Stamp Tax on Building Land (Verba 28.1 TGIS) – CAAD Arbitration 813/2014-T

ARBITRAL DECISION

STATEMENT OF FACTS

1. On 15 December 2014, …, S.A., taxpayer no. …, hereinafter referred to as the Petitioner, with registered office in Portugal, requested the constitution of an arbitral tribunal and filed a petition for an arbitral decision, in accordance with subsection a) of paragraph 1 of Article 2 and subsection a) of paragraph 1 of Article 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority (hereinafter referred to as AT) is the Respondent.

2. The Petitioner is represented, in these proceedings, by its representative, Dr. B…, and the Respondent is represented by jurists Dr. C… and Dr. D….

3. The request for constitution of the arbitral tribunal was accepted by the Honorable President of the CAAD and was notified to the Respondent on 15 December 2014.

4. By means of the request for constitution of the arbitral tribunal and the petition for arbitral decision, the Petitioner seeks the annulment of the third (3rd) installment, relating to the act of assessment of Stamp Duty, carried out under entry 28.1 of the General Table of Stamp Duty, relating to the year 2013, in the amount of € 10,337.92 (ten thousand, three hundred and thirty-seven euros and ninety-two cents), on the urban properties consisting of land intended for urban construction registered under articles … and …, parish of …, of which it is the owner.

5. Once the formal regularity of the petition presented was verified, in accordance with the provisions of subsection a) of paragraph 2 of Article 6 of the RJAT and the Petitioner having not proceeded to appoint an arbitrator, Dr. Jorge Carita was appointed by the President of the Deontological Council of the CAAD.

6. The Arbitrator accepted the appointment made, and the arbitral tribunal was constituted on 20 February 2015, at the headquarters of the CAAD, located at Avenida Duque de Loulé, no. 72-A, in Lisbon, as evidenced by the minutes of the constitution of the arbitral tribunal which were drawn up and which are attached to these proceedings.

7. No exceptions having been raised, there being no need for production of additional evidence beyond that which is already documented in the proceedings, no need being apparent for the parties to correct their respective procedural pleadings, and the proceedings containing all the necessary elements for the rendering of the decision, for reasons of procedural economy and celerity and the prohibition of unnecessary acts, in light of the position manifested by the parties, expressed by the Respondent through the response it submitted, and tacitly (given the silence of the Petitioner), the Tribunal deemed it appropriate to dispense with the holding of the meeting referred to in Article 18 of the RJAT, as well as the filing of further submissions.

8. The Tribunal, in compliance with paragraph 2 of Article 18 of the RJAT, designated 30 June 2015 as the date for the rendering of the arbitral decision, having warned the Petitioner that it should proceed with the payment of the subsequent arbitral fee, in accordance with paragraph 3 of Article 4 of the Regulation of Costs in Tax Arbitration Proceedings, and communicate such payment to the CAAD.

II. THE PETITIONER'S POSITION

The Petitioner supports its petition, in summary, as follows:

The Petitioner supports the petition for annulment of the third (3rd) installment, relating to the act of assessment of Stamp Duty to which it was subjected in the year 2013, with respect to construction land of which it is the owner, located in the parish of …, municipality of …, district of Lisbon, registered under articles … and …, as illegal, insofar as it suffers from:

a) Error concerning the prerequisites for the application of entry 28.1 of the TGIS, insofar as it understands that entry 28 of the General Table of Stamp Duty, amended by Law no. 55-A/2012, of 29 October, provides that "any and all urban property with tax patrimonial value exceeding one million euros would have to contribute to the public treasury, in the context of stamp duty, with 1% of that value." Thus, "despite the linear and direct interpretation of these two entries [28 and 28.1 of the TGIS], established in clear and objective wording, only the Tax Administration understood that plots of land for urban construction were properties subject to stamp duty, provided they had tax patrimonial value registered in the property matrix exceeding one million euros, contrary to taxpayers and the courts, from the first instance to the Supreme Administrative Court, passing through the central administrative courts - North and South - and the CAAD – Center for Administrative Arbitration, which have understood and continue to understand the contrary."

