Stamp Tax Verba 28.1 TGIS: VPT Per Unit vs Aggregate for Non-Horizontal Property (CAAD 808/2014-T)

ARBITRAL DECISION

I. REPORT

A…, taxpayer no. …, resident at …Street, no. …-…, …-… Lisbon and B…, taxpayer no. …, resident at …Street, no. …- 6th Floor, …-… Lisbon (hereinafter referred to only as "Claimants"), following the rejection of their administrative review request, jointly filed a petition for the constitution of a single arbitral tribunal, pursuant to the provisions of item a) of no. 1 of article 2 and article 10, both of Decree-Law no. 10/2011, of 20 January (Legal Framework for Tax Arbitration, hereinafter referred to only as "LFTA"), with a view to:

a) Declaration of illegality of the Stamp Tax ("ST") assessment acts issued by the Tax and Customs Authority ("TCA" or "Respondent Entity"), in the total amount of 10,115.30 euros, on the grounds of item 28.1 of the General Table of Stamp Tax ("GTST"), dated 17 March 2014 and relating to the year 2013, contained in the collection documents attached to the arbitral petition as document no. 5 and the consequent annulment of those acts; and,

b) Condemnation of the Respondent Entity to refund the amounts unduly paid plus the respective indemnity interest.

To this end, they allege, in summary, that:

1. The Stamp Tax assessment acts suffer from the defect of violation of law, due to errors regarding their legal requirements, because:

i. In the case of urban properties not constituted under the horizontal property regime, composed of various floors or independent-use divisions with residential use, the subjection to Stamp Tax contained in Item 28.1 of the GTST is determined by the Taxable Patrimonial Value ("TPV") attributed to each of its floors or divisions and not by the TPV resulting from the sum of the same, in accordance with the norms of the Real Property Tax Code (RPTC) and with a teleological interpretation of the norm;

ii. As the TCA treated each fraction as independent economic units according to the rules set out in the Real Property Tax Code ("RPTC"), by referral of Item 28.1 of the GTST;

iii. None of the three fractions of the urban property of the Claimants with residential use has a TPV equal to or greater than €1,000,000.00;

iv. The ST assessments also violate the principle of tax equality, since, if the property in question had been constituted under the horizontal property regime, there would be no place for ST taxation, given that the TPV attributed to each of its fractions/floors intended for residential use does not exceed €1,000,000.00.

The arbitral tribunal was constituted on 10-04-2015, in accordance with the provisions of item c) of no. 1 of article 11 of the LFTA.

Notified to this effect, the Respondent Entity filed a response, in which it invokes, in summary:

i. The situation of the Claimant's property falls under item 28.1 of the GTST, with the Claimants being owners of a single property and not of autonomous fractions. The Claimants sought to apply to their property a taxation regime analogous to that provided for horizontal property;

ii. The TPV relevant for the purposes of item 28 of the GTST is the total patrimonial value of the urban property and not the patrimonial value of each of the parts that compose it, even though they are susceptible to independent use;

iii. The unity of the urban property in vertical property composed of various floors or divisions is not affected by the fact that they are susceptible to independent economic use, remaining a single property, and thus its distinct parts cannot be equated to the autonomous fractions of a property constituted under horizontal property;

iv. Any other interpretation would violate the principle of legality provided in art. 103 of the Portuguese Constitution;

v. The taxation in question did not violate the principle of equality, since vertical property and horizontal property are differentiated legal institutions, the latter implying merely a legal alteration, giving rise to no new assessment, and the legislator may subject properties in regimes of horizontal and vertical property to a distinct and discriminatory tax framework, "without such discrimination necessarily being considered arbitrary";

Concluding for the legality and maintenance of the ST assessment acts.

As this was a matter strictly of law, the Arbitral Tribunal decided to dispense with the holding of the meeting provided for in article 18 of the LFTA, as well as with the presentation of briefs, at the proposal of the Respondent Entity and with the express consent of the Claimants.

The Arbitral Tribunal was duly constituted and is materially competent, in accordance with the provisions of art. 2, no. 1, item a) of the LFTA.

The parties have legal personality and capacity, are legitimate and are duly represented, as provided for in articles 4 and 10, no. 2 of the LFTA and art. 1 of Ordinance no. 112-A/2011, of 22 March.

