AIMI on Non-Residential Construction Land: IMI Additional Tax Arbitration Decision 8/2018-T

TAX ARBITRATION JURISPRUDENCE

Case No. 8/2018-T

Decision Date: 2019-11-25

IMI

Claim Value: €28,308.56

**Subject Matter: IMI – Additional Municipal Property Tax – Land for Construction with Non-Residential Allocation – Reform of Arbitral Decision (attached to decision).
Replaces the arbitral decision of 26 June 2018.

ARBITRAL DECISION

REPORT

A - PARTIES

A..., LDA., holder of NIPC..., with registered office at Rua..., no...., ...-..., ...-..., hereinafter referred to as Claimant or taxpayer.

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

The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD, and thus the Arbitral Tribunal was duly constituted on 12-03-2018 to assess and decide the subject matter of the present dispute, and the Tax and Customs Authority was automatically notified on 12-03-2018, as evidenced in the respective minutes.

The Claimant did not proceed with the appointment of an arbitrator, wherefore, pursuant to the provisions of No. 1 of Article 6 and subparagraph b) of No. 1 of Article 11 of Decree-Law No. 10/2011 of 20 January, as amended by Article 228 of Law No. 66-B/2012 of 31 December, the Ethics Council designated Arbitrator Dr. Paulo Ferreira Alves, whose appointment was accepted in accordance with legal provisions.

On 20-02-2018, the parties were duly notified of this designation pursuant to Article 11 No. 1, subparagraphs a) and b), of the RJAT and Articles 6 and 7 of the Ethics Code, and manifested no intention to refuse the Arbitrator's designation.

In accordance with the provision of subparagraph c) of No. 1 of Article 11 of Decree-Law No. 10/2011 of 20 January, as amended by Article 228 of Law No. 66-B/2012 of 31 December, the single Arbitral Tribunal was duly constituted on 12-03-2018.

The meeting provided for in Article 18 of the RJAT was held.

The Arbitral Tribunal is duly constituted and is materially competent pursuant to Articles 2, No. 1, subparagraph a), and 30, No. 1, of Decree-Law No. 10/2011 of 20 January.

The parties enjoy legal personality and capacity, are legitimate, and are duly legally represented (Articles 4 and 10, No. 2, of the same instrument and Article 1 of Ordinance No. 112-A/2011 of 22 March).

The proceedings do not suffer from defects rendering them invalid.

B - CLAIM

1. The Claimant herein requests the declaration of illegality of the tax assessment act for Municipal Property Tax (IMI) No. 2017..., for the fiscal year 2017, in the amount of €28,308.56 (twenty-eight thousand three hundred and eight euros and fifty-six cents).

C - GROUNDS FOR CLAIM

1. To substantiate its request for arbitral pronouncement, the Claimant alleged, with a view to declaring the illegality of the tax assessment act for Municipal Property Tax already described in point 1 of this Award, in summary, the following:

2.1. The Claimant was notified of the assessment of the AIMI – Additional Municipal Property Tax – on the sum of the Tax Values (VPT) of 16 supermarkets belonging to the Claimant.

2.2. The Claimant is engaged in wholesale and retail commerce through the operation of supermarkets of which it is the owner.

2.3. The 16 properties on which the AIMI was assessed consist, for the most part, of supermarkets already built or whose construction is nearing completion.

2.4. The contested assessment is thus illegal due to lack of tax incidence basis, as it was assessed on commercial properties, in accordance with Article 135-B No. 2, in conjunction with Article 6 No. 2 and Article 10 No. 2 of the CIMI.

2.5. In cases where construction was still ongoing or is ongoing for the supermarkets A..., as of the date of the tax event, these were lands licensed or authorizations for construction operations allocated to commerce.

2.6. These properties, with actual construction underway as of 1 January 2017, are excluded from the incidence of AIMI as they constitute commercial buildings, even if in the construction phase.

2.7. The Claimant concludes by requesting the declaration of illegality and annulment of the AIMI assessment act.

D - RESPONDENT'S REPLY

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

3.1. The properties subject to AIMI taxation, appearing in the assessment and itemized in the assessment statement, are classified as "land for construction."

