Stamp Tax on Building Land (Verba 28.1 TGIS) – CAAD Arbitral Decision 8/2016-T

Arbitral Decision [1]

The Arbitrator, Dr. Sílvia Oliveira, appointed by the Deontological Council of the Administrative Arbitration Center (CAAD) to form the Arbitral Tribunal, constituted on 29 March 2016, with respect to the process identified above, decided as follows:

1. REPORT

1.1. A..., holder of tax identification number nº..., resident at Rua..., nº..., r/c..., in Cascais, (hereinafter referred to as the "Claimant"), filed a request for arbitral pronouncement and constitution of a singular Arbitral Tribunal on 11 January 2016, pursuant to the provisions of article 4 and article 10, nº 2 of Decree-Law nº 10/2011, of 20 January [Legal Framework for Arbitration in Tax Matters (RJAT)], in which the Tax and Customs Authority is the Respondent (hereinafter referred to as the "Respondent").

1.2. The Claimant "(…) requests that the illegality of the (…) assessment acts" identified be declared and that the "(…) illegality of the rejection of the hierarchical appeals" filed against the said Stamp Tax assessments be declared.

1.3. The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of the CAAD on 12 January 2016 and notified to the Respondent on the same date.

1.4. The Claimant did not proceed with the appointment of an arbitrator, wherefore, pursuant to article 6, nº 2, paragraph a) of the RJAT, the undersigned was appointed as arbitrator by the President of the Deontological Council of the CAAD on 11 March 2016, the appointment having been accepted within the legally foreseen time frame and terms.

1.5. On the same date the parties were duly notified of that appointment and did not express a desire to refuse the arbitrator's appointment, in accordance with the provisions of article 11, nº 1, paragraphs a) and b) of the RJAT, combined with articles 6 and 7 of the Deontological Code.

1.6. Thus, in conformity with the provisions of paragraph c), nº 1, of article 11 of the RJAT, the Arbitral Tribunal was constituted on 29 March 2016, and an arbitral decision was issued on 30 March 2016, to the effect of notifying the Respondent to, in accordance with the provisions of article 17, nº 1 of the RJAT, file a reply within a maximum period of 30 days and, if so wished, request the production of additional evidence.

1.7. On 28 April 2016, the Respondent filed its Reply, having defended itself by objection and concluded that "the request for declaration of illegality and consequent annulment of the disputed assessment should be judged inadmissible, absolving the AT of the claim".

1.8. On the same date, the Respondent also filed a motion to "(…) propose that the holding of the meeting referred to in article 18 of the RJAT be dispensed with, thus allowing the Arbitral Tribunal to now know of the claim", being implicitly contained therein a request for dispensation of oral arguments.

1.9. In these terms, by decision of this Arbitral Tribunal dated 2 May 2016, taking into consideration the request for dispensation of the holding of the arbitral meeting referred to in article 18 of the RJAT, filed by the Respondent (see preceding item), and with the aim of guaranteeing the principle of contradiction and equality of the parties (in accordance with the provisions of article 16, paragraphs a) and b) of the RJAT), the Claimant was notified to comment, within a period of 5 days, on the possibility of dispensing with the holding of said meeting, as well as to comment on the possibility of dispensing with the presentation of oral arguments.

1.10. The Claimant filed a motion on 3 May 2016, agreeing with the dispensation of the holding of the meeting provided for in article 18 of the RJAT, as well as with the dispensation of the presentation of oral arguments (oral or written).

1.11. Thus, by arbitral decision dated 9 May 2016, in consonance with the procedural principles set forth in article 16 RJAT, of contradiction [paragraph a)] of equality of the parties [paragraph b)], of autonomy of the Arbitral Tribunal in conducting the process and in determining the rules to be observed [paragraph c)], of cooperation and good faith in proceedings [paragraph f)] and of free conduct of the process set forth in articles 19 and 29, nº 2 of the RJAT, as well as taking into account the principle of limitation of unnecessary acts provided for in article 130 of the Code of Civil Procedure (CPC), applicable by virtue of the provisions of article 29, nº 1, paragraph e) of the RJAT, this Arbitral Tribunal decided as follows:

1.11.1. To dispense with the holding of the meeting referred to in article 18 of the RJAT;

1.11.2. To dispense with the presentation of oral arguments;

1.11.3. To designate 31 May 2016 for the purposes of delivering the arbitral decision.

1.12. The Claimant was further warned that "until the date of delivery of the arbitral decision, it should proceed with the payment of the subsequent arbitration fee, in accordance with the provisions of nº 3 of article 4 of the Regulation of Costs in Tax Arbitration Processes and communicate such payment to the CAAD".

2. GROUNDS OF CLAIM

The Claimant supports its claim, in summary, as follows:

On the subject matter of the request for arbitral pronouncement

2.1. It begins by clarifying that "(…) it requests the constitution of an Arbitral Tribunal (…) for the assessment of the legality of the Stamp Tax assessments nºs 2012..., 2012..., 2012..., 2012..., 2012..., 2012... and 2012..., relating to the year 2012 (…)"

2.2. On the other hand, it clarifies that having the Claimant filed "(…) against said Stamp Tax assessments complaints (…) and having those complaints been rejected, it filed hierarchical appeals (…), these having also been rejected by the Tax and Customs Authority (…)".

