Stamp Tax on Building Land (Verba 28.1 TGIS) – CAAD Rules on Construction Land Taxation Requirements (83/2019-T)

ARBITRAL DECISION

I. REPORT

1. On 10 February 2019, the commercial company A..., S.A., NIPC..., with registered office at..., ... (hereinafter, Claimant), filed a request for constitution of an arbitral tribunal, pursuant to the combined provisions of Articles 2, No. 1, paragraph a), and 10, Nos. 1, paragraph a), and 2, of Decree-Law No. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters, as amended by Article 228 of Law No. 66-B/2012, of 31 December (hereinafter, abbreviated as RJAT), with a view to this Tribunal's pronouncement on:

• Declaration of illegality and annulment of the following decisions denying requests for official revision and Stamp Tax (IS) assessments: (i) decision denying the official revision request No. ...2018..., issued by the Deputy Director of the Finance Directorate of Lisbon, by sub-delegation, by order of 20.11.2018, relating to the tax act embodied in the IS assessment No. ..., in the amount of €15,097.50, which concerned the ownership of the urban property located in the parish of..., municipality of Oeiras, registered in the real estate register under article..., with reference to the year 2014; (ii) decision denying the official revision request No. ...2018..., issued by the Deputy Director of the Finance Directorate of Lisbon, by sub-delegation, by order of 20.11.2018, relating to the tax act embodied in the IS assessment No. ..., in the amount of €15,097.50, which concerned the ownership of the urban property located in the parish of..., municipality of Oeiras, registered in the real estate register under article..., with reference to the year 2015;

• Restitution of the amounts of improperly paid tax.

The Claimant attached 5 (five) documents and did not request the production of any other evidence.

The Respondent is the AT – Tax and Customs Authority (hereinafter, Respondent or AT).

As emerges from the request for arbitral pronouncement, the Claimant bases the challenge of the disputed tax acts, summarily, on the following:

The Claimant understands that the Stamp Tax assessments should be annulled due to manifest illegality, but also in light of the unconstitutionality of the corresponding taxation provisions, if interpreted and applied as the AT does.

According to the Claimant, the tax fact generating Stamp Tax on land for construction comprises three cumulative requirements, namely: ownership of the real right over the property; the taxable patrimonial value of the property; and an authorized or planned building intended for housing. Thus, such taxation would only take place in situations where the effective construction of the land had been authorized or planned and such construction was intended for housing; therefore, contrary to the AT's understanding, the mere registered classification of properties as "land for construction" could never legitimize the application of item 28 of the TGIS.

Accordingly, the Claimant argues that, to apply item 28.1 of the TGIS, there would always be necessary the existence of an administrative process associated with construction and a valid building license/authorization and an approved project, and this should be intended for housing. The Claimant further states that the fact that land for construction is situated in an area where, according to the respective PDM, construction is possible and such constructions can be intended for housing, cannot by itself generate the application of item 28.1 of the TGIS; in this context, it is evident to the Claimant that the mere expectation that a building for residential use might be erected on the land was not sufficient to characterize it as "land for construction" and consequently to configure a tax fact subsumable under item 28.1 of the TGIS.

The Claimant states, subsequently, that the express intention of the legislature was that the taxation provided for in item 28.1 of the TGIS would only be applicable to "land for construction" in situations where there existed a "building, authorized or planned, for housing." Now, says the Claimant, the property in question in this case did not have, in the years 2014 and 2015, a "building, authorized or planned" for "housing," as expressly required by item 28.1 of the TGIS, and therefore, since the corresponding legal requirements were not met, the taxation enshrined in item 28.1 of the TGIS could never have been applied in this case.

It thus becomes evident – in the words of the Claimant – that the disputed Stamp Tax assessments appear manifestly illegal, due to error in both factual and legal requirements, and should be promptly annulled, the same applying to the acts denying the official revision requests.