3.2. Therefore, the determination of the AIMI taxable value contained in the assessment that is the subject of the present request for arbitral pronouncement was performed in accordance with the objective tax incidence rules defined in the CIMI, namely, observing the classification of Article 6 of the CIMI.

3.3. However, it is curious that, in light of the classification that the CIMI gives to properties, as noted above, the Claimant should surreptitiously suggest the creation of a new classification of properties in Article 43, namely, "commercial buildings under construction," in some interpretative exercise that is abrogative in character disguised as legislative impulse.

3.4. Being certain that, in this case, we are dealing with land for construction tout court.

3.5. Indeed in this case, namely in the case of lands licensed or authorized for construction operations allocated to commerce, which were in that condition as of 01-01-2017 (the date of the tax event for AIMI purposes), it is not apparent on what legal grounds they can be classified as properties allocated to commercial purposes rather than "land for construction."

3.6. The Respondent concludes by contending that the assessment act in dispute in these proceedings does not suffer from any defect calling into question its legality and validity.

E - FACTUAL GROUNDS

1. Prior to examining the issue submitted for pronouncement, it is necessary to present the factual matter relevant for its understanding and the decision to be rendered, based on the facts alleged in accordance with the documentary evidence presented.

2. Thus, in accordance with the principle of free assessment of evidence, taking into account the evidence produced through the attached documents, regarding which the parties did not raise any challenge to their authenticity or probative value, the present Tribunal accepts the documents as true, suitable, and authentic, as stipulated in Article 75 No. 1 of the LGT.

3. As to relevant factual matters, the present Tribunal establishes the following facts as proven:

6.1. The Claimant is engaged in wholesale and retail commerce through the operation of supermarkets of which it is the owner, respectively:

6.2. The Claimant was notified of the Municipal Property Tax (IMI) No. 2017..., for the fiscal year 2017, in the amount of €28,308.56 (twenty-eight thousand three hundred and eight euros and fifty-six cents).

6.3. The assessment covered 16 properties with the following reference:

6.3.1. No.: ...

6.3.2. No.: ...

6.3.3. No.: ...

6.3.4. No.: ...

6.3.5. No.: ...

6.3.6. No.: ...

6.3.7. No.: ...

6.3.8. No.: ...

6.3.9. No.: ...

6.3.10. No.: ...

6.3.11. No.: ...

6.3.12. No.: ...

6.3.13. No.: ...

6.3.14. No.: ...

6.3.15. No.: ...

6.3.16. No.: ...

6.4. The 16 properties on which the AIMI was assessed consist of supermarkets already built or whose construction is nearing completion.

F - UNPROVEN FACTS

1. Of the facts with interest for the decision of the case, appearing in the challenge, all subject to concrete analysis, those not appearing in the factual description above were not proven.

G - ISSUES TO BE DECIDED

1. Given the positions assumed by the parties in the arguments presented, the following constitutes the central issue which must therefore be assessed and decided:

8.1. That alleged by the Claimant:

(i) Declaration of illegality of the tax assessment act for Municipal Property Tax (IMI) No. 2017..., for the fiscal year 2017, in the amount of €28,308.56 (twenty-eight thousand three hundred and eight euros and fifty-six cents).

H - SUBSTANTIVE LAW

1. Given the positions assumed by the parties in the pleadings and allegations presented, the request for arbitral pronouncement to be resolved by the present Arbitral Tribunal consists of assessing the legality of the additional assessment act for Municipal Property Tax (IMI) No. 2017..., for the fiscal year 2017, in the amount of €28,308.56 (twenty-eight thousand three hundred and eight euros and fifty-six cents).

2. According to the original arbitral decision, the request for arbitral pronouncement was upheld and, consequently, the illegality of the acts assessing additional municipal property tax with numbers 2017..., for the fiscal year 2017, in the amount of €28,308.56 (twenty-eight thousand three hundred and eight euros and fifty-six cents), was declared, and consequently the Tax and Customs Authority was condemned to refund the amount of tax paid.