2.3. Thus, according to the Claimant, "(…) the immediate subject matter of the present claim is the declaration of illegality of said assessments and the mediate subject matter of such claim is the declaration of illegality of the rejection of hierarchical appeals".

On the legitimacy and timeliness of the claim

2.4. In this context, the Claimant notes that having regard to the "(…) period of 90 days from the rejection of hierarchical appeals to request the constitution of an Arbitral Tribunal (…), the claim is timely" and "(…) the Arbitral Tribunal is competent".

Facts

2.5. "The Claimant is owner of land for construction, located in the Municipality of Sintra, Parish of ..." to which "(…) a Tax Property Value (VPT) exceeding €1,000,000.00 (…), in effect in the year 2012" was assigned.

2.6. It continues by noting that, having Law nº 55-A/2012 of 29/10 added "(…) item 28 to the General Table of Stamp Tax (TGIS), to now tax ownership, usufruct or surface right of urban real property (…)" whose VPT "(…) is equal to or greater than €1,000,000.00" and "(…) item 28.1, determining the taxation of the situations provided for (…) at the rate of 1%, in relation to property with residential use", "(…) the Tax and Customs Authority issued the (…)" disputed assessments.

2.7. Because it disagrees with the Respondent's position, the Claimant formulates two questions that it wishes to have answered:

2.7.1. "Should a plot of land for construction be considered a property with residential use for purposes of applying item 28.1 of the General Table of Stamp Tax?" and,

2.7.2. "If the answer to the first question is contrary to the Claimant's claim: is the norm on the tax base contained in item 28.1 of the General Table of Stamp Tax unconstitutional?"

2.8. The Claimant supports its position on the fact that "(…) the real property in question does not have residential use", whereby, in its view "(…) land for construction (…) is a species of urban real property distinct from residential properties", it concludes that "(…) land is not confused with residential properties".

2.9. Indeed, for the Claimant, "there is no use in land for construction, whether for housing, whether for commerce, whether for services", for "there is not, from the outset, for a naturalistic reason: if they are land ... for construction, land is not devoted to housing, nor to commerce" (Claimant's emphasis).

2.10. In fact, for the Claimant "the effective use of a real property depends on a requirement of a formal nature consisting of licensing or, in the absence of formal licensing, of presumed use, through its formal destination", whereby it holds that "urban properties with residential use are thus those which, in terms of the respective construction process to which articles 62 et seq. of the Legal Framework for Urban Buildings (…) refer, have been licensed as such or, in the absence of licensing, have had housing as their normal destination based on their physical characteristics".

2.11. The Claimant thus understands that "the legislator designed (…) the concept of land for construction based on its use, effective or presumed, for construction", and "the authorization or provision for building, even if intended for housing, in the area of implementation of land for construction, does not make them (…) into properties with residential use".

2.12. In these terms, for the Claimant, "even if the land is intended for the construction of properties devoted to housing, that use only occurs with the actual construction of the property, with the consequent removal of the land-for-construction property registration and its replacement by a new property registration of the constructed urban property or autonomous unit", whereby "the authorization or provision for any building does not thus alter the classification of land for construction, but only requires its evaluation in accordance with the new property value resulting from the authorization or provision for the building".

2.13. The Claimant continues, noting that "the legislator's intent was that taxation should apply only to constructed properties", an intention that is inferred, in the Claimant's view, "from the words spoken in the National Assembly by the Secretary of State for Tax Affairs".[2]

2.14. Thus, for the Claimant it is clear that "urban residential properties and houses (…) do not include land for construction", whereby it holds that "the land for construction, over which ownership the Stamp Tax assessment (…) was imposed, does not fall within the provision of item 28.1 of the TGIS".[3]

On unconstitutionality

2.15. In this matter, the Claimant argues that "the new taxation in Stamp Tax has the (…) objective" of "taxing the wealth embodied in ownership of real property", whereby "being land for construction that forms part of the Respondent's assets as merchandise or as raw material, this constitutes a direct violation of the principle of taxation on wealth and, therefore, a violation of the principle of (…) taxpaying capacity" (Claimant's emphasis).

2.16. Now, for the Claimant, "(…) such real properties are not demonstrative of wealth, insofar as they are merely and solely productive instruments".

2.17. Additionally, the Claimant further understands that with the Stamp Tax assessments made there is "(…) a violation (…) of the constitutional principle of equality".

2.18. In this manner, the Claimant understands that "the assessment now contested is illegal, whether by violation of nº 28 of the TGIS, whether by unconstitutionality (…)", and the assessments should "(…) be declared illegal".

3. RESPONDENT'S REPLY

3.1. The Respondent replied, sustaining the inadmissibility of the request for arbitral pronouncement, having invoked the following arguments:

3.2. "It is the understanding of the AT that the property on which each of the disputed assessments rests has the legal nature of property with residential use, whereby the assessment acts subject of the present request for arbitral pronouncement should be maintained, as they embody correct interpretation of Item 28 of the General Table, added by Law 55-A/2012, of 29/12".

