI. ON THE LAW

A. Preliminary Issue – Untimeliness of the Request for Arbitral Pronouncement

1. The Respondent alleges the exception of untimeliness of the Request for Arbitral Pronouncement, which would constitute a dilatory exception, under paragraph h) of article 89(1) of the APTA (current paragraph k), as amended by Decree-Law no. 214-G/2015, of October 2), and paragraph e) of article 287(1) of the CPC (current article 278, as amended by Law no. 41/2013, of June 26), applicable pursuant to article 2 of the RJAT, and would prevent knowledge of the merits and result in dismissal of the TCA from the case.

2. According to the Respondent, the object of the present Request for Arbitral Pronouncement is the illegality of the Stamp Tax assessment acts for the years 2012 and 2013, in light of the allegations in the petition and the claims formulated by the Claimant.

3. Therefore, with the period for submission of the request for arbitral pronouncement being 90 days, counted from the end of the period for voluntary payment, which ended on November 30, 2012 and November 30, 2013, respectively, for the 2012 and 2013 assessment acts, by virtue of article 10 of the RJAT and paragraph d) of article 102(1) of the TPPC, and the Request for Arbitral Pronouncement having been submitted on 11/02/2016, the same would be manifestly untimely.

4. In turn, the Claimant maintains that the exception of untimeliness of the Request for Arbitral Pronouncement, alleged by the Respondent, cannot succeed, considering that, as contextualized in articles 1 through 8, the submission of the Request for Arbitral Pronouncement followed the failure of the Tax Authority to respond to the Request for Official Review submitted and the consequent formation of tacit dismissal.

5. Thus, the timeliness of the request for arbitral pronouncement should be assessed against the "tax fact/fiction" of the formation of tacit dismissal of the request for official review, in accordance with the combined provisions of paragraph a) of article 10 of the RJAT and paragraph d) of article 102(1) of the TPPC.

6. It is incumbent upon the arbitral tribunal to decide based on the applicable legal framework.

7. With regard to the period for submission of the Request for Arbitral Pronouncement, the following provisions of the RJAT, TPPC and GTL must be observed:

Article 10 of the RJAT

"1 - The request for establishment of an arbitral tribunal is submitted:

a) Within 90 days, counted from the facts provided for in nos. 1 and 2 of article 102 of the Tax Procedure and Process Code, as to acts susceptible of autonomous challenge and, likewise, from notification of the decision or the end of the legal period for decision of hierarchical appeal;

b) Within 30 days, counted from notification of the acts provided for in paragraphs b) and c) of article 2, in the remaining cases." (emphasis added).

Article 102 of the TPPC

"1 - Challenge shall be submitted within three months counted from the following facts: (As amended by Law no. 66-B/2012, of December 31)

a) End of the period for voluntary payment of tax obligations legally notified to the taxpayer;

b) Notification of the remaining tax acts, even when they do not give rise to any assessment;

c) Summons of subsidiary liable parties in tax enforcement proceedings;

d) Formation of the presumption of tacit dismissal;

e) Notification of the remaining acts that may be subject to autonomous challenge under this Code;

f) Knowledge of acts harmful to legally protected interests not covered in the previous paragraphs. (…)" (emphasis added).

Article 57 of the General Tax Law

"1 - The tax procedure must be concluded within four months, and the tax administration and taxpayers must refrain from performing unnecessary or dilatory acts. (…)

5 - Notwithstanding the principle of dispatch and diligence, non-compliance with the period referred to in no. 1, counted from the entry of the taxpayer's petition into the competent tax administration service, gives rise to the presumption of its dismissal for purposes of hierarchical appeal, contentious appeal or judicial challenge." (emphasis added).

1. Having analyzed the Request for Arbitral Pronouncement, it is quickly concluded what its object is, namely:

2. From the outset, in the preamble it is stated that the Request is submitted "(…) following the formation of the presumption of tacit dismissal of the Request for Official Review of annulment of the referred Stamp Tax assessments (…)"

3. This is followed, in the chapter entitled "Preliminary Issues" by a section entitled "On the Formation of Tacit Dismissal", in articles 1 through 8, in which the succession of acts leading to the formation of the aforementioned tacit act of dismissal is detailed.