3. In the arbitral decision, the arbitral tribunal found "materially unconstitutional Article 135-B of the CIMI insofar as it subjects taxation to AIMI the ownership of land for construction belonging to companies whose object is the commercialization of properties" and that, consequently, "the assessment that is the subject of the present proceedings suffers from the defect of violation of law, by embodying an error regarding the legal presuppositions for the application of a materially unconstitutional norm, which has as its consequence its annulment (Article 163, No. 1, of the Code of Administrative Procedure)."

4. Against this decision, the Respondent appealed to the Constitutional Court which, by Summary Decision of 18 June 2019 (Decision 471/2019, Case 753/2018, 2nd Section), decided:

"a) Not to find unconstitutional the norm contained in Article 135-B, Nos. 1 and 2, of the Municipal Property Tax Code, added by Article 219 of Law No. 42/2016 of 28.12, in the segment in which it subjects taxation to additional municipal property tax (AIMI) the ownership of land for construction belonging to companies whose object is the commercialization of properties.

And, in consequence,

b) To allow the present appeal, determining that the appealed decision be reformed in accordance with the preceding judgment of non-unconstitutionality."

1. Pursuant to Summary Decision No. 471/2019 of the Constitutional Court of 29-05-2019, it was determined that reform of the arbitral decision rendered was necessary.

2. Accordingly, in compliance with the provisions of Article 2 of Law No. 28/82 of 15-11, the decision previously rendered is hereby reformed, since, having the Constitutional Court decided with binding force in the present case, it must be concluded that the contested assessments, which applied the provisions of No. 2 of Article 135-B of the IMI Code to land for construction held by a real estate company, do not suffer from the defects that the Claimants allege.

3. It should be added that, given the wording of Article 135-B of the CIMI, there are excluded from the incidence of AIMI "urban properties classified as 'commercial, industrial or for services' and 'other' in accordance with subparagraphs b) and d) of No. 1 of Article 6 (...)" of the Municipal Property Tax Code (CIMI), whereby only urban properties allocated to residential purposes and land for construction, as defined in that Article 6, are covered.

4. In the case submitted for assessment, land for construction is at issue, whereby it is indisputable that it falls within the objective tax incidence of the tax, since, at least according to the letter of the law, we are not within the scope of its exclusion.

5. The Constitutional Court has recently understood, similarly to what occurs with the decision to which compliance is now given, that there exists no judgment of unconstitutionality regarding its application to land for construction, even if allocated to real estate activities.

6. In compliance with what was decided by the Constitutional Court, it is concluded that no unconstitutionality occurs, and the contested assessment acts do not merit any censure.

I - COMPENSATORY INTEREST

1. The Claimant further requests the payment of compensatory interest.

2. Given the lack of merit of the main claim, no provision is made for the Claimant's request regarding the payment of compensatory interest.

J - DECISION

The present Tribunal hereby decides:

(i) To judge as without merit the request for declaration of illegality of the additional tax assessment act for Municipal Property Tax (IMI) No. 2017..., for the fiscal year 2017, in the amount of €28,308.56 (twenty-eight thousand three hundred and eight euros and fifty-six cents).

The process value is fixed at €28,308.56 taking into account the economic value of the case as measured by the value of the contested tax assessments, and accordingly the costs are fixed in the amount of €1,530.00 (one thousand five hundred and thirty euros), to be borne by the Claimant in accordance with Article 12, No. 2 of the Tax Arbitration Regime, Article 4 of the RCPAT and Table I attached thereto. – No. 10 of Article 35, and Nos. 1, 4 and 5 of Article 43 of the LGT, Articles 5, No. 1, subparagraph a) of the RCPT, 97-A, No. 1, subparagraph a) of the CPPT and 559 of the CPC).

Let it be notified.

Lisbon, 25 November 2019

The Arbitrator

Paulo Ferreira Alves

Arbitral Decision

REPORT

A - PARTIES

A..., LDA., holder of NIPC..., with registered office at Rua..., no...., ...-..., ...-..., hereinafter referred to as Claimant or taxpayer.

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

The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD, and thus the Arbitral Tribunal was duly constituted on 12-03-2018 to assess and decide the subject matter of the present dispute, and the Tax and Customs Authority was automatically notified on 12-03-2018, as evidenced in the respective minutes.