As a subsidiary argument, the Claimant alleges that the taxation provided for in item 28.1 of the TGIS, when interpreted so as to be applied indiscriminately to "land for construction," is contrary to the principle of equality, enshrined in Article 13 of the CRP and, in parallel, contrary to the principles of tax equality and contributive capacity enshrined in Article 104, No. 3, of the CRP, inasmuch as it is susceptible to originating differentiated treatment and unjustified inequality among taxpayers.

The Claimant further argues that, should the present request for arbitral pronouncement proceed, it should be reimbursed the amounts of improperly paid tax, increased by indemnity interest.

1. The request for constitution of an arbitral tribunal was accepted and automatically notified to the AT on 18 February 2019.

The Claimant did not proceed to appoint an arbitrator, and therefore, in accordance with the provisions of No. 1 of Article 6 and paragraph a) of No. 1 of Article 11 of the RJAT, the President of the Deontological Council of CAAD appointed the undersigned as arbitrator of the single Arbitral Tribunal, who communicated acceptance of the office within the applicable period.

On 2 April 2019, the Parties were duly notified of such appointment and did not manifest the will to refuse the appointment of the arbitrator, in accordance with the combined provisions of Article 11, No. 1, paragraphs b) and c), of the RJAT and Articles 6 and 7 of the Deontological Code of CAAD.

Thus, in accordance with what is prescribed in paragraph c) of No. 1 of Article 11 of the RJAT, the single Arbitral Tribunal was constituted on 23 April 2019.

1. On 16 May 2019, the Respondent, duly notified for this purpose, filed its Response in which it specifically challenged the arguments raised by the Claimant.

In essence, and also briefly, it is important to extract the most relevant argumentation on which the Respondent based its Response:

According to the Respondent, upon consultation of the certificate of the contents of the urban property that underlies the assessments in question, it is verified that the land lots for construction are allocated to housing.

Now, says the Respondent, urban properties that are land for construction and to which residential allocation has been attributed within the scope of their respective appraisals, as recorded in their respective registers, are subject to Stamp Tax; in effect, says the Respondent that the fact that, in the tax incidence rule (item 28.1 of the TGIS), the property with residential allocation was substantivized to the detriment of the residential property, appeals to the allocation coefficient (cf. Article 41 of CIMI) which applies indiscriminately to all urban properties.

The Respondent further argues that the determination of the taxable patrimonial value of land for construction has as a prerequisite the determination of the value of the authorized or planned buildings, for which purpose account must be taken, in accordance with what is provided in Article 38 of CIMI, of the allocation of such buildings; accordingly, as it becomes clear that the application of the allocation coefficient for purposes of determining the taxable patrimonial value of land for construction is a given, it is symptomatic that its consideration for purposes of applying item 28.1 of the TGIS cannot be ignored.

Also in this context, the Respondent emphasizes that a property licensed or intended for housing is not the same as a property with residential allocation.

Regarding the unconstitutionality allegations raised by the Claimant, the Respondent understands that item 28 of the TGIS is a provision in accordance with the CRP.

1. On the same date, the Respondent filed the respective administrative file (hereinafter, PA).

2. On 16 May 2019, an order was issued dispensing with the holding of the meeting referred to in Article 18 of the RJAT, as well as the submission of arguments, and determining, as the deadline for issuing the arbitral decision, 1 July 2019.

II. CASE MANAGEMENT

1. The Arbitral Tribunal was regularly constituted (cf. Article 5 of the RJAT).

The request for arbitral pronouncement is timely, as it was presented within the period provided for in Article 10, No. 1, paragraph a), of the RJAT.

The parties have legal personality and capacity, have standing, and are regularly represented (cf. Articles 4 and 10, No. 2 of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March).

The case does not suffer from any defects.

The joinder of claims is admitted – various tax acts concerning Stamp Tax are at issue, with the declaration of illegality and annulment of each of them being petitioned – because it is verified that the merits of the claims formulated by the Claimant essentially depend on the appraisal of the same factual circumstances and the interpretation and application of the same principles or rules of law (cf. Article 3, No. 1, of the RJAT).