b) It continues, mentioning that: "the option was to seek new wording for the aforementioned entry, which occurred with the Budget for 2014, thus coming to contemplate, not only urban properties, but also '... construction land whose construction, authorized or intended, is for housing...'. Now, 'when the legislator gives new wording to the said entry, in our view, it continues to be very clear, very objective and very precise as to what it wants to be taxed, in the context of stamp duty, with respect to construction land, namely that it wants only and exclusively construction land to be taxed in which the construction authorized or intended for it is for housing, which, conversely, if the authorized or intended construction is for mixed use - commerce and housing - does not constitute a source of income subject to stamp duty under entry 28.1 of the TGIS.'"

c) It further states that, "for the legislator, as it appears, it is not any land with a value equal to or exceeding one million euros that automatically becomes subject to stamp duty at the rate of 1%, but, for this to be possible, it is necessary that it be authorized or intended for construction and that this construction be for housing, therefore it seems clear that if any construction is authorized or intended that is simultaneously for housing and commerce, then the patrimonial value that is equal to or exceeding one million euros, attributed to that land, is automatically outside the scope of taxation, and is not taxed under that duty.'"

d) It specifies further that in the case of the Petitioner there are "authorized constructions devoted simultaneously to housing and commerce, namely, according to Permit no. …/2006(…), each one of the buildings authorized therein has an area of 6,750.00 m2, devoted to housing, of 840 m2, devoted to commerce and of 3,160.00 m2, devoted to parking and storage facilities.", questioning, consequently, "if the areas occupied by the authorized buildings to be constructed are not, all of them, devoted to housing, how can the tax patrimonial value resulting from the evaluations be subject to stamp duty, if there is nothing in the Law that determines that in this type of evaluations, one distinguishes the tax patrimonial value of the area that will be occupied by the part devoted to housing, by the part devoted to commerce and by the parts devoted to parking and storage facilities?"

e) It further argues that "admitting, without conceding, that even construction land for urban development valued at an amount equal to or exceeding one million euros, where constructions are authorized, simultaneously, for housing and commerce, are a source of income subject to stamp duty under the aforementioned entry 28.1, it is still questioned whether neither these construction lands nor those in which constructions are only for housing are sources of income for that duty.'"

f) It concludes, alluding to the fact that: "Knowing that the real estate that will be constructed on the aforementioned plots of land [belonging to the Petitioner] consist of 40 dwelling units, all of them independent from each other and capable of generating separate income, it is certain and sure that the tax patrimonial value attributed to each of them in evaluation will never be equal to or exceeding €1,000,000.00.", therefore, the maintenance of the disputed assessments constitutes an infringement of the Principle of Ability to Pay and the Principle of Equality.

g) It concludes thus, in the sense that "we will certainly be faced with the unconstitutionality of entry 28.1 of the TGIS, which it seeks to have established."

III. THE RESPONDENT'S RESPONSE

On its part, the AT alleges, in its response:

a) With regard to the alleged error concerning the prerequisites of the assessments, the Respondent understands that: "the concept of dedication of the urban property is found in the section relating to the evaluation of real estate, which is well understood because the evaluation of the real estate (purpose) incorporates value to the real estate, constituting a fact of distinction that is determinant (coefficient) for evaluation purposes. As results from the expression '... value of authorized buildings', contained in Article 45, paragraph 2 of the CIMI, the legislator chose to determine the application of the methodology of evaluation of properties in general, to the evaluation of construction land, and therefore applicable to them is the dedication coefficient provided for in Article 41 of the CIMI."

b) The Respondent argues that: "for purposes of determining the tax patrimonial value of construction land, it is clear that the dedication coefficient applies in the context of evaluation, therefore its consideration for purposes of application of entry 28 of the TGIS cannot be ignored, with the following order of considerations being relevant:

• in the application of law to specific cases it is important to determine the exact meaning and scope of the norm, so as to reveal the rule contained in it, an indispensable condition so that it can be applied, in accordance with the techniques and interpretive elements generally accepted and provided for in Article 9 of the Civil Code (Article 11 of the LGT);

• Article 67, paragraph 2 of the CIMI mandates the subsidiary application of the provisions of the CIMI;

• The dedication of the property (suitability or purpose) is a coefficient that concurs for the evaluation of the property, in the determination of tax patrimonial value, applicable to construction land;

• Entry 28 of the TGIS itself refers to the expression 'properties with residential dedication', calling for a qualification that overlies the species provided for in paragraph 1 of Article 6 of the CIMI".

c) In this sequence, the AT understands that "the reference to properties with residential dedication contained in entry 28 of the CIS should be understood in a broad manner, encompassing both built residential properties and construction land, already from the wording of the norm itself and the concept used", particularly because "the legislator does not refer to 'properties intended for housing', having opted for the notion of 'residential dedication'. This is a different and broader expression whose meaning must be found in the need to integrate other realities beyond those identified in Article 6, paragraph 1, subsection a) of the CIMI."

d) Furthermore, it states that: "tax law considers as an integral element for purposes of evaluating construction land, the value of implementation, which varies between 15% and 45% of the value of authorized or intended buildings based on the urbanization and construction project. (...) therefore, through the Legal Framework for Urbanization and Construction and the Municipal Master Plans it is possible, 'much before the actual construction of the property, (...) to ascertain and determine the dedication of the construction land'."

e) Concluding, to the effect that "the petitioner's plots of construction land are intended for housing, since only a very small percentage is intended for commerce,", therefore, the Petitioner's thesis concerning the illegality of the Stamp Duty assessment is lacking.

f) It concludes, also, stating that "the acts of assessment of stamp duty contested, in terms of substance, did not violate any legal or constitutional provision, and should be maintained in the legal order."

IV. PRELIMINARY MATTERS

The Tribunal is competent and is duly constituted, in accordance with subsection a) of paragraph 1 of Article 2 and Articles 5 and 6, all of the RJAT.

The parties have legal personality and capacity, show themselves to be legitimate and are duly represented.

There are no nullities, exceptions, or preliminary issues that prevent the Tribunal from considering the merits of the petition.

V. FINDINGS OF FACT

With interest for the decision, the following facts are deemed proven:

A. The Petitioner is the owner of two plots of construction land, located in …, with an area of 1,560 m2 each, designated as lot 38 and 39, registered in the property registry of the parish of …, municipality of …, under articles …, …, respectively. (see Docs. no. 3 and 4 attached with the initial petition);

B. The construction land was evaluated as such in 2012, with a tax patrimonial value (VPT) of € 1,550,690.00 (one million, five hundred and fifty thousand, six hundred and ninety euros) being determined for each of them (Docs. no. 3 and 4 attached with the initial petition);

C. In carrying out these patrimonial valuations, the AT applied a dedication coefficient, which was, in this case, that of "housing". (see Docs. no. 3 and 4 attached with the initial petition);

D. On the land there are, as yet, no buildings, but constructions have been authorized devoted, simultaneously, to housing and commerce, according to Permit no. …/2006, issued by the Municipal Council of ... (see Doc. no. 5 attached with the initial petition);

E. In November 2014, the Petitioner was notified to proceed with payment of the 3rd installment of the act of assessment of Stamp Duty, relating to the year 2013, carried out under entry no. 28.1 of the General Table of Stamp Duty, in the amount of € 5,168.96 (five thousand, one hundred and sixty-eight euros and ninety-six cents) for each one of the construction lands, registered under articles … and …, of which it is the owner. (see Docs. no. 1 and 2 attached with the initial petition);

F. The Petitioner proceeded to pay the 3rd installment of Stamp Duty for the year 2013 here contested, relating to each one of the aforementioned construction lands, on 27.11.2014, in a total amount of € 10,337.92 (ten thousand, three hundred and thirty-seven euros and ninety-two cents); (see Doc. no. 1 and 2 attached with the initial petition).