The Claimant did not proceed with the appointment of an arbitrator, wherefore, pursuant to the provisions of No. 1 of Article 6 and subparagraph b) of No. 1 of Article 11 of Decree-Law No. 10/2011 of 20 January, as amended by Article 228 of Law No. 66-B/2012 of 31 December, the Ethics Council designated Arbitrator Dr. Paulo Ferreira Alves, whose appointment was accepted in accordance with legal provisions.

On 20-02-2018, the parties were duly notified of this designation pursuant to Article 11 No. 1, subparagraphs a) and b), of the RJAT and Articles 6 and 7 of the Ethics Code, and manifested no intention to refuse the Arbitrator's designation.

In accordance with the provision of subparagraph c) of No. 1 of Article 11 of Decree-Law No. 10/2011 of 20 January, as amended by Article 228 of Law No. 66-B/2012 of 31 December, the single Arbitral Tribunal was duly constituted on 12-03-2018.

The meeting provided for in Article 18 of the RJAT was held.

The Arbitral Tribunal is duly constituted and is materially competent pursuant to Articles 2, No. 1, subparagraph a), and 30, No. 1, of Decree-Law No. 10/2011 of 20 January.

The parties enjoy legal personality and capacity, are legitimate, and are duly legally represented (Articles 4 and 10, No. 2, of the same instrument and Article 1 of Ordinance No. 112-A/2011 of 22 March).

The proceedings do not suffer from defects rendering them invalid.

B - CLAIM

1. The Claimant herein requests the declaration of illegality of the tax assessment act for Municipal Property Tax (IMI) No. 2017..., for the fiscal year 2017, in the amount of €28,308.56 (twenty-eight thousand three hundred and eight euros and fifty-six cents).

C - GROUNDS FOR CLAIM

1. To substantiate its request for arbitral pronouncement, the Claimant alleged, with a view to declaring the illegality of the tax assessment act for Municipal Property Tax already described in point 1 of this Award, in summary, the following:

5.1. The Claimant was notified of the assessment of the AIMI – Additional Municipal Property Tax – on the sum of the Tax Values (VPT) of 16 supermarkets belonging to the Claimant.

5.2. The Claimant is engaged in wholesale and retail commerce through the operation of supermarkets of which it is the owner.

5.3. The 16 properties on which the AIMI was assessed consist, for the most part, of supermarkets already built or whose construction is nearing completion.

5.4. The contested assessment is thus illegal due to lack of tax incidence basis, as it was assessed on commercial properties, in accordance with Article 135-B No. 2, in conjunction with Article 6 No. 2 and Article 10 No. 2 of the CIMI.

5.5. In cases where construction was still ongoing or is ongoing for the supermarkets A..., as of the date of the tax event, these were lands licensed or authorizations for construction operations allocated to commerce.

5.6. These properties, with actual construction underway as of 1 January 2017, are excluded from the incidence of AIMI as they constitute commercial buildings, even if in the construction phase.

5.7. The Claimant concludes by requesting the declaration of illegality and annulment of the AIMI assessment act.

D - RESPONDENT'S REPLY

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

6.1. The properties subject to AIMI taxation, appearing in the assessment and itemized in the assessment statement, are classified as "land for construction."

6.2. Therefore, the determination of the AIMI taxable value contained in the assessment that is the subject of the present request for arbitral pronouncement was performed in accordance with the objective tax incidence rules defined in the CIMI, namely, observing the classification of Article 6 of the CIMI.

6.3. However, it is curious that, in light of the classification that the CIMI gives to properties, as noted above, the Claimant should surreptitiously suggest the creation of a new classification of properties in Article 43, namely, "commercial buildings under construction," in some interpretative exercise that is abrogative in character disguised as legislative impulse.

6.4. Being certain that, in this case, we are dealing with land for construction tout court.

6.5. Indeed in this case, namely in the case of lands licensed or authorized for construction operations allocated to commerce, which were in that condition as of 01-01-2017 (the date of the tax event for AIMI purposes), it is not apparent on what legal grounds they can be classified as properties allocated to commercial purposes rather than "land for construction."

6.6. The Respondent concludes by contending that the assessment act in dispute in these proceedings does not suffer from any defect calling into question its legality and validity.