There are no exceptions or preliminary questions that obstruct knowledge of the merits and that must be addressed.

III. GROUNDS

III.1. FACTUAL FINDINGS

§1. PROVEN FACTS

1. The following facts are considered proven:

a) The Claimant, in the scope of its activity, is the owner of various urban properties, including land for construction.

b) In the years 2014 and 2015, the Claimant was the owner of the urban property located at... (...)...,... parish of..., municipality of Oeiras, registered in the respective urban real estate register under article no..., as land for construction, with taxable patrimonial value of €1,509,750.00 and having the "Type of localization coefficient: Housing." [cf. PA]

c) The AT assessed Stamp Tax, relating to the years 2014 and 2015 and concerning the urban property identified in proven fact b), and the following Stamp Tax assessments were issued [cf. PA and documents nos. 1 and 2 attached to the PPA]:

d) The aforementioned Stamp Tax assessments resulted from the application of item 28.1 of the TGIS to the urban property identified in proven fact b). [cf. PA and documents nos. 1 to 5 attached to the PPA]

e) Following the aforementioned Stamp Tax assessments, the following collection notices were issued and notified to the Claimant [cf. documents nos. 1 to 5 attached to the PPA]:

f) The Claimant made timely voluntary payment of the total amount of Stamp Tax assessed in the years 2014 and 2015 which amounted to €30,195.00 (thirty thousand one hundred ninety-five euros). [cf. documents nos. 1 to 5 attached to the PPA]

g) On 11 May 2018, the Claimant filed a request for official revision concerning the aforementioned Stamp Tax assessments, in accordance with the terms and grounds stated in the respective initial petition that is contained in the PA and which is hereby deemed fully reproduced, which gave rise to the initiation by the AT of two official revision proceedings, which were filed under no. ...2018... (Stamp Tax assessment relating to the year 2014) and no. ...2018... (Stamp Tax assessment relating to the year 2015) [cf. PA and documents nos. 1 and 2 attached to the PPA].

h) In the course of the aforementioned official revision proceedings, the Claimant was notified, by letters dated 23.11.2018, sent by registered mail, of the respective denial decisions issued by the Deputy Director of the Finance Directorate of Lisbon, by sub-delegation, which were based on the information dated 19.11.2018 contained in documents nos. 1 and 2 attached to the PPA, which are hereby deemed fully reproduced and from which, among other things, the following appears:

"III. ANALYSIS OF THE REQUEST/OPINION

(…)

1. We follow here the understanding advocated in Service Instruction No. ..., Series 1, of 16/02/2017, of the Office of the Sub-Director General of the Property Tax Area (cf. fls. 41 of the file).

2. In accordance with this instruction, Article 194 of Law No. 83-C/2013, of 31/12 (State Budget Law for 2014) amended the wording of item 28 of the TGIS, which now expressly covers land for construction the building of which, authorized or planned, is intended for housing, in accordance with the IMI Code.

3. It was, accordingly, in conformity with the legal framework in force in (…) [2014 and 2015], that the disputed taxation was carried out, given that:

(i) the applicant was the passive subject and bearer of the tax obligation, insofar as she was the owner of the property on the date of (…) [31.12.2014 and 31.12.2015] (cf. Articles 8, No. 1 of the IMI Code, by referral of Articles 2, No. 4 and 3, No. 3, paragraph u) of the IS Code);

(ii) the property met the requirements of objective incidence, as:

. it was (and is) land for construction intended for housing (as so recorded in the register on the said date), and therefore falls within item 28.1 of the TGIS, in the wording given to it by Law No. 83-C/2013, of 31/12;

. the taxable patrimonial value, on (…)[31.12.2014 and 31.12.2015], was €1,509,750.00, that is, it was greater than €1,000,000.00;

. the property was located in Portuguese territory (Article 4, No. 6, of the IS Code).