VI. MOTIVATION CONCERNING THE FINDINGS OF FACT

For the conviction of the Arbitral Tribunal, with respect to the facts deemed proven, the documents attached to the proceedings were relevant, as well as the administrative file, all analyzed and considered in conjunction with the pleadings, from which results agreement as to the factual allegations presented by the Petitioner in the petition for arbitral decision.

VII. FACTS DEEMED NOT PROVEN

There are no facts deemed not proven, because all the facts relevant for the appreciation of the petition were deemed proven.

VIII. LEGAL GROUNDS

In the present case, there are three disputed legal questions:

1. to determine whether, in the year 2013, construction land is subject to stamp duty, as provided by entry no. 28 of the TGIS;

2. to determine whether the provision in entry no. 28 of the TGIS is unconstitutional by violation of the principle of ability to pay and equality, as provided in Article 104 of the CRP, in the interpretation that the AT makes of it;

3. to determine whether the Petitioner, should the preceding questions be answered affirmatively, has the right to indemnity interest.

Let us consider,

I – CLASSIFICATION OF CONSTRUCTION LAND WITHIN THE SCOPE OF ENTRY 28.1 OF THE TGIS

1. Law no. 55-A/2012, of 29 October (which we shall hereinafter refer to as Law no. 55-A/2012, of 29.10 or simply Law), made amendments to, among others, various articles, of the Stamp Duty Code, more specifically 12 of its articles. We shall not pronounce on all of them, but only on those we consider most relevant for the analysis of the case sub judice.

2. Thus, in the norm of tax incidence provided for in Article 1 of the CIS, the legislator determined that, in addition to acts, contracts, documents, securities, papers and other facts provided for in the General Table, including gratuitous transfers of assets, stamp duty would also apply to "legal situations", now also provided for in the TGIS.

3. The new wording of paragraph 4 of Article 2 determined that for these "legal situations", the following are taxpayers under stamp duty as those referred to in Article 8 of the CIMI, namely, in most cases, the duty is owed by the owner of the property on 31 December of the year to which the duty relates.

4. In these "legal situations", the duty constitutes a charge of the taxpayer provided for in paragraph 4 of Article 2 of the CIS, namely, the property owner identified above (as a general rule), by reference to the application of the rule of Article 8 of the CIMI.

5. In these "legal situations", the application of the principle of territoriality results in the duty being owed whenever the properties are located in national territory, in accordance with the addition to Article 4 of the CIS of its paragraph 6, by Law no. 55-A/2012.

6. As for the arising of the tax obligation, for these new "legal situations" it is considered to be established "... at the moment and in accordance with the rules provided for in the CIMI, with the necessary adaptations" (See subsection u) of Article 5 of the CIS, added by Law no. 55-A/2012, of 29 October), which directs us to the rules provided for in Articles 9 and 10 of the CIMI.

7. Now, the fundamental amendment, which conditions all the others, is contained in Article 4 of Law no. 55-A/2012, which adds to the General Table of Stamp Duty (TGIS), attached to the Stamp Duty Code (CIS), a new entry, no. 28, with the following wording:

"28. Ownership, usufruct or right of surface of urban properties whose tax patrimonial value shown in the property registry, in accordance with the Stamp Duty Code (CIS), is equal to or exceeding € 1,000,000 - on the tax patrimonial value used for IMI purposes:

28.1 For properties with residential dedication ------------------------------------- 1%

28.2 For properties when the liable parties who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance ----------------------------------------------------------------- 7.5%"

1. Thus, in accordance with the said entry, and in what matters to us here, only the ownership, usufruct, or right of surface of the following is subject to Stamp Duty:

a) "urban properties,

b) with residential dedication,

c) and whose tax patrimonial value shown in the property registry, in accordance with the Code for Property Tax (CIMI), is equal to or exceeding € 1,000,000;" (emphasis added)