The proceedings do not suffer from any nullities and there are no exceptions that need to be addressed or that prevent the examination of the merits of the case.

II. GROUNDS

2.1 Facts

On the basis of the elements contained in the proceedings and of interest to the decision to be rendered, the following facts are established as proven:

1. The Claimants are co-owners, in the proportion of ½ each, of the urban property constituted under the regime of full property (not constituted under horizontal property regime) located at …, no. … to …, parish of …, municipality of Lisbon, registered in the urban property register of the respective parish under article …, with a total taxable patrimonial value of €1,442,290.00. (see Document no. 4 attached to the arbitral petition, the content of which is regarded as reproduced);

2. The identified property in full property is composed of five floors or divisions with independent use (ground floor, 1st, 2nd floors and attic dependent on the 2nd floor), arranged over 4 storeys. (see Document no. 4 attached to the arbitral petition, the content of which is regarded as reproduced);

3. Of the five floors or divisions with independent use of the urban property identified above, two are allocated to commerce (shops no. … and …), whose TPV totals €430,760.00 (see Document no. 4 attached to the arbitral petition, the content of which is regarded as reproduced);

4. And the remaining three floors or divisions with independent use are allocated to residential use, whose TPV totals €1,011,530.00 (see Documents no. 4 and 5 attached to the arbitral petition, the contents of which are regarded as reproduced);

5. The TPV attributed to each of the three floors or divisions with independent use intended for residential use of the urban property identified above is:

1st floor: €357,670.00;

2nd floor: €357,670.00; and,

Attic: €296,190.00. (see Documents nos. 4 and 5 attached to the arbitral petition, the contents of which are regarded as reproduced);

1. Claimant A… was notified of the Stamp Tax assessment acts for the year 2013, with assessment date of 2014-03-17, contained in the collection documents for payment of the first instalment of the tax assessed for each floor or division with independent use allocated to residential use, at the rate of 1%, with the payment deadline in April 2014, as follows detailed:

(see document no. 5 attached to the arbitral petition, the content of which is regarded as reproduced);

1. Claimant B… was notified of the Stamp Tax assessment acts for the year 2013, with assessment date of 2014-03-17, contained in the collection documents for payment of the first instalment of the tax assessed for each floor or division with independent use allocated to residential use, at the rate of 1%, in the respective proportion, with the payment deadline in April 2014, as follows detailed:

(see document no. 5 attached to the arbitral petition, the content of which is regarded as reproduced);

1. On 29 April 2014, Claimant B… made payment of the first instalment of the assessed Stamp Tax (see Document no. 5 attached to the arbitral petition, the content of which is regarded as reproduced);

2. Claimant B… was notified of the Stamp Tax assessment acts for the year 2013, with assessment date of 2014-03-17, contained in the collection documents for payment of the second instalment of the tax assessed for each floor or division with independent use allocated to residential use, at the rate of 1%, in the respective proportion, with the payment deadline in July 2014, as follows detailed:

(see Document no. 5 attached to the arbitral petition, the content of which is regarded as reproduced);

1. On 28 July 2014, Claimant B… made payment of the second instalment of the assessed Stamp Tax (see Document no. 5 attached to the arbitral petition, the content of which is regarded as reproduced);

2. Claimant A… was notified of the Stamp Tax assessment acts for the year 2013, with assessment date of 2014-03-17, contained in the collection documents for payment of the third instalment of the tax assessed for each floor or division with independent use allocated to residential use, at the rate of 1%, in the respective proportion, with the payment deadline in November 2014, as follows detailed:

(see Document no. 5 attached to the arbitral petition, the content of which is regarded as reproduced);

1. On 6 November 2014, Claimant A… made payment of the third instalment of the assessed Stamp Tax. (see Document no. 5 attached to the arbitral petition, the content of which is regarded as reproduced);

2. Claimant B… was notified of the Stamp Tax assessment acts for the year 2013, with assessment date of 2014-03-17, contained in the collection documents for payment of the third instalment of the tax assessed for each floor or division with independent use allocated to residential use, at the rate of 1%, in the respective proportion, with the payment deadline in November 2014, as follows detailed:

(see Document no. 5 attached to the arbitral petition, the content of which is regarded as reproduced);

1. On 1 November 2014, Claimant B… made payment of the third instalment of the assessed Stamp Tax (see Document no. 5 attached to the arbitral petition, the content of which is regarded as reproduced);