3.3. "With this legislative change, the ST would now apply also to ownership, usufruct or surface right of urban properties whose VPT contained in the tax register, in accordance with the IMI Code, is equal to or greater than EUR 1,000,000.00".

3.4. "In the absence of any definition of the concepts of urban property, land for construction and residential use, under Stamp Tax law, recourse must be made to the IMI Code, in search of a definition that permits assessment of possible subjection to ST, in accordance with the provision of art. 67, nº 2 of the ST Code in the wording given by Law nº 55-A/2012, of 29/10".

3.5. Thus, the Respondent continues, "in accordance with the said legal provision, to matters not regulated in the Code, concerning item nº 28 of the TGIS, the provision of the IMI Code is applied subsidiarily", which:

3.5.1. "Provides in nº 1 of art. 2 that property is every portion of territory, encompassing waters, plantations, buildings and structures of any nature incorporated or situated therein, with a character of permanence, provided it forms part of the assets of a natural or legal person and, under normal circumstances, has economic value (…)" and,

3.5.2. "Provides in art. 6, nº 1 (…) integrating into this concept" (of urban property) "land for construction, that is, land situated within or outside an urban area, for which a license or authorization has been granted, prior notification admitted or favorable prior information issued for a subdivision or construction operation (…)".

3.6. On the other hand, according to the Respondent, "the notion of the use of urban property is found in the part relating to the evaluation of real properties, which is well understood because the evaluation of the real property (purpose) incorporates value to the real property, constituting a determining fact of distinction (coefficient) for evaluation purposes".[4]

3.7. "Contrary to what the Claimant advocates, the AT understands that the concept of properties with residential use, for purposes of the provision in item 28 of the TGIS, comprises both constructed properties and land for construction, starting from the literal element of the norm".

3.8. And, according to the Respondent, "note that the legislator does not refer to properties intended for housing, having opted for the notion of residential use - a different and broader expression, whose meaning must be found in the need to integrate other realities beyond those identified in art. 6, nº 1 paragraph a) of the CIMI".

3.9. On the other hand, although "with regard to the legal framework for urbanization and building, (…) the same has as its basis constructed buildings", "one cannot ignore that the building license permit for urbanization operations must contain, among other elements, the number of plots, (…), the purpose (…)", the Respondent understanding that "also Municipal Master Plans establish the strategy for municipal development, municipal policy for land use planning and urbanism and other urban policies (…)" whereby "much before the actual construction of the property, it is possible to determine and establish the use of the land for construction".

3.10. Regarding the "alleged violation of constitutional principles, the AT cannot but point out that the CRP requires that what is necessarily equal be treated equally and what is essentially different be treated differently, not preventing differentiated treatment (…)", whereby "the AT understands that the provision of item 28 of the TGIS does not constitute a violation of any constitutional mandate" given that "it applies to ownership, usufruct or surface right of urban properties with residential use whose VPT contained in the tax register, in accordance with the IMI Code, is equal to or greater than EUR 1,000,000.00, that is, it applies to the value of the real property", being "a general and abstract norm, applicable indiscriminately to all cases in which the factual and legal requirements are met".

3.11. Indeed, "the different aptitude of real properties (housing/services/commerce) supports different treatment, having been the legislator's option, for political and economic reasons, to exclude from the application of Stamp Tax real properties intended for purposes other than housing".

3.12. In fact, "(…) taxation under Stamp Tax obeys criteria of suitability, applying indiscriminately to all holders of properties with residential use of value exceeding EUR 1,000,000.00, applying to the wealth embodied and manifested in the value of real properties".

3.13. Thus, according to the Respondent, "the option for this revenue-obtaining mechanism is justified, which would only be subject to censure, in the face of the principle of proportionality, if it resulted manifestly indefensible", "which is not the case since such measure will be applied indiscriminately to all holders of properties with residential use of value exceeding EUR 1,000,000.00".

3.14. In these terms, "(…) the disputed assessments embody a correct interpretation and application of law to facts, suffering from no defect of violation of law (…) and should therefore be judged inadmissible and the (…) Respondent absolved of the claim".

4. PROCEDURAL DECISION

4.1. The request for arbitral pronouncement is timely since it was filed within the period provided in paragraph a) of nº 1 of article 10 of the RJAT.[5]

4.2. The parties have standing and capacity, are legitimate as to the request for arbitral pronouncement and are duly represented, in accordance with the provisions of articles 4 and 10 of the RJAT and article 1 of Regulation nº 112-A/2011, of 22 March.

4.3. The joinder of claims made here by the Claimant is legal and valid, in accordance with the provisions of article 3, nº 1 of the RJAT, given that the success of the claims depends essentially on the assessment of the same circumstances of fact and on the interpretation and application of the same principles or rules of law.