1. It so happens that, and as a consequence of the content of the petition for constitution of the arbitral tribunal presented by the Petitioner, it becomes necessary to make reference to the amendment of entry 28.1 of the TGIS introduced by Law no. 83-C/2013, of 31 December (Budget Law for 2014), according to which, its Article 194, came to establish that:

"28.1 – For residential properties or for construction land whose construction, authorized or intended, is for housing, in accordance with the provisions of the CIMI – 1%;

1. Now, given that the Stamp Duty assessments contested in these proceedings relate to the year 2013, the wording being in force that was given to entry 28.1 of the TGIS by Law no. 55-A/2012, of 29 October and not its successor – approved by the Budget Law of 2014 – it is in function of that wording that the present tribunal will appreciate the contested petition, as that is the law applicable to the case sub judice, in accordance with the rules of the application of laws over time.

2. Thus, and in this sequence, the greatest difficulty that the taxpayer has faced, in the light of the amendments introduced by Law no. 55-A/2012, of 29.10, with expression in the case sub judice, has manifested itself in the interpretation of the expression "property with residential dedication".

3. A concept that determines, or does not, the incidence, of construction land, in entry 28.1 of the TGIS, whose assessments are contested here.

4. Now, the obstacle arises from the non-existence of the definition of the concept "property with residential dedication" in tax legislation, namely in the CIMI, to which the CIS refers, as subsidiary law, in conformity with Article 67 thereof, introduced by Law no. 55-A/2012, 29.10.

5. In truth, the CIMI provides, in its Articles 2 to 6, regarding: the concept of property (Article 2), defines what should be understood as rural properties (Article 3), what should be understood as urban properties (Article 4); what should be understood as mixed properties (Article 5) and enumerates the species of urban properties (Article 6), to whose wording we refer.

6. However, none of the legal norms identified above admits the concept of "property with residential dedication", therefore, and in accordance with the essential rules of legal hermeneutics and interpretation of tax laws, we must first resort to the letter of the law, presuming that the legislator expressed itself appropriately, and then to its systematic integration with the norms contained in the CIMI, without, however, disregarding the intention or spirit of the legislator.

7. Thus, there arises the question: what did the legislator intend when drafting entry 28.1 of the TGIS, when indicating as a prerequisite for its incidence "property with residential dedication". Did the legislator intend to encompass in this concept construction land – the matter that occupies us here -?

8. Could it be that it intended to interpret the expression "property with residential dedication" in the sense, which the Respondent makes, that "the reference to properties with residential dedication contained in entry 28 of the CIS should be understood in a broad manner, encompassing both built residential properties and construction land, already from the wording of the norm itself and the concept used", particularly because "the legislator does not refer to 'properties intended for housing', having opted for the notion of 'residential dedication'. This is a different and broader expression whose meaning must be found in the need to integrate other realities beyond those identified in Article 6, paragraph 1, subsection a) of the CIMI."?

Let us consider,

1. For clarity in exposition, and regarding the matter of the concept of "properties with residential dedication" we recall that which was upheld in the Judgment of the STA rendered in case no. 0317/14, which we accompany, to the effect that: "residential dedication" always appears in the CIMI referred to "buildings" or "constructions", existing, authorized or intended, inasmuch as only these can be inhabited, which is not the case with construction land, which does not have, in itself, conditions for such, not being capable of being utilized for housing except if and when upon them is constructed the construction authorized and intended for them (but in that case they will no longer be "construction land" but another species of urban property – "residential", "commercial, industrial or for services" or "other" – Article 6 of the CIMI)".

2. Thus being, following this path, with which we agree in its entirety, it seems that the Respondent's thesis regarding the possible connection of the concept of "dedication to housing" to a plot of construction land, without any construction capable of being inhabited, must fail.

3. It is also to be noted that the imprecision of the concept under consideration – "property with residential dedication" - was amended by the Budget for 2014, approved by Law no. 83-C/2013, 31.12, giving new wording to entry 28 of the TGIS, now specifying its scope of application and objective incidence with the use of apparently objective concepts legally defined in Article 6 of the CIMI, as mentioned above.