2. In the notification documents for payment of Stamp Tax for the year 2013, the Patrimonial Value of the Property is listed as – total subject to Tax: 1,011,530.00. (see Document no. 5 attached to the arbitral petition, the content of which is regarded as reproduced);

3. The Stamp Tax assessments identified above were made by reference to item 28.1 of the GTST (see Document no. 5 attached to the arbitral petition, the content of which is regarded as reproduced);

4. From the assessment acts contained in the identified collection documents, a total tax of 10,115.30 euros resulted (see Document no. 5 attached to the arbitral petition, the content of which is regarded as reproduced);

5. The Claimants filed administrative review requests against the identified ST assessment acts which were processed at the Lisbon 4 Finance Service under case numbers … 2014 … and … 2014 …, which were denied by order issued by the Finance Director, by substitution, on 2014.09.30. (see Documents nos. 1, 2 and 3 attached to the arbitral petition, the contents of which are regarded as reproduced);

Given the positions taken by the parties and because the question to be decided by this arbitral tribunal is strictly one of law (identified below), the facts established were based on the documents attached to the proceedings and identified in each of the points of the factual matter, which were not challenged.

There are no other facts not proven with interest for the decision of the case.

2.2 Law

The question to be decided in these arbitral proceedings is whether the tax assessment acts for Stamp Tax are illegal, due to erroneous interpretation and application of item no. 28.1 of the GTST, added by Law no. 55-A/2012, of 29 October, when it is considered that the taxable patrimonial value ("TPV") of an urban property in full property (not constituted under the horizontal property regime), with floors or divisions of independent use allocated to residential use that is relevant for the purposes of the scope of application of that item, is constituted by the value resulting from the sum of the TPV attributed to each of those floors or divisions. Whether the Stamp Tax assessments further suffer from the defect of unconstitutionality, due to violation of the principle of equality.

On the question that is the subject of these proceedings, this Arbitral Tribunal has already pronounced itself, namely in the decisions rendered in case numbers 50/2013-T; 132/2013-T and 194/2014-T, whose arbitral jurisprudence we follow.

As appears from the established facts, the TCA services assessed Stamp Tax on the Claimants, at the rate of 1%, considering that the TPV of the urban property constituted under full property, of which the Claimants are co-owners, is greater than €1,000,000.00, taking into account the sum of the TPV of each of the floors or divisions with independent use allocated to residential use that compose that property.

The Claimants allege that the TCA incorrectly assessed Stamp Tax as the legal requirements for the application of item no. 28.1 of the GTST are not met, since the TCA cannot consider the total TPV of the three floors or divisions with independent use of the urban property in question, when the legislator itself determined for the purposes of the Real Property Tax Code that what is relevant is the unit as an autonomous economic value.

For its part, the Respondent contends, in summary, that the TPV that is relevant for the purposes of application of item 28.1 of the GTST is the total TPV of the urban property and not the TPV of each of the parts that compose the property in vertical property, even though they are susceptible to independent use.

Let us examine this.

Article 4 of Law no. 55-A/2012, of 29 October, added to the GTST item no. 28, with the following wording (in its original version):

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

28.1 — For property with residential use — 1%;

28.2 — For property, when the taxpayers who are not individuals are residents in a country, territory or region subject to a clearly more favourable tax regime, as listed in an ordinance approved by the Minister of Finance — 7.5%."

(italics in original)

Article 6 of the above-mentioned Law provides, as regards the year 2013, that, "the assessment of the stamp tax provided for in item no. 28 of the respective General Table should be levied on the same taxable patrimonial value used for the purpose of assessing real property tax to be carried out in that year."

At the date of the facts, the legal requirements for the application of item 28.1 of the GTST are therefore urban properties, with residential use, whose TPV contained in the register, in accordance with the RPTC, is equal to or greater than €1,000,000.00.

Law no. 55-A/2012, of 29 October, by reference to item 28 of the GTST, also established various amendments to the Stamp Tax Code, notably as regards its assessment and payment, expressly referring to the rules provided in the RPTC (see art. 23, no. 7, art. 44, no. 5, art. 46, no. 5, art. 49, no. 3 of the Stamp Tax Code) with the necessary adaptations, providing in no. 2 of art. 67 of the Stamp Tax Code that, "To matters not regulated in this Code concerning item no. 28 of the General Table, the provisions of the RPTC shall apply, on a subsidiary basis."