E - FACTUAL GROUNDS

1. Prior to examining the issue submitted for pronouncement, it is necessary to present the factual matter relevant for its understanding and the decision to be rendered, based on the facts alleged in accordance with the documentary evidence presented.

2. Thus, in accordance with the principle of free assessment of evidence, taking into account the evidence produced through the attached documents, regarding which the parties did not raise any challenge to their authenticity or probative value, the present Tribunal accepts the documents as true, suitable, and authentic, as stipulated in Article 75 No. 1 of the LGT.

3. As to relevant factual matters, the present Tribunal establishes the following facts as proven:

23.1. The Claimant is engaged in wholesale and retail commerce through the operation of supermarkets of which it is the owner, respectively:

23.2. The Claimant was notified of the Municipal Property Tax (IMI) No. 2017..., for the fiscal year 2017, in the amount of €28,308.56 (twenty-eight thousand three hundred and eight euros and fifty-six cents).

23.3. The assessment covered 16 properties with the following reference:

23.3.1. No.: ...

23.3.2. No.: ...

23.3.3. No.: ...

23.3.4. No.: ...

23.3.5. No.: ...

23.3.6. No.: ...

23.3.7. No.: ...

23.3.8. No.: ...

23.3.9. No.: ...

23.3.10. No.: ...

23.3.11. No.: ...

23.3.12. No.: ...

23.3.13. No.: ...

23.3.14. No.: ...

23.3.15. No.: ...

23.3.16. No.: ...

23.4. The 16 properties on which the AIMI was assessed consist of supermarkets already built or whose construction is nearing completion.

F - UNPROVEN FACTS

1. Of the facts with interest for the decision of the case, appearing in the challenge, all subject to concrete analysis, those not appearing in the factual description above were not proven.

G - ISSUES TO BE DECIDED

1. Given the positions assumed by the parties in the arguments presented, the following constitute the central issues to be resolved which must therefore be assessed and decided:

25.1. That alleged by the Claimant:

(ii) Declaration of illegality of the tax assessment act for Municipal Property Tax (IMI) No. 2017..., for the fiscal year 2017, in the amount of €28,308.56 (twenty-eight thousand three hundred and eight euros and fifty-six cents).

H - SUBSTANTIVE LAW

1. Given the positions assumed by the parties in the pleadings and allegations presented, the request for arbitral pronouncement to be resolved by the present Arbitral Tribunal consists of assessing the legality of the additional assessment act for Municipal Property Tax (IMI) No. 2017..., for the fiscal year 2017, in the amount of €28,308.56 (twenty-eight thousand three hundred and eight euros and fifty-six cents).

2. The Claimant, in summary, alleged that the regime of the Additional Municipal Property Tax (AIMI) does not apply to land for construction licensed or authorized for construction operations allocated to commerce, including those that are in the process of being built into supermarkets allocated to the Claimant's economic activity.

3. The Respondent argues, briefly, that in the case of lands licensed or authorized for construction operations allocated to commerce, they fall within the concept of land for construction and are covered by the Additional Municipal Property Tax (AIMI).

4. On the legal regime of the Additional Municipal Property Tax (AIMI), implemented by Law No. 42/2016 of 28 December (State Budget for 2017) which added Chapter XV to the CIMI, with Articles 135-A to 135-K, the following was established:

5. Article 135-A defines the subjective tax incidence of this tax, establishing that "passive taxpayers of the additional municipal property tax are natural or legal persons who are owners, usufructuaries or surface rights holders of urban properties situated in Portuguese territory," being "equated to legal persons any structures or centers of collective interests without legal personality that appear in the cadastres as passive taxpayers of the municipal property tax."

6. Article 135-B defines the objective incidence of this additional tax, establishing the following: "1 - The additional municipal property tax is assessed on the sum of the tax values of the urban properties situated in Portuguese territory of which the passive taxpayer is the holder.

2 - Excluded from the additional municipal property tax are urban properties classified as 'commercial, industrial or for services' and 'other' in accordance with subparagraphs b) and d) of No. 1 of Article 6 of this Code.

1. The reference of Article 135-B to Article 6 of the CIMI, which provides as follows: "1 - Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Land for construction;

d) Other.