1. Finally, since the applicant invokes the unconstitutionality of item 28 of the TGIS, it is important to emphasize that the AT is not recognized as having competence to, in general, assess the constitutionality of the norms by which its activity is governed, applying them or refraining from applying them as it concludes they are or are not respectful of the Constitution. Such competence is conferred on the Courts, particularly on the Constitutional Court, as follows from Articles 221 and 223, No. 1 of the Constitution.

2. Finally, regarding the indemnity interest petitioned, we understand there is no right thereto, even if it were recognized that the revision was admissible due to error by the Services.

3. In effect, the revision of the tax act, in accordance with Article 78 of the LGT, whether at the initiative of the taxpayer or the AT, does not determine the payment of indemnity interest on the basis of No. 1 of Article 43 of the LGT, as it is not expressly provided therein."

i) On 10 February 2019, the Claimant filed the request for constitution of an arbitral tribunal that gave rise to the present case. [cf. CAAD case management system]

§2. UNPROVEN FACTS

1. With relevance for the appraisal and decision of the case, it was not established that there exists any act defining the characteristics of the building(s) that could be constructed on the land for construction in question, particularly the purpose to which it is intended.

§3. REASONING REGARDING FACTUAL MATTERS

1. The facts pertinent to the judgment of the case were selected and identified according to their legal relevance, in light of the plausible solutions to the legal questions, in accordance with the combined application of Articles 123, No. 2, of the CPPT, 596, No. 1 and 607, No. 3, of the CPC, applicable by virtue of Article 29, No. 1, paragraphs a) and e), of the RJAT.

The Tribunal's conviction was based on the facts alleged by the Parties, whose correspondence with reality was not disputed, and on critical analysis of the documentary evidence contained in the file, including the administrative file.

The unproven factuality was thus considered due to the absence of any evidentiary elements proving it.

III.2. LEGAL GROUNDS

§1. MERITS

§1.1. DELIMITATION OF THE SUBJECT MATTER

1. The Claimant argues the existence of various defects – having established a subsidiary relationship between them – on which it bases the request for declaration of illegality of the disputed Stamp Tax assessments and the acts denying the aforementioned official revision requests.

Specifically, the Claimant invokes:

(a) Violation of the tax incidence rule contained in item 28.1 of the TGIS, due to error in factual and legal requirements.

Subsidiarily,

(b) Substantive unconstitutionality of the tax incidence rule contained in item 28.1 of the TGIS, due to violation:

• of the principle of equality, established in Article 13 of the CRP; and
• of the principles of tax equality and contributive capacity, enshrined in Article 104, No. 3, of the CRP.

1. Article 124 of the CPPT provides as follows:

Article 124
Order of Knowledge of Defects in the Judgment

1. In the judgment, the court shall appraise prioritarily the defects that lead to the declaration of non-existence or nullity of the challenged act and, thereafter, the challenged defects that lead to its annulment.

2. In the aforementioned groups, the appraisal of the defects is made in the following order:

a) In the first group, those of the defects whose merits, according to the prudent discretion of the judge, determine more stable or effective protection of the injured interests;

b) In the second group, the one indicated by the challenger, provided that it establishes a subsidiary relationship among them and no other defects are argued by the Public Prosecutor or, in the other cases, the one fixed in the preceding paragraph.

This provision establishes a priority for knowledge of defects whose merits determine, according to the prudent discretion of the judge, more stable or effective protection of the injured interests.

Reverting to the case at hand, we have that none of the defects invoked by the Claimant can be considered as arising from situations that can determine the nullity of the tax acts challenged in light of the legal criteria that characterize them; on the other hand, as stated, the Claimant established an order of priority for such knowledge.

Therefore, we shall begin with the appraisal of the defect of violation of the tax incidence rule contained in item 28.1 of the TGIS, being understood that it will only be important for us to appraise the indicated defects of unconstitutionality if and insofar as the interpretation and implementation of the legal solution resulting from the aforementioned item of the TGIS involves the subsumption of the sub judice situation to its legal provision.