From the aforementioned norms, it is noted that the concept of "property with residential use" provided for in the aforementioned item no. 28, no. 1 is not defined in the Stamp Tax Code, nor in the cited Law, nor in the RPTC, the norms of which are of subsidiary application, as provided for in no. 2 of art. 67 of the Stamp Tax Code.

On this matter, this Arbitral Tribunal has already pronounced itself in the decision rendered in case no. 53/2013-T, which we follow here, in understanding that a "property with residential use" must «be a property that already has effective allocation for that purpose».

It is unambiguous that a property in full property or under the regime of vertical property constitutes an urban property, in accordance with the provisions of no. 1 of article 2 and article 4 of the RPTC, applicable on a subsidiary basis by force of the provisions of art. 67 of the Stamp Tax Code, and it is equally certain that, both for the purposes of the scope of application of item 28.1 of the GTST and for the purposes of classification of urban properties, as provided for in article 6 of the RPTC (also of subsidiary application), the legislator makes no distinction between properties constituted in vertical property and under the horizontal property regime (as mentioned in the arbitral decisions rendered in case numbers 50/2013-T and 132/2013-T), the legal requirement for taxation of item 28.1 being urban properties that are effectively already allocated to residential use, as what is relevant is the effective and current use of each of the properties.

What then will be the taxable patrimonial value relevant in the case of properties in full property composed of floors or divisions susceptible to independent use with "residential use", for the purposes of the scope of application of item 28.1 of the GTST?

The taxable patrimonial value of each property is determined in accordance with articles 38 and following of the RPTC. In the case of a property under the regime of full property or vertical property, each floor or division with independent use that comprises it is equally subject to assessment, with a taxable patrimonial value being attributed to each of those floors or divisions, in accordance with the provisions of articles 12 and 38 and following of that normative.

Indeed, no. 1 of article 12 of the RPTC establishes that "the property registers are records containing, in particular, the characterization of properties, their location and taxable patrimonial value, the identification of owners (…)", with its no. 3 providing that, "Each floor or part of property susceptible to independent use is considered separately in the matriculation registration, which also discriminates its respective taxable patrimonial value", and, in accordance with the provisions of no. 1 of article 119 of the RPTC, it is on that separately considered taxable patrimonial value that the Real Property Tax will be calculated and assessed in relation to each floor or part with independent use that comprise an urban property under the regime of vertical or full property, given the autonomy of each of those units.

As written by Silvério Mateus and Freitas Corvelo, in "Real Property Tax and Stamp Tax, Annotated and Commented", 1st Edition, Engifisco, pp. 159 and 160, "Another aspect that should be highlighted in the register concerns the need to show the autonomy that, within the same property, may be attributed to each of its parts, functionally and economically independent. In these cases, the matriculation registration not only must refer to each of these parts but must make express reference to the patrimonial value corresponding to each of them.

An example that may illustrate this situation is the case of an urban property, not constituted under the horizontal property regime, composed of various floors. (...) However, since each of these units may be the subject of leasing or any other use by its respective owner, the register must evidence these units and a patrimonial value must be attributed to each of them." (italics in original)

As evidenced in the Arbitral Award rendered in case no. 194/2014-T, which we follow here, "the Real Property Tax Code establishes, both as to the matriculation registration and the discrimination of the respective taxable patrimonial value, and as to the assessment of the tax, the autonomization of the parts of urban property susceptible to independent use and the segregation/individualization of the TPV relating to each floor or part of property susceptible to independent use.

Thus, each property, in accordance with the concept defined by article 2 of the RPTC, corresponds to a single article in the register (no. 2 of article 82 of the RPTC), but, according to no. 3 of art. 12 of the same Code, referring to the concept of property register (...), "each floor or part of property susceptible to independent use is considered separately in the matriculation registration, which also discriminates its respective taxable patrimonial value (...).

That is, the rule is autonomization, the characterization as "property" of each part of a building, provided it is functionally and economically independent, susceptible to independent use, in accordance with the concept of property defined in no. 1 of article 2 of the RPTC: property is any fraction (of land, encompassing water, plantations, buildings and constructions of any nature incorporated in or situated on it, with a character of permanence) provided it forms part of the patrimony of an individual or legal entity and, in normal circumstances, has economic value, as well as water, plantations, buildings or constructions, in the aforementioned circumstances, endowed with economic autonomy."