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

3 - Land for construction is understood to be land situated within or outside an urban agglomeration for which a license or authorization for a subdivision or construction operation has been granted, or where prior communication has been admitted or favorable prior information has been issued, as well as those declared as such in the acquisition deed, except for land where the competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal territorial planning instruments, are allocated to public spaces, infrastructure or facilities.

4 - The provision of subparagraph d) of No. 1 includes land situated within an urban agglomeration that is not land for construction nor covered by the provision of No. 2 of Article 3 and also buildings and constructions licensed or, in the absence of a license, that have as their normal purpose uses other than those referred to in No. 2 and also those of the exception in No. 3."

1. Accordingly, and given the above-cited norms, the present Tribunal resorts to Article 11 of the General Tax Law and Article 9 of the Civil Code to proceed with the interpretation of tax laws.

2. Article 11 of the General Tax Law states:

"Interpretation

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

Whenever tax norms employ terms specific to other branches of law, these must be interpreted in the same sense they have therein, unless otherwise directly derived from law.

If doubt persists regarding the meaning of the tax incidence norms to apply, regard must be had to the economic substance of the tax facts.

Gaps resulting from tax norms covered in the legislative reserve of the Assembly of the Republic are not susceptible to analogical integration."

It is equally necessary to resort to the general principles of law interpretation established in Article 9 of the Civil Code, to which No. 1 of Article 11 of the LGT refers.

Article 9 of the CC establishes the following:

"Interpretation of law

Interpretation must not be confined to the letter of the law, but must reconstruct from the texts the legislative intent, having particularly in mind the unity of the legal system, the circumstances in which the law was enacted and the specific conditions of the time in which it is applied.

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

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

1. Accordingly, given the position assumed by the parties, the factual findings and the legal regime of the AIMI, it is incumbent on the present Tribunal to determine whether land for construction licensed or authorized for construction operations allocated to commerce, industry or for services is covered by the Additional Municipal Property Tax (AIMI).

2. It should be noted that in the present proceedings, it is not challenged that the land subject to the assessment is intended for the construction of properties "for services," as is suggested by the type of location coefficient used. Furthermore, its allocation to services or the company's activity is not impugned.

3. Indeed, from the list of proven facts, it was demonstrated that the Claimant is engaged in wholesale and retail commerce through the operation of supermarkets of which it is the owner, and;

4. that the properties subject to AIMI here in discussion constitute land for construction, licensed or authorized for construction operations allocated to commerce, industry or for services. Furthermore, as of the date the tax was due on 31-12-2017, the Claimant was constructing commercial surface areas (supermarkets) on said land for construction.

5. On this matter, there are various pronouncements rendered by CAAD, specifically in the following cases 668/2017-T, 675/2017-T, 681/2017-T and 688/2017-T, in which it was decided that land for construction with commercial, industrial or service allocation is not covered by Article 135-A, and consequently is not subject to AIMI.

6. Following the jurisprudence referred to above, it should be said that the creation of AIMI, as a complementary tax on real property wealth, aimed to introduce into the tax system "a progressive element of personal base, taxing more heavily the most substantial patrimonies" (Report of the Budget for 2017, page 60), and thus it is compatible with the objective that the taxation of property should contribute to equality among citizens, as provided in No. 3 of Article 104 of the CRP. Progressivity has as its corollary, tending to impose greater taxation on those with greater ability to pay.

7. On the other hand, the exclusion from taxation of properties specially suited for productive activity, namely those "commercial, industrial or for services," finds a constitutionally acceptable foundation in the obligation of the State to promote the increase of economic well-being, which presupposes the proper functioning of productive activities and constitutes one of its priority incumbencies within the economic sphere [Article 81, subparagraph a), of the CRP].

8. And in line with what was understood in the arbitral award of 17-03-2016 rendered in Case No. 507/2015-T, while the ownership of real property intended for housing of high value is a tending-to-be-reliable indication of economic well-being superior to that of the generality of citizens, it cannot be considered that there exists a reliable indication of superior ability to pay when one is dealing with the ownership of rights over properties intended for the exercise of economic activities (commercial, industrial, provision of services or similar), as they must be adequate for the functioning of the respective companies, and their size and corresponding value is not an indication of affluence.