4.4. The Tribunal is competent as to the assessment of the request for arbitral pronouncement filed by the Claimant.

4.5. As regards the value of the Request for Arbitral Pronouncement, as indicated by the Claimant, the same amounted to EUR 50,503.15, which corresponded, according to the Claimant, to the value of the economic utility of the claim, that is, to the "(…) value corresponding to the improperly assessed tax here in dispute (…)".

4.6. However, having regard to the content of the claim filed by the Claimant, to the effect that "(…) the illegality of the (…) assessment acts" be declared and that the "(…) illegality of the rejection of hierarchical appeals" filed against said Stamp Tax assessments be declared, as well as to the provisions of articles 306 and 297, both of the CPC, "when several claims are joined in the same action, the value is the sum of the values of all of them".

4.7. Thus, in the case under analysis, having regard to the content of the decisions rendered on said hierarchical appeals, the legality of which it is also sought to review, namely, with respect to appeals nº ...2013... and nº ...2013..., as detailed in items 5.2.7 to 5.2.8 (and to which reference is made herein), the total value of the assessments whose legality is also sought to be reviewed amounts to EUR 48,275.79 and not EUR 50,503.15.

4.8. Consequently, the value of the case is fixed at EUR 48,275.79, with implications for the amount of final costs of the case, which in accordance with the provisions of article 4, nº 4 of the Regulation of Costs in Tax Arbitration Processes, will be fixed by the Arbitral Tribunal in the Decision chapter.

4.9. No exceptions were raised that warrant consideration.

4.10. There are no nullities, therefore it is now necessary to consider the merits of the claim.

5. MATTERS OF FACT

5.1 Proven Facts

5.2. The following facts are considered proven:

5.2.1. The Claimant is owner of the following land for construction:

5.2.2. The Claimant was notified of the following collection documents, dated 7 November 2012, relating to Stamp Tax assessments for the year 2012[6], with payment deadline of 20 December 2012 ("Single Payment"):

5.2.3. The Claimant filed, on 13 December 2012, the following gracious complaints relating to the Stamp Tax assessments identified above:

5.2.4. The Claimant was notified on 15 March 2013, by means of the following letters dated 5 March 2013, of the rejection decisions of the following gracious complaints:

5.2.5. The Claimant filed, on 10 April 2013, the following hierarchical appeals against the rejection decisions of the gracious complaints (identified in the preceding item):

5.2.6. The Claimant was notified on 15 October 2015 of the decisions rendered on the hierarchical appeals identified in the preceding item, by means of the following letters:

5.2.7. As a result of the partial granting of hierarchical appeals nº ...2013... and nº ...2013..., the following corrections were made:

5.2.8. As a result of the corrections referred to in the preceding item, the total value of assessments became as follows:

5.3. No other facts capable of affecting the decision on the merits of the claim were proven.

5.4 Unproven Facts

5.5. No evidence was obtained that the Stamp Tax amounts assessed by the Respondent were paid by the Claimant.

5.6. No facts were found to be unproven with relevance to the arbitral decision.

6. LEGAL GROUNDS

6.1. In the case at hand, the essential question to be decided is whether the scope of item 28.1 of the TGIS (in the wording given to it by Law nº 55-A/2012 of 29 October) is, namely, whether:

6.1.1. Land for construction should be included in that norm and, specifically,

6.1.2. Land for construction with VPT equal to or greater than EUR 1,000,000 does or does not fall within the species of urban properties "with residential use",

in order to determine whether the Stamp Tax assessments subject of the request for Arbitral Pronouncement, as well as the decisions rejecting the hierarchical appeals filed against the decisions rejecting the gracious complaints filed against such assessments, suffer or do not suffer from a defect of violation of that item nº 28.1 (by error regarding the legal requirements), which would justify the declaration of their illegality and respective annulment.

6.2. The answer to the questions stated in the preceding item requires the analysis of the legal norms applicable to the specific case, in order to determine what the correct interpretation is in light of the provisions of the Law and the Constitution (given that it concerns assessing a requirement for the incidence of a tax, carefully protected by the principle of fiscal legality, resulting from the provision of article 103, nº 2 of the CRP), with the ultimate objective of evaluating whether the disputed assessments "(…) suffer from a material defect of violation of law and the Constitution".[9]

On the scope of item 28.1 of the TGIS (in the wording given to it by Law nº 55-A/2012 of 29 October)

6.3. Law nº 55-A/2012 made several amendments to the Stamp Tax Code and added to the TGIS item 28, with the following wording:

"28. Ownership, usufruct or surface right of urban properties whose VPT contained in the tax register, in accordance with the IMI Code, is equal to or greater than EUR 1,000,000.00 – on the VPT for purposes of IMI:

28.1 – For property with residential use – 1%.

28.2 – (…)".

6.4. Notwithstanding the text of Law nº 55-A/2012 (in effect as of 30 October 2012) not having qualified the concepts contained in said item nº 28, namely the concept of "property with residential use", if we examine the provision of article 67, nº 2 of the Stamp Tax Code (also added by said Law), it verifies that "to matters not regulated in this Code, relating to item 28 of the General Table, the IMI Code applies subsidiarily" (our emphasis).