Thus, when no. 4 of article 2 provides that "For the purposes of this tax, each autonomous fraction, under the horizontal property regime, is deemed to constitute a property", it does not establish properly an exceptional or special regime for properties under horizontal property.

After all, each building under horizontal property (article 92 of the RPTC) has only a single matriculation registration (no. 1), generically describing the building and mentioning the fact that it is under a horizontal property regime (no. 2), and the matriculation autonomy is made concrete in the attribution to each of the autonomous fractions, described in detail and individualized, of a capital letter, according to alphabetical order (no. 3). This appears to be the specificity of buildings under horizontal property; in other cases, of properties under vertical or full property, with divisions or floors with autonomy but without the status of horizontal property, the register also establishes the autonomy but evidencing the units with indication of the type of floor/storey." (italics in original)

Indeed, when an urban property constituted in full property moves to the horizontal property regime, it maintains the same matriculation article number, and equally maintains the taxable patrimonial value that was attributed to each of its autonomous parts or floors, with those fractions then being identified by letters of the alphabet, since there is no place for a new assessment, with only a purely legal alteration of the property's regime occurring. It is thus verified that, under Real Property Tax, the rules and principles are the same, whether for properties constituted under the horizontal property regime, or for properties constituted under full property or vertical property, namely as to the provisions regarding assessment and determination of TPV, registration in the register, and assessment of Real Property Tax.

Considering that in light of the RPTC, the floors or divisions with independent use that comprise an urban property under the regime of full or vertical property are taxed autonomously, since the Real Property Tax is assessed individually on the TPV attributed to each of those floors or divisions with independent use, given the relevance of their autonomy, necessarily, the principles and rules will have to be the same under Stamp Tax (notably, as to the provisions regarding assessment and determination of TPV, registration in the register, and assessment of Real Property Tax), both because item 28.1 of the GTST so requires at its end, and by subsidiary application, by force of the provisions of no. 2 of art. 67 of the Stamp Tax Code.

In accordance with this, and, on the assumption that the legislator in question «established the most correct solutions and knew how to express its intent in adequate terms» (in accordance with what is prescribed in no. 3 of art. 9 of the Civil Code, by referral of art. 11 of the General Tax Law), only the floors, parts or divisions with independent use with residential use, whose TPV contained in the register is equal to or greater than €1,000,000.00, are covered by the scope of application of item 28.1 of the GTST.

As highlighted in the arbitral decision rendered in case no. 132/2013-T, "The uniform criterion that is thus required is that which determines that the scope of application of the norm in question only takes place when any of the parts, floors or divisions with independent use of property in horizontal or full property with residential use possesses a TPV greater than €1,000,000.00" (italics in original) and not when this value results from the sum of the TPV attributed to each floor or division with independent use.

As also mentioned in the arbitral decision rendered in case no. 50/2013-T, "The criterion sought by the TCA, of considering the value of the sum of the TPV attributed to the parts, floors or divisions with independent use, on the argument that the property is not constituted under the horizontal property regime, finds no legal support and is contrary to the criterion that applies under the RPTC and, by referral, under Stamp Tax.

To which is added the fact that the law itself expressly establishes, in the final part of item 28 of the GTST, that the Stamp Tax to be levied on urban properties of value equal to or greater than €1,000,000.00 – "on the taxable patrimonial value used for the purpose of Real Property Tax."

In light of the foregoing, one cannot agree with the TCA in stating that the Claimants seek to apply to their property a taxation regime analogous to that provided for horizontal property in the RPTC.

For, it is the very norm provided for in item 28.1 of the GTST at its end that determines that Stamp Tax is levied "on the taxable patrimonial value used for the purpose of Real Property Tax", and therefore, what is relevant for the purposes of tax scope of application is the individually determined taxable patrimonial value for each of the parts, floors or divisions with independent use on which Real Property Tax is assessed annually, that is, the assessment of Stamp Tax follows the rules provided for in the RPTC, by express referral of the aforementioned item 28 and no. 2 of art. 67 of the Stamp Tax Code.