9. It is equally understood by the Constitutional Court that the principle of equality, as a limit to legislative discretion, does not require equal treatment of all situations, but rather implies that those in equal situations be treated equally and those in unequal situations be treated unequally, so as not to create arbitrary and unreasonable discriminations, because they lack sufficient material foundation. The principle of equality does not prohibit the establishment of distinctions, but rather distinctions devoid of objective and rational justification. ( )

10. Indeed, the restriction of the incidence of AIMI to residential properties and land for construction of residential properties, which came to be enshrined in the wording for No. 2 of Article 135-B of the CIMI, would have constitutionally acceptable foundation, in the interpretation adopted above.

11. Being the tax event chosen as an index of ability to pay the ownership of real property of value considered high, it would lack coherence not to apply the tax to buildings intended for services ( ) and to apply it to the land intended for their construction, whose value is incorporated in the value of the buildings.

12. Thus, from a perspective that keeps in mind the unity of the legal system (Article 9, No. 1, of the Civil Code), of decisive interpretative value, imposed by the principle of coherence in values or axiological coherence of the legal order ( ), the exclusion provided for in No. 2 of Article 135-B of the CIMI relating to urban properties classified as "for services" should be interpreted expansively as expressing a legislative intent to exclude also from taxation the land intended for the construction of such properties.

13. In any case, to adopt a literal interpretation of this norm, with the meaning that all land for construction is covered by the incidence of AIMI, it would be materially unconstitutional, being incompatible with the principle of equality (Article 13 of the CRP), by considering as a tax event the ownership of land for construction of properties intended for services and not the ownership of the properties built thereon, by constituting discriminatory treatment of taxpayers in the first situation without material justification, as it is necessarily lesser the ability to pay indicated by the real property patrimony in that situation, which must be present, and with increase, in the second.

14. In situations of unjustified discriminatory treatment, expressed in the imposition of a duty or burden in violation of the principle of equality, what is illegitimate is, in principle, the act of imposing the duty only on some of the taxpayers, the inequality being resolved with the elimination of the duties or burdens for those with whom it was discriminatorily burdened. ( )

15. For the foregoing reasons, the contested AIMI assessment suffers from the defect of violation of law, by an error regarding the legal presuppositions, embodied in the erroneous interpretation and application of Article 135-B, No. 2, of the IMI Code, insofar as it includes in the taxable value the tax value of land for construction with the numbers No.: …; No.: …; No.: …; No.: …; No.: …; No.: …; No.: …; No.: …; No.: …; No.: …; No.: …; No.: …; No.: …; No.: …; No.: …; No.: …, whereby its annulment is justified, in the respective part, in accordance with Article 163, No. 1, of the Code of Administrative Procedure, subsidiarily applicable under Article 2, subparagraph c), of the LGT.

16. And, thus, the Claimant's claim is upheld.

I - REIMBURSEMENT OF THE AMOUNT PAID AND PAYMENT OF COMPENSATORY INTEREST

1. The Claimant further requests condemnation of the AT to reimburse the improperly assessed tax, in the amount of €28,308.56, plus the respective compensatory interest.

2. Article 24, No. 1, subparagraph b), of the RJAT provides that the arbitral decision on the merit of the claim not subject to appeal or challenge binds the tax administration as from the end of the period provided for appeal or challenge, and the latter must, in the exact terms of the upholding of the arbitral decision in favor of the passive taxpayer and until the end of the period provided for the spontaneous execution of decisions of the tax judicial courts, restore the situation that would have existed if the tax act that is the subject of the arbitral decision had not been performed, adopting the necessary acts and operations for this purpose, which is in keeping with the provision of Article 100 of the LGT (applicable by virtue of the provision of subparagraph a) of No. 1 of Article 29 of the RJAT) which establishes that "the tax administration is obliged, in case of total or partial upholding of a complaint, judicial challenge or appeal in favor of the passive taxpayer, to the immediate and full restoration of the legality of the act or situation that is the subject of the dispute, including the payment of compensatory interest, if applicable, as from the end of the period for execution of the decision."