6.5. Now, from reading the Municipal Property Tax Code (IMI), we easily note that the concept of "property with residential use" naturally refers to the concept of "urban property", defined in accordance with articles 2 and 4 of that Code.

6.6. Indeed, in accordance with article 2, nº 1 of the IMI Code, "(…) property is every portion of territory, encompassing waters, plantations, buildings and structures of any nature incorporated or situated therein, with a character of permanence, provided it forms part of the assets of a natural or legal person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or structures, in the circumstances mentioned above, endowed with economic autonomy in relation to the land where they are located, although situated in a portion of territory that constitutes an integral part of diverse assets or has no patrimonial nature" (our emphasis).

6.7. Additionally, in accordance with nºs 2 and 3 of the same article, "buildings or structures, even if movable by nature, are considered as having a character of permanence when devoted to non-transitory purposes", it being presumed "the character of permanence when buildings or structures are located in the same place for a period exceeding one year".

6.8. On the other hand, in accordance with article 4 of the IMI Code, "urban properties are all those that should not be classified as rural (…)".

6.9. In this context, among the various species of "urban properties" referred to in article 6 of the IMI Code, "land for construction" is expressly mentioned [nº 1, paragraph c)], with nº 3 of the same article adding that "land for construction is considered to be land located within or outside an urban area, for which a license or authorization has been granted, prior notification admitted or favorable prior information issued for a subdivision or construction operation, and also those that have been declared as such in the acquisition title, except for land on which competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land use planning plans, are assigned to spaces, infrastructure or public facilities" (our emphasis).

6.10. As can be seen from the norms of the IMI Code transcribed above, it is not possible to extract what the legislator intended to say when it refers in the text of the law to "properties with residential use", since that concept is not used in the classification of properties, nor is this concept, with this terminology, found in any other legal instrument.

6.11. On the other hand, given that Law nº 55-A/2012, of 29/10, has no preamble, it is therefore not possible to extract from it the legislator's intention.

6.12. Thus, in the absence of an exact terminological correspondence of the concept of "property with residential use" with any other concept used in other legal instruments, various interpretative hypotheses may be advanced, the text of the law being the starting point for the interpretation of that expression, since it is on the basis of it that the legislative intent will have to be reconstructed, as follows from the provision of nº 1 of article 9 of the Civil Code, applicable by virtue of the provision of article 11, nº 1 of the General Tax Law (LGT).

On the interpretation of the concept of "urban property with residential use"

6.13. Indeed, in accordance with article 9 of the Civil Code, "interpretation must not be limited to the letter of the law, but must reconstruct, from the texts, the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied", nor can "the legislative intent be considered by the interpreter if it has no minimum verbal correspondence in the letter of the law, even if imperfectly expressed" (our emphasis).

6.14. In these terms, it may be affirmed that fiscal laws are interpreted as any others, it being necessary to determine their true meaning in accordance with the techniques and interpretative elements generally accepted by legal doctrine (cfr. article 9 of the Civil Code and article 11 of the LGT) [10].

6.15. Thus, the concept closest to the literal wording of the expression "property with residential use" is manifestly that of "residential properties", referred to in article 6, nº 1 of the IMI Code (and defined in nº 2 of the same article), encompassing buildings or structures licensed for residential purposes or, in the absence of a license, that have housing as their normal destination (our emphasis).

6.16. "That is, for purposes of the IMI Code, both properties licensed for housing, even if they are not being used as such, and, in the case of lack of license, those that have housing as their normal destination are residential".[11]

6.17. Therefore, if one adopts the interpretation that "property with residential use" means "residential property", the assessments whose declaration of illegality is sought will, in fact, be illegal, because there is, on the land identified, any building or structure.

6.18. In fact, the non-coincidence of the terms of the expression used in item nº 28.1 of the TGIS with what is extracted from the provision of nº 2 of article 6 of the IMI Code points to the legislator not having intended to use the same concept.

6.19. On the other hand, it is necessary to also consider that the norms on the incidence of taxes must be interpreted in their exact terms, without resort to analogy, making certainty and security in their application prevail.[12]

6.20. Finally, it is important to also inquire what the ratio legis underlying the rule of item 28.1 of the TGIS is and, in obedience to the provision of article 9 of the Civil Code,[13] what the circumstances are in which the norm was drafted and what the specific conditions are of the time in which it is applied.

6.21. Indeed, in this matter, the legislator intended to introduce a principle of taxation on wealth externalized in the ownership, usufruct or surface right of luxury urban properties with residential use, having considered, as a determining element of taxpaying capacity, urban properties with residential use, of high value (luxury), that is, of value equal to or greater than EUR 1,000,000.00, on which a special rate of Stamp Tax would (and did) apply (our emphasis).

6.22. In fact, in the preamble of the draft Law that introduced the amendments regarding item 28 of the TGIS, the following were presented as reasons:

6.22.1. "The pursuit of the public interest, in light of the Country's economic-financial situation, requires a strengthening of budgetary consolidation that will require, in addition to permanent activism in reducing public spending, the introduction of tax measures inserted in a broader set of measures to combat budgetary deficit".