4. However, this amendment – to which the legislator does not attribute interpretative character – reinforces the unequivocal character, for the future, that construction land whose construction, authorized or intended, is for housing is encompassed within the scope of entry 28 of the TGIS (provided that its respective tax patrimonial value is equal to or exceeding € 1,000,000.00), saying nothing or clarifying regarding the situations preceding this legislative amendment, namely the one that is sub judice.

5. Nevertheless, in view of the provisions of Article 103, paragraph 3 of the CRP and Article 12 of the LGT, in respect of the principle prohibiting retroactivity of taxes, it is to be concluded that, in the year 2013, construction land was not included in the provision of entry 28 of the TGIS.

6. Furthermore, the Respondent still invokes, in support of its position, that "the concept of dedication of the urban property is found in the section relating to the evaluation of real property, which is well understood because the evaluation of the real property (purpose) incorporates value to the real property, constituting a fact of distinction that is determinant (coefficient) for evaluation purposes." Particularly, because and "as results from the expression '...value of authorized buildings', contained in Article 45, paragraph 2 of the CIMI, the legislator chose to determine the application of the methodology of evaluation of properties in general, to the evaluation of construction land, and therefore applicable to them is the dedication coefficient provided for in Article 41 of the CIMI".

7. Concluding, to the effect that: "(...) for purposes of determining the tax patrimonial value of construction land, it is clear that the dedication coefficient applies in the context of evaluation, therefore its consideration for purposes of application of entry 28 of the TGIS cannot be ignored."

8. Now, the truth is, that also by this means it does not seem to us appropriate to consider and accept the legitimacy or legality of the stamp duty assessment on construction land in the terms alleged by the Respondent, inasmuch as, and as stated in the arbitral decision rendered in case no. 53/2013-T, to which we adhere in its entirety, "With respect to Article 45 of the CIMI, it has no relation whatsoever with the classification of properties, merely indicating the factors to be considered in the evaluation of construction land."

9. On this matter there has also been a pronouncement in the CAAD, now in case no. 158/2013-T, with which we agree and adhere, to the effect that: "It is true that the CIMI determines the application, to the evaluation of construction land, of the methodology of evaluation applicable to built buildings, incorporating for such, in the value of the land, the estimated value of the building to be constructed; and that this value is determined, in turn, by the type of dedication intended for the properties to be built. Put in simpler terms, the law (CIMI) says that to determine the tax patrimonial value of construction land, one incorporates in this part of the estimated value of the buildings to be constructed; and to estimate the value of the buildings to be constructed, one takes into account the dedication intended for them. Contrary to what the AT argues, it results precisely from the letter of these provisions that the concept of 'dedication' is inapplicable to construction land. The dedication that is taken into account, for evaluation purposes, even of construction land, is always and only the dedication of the buildings to be constructed. The dedication intended for the buildings to be constructed influences the tax patrimonial value of the construction land, but nothing more. From the norm relating to the determination of the value of real property which determines that, in the value of construction land there is incorporated the estimated value of the buildings to be erected, which, in turn, is influenced by the future dedication of such buildings, one cannot derive that the dedication in question is a dedication of the properties themselves, and this for two reasons: The first, because this interpretation would be contrary to the very literality of the provisions that mandate consideration, in the evaluation of construction land, of the dedication of the properties to be built; And the second, because the manner in which the law mandates the evaluation of a particular patrimonial reality cannot be determinant of the nature or legal qualification of that same patrimonial reality, having in view, above all, the principle of typicality of norms of tax incidence. The fact that the law mandates the application to a patrimonial reality of the same evaluation methodology as is applied to another different patrimonial reality does not mean that the first reality comes to share the nature of the second. Thus, if it is true that the value of authorized or intended buildings influences the real value of construction land, and therefore that value should be reflected in the tax patrimonial value of the same land, it does not follow therefrom that a plot of land comes to have residential dedication when it is intended for the construction, upon it, of residential properties, this distinction being drawn clearly from the very provisions on the evaluation of properties under the CIMI."