The TCA, to assess item 28.1 of the GTST here in question, departed from each of those floors or divisions with independent use, in accordance with the norms of the RPTC, and then summed that taxable patrimonial value, applying the 1% rate on the taxable patrimonial value attributed to each of those divisions with residential use, overlooking that the property in question is composed of further divisions with independent use allocated to other purposes, specifically to commercial purposes.

Furthermore, and in violation of what is provided in the law, the TCA cannot arbitrarily sum only the TPV of the floors or independent divisions with residential use, to reach a taxable patrimonial value equal to or greater than €1,000,000.00, when the property in question is composed of other floors or divisions with independent uses allocated to other purposes, other than residential, as results from the established facts.

For, following the logic of the TCA, in defending that it is a legal requirement for the scope of application of item 28.1 of the GTST the global patrimonial value of the property and not that of each of its parts, then it cannot assess the tax, given that the property of which the Claimants are co-owners is composed of floors or divisions with independent use allocated to residential and commercial use, totaling a taxable patrimonial value of €1,442,290.00 (and not €1,011,530.00), thus not meeting the legal requirements for the scope of application of item 28.1 of the GTST.

The interpretation to the effect that what is relevant in the scope of application provision of item 28.1 of the GTST is the TPV attributed to each of the autonomous parts, floors or divisions with independent use with residential use and not the value resulting from the sum of those taxable patrimonial values is what equally results from its ratio legis, as required by no. 1 of art. 9 of the Civil Code, applicable by force of the provisions of art. 11 of the General Tax Law.

Indeed, in the presentation and discussion of Law Proposal no. 96/XII/2nd (which can be consulted in the Parliamentary Record of the Portuguese Parliament, I Series no. 9/XII/2012, of 11-10-2012) in the Parliament, the Secretary of State for Tax Affairs declared at one point the following:

"For the first time in Portugal a special tax on high-value properties intended for residential use is being created. This rate will be 0.5% to 0.8% in 2012, and 1% in 2013, and will apply to homes valued at €1 million or more. With the creation of this additional tax rate, the tax burden required of these owners will be significantly increased in 2012 and 2013."

(bold and italics in original)

To this end, we follow the arbitral decision rendered in case no. 50/2013-T in referring to the fact that "The legislator in introducing this legislative innovation considered as the determining element of the contributive capacity urban properties, with residential use, of high value (luxury), more precisely, of value equal to or greater than €1,000,000.00, on which a special rate of stamp tax was thereafter levied, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of superficies of high-value urban properties with residential use. For this reason, the criterion was the application of the new rate to urban properties with residential use, whose TPV is equal to or greater than €1,000,000.00.

This is what is concluded from the analysis of the discussion of Law Proposal no. 96/XII in the Parliament, available for consultation in the Parliamentary Record of the Portuguese Parliament, I series, no. 9/XII/2 of 11 October 2012.

The justification of the measure designated as "special tax on high-value urban residential properties" is based on the invocation of the principles of social equity and tax justice, calling those holding high-value properties intended for residential use to contribute in a more intense manner, applying the new special rate on "homes valued at €1 million or more."

It is clear that the legislator understood that this value, when attributed to a residence (house, autonomous fraction or floor with independent use), expresses a contributive capacity above the average and, as such, susceptible to determining a special contribution to ensure the fair distribution of the tax burden."

(italics in original)

According to the established facts, the TPV of each of the floors or divisions with independent use allocated to residential use, which comprise the property constituted in full property of which the Claimants are co-owners, and, which was determined in accordance with the rules of the RPTC, is less than €1,000,000.00, and therefore, the legal requirements for taxation of item 28.1 of the GTST are not met.

Therefore, the ST assessment acts, subject to these arbitral proceedings, in the total amount of €10,115.30, suffer from the defect of violation of the provisions of item 28.1 of the GTST and no. 2 of art. 67 of the Stamp Tax Code, due to error regarding its legal requirements, declaring thereby the illegality of those assessment acts, with the consequent annulment thereof [art. 135 of the Code of Administrative Procedure, of subsidiary application under art. 29 no. 1, items a) and d) of the LFTA].