4. It is only in the chapter on Law that considerations about the legality of the Stamp Tax assessments in question are addressed.

5. Nor could it be otherwise, since, where the challenge concerns the tacit dismissal of the request for official review of assessment acts, the immediate object of the challenge is the act of tacit dismissal, and mediately the assessment act(s), which would be the only acts susceptible of appraisal of illegality.

6. In this regard, reference is made to the Supreme Administrative Court decision,[4] whose Rapporteur was Councillor Lopes de Sousa: "On the other hand, having that gracious challenge as its object an assessment act, the object of the judicial process for challenging tacit dismissal of gracious challenge, although it is formally the tacit dismissal, is mediately the assessment act that was the object of the challenge, and it is precisely this assessment act, in cases of tacit dismissal, the only one whose legality can be appraised in the judicial challenge process, because the legal fiction that is tacit dismissal cannot contain its own defects and any eventual procedural illegalities of the gracious challenge process, aimed at ensuring the rigor of the decision, will be irrelevant if no express decision comes to be rendered. (…) Besides, there are no reasons of legal certainty and security, which are those underlying the lapse of the right to contentious challenge, that can explain that this right is extinguished before the moment when these reasons matter, which is that of the end of the period for challenge." (emphasis added).

7. In such cases, the request thus directly concerns the illegality of the tacit act of dismissal of the request for official review and mediately concerns the illegality of the referred Stamp Tax assessment acts for 2012 and 2013.

8. Indeed, as referred to in the Supreme Administrative Court decision in case no. 0862/2013, "Tacit dismissal is a legal fiction designed to allow interested parties contentious reaction against non-compliance with legal deadlines for decision by the tax administration (art.57° nos 1 and 5 GTL). The act of tacit dismissal contains, albeit implicitly, an appraisal of the legality of the assessment act, whereby the appropriate procedural means of contentious reaction is judicial challenge, to be lodged within 90 days after the formation of the presumption of tacit dismissal (art. 102° no.1 al. d) TPPC; cf. Supreme Administrative Court decisions SCT 2.02.2005 case no. 1171/04; 4.05.2005 case no. 1276/04; 6.10.2005 case no. 1166/04; 6.10.2005 case no. 653/05). In this context, judicial challenge submitted on May 2, 2011 is timely, following a request for official review formulated on October 14, 2010, concerning an IRC assessment notified on November 23, 2009 (fact affirmed in the judicial decision and not contested by the parties)".[5]"

9. Therefore, since the present Request for Arbitral Pronouncement was submitted following the formation of tacit dismissal of the request for official review, in accordance with the combined provisions of paragraph a) of article 10 of the RJAT and paragraph d) of article 102(1) of the TPPC, it is against this tax fact that the timeliness of the present Request for Arbitral Pronouncement should be assessed.

10. In the same sense, reference is made to the Arbitral Decision in case no. 531/2015-T,[6] cited by the Claimant: "In the view of this tribunal, the Respondent's position is without merit. This is because the Claimant declares initially that it submits "(…) Request for arbitral pronouncement directly concerning the dismissal of the gracious challenge (…) and mediately concerning the legality of the assessment act relating to the IRC for the 2012 tax period", reiterating this request in article 21 of the initial petition. Throughout the initial petition, the Claimant expresses itself on the content of the decision dismissing the gracious challenge (see articles 43 and following of the initial petition). In that measure, there is no doubt about the object of the present request for arbitral pronouncement which covers the order dismissing the gracious challenge as well as the IRC self-assessment for 2012. Having the request for arbitral pronouncement been submitted within 90 days following notification of the decision dismissing the gracious challenge, it is timely in light of paragraph a) of article 10(1) of the RJAT. The exception invoked by the Respondent therefore lacks merit."