10. Thus being, what matters for purposes of the incidence of entry no. 28.1 of the TGIS is that the property be urban, that it have a VPT equal to or exceeding € 1,000,000.00 and that it be actually dedicated to housing, which is not the case with construction land, whose assessment is contested in these proceedings.

11. This is what results from the jurisprudence of the arbitral tribunals[1] and the superior tax courts[2] that have come to interpret entry no. 28.1 of the TGIS and its prerequisites for application, and with which we adhere in its entirety.

12. It is to be noted, finally, the position of the Supreme Administrative Court, the summary of one of the Judgments referenced here being transcribed and which has been the guidance in the various decisions rendered in that distinguished Court, regarding the illegality of stamp duty under entry 28.1 of the TGIS on construction land:

"Having the legislator not defined the concept of '(urban) properties with residential dedication', and resulting from Article 6 of the Municipal Property Tax Code (subsidiarily applicable to the Stamp Duty provided for in the new entry no. 28 of the General Table) a clear distinction between 'residential urban properties' and 'construction land', the latter cannot be considered, for purposes of the incidence of Stamp Duty (Entry 28.1 of the TGIS, in the wording of Law no. 55-A/2012, of 29 October), as urban properties with residential dedication." (Judgment of the STA no. 0317/14, of 14.05.2014)

1. Thus being, the AT could never have subjected the petitioner to stamp duty, under entry 28 of the TGIS, of the year 2013, which is now contested, and should, therefore, the same be annulled, as illegal.

II - VIOLATION OF CONSTITUTIONAL LAW

1. The logic of taxation of wealth and fortune prevails, with greater or lesser intensity, within the framework of Law no. 55-A/2012, 29.10, a conclusion that results from the generalized increase in the tax burden, in the financial logic, exclusively directed to tax situations that would produce immediate revenue.

2. The taxation of investment income is increased, the list of manifestations of fortune is expanded, the taxation of income obtained in Portugal by entities domiciled in tax havens is increased, and finally, to all of this is added the taxation of housing properties, with value exceeding € 1,000,000.00.

3. And if the legislator includes in this statute properties for housing, establishing a value above which they would come to be taxed by another tax, this could only mean that it considered that whoever was the owner of a property of that value would thereby express an element indicating additional means of fortune, which could be called upon to participate in the collective effort of supplementary revenue collection for tax purposes.

4. In truth, the legislator, in introducing this legislative innovation, considered as a determining element of ability to pay urban properties, with residential dedication, of high value (luxury), more precisely, of value equal to or exceeding € 1,000,000.00, on which a special rate of stamp duty came to apply, intending to introduce a principle of taxation of wealth externalized in the ownership, usufruct or right of surface of luxury urban properties with residential dedication. For this reason, the criterion was the application of the new rate to urban properties with residential dedication, whose VPT is equal to or exceeding € 1,000,000.00.

5. This same conclusion is drawn from the analysis of the discussion of the bill no. 96/XII in the Assembly of the Republic, available for consultation in the Diary of the Assembly of the Republic, I series, no. 9/XII/2, of 11 October 2012.

6. The substantiation of the measure designated as "special rate on housing urban properties of highest value" rests on the invocation of the principles of social equity and fiscal justice, calling upon the holders of properties of high value intended for housing to contribute in a more intense manner, by imposing the new special rate on "houses with value equal to or exceeding 1 million euros."

7. Indeed, the legislator clearly considered that this value, when imputed to a dwelling (house, autonomous fraction or apartment with independent use) reflected a capacity to pay above average and, as such, capable of determining a special contribution to guarantee the just distribution of the tax burden.

8. Also following these considerations inspiring the legislative innovation under consideration, one must conclude that the mere existence of a plot of construction land cannot be, by itself, an indicator of ability to pay.

9. In truth, a plot of construction land belonging to a company such as the Petitioner does not reflect wealth capable of taxation, in the context of Stamp Duty, because it is not capable, in the state in which it is found, of generating any wealth.