6.22.2. "These measures are fundamental to strengthen the principle of social equity in austerity, guaranteeing an effective distribution of the sacrifices necessary to meet the adjustment program (…), the Government being strongly committed to ensuring that the distribution of these sacrifices is made by all and not just by those who live from the income of their work".

6.22.3. "In accordance with that goal, this legal instrument broadens the taxation of capital income and property, equitably encompassing a broad set of sectors of Portuguese society".

6.22.4. "A rate is created under Stamp Tax applying to urban properties with residential use whose VPT is equal to or greater than one million Euros" (our emphasis).

6.23. Thus, from this motivation of the legislator, it results that the taxation in question aims at "an effective distribution of sacrifices", making that taxation apply to property (as opposed to income from work, already affected by other measures).

6.24. For being too broad, this enunciation of the reasons underlying the adoption of the measures contributed little to the interpretation of the concept of "urban property with residential use".

6.25. And we understand that this is likewise what can be concluded from the analysis of the discussion of draft Law nº 96/XII in the National Assembly,[14] which was the origin of the proposal for amendments, with no distinct interpretative ratio being perceived from that presented here.[15]

6.26. Indeed, the justification of the measure designated as "special tax on urban residential properties of highest value" is therefore based on the invocation of the principles of social equity and fiscal justice (calling upon the holders of high-value properties intended for housing to contribute in a more aggravated way), by making the new special tax apply to "houses of value equal to or greater than 1 million Euros" (our emphasis).

6.27. Now, if such logic seems to make sense when applied to a "residence" (whether it is a house, an autonomous unit, a part of property with independent use or an autonomous unit) whenever it represents, on the part of its holder, above-average taxpaying capacity (and, in that measure, capable of determining a special contribution to ensure fair distribution of tax burden), it will make no sense if applied to "land for construction".

6.28. In these terms, the Respondent cannot distinguish where the legislator itself understood not to do so, under pain of violating the coherence of the tax system and the principles of fiscal legality (article 103, nº 2 of the CRP), of justice, equality and fiscal proportionality (included therein).

6.29. On the other hand, having regard to what has already been analyzed above, it should also be noted that the concept of "property (urban) with residential use" was not defined by the legislator, neither in the text of Law nº 55-A/2012 (which introduced it), nor in the IMI Code, to which nº 2 of article 67 of the Stamp Tax Code (likewise introduced by that Law) refers subsidiarily.

6.30. In fact, it is a concept that, probably due to its imprecision (a fact all the more serious given that it is in function of it that the scope of objective incidence of the new taxation is determined) had a very short life, since it was abandoned when Law nº 83-C/2013 (the State Budget Law for 2014[16]) came into effect on 1 January 2014, which gave new wording to that item nº 28.1 of the TGIS and which now determines its scope of objective incidence through the use of concepts that are legally defined in article 6 of the IMI Code.[17]

6.31. This amendment, "to which the legislator did not attribute an interpretative character, merely makes unequivocal, for the future, that land for construction whose building, authorized or foreseen, is for housing purposes is encompassed within the scope of item 28.1 of the TGIS (provided that the respective VPT is of value equal to or greater than 1 million Euros), nothing clarifying, however, as to past situations", as is the case with the assessments that are the subject of the present proceedings (our emphasis).[18]

6.32. Now, as to the assessments subject of the request for arbitral pronouncement, it does not result, either from the letter or from the spirit of the law, that its intention was, ab initio, to encompass in its scope of objective incidence land for construction for which authorization or provision was made for the construction of residential buildings, as today results from the text of item 28.1 of the TGIS (after the wording introduced by the State Budget Law for 2014[19]) (our emphasis).

6.33. In this context, from the letter of the law nothing unequivocal results, since it itself, by using a concept that it did not define (and which was also not found defined in the legal instrument to which it referred subsidiarily) unnecessarily lent itself to equivocation in the matter of tax incidence (a matter in which certainty and legal security should also be primary concerns of the legislator).

6.34. And from its "spirit", ascertainable in the statement of reasons[20] of the draft Law that originated Law nº 55-A/2012, nothing more results than concern to secure new tax revenue, from sources of wealth "more spared" in the past by the fiscal legislator than income from work, in particular capital income, property gains and property, reasons which bring no relevant contribution to the clarification of the concept of "properties (urban) with residential use", since they take it as established, with no concern whatsoever to clarify it.

6.35. Thus, it can be ascertained that the reality that it was intended to tax was, in fact, in colloquial language (and despite the imprecision of the wording of the law with the expression "urban properties with residential use"), that of "houses", and not any other realities (as mentioned above in item 6.26.).

6.36. Add to this that "residential use" always appears in the IMI Code as relating to "buildings" or "structures", since only these can be inhabited, which is not the case with land for construction which does not, in itself, have conditions for such, not being capable of being used for housing unless and until construction authorized and foreseen for it is erected thereon.