§1.2. INTERPRETATION AND DELIMITATION OF THE OBJECTIVE SCOPE OF APPLICATION OF ITEM 28.1 OF THE TGIS

1. At the epicenter of the disagreement opposing the Parties in this case is the tax incidence rule contained in item 28.1 of the TGIS – in force at the date of the facts and subsequently revoked by Article 210, No. 2, of Law No. 42/2016, of 28 December – and therefore it is necessary, naturally, to begin by interpreting this provision, with a view to assessing its scope and, thereby, delimiting its field of application.

2. Law No. 55-A/2012, of 29 October, introduced various amendments to the Stamp Tax Code and added item 28 to the TGIS, with the following wording (cf. Article 4):

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

28.1 – Per residential property – 1%;

28.2 – Per property, when the passive subjects who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the list approved by order of the Minister of Finance – 7.5%.

Subsequently, Law No. 83-C/2013, of 31 December (State Budget Law for 2014), amended the wording of item 28.1 of the TGIS (cf. Article 194), and it came to have the following substance (wording applicable to the sub judice situation):

28.1 – Per residential property or per land for construction the building of which, authorized or planned, is intended for housing, in accordance with what is provided in the IMI Code – 1%

1. The interpretation of the tax incidence rule contained in item 28.1 of the TGIS cannot fail to be carried out on the basis of the hermeneutical directives emanating from Article 11 of the LGT and Article 9 of the Civil Code:

Article 11
Interpretation

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

2. Whenever, in tax provisions, terms proper to other branches of law are employed, they shall be interpreted in the same sense that they have there, unless otherwise directly follows from the law.

3. If doubt persists about the meaning of the applicable tax incidence provisions, account should be taken of the economic substance of the tax facts.

4. Gaps resulting from tax provisions covered by the reservation of law of the Assembly of the Republic are not susceptible to analogical integration.

Article 9
Interpretation of the Law

1. Interpretation must not be confined to the letter of the law, but must reconstruct from the texts the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

2. However, the interpreter cannot take into account the legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

3. In fixing the meaning and scope of the law, the interpreter shall presume that the legislature adopted the most correct solutions and knew how to express its thought in adequate terms.

With regard to this interpretative task, with all due respect, we appropriate here the following considerations set forth in the arbitral decision issued on 02.10.2013 in case no. 53/2013-T:

"The relevance of the text of the law is especially emphasized in the interpretation of provisions of the Stamp Tax incidence rules, which are reconditioned to an amalgam, under a common denomination, of an incongruous set of taxes of completely distinct natures (on income, on expenditure, on property, on acts, etc.), which leaves no appreciable margin for application of the primary interpretive criterion, which is the unity of the legal system, which requires its overall coherence.

The recognized lack of coherence of Stamp Tax is particularly exuberant in the case of this item no. 28.1, hastily included on the margins of the General State Budget, by a fiscal legislator without perceptible overall fiscal orientation, who is successively implementing norms of fiscal increase in keeping with the reversals of budget execution, the impositions of international institutional creditors (represented by the 'troika') and the oversight of the Constitutional Court.

In fact, although in the 'Statement of Reasons' of Bill No. 96/XII/2nd, on which Law No. 55-A/2012 was based, reference is made to the laudable concern of the Government to 'strengthen the principle of social equity in austerity, guaranteeing an effective sharing of the sacrifices necessary to comply with the adjustment program' and its commitment 'to ensure that the sharing of those sacrifices will be made by all and not just by those who live from the income of their work,' it is manifest, on the one hand, that those reasons for equity, certainly existing, did not begin to count in mid-2012, already existing at the beginning of the year, when the General State Budget came into force, and on the other hand, that the scope of item no. 28.1, in taxing additionally properties with residential allocation and not also properties that do not have it, suggests that the concerns of social equity and the proclaimed intention of sharing sacrifices with all, affects much more some than it does properly all.