10. In view of the foregoing, the act of assessment of Stamp Duty relating to the year 2013, contested, in the amount of € 10,337.92 (ten thousand, three hundred and thirty-seven euros and ninety-two cents) is null, by violation of the provision in entry 28.1 of the TGIS, of the principle of ability to pay and the principle of taxation of wealth, as provided in Article 104 of the Constitution of the Portuguese Republic.

III – INDEMNITY INTEREST

1. The Petitioner further petitions that recognition be given to its right to indemnity interest, based on error attributable to the administration.

2. Paragraph 1 of Article 43 of the LGT and Article 61 of the Code of Procedure and Tax Process provide that indemnity interest is due when it is determined in amicable review or judicial contest that there has been error attributable to the services from which there results the payment of a tax debt in an amount greater than that legally due.

3. Error is considered attributable to the administration when the error is not attributable to the taxpayer and rests on erroneous factual premises that are not the responsibility of the taxpayer.

4. Now, resulting from the tax acts contested the obligation to pay tax in an amount greater than that which would be due, indemnity interest is due in accordance with the legally provided terms, the legislator presuming, in these cases, in which the annulment of the assessment occurs, that harm occurred in the sphere of the taxpayer as a result of having been deprived of the patrimonial sum that it had to deliver to the State by virtue of an illegal assessment. Consequently, the taxpayer has a right to such indemnification, independent of any allegation or proof of the harm suffered.

5. In the present case, it is unquestionable that, as a consequence of the establishment of the illegality of the tax acts, there will be a refund of the tax by virtue of the provision in paragraph 1 of Article 43 of the LGT, and Article 100 of the LGT, passing, necessarily through this the restoration of the "situation that would exist if the tax act which is the subject of the arbitral decision had not been carried out".

6. Similarly, it is understood that it will be free from doubt that the illegality of the act is attributable to the Tax Authority, which autonomously carried it out illegally.

7. As to the concept of "error", it has been understood that only in cases of annulments based on defects respecting the tax legal relationship will there be grounds for payment of indemnity interest, such right not being recognized in the case of annulments for procedural defects or defects of form.

8. Thus being, in the presence of a defect of violation of substantive law, which is embodied in error regarding the legal premises, attributable to the Tax Authority, the Petitioner has a right to indemnity interest, in accordance with Articles 43, paragraph 1 of the LGT, and 61 of the CPPT, calculated on the amount of € 10,337.92 (ten thousand, three hundred and thirty-seven euros and ninety-two cents), and counted from the payment of the tax until the complete refund of the said amount.

IV. DECISION

In accordance with the foregoing, it is decided:

1. To annul the 3rd installments of the act of assessment of Stamp Duty contested by the Petitioner, relating to the year 2013.

2. To order the Tax and Customs Authority to refund to the Petitioner the amount it paid, together with indemnity interest.

Value of the Case

The value of the case is fixed at € 10,337.92 (ten thousand, three hundred and thirty-seven euros and ninety-two cents) in accordance with Article 97-A, paragraph 1, a), of the CPPT, made applicable by virtue of subsections a) and b) of paragraph 1 of Article 29 of the RJAT and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

Costs

Costs to be borne by the Respondent in accordance with Article 22, paragraph 2 of the RJAT, Article 4 of the RCPAT, and Table I attached thereto, which are fixed in the amount of € 918.00.

Let notice be given.

Lisbon, 23 June 2015

The Arbitrator

(Jorge Carita)

[1] Decisions of the CAAD rendered in cases no. 50/2013-T, no. 132/2013-T, no. 181/2013-T, no. 183/2013-T, no. 185/2013-T, no. 248/2013 T, among others.

[2] Decisions of the STA rendered in cases no. 046/14, of 14.05.2014; no. 0271/14, of 14.05.2014; no. 0395/14, of 28.05.2014, 01871/13, of 14.05.2014, 055/14, of 14.05.2014, among others.