11. In conclusion, the Request for Arbitral Pronouncement directly concerns the (tacit) dismissal of the request for official review of the Stamp Tax assessments for the years 2012 and 2013, and, contrary to the allegation by the Respondent, this object is clearly expressed in the Request.

12. The fact that the legality of the Stamp Tax assessments in question is discussed in the Request for Arbitral Pronouncement results from the very nature of the act in dispute, which is a tacit and not express act of dismissal, regarding which nothing more is possible than to verify the passage of time, without any action by the Respondent.

13. Considering the date of submission of the request for official review of the Stamp Tax assessments (23/07/2015) and the lack of an express decision on that request within the legal period of 4 months, a tacit dismissal act was formed on 23/11/2015, and counting from that date the 90-day period for submission of the Request for Establishment of Arbitral Tribunal.

14. Having the Request been submitted on 11/02/2016, the 90-day period referred to above has not been exceeded, so the request is timely in accordance with paragraph a) of article 10(1) of the RJAT.

15. The exception of untimeliness alleged by the Respondent therefore lacks merit.

B. Application of Item 28.1 of the General Table of Stamp Tax to Vertical Properties

1. In the matter of Stamp Tax, article 1 of the Code establishes that "Stamp Tax is levied on all acts, contracts, documents, titles, papers and other facts or legal situations provided for in the General Table, including gratuitous transfers of property". (emphasis added)

2. Thus, for purposes of the rule of incidence, it will be necessary to analyze the set of acts, contracts, documents, etc., enumerated in the GTST, attached to the STC.

3. The said GTST was amended in 2012 by Law no. 55-A/2012, of October 29, which added a new item with the following wording:

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

28.1 – For property with residential use - 1 %" (emphasis added)

1. The aforementioned wording was in force until the end of 2013, having been amended by the State Budget Law for 2014:[7]

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

28.1. For residential property or for land for construction whose authorized or planned construction is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code – 1%." (emphasis added).

1. With regard to item 28, there is a general reference to the CIMI (in article 67(2)) and a specific reference regarding tax assessment (in article 23(7)).

2. There is thus no definition in the STC of "property with residential use", in the wording in force until the end of 2013, or of "residential property", in the wording in force from January 1, 2014.

3. Thus, for purposes of interpretation of item 28.1 of the GTST, recourse must be had to the rules of the CIMI, whose most relevant provisions are enumerated below.

4. Article 2 of the CIMI contains the definition of property as being "1 – (…) any portion of territory, embracing (…) buildings and constructions of any nature incorporated or established therein, with the character of permanence, provided it is part of the assets of an individual or legal entity and, under normal circumstances, has economic value, as well as (…) buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land on which they are located(…) 4 - For purposes of this tax, each autonomous fraction, in the horizontal property regime, is deemed to constitute a property." (emphasis added).

5. The definition of urban properties, in turn, results from article 4, which indicates that they shall be "(…) all those that should not be classified as rural (…)" and from article 6(1) of the CIMI, which establishes that "(…) urban properties are divided into: a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Others.". (emphasis added).

6. Still on this classification, article 6(2) clarifies that "Residential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of license, which have as their normal destination each of these purposes.". (emphasis added).

7. With usefulness for the decision of the dispute, the following provisions relating to property registration and the assessment and collection of Municipal Property Tax are noted.

8. Thus, article 12(3) of the CIMI establishes that "Each floor or part of property susceptible of independent use is considered separately in the property register, which also discriminates the respective taxable patrimonial value" (emphasis added).

9. Article 80(2) of the CIMI stipulates that "(…) to each property corresponds a single article in the register", with the exceptions provided for in articles 84 (mixed properties) and 92 (property in horizontal property regime) of the same code, in which it is provided that the same property may have more than one property register entry (mixed properties) or that a building has only one entry in the register, with each autonomous fraction described and individualized by the corresponding capital letter (property in horizontal property regime).