6.37. Thus, given that land for construction (whatever the type and purpose of the building that will, or may be, erected on it) does not satisfy, in itself, any condition for, as such, to be licensed or for housing to be defined as its normal destination, and the norm on the incidence of Stamp Tax refers to urban properties with "residential use" (without establishing any specific concept for this purpose), one cannot extract from it that it contains a future potentiality, inherent to a distinct property that may possibly be built on that land.

6.38. In these terms, it can be concluded that, resulting from article 6 of the IMI Code a clear distinction between "residential" urban properties and "land for construction", the latter cannot be considered as "urban properties with residential use", for purposes of the provision of item nº 28.1 of the TGIS, in its original wording (which was given to it by Law nº 55-A/2012, of 29 October) (our emphasis).[21]

6.39. In summary, and in response to the questions raised above in items 6.1.1 and 6.1.2, it can be concluded that Stamp Tax as referred to in item nº 28.1 of the TGIS (in the wording provided for by Law nº 55-A/2012) cannot apply to "land for construction" since land for construction (with VPT equal to or greater than EUR 1,000,000) does not fall within the species of urban properties "with residential use", being therefore illegal:

6.39.1. The Stamp Tax assessment acts subject of the request for arbitral pronouncement filed by the Claimant, as well as,

6.39.2. The decisions rejecting the hierarchical appeals filed against the decisions rejecting the gracious complaints filed against those Stamp Tax assessments.[22]

6.40. In these terms, in light of the conclusions stated in the preceding items, the analysis of the question of the alleged unconstitutionality of item 28.1 of the TGIS (invoked by the Claimant in the Claim, for alleged violation of the principles of taxation on wealth, of productive capacity and of equality) will be moot, since here it was concluded that Stamp Tax as referred to in that item of the TGIS (in the wording provided for by Law nº 55-A/2012) does not apply to "land for construction".

On responsibility for payment of arbitration costs

6.41. In accordance with the provision of article 22, nº 4 of the RJAT, "in the arbitral decision rendered by the arbitral tribunal appears the determination of the amount and distribution among the parties of costs directly resulting from the arbitration process".

6.42. Thus, in accordance with the provision of article 527, nº 1 of the CPC (per article 29, nº 1, paragraph e) of the RJAT), it shall be established that the Party that caused costs shall be condemned in costs or, in the absence of success in the action, the one that benefited from the process shall be.

6.43. In this context, nº 2 of the said article specifies the expression "caused costs", according to the principle of proportional defeat, understanding that the defeated party causes costs of the process, in proportion to its defeat.

6.44. In the case under analysis, having regard to the above set forth, the principle of proportionality imposes that responsibility for costs be attributed to the Claimant and the Respondent in proportion to their respective defeat (4.4% and 95.6%, respectively), in accordance with the provision of article 12, nº 2 of the RJAT and article 4, nº 4 of the Regulation of Costs in Arbitration Processes.

7. DECISION

7.1. Having regard to the analysis conducted in the preceding Chapter, this Arbitral Tribunal decided:

7.1.1. To judge partially admissible the request for arbitral pronouncement filed by the Claimant, condemning the Respondent to annul the Stamp Tax assessments not yet annulled (and identified in these proceedings), also mandating the annulment of the rejection decisions rendered on the hierarchical appeals filed regarding the assessments now mandated to be annulled, with the consequences resulting therefrom;

7.1.2. To condemn the Claimant and the Respondent to pay the costs of the present proceedings in proportion to their respective defeat.

Value of the case: Having regard to the provisions of articles 306, nº 2 of the CPC, article 97-A, nº 1 of the CPPT and article 3, nº 2 of the Regulation of Costs in Tax Arbitration Processes, as well as to the above set forth in Chapter 4 of this decision, the value of the case is fixed at EUR 48,275.59.

Costs of the process: In accordance with the provision of Table I of the Regulation of Costs of Tax Arbitration Processes, the value of the Arbitration Costs is fixed at EUR 2,142.00, to be borne by the Claimant (4.4%) and the Respondent (95.6%), in accordance with article 22, nº 4 of the RJAT.

Notify.

Lisbon, 31 May 2016

The Arbitrator,

Sílvia Oliveira

[1] The drafting of the present decision is governed by the spelling before the 1990 Orthographic Agreement, except as regards transcriptions made.

[2] In this context, the Claimant cites the plenary session of 10 October 2012, for assessment in general terms of draft law nº 96/XII, which gave rise to Law nº 55-A/2012, of 29/10, in which it is stated that "(…) a special taxation is created on properties of high value intended for housing (…)", which "(…) will apply to houses of value equal to or greater than 1 million euros" (Claimant's emphasis).

[3] In this matter, the Claimant cites several arbitral decisions and the position endorsed by the STA, namely in the Judgment of 9/04/2014 (Case nº 1870/13 and 48/14) and in the Judgment of 23/04/2014 (Case nº 270/14 and 272/14).