3. Although Article 2, No. 1, subparagraphs a) and b), of the RJAT uses the expression "declaration of illegality" to define the competence of the arbitral tribunals functioning at CAAD, making no reference to condemnatory decisions, it should be understood that the competences include the powers that in judicial challenge proceedings are attributed to the tax courts, being this the interpretation that is in keeping with the sense of the legislative authorization on which the Government based itself to approve the RJAT, in which it proclaims, as the first guideline, that "the tax arbitration proceedings must constitute an alternative procedural means to the judicial challenge proceedings and to the action for recognition of a right or legitimate interest in tax matters."

4. Judicial challenge proceedings, despite being essentially a process of annulment of tax acts, admit condemnation of the Tax Administration in the payment of compensatory interest, as can be inferred from what is established in Article 43, No. 1, of the LGT and Article 61, No. 4, of the CPPT.

5. Thus, No. 5 of Article 24 of the RJAT, in saying that "payment of interest is due, regardless of its nature, as provided for in the general tax law and in the Tax Procedure and Process Code," should be understood as permitting the recognition of the right to compensatory interest in arbitral proceedings.

6. On the other hand, since the right to compensatory interest depends on the right to reimbursement of amounts improperly paid, which are its calculation base, the possibility of recognition of the right to compensatory interest is inherent to the possibility of appraisal of the right to reimbursement of such amounts.

7. It is thus incumbent on the Tribunal to assess the request for reimbursement of the improperly paid amount and payment of compensatory interest.

J - RIGHT TO REIMBURSEMENT OF THE AMOUNT PAID

1. As a result of the illegality of the contested assessment act, there is a right to reimbursement of the illegally assessed tax, by force of Article 24, No. 1, subparagraph b), of the RJAT and Article 100 of the LGT, as this appears essential to restore the situation that would have existed if the tax act that is the subject of the arbitral decision had not been performed.

2. Accordingly, the request for reimbursement of the amount of €28,308.56 is upheld.

L - COMPENSATORY INTEREST

1. The Claimant further requests the payment of compensatory interest.

2. In view of the foregoing, the assessment of the IMI, in the part covered by the annulment to be decreed, results from errors of fact and law attributable exclusively to the tax administration, insofar as the Claimant fulfilled its declaration obligation and these were committed by the latter and the latter could not have been unaware of different understandings.

3. Indeed, being demonstrated that the Claimant paid the impugned tax in an amount higher than what is due, by force of Article 61 of the CPPT and Article 43 of the LGT, the Claimant is entitled to the compensatory interest owed, said interest to be counted from the date of payment of the improperly assessed tax (annulled) until the date of issue of the respective credit note, counting the period for this payment from the beginning of the period for the spontaneous execution of the present decision (Article 61, Nos. 2 to 5, of the CPPTAX), all at the rate determined in accordance with the provision of No. 4 of Article 43 of the LGT.

4. The Claimant's request is thus upheld.

M - DECISION

The present Tribunal hereby decides:

(ii) To judge as well-founded the request for declaration of illegality of the additional tax assessment act for Municipal Property Tax (IMI) No. 2017..., for the fiscal year 2017, in the amount of €28,308.56 (twenty-eight thousand three hundred and eight euros and fifty-six cents).

(iii) To condemn the Respondent to reimburse to the Claimant this amount improperly assessed and paid in the amount of €28,308.56 (twenty-eight thousand three hundred and eight euros and fifty-six cents), plus the payment of compensatory interest already accrued for the period, counting from the payment of the tax in accordance with Nos. 2 to 5 of Article 61 of the CPPT at the rate determined in accordance with the provision of No. 4 of Article 43 of the LGT until full and effective reimbursement.

The process value is fixed at €28,308.56 taking into account the economic value of the case as measured by the value of the contested tax assessments, and accordingly the costs are fixed in the amount of €1,530.00 (one thousand five hundred and thirty euros), to be borne by the Respondent in accordance with Article 12, No. 2 of the Tax Arbitration Regime, Article 4 of the RCPAT and Table I attached thereto. – No. 10 of Article 35, and Nos. 1, 4 and 5 of Article 43 of the LGT, Articles 5, No. 1, subparagraph a) of the RCPT, 97-A, No. 1, subparagraph a) of the CPPT and 559 of the CPC).

Let it be notified.

Lisbon, 26 June 2018

The Arbitrator

Paulo Ferreira Alves