10. Regarding the assessment document, article 119(1) of the CIMI clarifies that "The services of the Directorate-General of Tax send to each taxpayer, by the end of the month prior to that of payment, the competent assessment document, with discrimination of the properties, their parts susceptible of independent use, respective taxable patrimonial value and of the tax amount assigned to each municipality of the location of the properties." (emphasis added)

11. In view of the foregoing, it is necessary to decide on what interpretation should be given to item 28.1 of the GTST, whether that of the Claimant, which defends that it does not apply to the property in question, given that it, although constituted in complete ownership, is composed of autonomous apartments, intended for residential purposes, or whether, conversely, the interpretation followed by the Respondent should be followed, which maintains that, in the case of properties in complete ownership, for purposes of Stamp Tax the property as a whole is relevant, given that the said divisions susceptible of independent use are not deemed to be properties under the CIMI, a fact that is only relevant for properties in horizontal property regime.

12. For this purpose, it is recalled that item 28.1 of the GTST provides that Stamp Tax will be levied on:

• Ownership, usufruct or right of superficies;
• Of (residential use) property;
• With taxable patrimonial value equal to or greater than €1,000,000.00.

1. On the concept of residential property relevant for purposes of item 28.1 of the GTST, Supreme Administrative Court Decision no. 01870/13[8] synthesizes in this way the doubts resulting from the initial wording of item 28.1 in question and the subsequent clarification given by the State Budget Law for 2014:[9] "The concept of 'urban property with residential use' was not defined by the legislator. (…). And it is a concept that, probably due to its imprecision – a fact all the more serious in that it is in light of it that the scope of objective incidence of the new taxation is determined – had a short life, in that it was abandoned upon the entry into force of the State Budget Law for 2014 (Law no. 83-C/2013, of December 31), which gave new wording to item no. 28 of the General Table, and which now determines its scope of objective incidence through the use of concepts that are legally defined in article 6 of the Municipal Property Tax Code.".

2. Thus, for purposes of incidence of item 28.1 of the GTST, there must exist a residential property, that is, a property licensed for residential purposes or, in the absence of license, a property whose normal purpose is residential use.

3. In the case at hand, we are dealing with a property in complete ownership regime, although with divisions or floors susceptible of independent use, intended for residential purposes, as results from the respective property certificate.

4. It remains to be determined what TPV will be relevant for purposes of the rule of incidence, if the total patrimonial value of the property, which is greater than €1,000,000, or the patrimonial value of each floor susceptible of independent use.

5. In this regard, see, among others, the arbitral decision rendered in case no. 724/2014-T, cited by Supreme Administrative Court Decision 047/2015 of September 9, 2015, which we endorse: "Having consulted the CIMI, it is verified that its article 6 merely indicates the different types of urban properties, among which it mentions residential ones (…) From this we can conclude that, in the legislator's view, what matters is not the legal-formal precision of the concrete situation of the property but rather its normal use, the purpose for which the property is intended. We further conclude that for the legislator the situation of the property in vertical or horizontal property was not relevant, since no reference or distinction is made between them. What is relevant is the material truth underlying its existence as an urban property and its use."[10][11]

6. The argument of the Respondent therefore does not hold that, for purposes of item 28.1 of the GTST, contrary to the rules of the CIMI, applicable to Stamp Tax and more specifically to this item by reference in article 67 of the CIMI, the property as a whole would be relevant, regardless of the existence of divisions or parts susceptible of independent use, given the existence of a property in complete ownership and not a property in horizontal property regime.

7. As mentioned above, this distinction is not relevant for purposes of Municipal Property Tax and should not be relevant for purposes of Stamp Tax, under pain of violation of the principle of tax legality established constitutionally.

8. Indeed, pursuant to article 12(3) of the CIMI, each floor or part susceptible of independent use is considered separately in the property register, which discriminates the respective taxable patrimonial value, and pursuant to article 119(1) of the CIMI, the assessment document is sent with discrimination of the properties, their parts susceptible of independent use and respective taxable patrimonial value.