[4] In this matter, the Respondent refers that "as results from the expression value of authorized buildings, contained in art. 45, n. 2 of the CIMI, the legislator opted for determining the application of the methodology of evaluation of properties in general, to the evaluation of land for construction, being therefore applicable to them the coefficient of use provided for in art. 41 of the CIMI" (in this sense, the Respondent cites the Judgment of the TCAS nº 04950/11, of 14/02/2012).

[5] In this context, taking into account that in the request for arbitral pronouncement is included the request to review the acts of rejection of hierarchical appeals (notified to the Claimant on 15 October 2016), filed against the decisions rejecting the gracious complaints filed against the Stamp Tax assessments in crisis (see article 5 of the Claim), as a way of being able to declare, in the final analysis, the illegality of the Stamp Tax assessments subject of the claim, the decision of the hierarchical appeal that involves the assessment of the legality of an assessment act is encompassed in the provision of paragraph e) of nº 1 of article 102 of the CPPT, in accordance with which the three-month period (in effect as of 1 January 2013) from the respective notification is applicable, for filing the judicial challenge.

On the other hand, also taking into account the provision of article 10, nº 1, paragraph a) of the RJAT [which provides that the request for constitution of an arbitral tribunal must be filed "within a period of 90 days, counted from the facts provided for in nºs 1 and 2 of article 102 of the CPPT, as to acts capable of autonomous challenge and, as well, from notification of the decision (…) of the hierarchical appeal"], as well as the date of filing of the request for arbitral pronouncement (11 January 2016), the claim is timely.

[6] The tax year appears identified in the collection note as "Law 55-A/2012".

[7] In accordance with the content of the decision of the respective hierarchical appeals, it is the VPT corresponding to the part of the land devoted to housing.

[8] Having regard to the content of the decisions of the respective hierarchical appeals.

[9] In this context, the Claimant in the Claim filed states as questions of law subject of the claim whether "land for construction should be considered property with residential use for purposes of applying item 28.1 of the General Table of Stamp Tax?" and "if the answer to the first question is contrary to the Claimant's claim (…)" whether "(…) the norm on the tax base contained in item 28.1 of the General Table of Stamp Tax is unconstitutional?".

[10] In this sense, see Judgment of TCAS Case 07648/14, of 10 July.

[11] See Arbitral Decision nº 48/2013-T, of 9 October.

[12] Cfr. Judgment of TCAS Case 5320/12, of 2 October, Judgment of TCAS Case 7073/13, of 12 December and Judgment of TCAS 2912/09, of 27 March 2014.

[13] In accordance with this article, the interpretation of the legal norm must not be limited to the letter of the law, but must reconstruct the legislative intent from the texts and other elements of interpretation, taking into account the unity of the legal system.

[14] Available for consultation in the Diary of the National Assembly, I series, nº 9/XII/2, of 11 October 2012.

[15] As already referred to in several Arbitral Decisions issued by the CAAD (namely in Case nº 48/2013-T, of 9 October).

[16] Introduced by Law nº 83-C/2013, of 31 December.

[17] See in this sense Judgment of STA 048/14, of 9 April and Judgment of STA 0272/14, of 23 April.

[18] See in this sense Judgment of STA 048/14, of 9 April and Judgment of STA 0272/14, of 23 April.

[19] In this context, it should be noted that, having regard to the provision of article 103, nº 3 of the CRP (prohibition of authentic retroactivity of fiscal law), it is not possible to admit the application of the new wording of item 28.1 of the TGIS (in effect as of 1 January 2014) to a Stamp Tax assessment concerning the year 2013, since we would be faced with the application of a new law to a prior tax fact (given that this fact occurred on 31 December 2013 and is therefore prior to the entry into force of the new wording of the law). Still in this matter, and in support of the interpretation of the constitutional norm, it becomes also important to mention the provision of article 12, nº 1 of the LGT, in accordance with which "tax norms apply to facts occurring after their entry into force, no retroactive taxes being able to be created". In judicial matters, the Constitutional Court (TC), in its case law on fiscal matters, namely in Judgment nº 128/2009, of 12 March, considered that it results from article 103, nº 3 of the CRP that "any fiscal norm (…) will be constitutionally censured when it assumes a retroactive nature, the expression retroactivity being used here in its proper or authentic sense", that is, "it prohibits the application of a new fiscal law, disadvantageous, to a tax fact occurring within the validity of the revoked fiscal law (the old law) and more favorable".

[20] In the presentation and discussion in the National Assembly of draft Law nº 96/XII – 2ª (which gave rise to Law nº 55-A/2012, of 29 October), the Secretary of State for Tax Affairs is said to have expressly stated that "the Government proposes the creation of a special tax on urban residential properties of highest value (…) being the first time in Portugal that a special taxation on high-value properties intended for housing is created. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013 and will apply to houses of value equal to or greater than 1 million Euros" [See Diary of the National Assembly (DAR I Series nº 9/XII, of 11 October, page 32)].

[21] See Judgment of STA 048/14, of 9 April, Judgment of STA 0272/14, of 23 April, Judgment of STA 0505/14, of 29 October and Judgment of STA 0740/14, of 10 September.

[22] Insofar as they maintained, in the legal order, the Stamp Tax assessments now declared illegal.