The examination of the other questions raised by the Claimants is thus foreclosed, namely the alleged defect of unconstitutionality, as the illegality of the above-identified assessments has been declared, due to a substantive defect that prevents the renewal of the acts, effectively securing the protection of the rights of the Claimants, in accordance with the provisions of art. 124 of the Code of Tax Procedure and Process, subsidiarily applicable by force of the provisions in item a) of no. 1 of art. 29 of the LFTA.

III. Refund of Tax Paid and Indemnity Interest

The Claimants further request the refund of the tax already paid, plus the payment of indemnity interest.

Let us examine this.

Article 24, item b), no. 1 of the LFTA provides that the TCA must "restore the situation that would exist if the tax act subject to the arbitral decision had not been carried out, adopting the acts and operations necessary for this purpose", in the exact terms of the success of the arbitral decision in favour of the taxpayer and until the expiration of the deadline provided for the spontaneous execution of sentences of tax courts, in the event that no appeal has been filed or the arbitral decision which decided on the merits of the petition has not been impugned.

Moreover, article 100 of the General Tax Law - under the heading "effects of a decision favourable to the taxpayer" - provides that the "tax administration is obliged, in case of total or partial success of administrative review claims or appeals, or of judicial proceedings in favour of the taxpayer, to immediately and fully restore the situation that would exist if the illegality had not been committed, including the payment of indemnity interest, in the terms and conditions provided by law".

Therefore, in light of the provisions of article 100 of the General Tax Law and item b) of no. 1 of article 24 of the LFTA, it is unambiguous that in this case the Claimants are entitled to a refund of the tax paid, as a consequence of the declaration of illegality of the assessment acts, subject to these proceedings.

Let us now examine the request for payment of indemnity interest.

No. 5 of the cited article 24 of the LFTA further provides that "payment of interest, regardless of its nature, is due, in the terms provided in the general tax law and in the Code of Tax Procedure and Process". It results from the aforementioned legal provision that in case of success of an arbitral decision in favour of the taxpayer, there will be place for the payment of indemnity interest, in accordance with no. 1 and 2 of article 43 and article 100 of the General Tax Law.

No. 1 of article 43 of the General Tax Law establishes that "indemnity interest is due when determined, in administrative review or judicial impugnation, that there was error imputable to the services from which resulted payment of the tax debt in an amount greater than legally due". Thus, as stated by Jorge Lopes de Sousa, in "Guide to Tax Arbitration", Almedina, March 2013, page 223, the right to indemnity interest depends on the verification of the following requirements:

"- that there be an error in an act of assessment of a tax;

• that it be imputable to the services (directly or through general guidance);

• that the existence of that error be determined in proceedings of administrative review or judicial impugnation;

• that from that error resulted payment of a tax debt in an amount greater than legally due".

In the case at hand, there is no doubt that the tax assessment acts for Stamp Tax, subject to this arbitral decision, were due to an error imputable to the services, that is, an error regarding the legal requirements, in light of the considerations described above, to which reference is made. From that error resulted the payment of the tax, as established by the facts.

Therefore, all requirements being met, the Claimants will be entitled to the payment of indemnity interest, which will be calculated and accounted for in accordance with article 61 of the Code of Tax Procedure and Process, that is, from the date on which the Claimants made the payments of the tax, calculated on the basis of the amounts paid until the date of the full reimbursement of the amounts paid, at the legal rate.

IV. DECISION

In these terms and on the grounds stated, this Arbitral Tribunal decides:

a) To uphold the petition for declaration of illegality of the Stamp Tax assessment acts, contained in the identified collection documents, in the total amount of €10,115.30, with the consequent annulment thereof;

b) To condemn the Tax and Customs Authority to reimburse the Claimants for the amounts they paid;

c) To condemn the Tax and Customs Authority to pay the Claimants indemnity interest, at the legal rate, counted from the date on which they made the payments until the date of the full reimbursement of those amounts.

The value of the case is set at €10,115.30, in accordance with the provisions of item a) of no. 1 of art. 97-A of the Code of Tax Procedure and Process and no. 2 of art. 3 of the Regulation of Costs in Tax Arbitration Proceedings, as well as of art. 306 of the Code of Civil Procedure.

Costs to be borne by the Respondent Entity, in the amount of €918.00, in accordance with the provisions of no. 4 of art. 22 of the LFTA and no. 4 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached to the same Regulation.

Notify parties.

Lisbon, 10 September 2015.

The Arbitrator,

Conceição Pinto Rosa.