9. Thus, the Respondent cannot give relevance to divisions or parts susceptible of independent use in the case of a property in complete ownership for purposes of issuing the Stamp Tax assessment notice, but consider that it is a single property for verification of the remaining requirements of the rule of incidence, namely the relevant TPV.

10. Returning to the aforementioned decision to conclude: "(…)Now, article 12, no. 3 of the Municipal Property Tax Code establishes that 'each floor or part of property susceptible of independent use is considered separately in the property register, which also discriminates the respective taxable patrimonial value'. (…) It should be noted that the TCA itself seems to agree with the criterion set forth, which is why the assessments that it itself issues are very clear in their essential elements, from which results that the value of incidence is the one corresponding to the TPV of each of the floors and the individualized assessments. Therefore, if the legal criterion requires the issuance of individualized assessments for the autonomous parts of properties in vertical property, in the same manner as it establishes for properties in horizontal property, it clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of the new tax. Thus, Stamp Tax (within the scope of Item no. 28 of the GTST) would only be incurrent if any of the parts, floors or divisions with independent use presented a TPV exceeding €1,000,000.00. The TCA cannot consider as the reference value for the incidence of the new tax the total value of the property, when the legislator itself established a different rule for purposes of Municipal Property Tax (and, as previously mentioned, this is the code applicable to matters not regulated with respect to Item no. 28 of the GTST). In conclusion, the current legal regime does not impose the obligation to constitute horizontal property, so the TCA's action translates into arbitrary and illegal discrimination. Indeed, the TCA cannot distinguish where the legislator itself chose not to do so, under pain of violating the coherence of the tax system, as well as the principle of tax legality provided for in article 103 of the Constitution of the Portuguese Republic, and also the principles of tax justice, equality and proportionality." (emphasis added)..

11. Thus, in the case at hand, the property in question was, at the relevant date of the facts, constituted in complete ownership, but had parts, floors or divisions with independent use intended for residential purposes.

12. None of those parts, floor or division with independent use and dedicated to residential purposes possessed a taxable patrimonial value equal to or greater than €1,000,000.00, in the years 2012 or 2013, as verified above.

13. Indeed, Dwelling A had a TPV of €894,054.42 (in 2012) and €967,940.00 (in 2013), while Dwelling B had a TPV of €159,652.58 (in 2012) and €206,290.00 (in 2013).

14. One of the prerequisites of the rule of incidence provided for in item 28.1 of the GTST is thus not met, whereby the Stamp Tax assessments for 2012 and 2013 should be declared illegal.

15. We thus endorse the arbitral decision rendered in case no. 463/2015–T regarding the Stamp Tax assessments for 2014 relating to the property sub judice:

"6.33. As a consequence, the discrimination operated by the Respondent translates into arbitrary and illegal discrimination, in that the law does not impose the obligation to constitute horizontal property.

6.34. And, taking into account all the social and economic reality (sometimes present in many of the properties existing in vertical property ownership), the legislator itself in the Municipal Property Tax Code dealt with both situations (horizontal and vertical property) in an equitable manner, applying the same criteria.

6.35. Indeed, it should be reiterated that the Respondent cannot distinguish where the legislator itself chose not to do so, under pain of violating the coherence of the tax system and the principles of tax legality (article 103, no. 2 of the CRP), of justice, equality and proportionality in tax matters, included therein.

6.36. Analyzing the situation sub judice, it is found that the TPV of the two autonomous units with residential use ranges between EUR 208,290.00 and EUR 987,940.00, so that in any of them, individually considered, the said TPV is less than EUR 1,000,000.00 (as already referred to in point 6.30., above).

6.37. Thus, in light of the foregoing, and in response to the question raised in point 6.1.1., above, it is concluded that on the two autonomous units with residential use (of the urban property identified in the proceedings) Stamp Tax as referred to in item no. 28 of the GTST cannot be levied, being therefore illegal the assessment acts that are the object of the Request for Arbitral Pronouncement submitted by the Claimant.

6.38. Additionally, having also taken into consideration everything that was previously stated, we can conclude that the interpretation made by the Respondent is not in accordance with the Law and the Constitution, in that it violates the principle of equality (article 13 of the CRP) and does not contribute to equality among citizens (article 104, no. 3, of the CRP)."

1. In that measure, the requirements of the rule of incidence contained in item 28.1 of the GTST not being met, the disputed assessments suffer from the defect of violation of law, by error in the legal premises as to the provisions of item 28.1 of the GTST, which implies the declaration of their illegality and consequent annulment.

C. On the Right to Compensatory Interest

1. With regard to the claim formulated by the Claimant for compensatory interest, attention should be paid to the provisions of article 43 of the General Tax Law ("GTL"):

"1 – Compensatory interest is due when it is determined, in gracious challenge or judicial impugnation, that there was error attributable to the services resulting in payment of the tax debt in an amount exceeding that legally due.

2 – It is also considered that there is error attributable to the services in cases in which, although the assessment is made on the basis of the taxpayer's declaration, the latter followed, in its completion, the general guidance of the tax administration, duly published.

3 - Compensatory interest is also due in the following circumstances:

a) When the legal period for official reimbursement of taxes is not complied with;

b) In case of annulment of the tax act by initiative of the tax administration, as from the 30th day following the decision, without processing of the credit note;

c) When the review of the tax act by initiative of the taxpayer is carried out more than one year after the taxpayer's request, unless the delay is not attributable to the tax administration."

1. Indeed, pursuant to article 100 of the GTL: "The tax administration is obliged, in case of total or partial success of challenges or administrative appeals, or of judicial proceeding in favor of the taxpayer, to the immediate and full restoration of the situation that would have existed if the illegality had not been committed, including the payment of compensatory interest, in the terms and conditions provided for in the law".

2. Article 61 of the TPPC adds:

"(…) 1 - The right to compensatory interest is recognized by the following entities:

a) By the entity competent to decide the gracious challenge, when the reason is error attributable to the services resulting in payment of the tax debt in an amount exceeding that legally due; (…)

d) By the entity competent to decide on the request for review of the tax act by initiative of the taxpayer, when the legal period for review of the tax act is not complied with.

2 - In case of judicial annulment of the tax act, it is the responsibility of the entity executing the judicial decision from which this right results to determine the payment of compensatory interest to which there may be ground.

3 - Compensatory interest shall be assessed and paid within 90 days counted from the decision recognizing such right or from the day following the end of the legal period for official reimbursement of the tax.

4 - If the decision recognizing the right to compensatory interest is judicial, the payment period is counted from the beginning of its spontaneous execution period.

5 - Interest is counted from the date of improper payment of the tax until the date of processing of the respective credit note, in which they are included (…)".

1. The question thus arises as to whether in the case at hand, before the success of the request for arbitral pronouncement, compensatory interest will be due, and what its start and end date will be.

2. With regard to the issue of compensatory interest in the case of a request for official review of tax acts, see among others the Supreme Administrative Court decision in case 0722/2014,[12] whose reasoning we endorse: "The situation of the proceedings is classifiable under no. 3, paragraph c) of article 43 of the General Tax Law because the taxpayer, being able to have previously obtained the annulment of the assessment act made on 27/08/2004, did nothing, temporarily losing interest in the recovery of its money, until on 23/11/2007, it submitted a request for official review of the tax act. Between 2004 and 2007 an extensive period elapses in which the restoration of legality could have been provoked by the taxpayer's initiative which it did not develop, which justifies that the right to compensatory interest must have a more reduced extent as opposed to the situation in which the taxpayer raises the question of the illegality of the assessment act immediately after the disbursement of the amount in question. The legislator considers that the period of one year is the reasonable period for the Administration to decide the request for review and execute its respective decision, when favorable to the taxpayer, deviating from full indemnification of damages from the moment they arose in the taxpayer's patrimony. (…) The appealed decision attributed the indemnification from the occurrence of the harmful event, whereas in light of the current tax law provisions such indemnification has no legal basis, at least under the process of challenging the decision dismissing the request for official review of the assessment act. This has consistently been the position affirmed by the Supreme Administrative Court jurisprudence, in similar situations, of which by way of merely exemplary enumeration the Decision 01041/06 of 15-02-2007 is mentioned, available at www.dgsi.pt, here reiterated. Therefore, it is declared that the compensatory interest to which the challengers are entitled in this proceeding are only due from one year after the request for review formulated by them, namely from 24/11/2008." (emphasis added).

3. In the case at hand, with the request for official review dated July 23, 2015, compensatory interest will only be due as from one year following the submission of the said request for official review.

4. Thus, in addition to the reimbursement of the total amount of the Stamp Tax assessments, the TCA is condemned to assess compensatory interest, counted from one year following the submission of the request for official review until the date of issue of the respective credit note.

VII. DECISION

1. For these reasons, this singular Arbitral Tribunal decides:

a. To judge the exception of untimeliness of the request for arbitral pronouncement lacks merit;

b. To judge the request for arbitral pronouncement meritorious, declaring illegal the tacit dismissal of the request for official review submitted with reference to the Stamp Tax assessments for 2012 and 2013;

c. To annul the Stamp Tax assessments for 2012 and 2013, for defect of violation of law as to the rule contained in item 28.1 of the GTST, by error in the legal premises, and consequent reimbursement by the Respondent to the Claimant of the stamp tax paid concerning the tax acts that are the object of these proceedings;

d. To judge meritorious, as proven, the claim for payment of compensatory interest by the Respondent to the Claimant, in accordance with what is provided in paragraph c) of article 43(1) of the GTL and in article 61 of the TPPC.

VIII. VALUE OF THE PROCEEDINGS

1. The value of the proceedings is fixed at €22,279.37 (twenty-two thousand, two hundred and seventy-nine euros and thirty-seven cents), in accordance with paragraph a) of article 97-A(1) of the TPPC, applicable by virtue of paragraphs a) and b) of article 29(1) of the RJAT and article 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPTA).

IX. COSTS

1. Costs in accordance with Table I of the RCPTA, calculated based on the value of the claim, to be borne by the Respondent, in accordance with article 12(2) and article 22(4), both of the RJAT, and article 4(4) of the cited Regulation.

Let it be notified.

Lisbon, CAAD, October 25, 2016

The Singular Arbitrator,

(Vera Figueiredo)

Text prepared by computer, in accordance with article 131(5) of the Civil Procedure Code, applicable pursuant to paragraph e) of article 29(1) of the RJAT, drafted according to the orthography of the Agreement on the Portuguese Language, approved by Resolution of the Assembly of the Republic no. 26/91 and ratified by Decree of the President of the Republic no. 43/91, both of August 23.

[1] Arbitral Decision in case no. 463/2015-T, of November 16, 2015, published at https://caad.org.pt/tributario/decisoes/

[2] Cf. Arbitral Decision in case no. 531/2015-T, of April 4, 2016, and Arbitral Decision in case no. 617/2015-T, of February 22, 2016, published at https://caad.org.pt/tributario/decisoes

[3] See note 1 above.

[4] Supreme Administrative Court Decision in case no. 0734/08 of December 17, 2008, published at www.dgsi.pt.

[5] Supreme Administrative Court Decision in case no. 0862/2013, of June 18, 2014, published at www.dgsi.pt.

[6] Arbitral Decision in case no. 531/2015-T of April 4, 2016 published at https://caad.org.pt/tributario/decisoes/

[7] Law no. 83-C/2013, of December 31, which came into force on January 1, 2014.

[8] Supreme Administrative Court Decision no. 01870/13, April 9, 2014

[9] See note 7 above.

[10] Supreme Administrative Court Decision in case no. 047/2015, of September 9, 2015, published at www.dgsi.pt.

[11] Decision of CAAD in case no. 724/2014, of April 29, 2015, published at https://caad.org.pt/tributario/decisoes/

[12] Supreme Administrative Court Decision 0722/2014 of January 28, 2015, published at www.dgsi.pt.