In this context, as there are no safe interpretative elements that allow detection of legislative coherence in the solution adopted in the said item no. 28.1 or the correctness or incorrectness of the adopted solution (relevant for interpretative purposes in light of No. 3 of Article 9 of the Civil Code), the substance of the legal text must be the primordial element of interpretation, in accordance with the presumption, imposed by the same No. 3 of Article 9, that the legislature knew how to express its thought in adequate terms."

1. Having analyzed the wording – both the original and the current – of item 28.1 of the TGIS, we find that this provision has a fundamentally referential character, as its relevant regulatory content depends on the normativity ad quam contained in the IMI Code.

In fact, whether concerning objective incidence, with the reference to "urban properties" and the "taxable patrimonial value recorded in the register, in accordance with the Municipal Property Tax Code," or concerning the determination of the taxable subject matter, with the reference to the "taxable patrimonial value used for IMI purposes," the regulatory substance of this item 28 of the TGIS results from the referral – in accordance with a general referral – to the set of regulations found in the IMI Code.

In fact, this aspect is reinforced by No. 2 of Article 67 of the CIS, which determines that to matters not regulated in the CIS concerning item 28 of the TGIS, the provisions of the IMI Code shall apply, subsidiarily.

In this conformity, it is then necessary to assemble the provisions of the IMI Code that appear pertinent for understanding and, therefore, for the application of item 28.1 of the TGIS.

In the IMI Code, the concept of "property" is defined in Article 2 as follows:

1. For purposes of this Code, property is every portion of territory, including water, plants, buildings and constructions of any nature incorporated therein or situated thereon, of a permanent character, provided it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as water, plants, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are located, although situated in a portion of territory that constitutes an integral part of a different patrimony or does not have a patrimonial nature.

2. Buildings or constructions, although movable by nature, are deemed to have a permanent character when devoted to non-transitory purposes.

3. Permanent character is presumed when buildings or constructions are situated in the same place for a period exceeding one year.

4. For purposes of this tax, each autonomous unit, under horizontal property regime, is deemed to constitute a property.

Subsequently, in Articles 3 to 5 of the IMI Code, the species of properties existing are enumerated, namely:

Rural Properties (Article 3):

1 – Rural properties are lands situated outside an urban agglomeration that cannot be classified as land for construction, in accordance with No. 3 of Article 6, provided that:

a) They are devoted or, in the absence of concrete devotion, have as normal destination a use generating agricultural income, such as are considered for purposes of personal income tax (IRS);

b) Not having the devotion indicated in the preceding paragraph, they are not built or dispose only of buildings or constructions of an ancillary character, without economic autonomy and of reduced value.

2 – Rural properties are also lands situated within an urban agglomeration, provided that, by force of legally approved provision, they cannot have use generating any income or can only have use generating agricultural income and are actually having this devotion.

3 – Rural properties are also:

a) Buildings and constructions directly devoted to the production of agricultural income, when situated in the lands referred to in the preceding numbers;

b) Water and plants in the situations referred to in No. 1 of Article 2.

4 – For purposes of this Code, urban agglomerations are considered, besides those situated within legally fixed perimeters, nuclei with a minimum of 10 units served by public use streets, being their perimeter delimited by points distant 50 m from the axis of the streets, in the transverse direction, and 20 m from the last building, in the direction of the streets.

Urban Properties (Article 4):

Urban properties are all those that should not be classified as rural, without prejudice to what is provided in the following article.

Mixed Properties (Article 5):

1. Whenever a property has rural and urban parts, it is classified, in its entirety, in accordance with the main part.

2. If none of the parts can be classified as main, the property is deemed mixed.

In Article 6 of the IMI Code, the species of urban properties are indicated:

1. Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Land for construction;

d) Other.

1. Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes by the municipalities or, in the absence of a license, which have as normal destination each of these purposes.

2. Land for construction is considered to be land situated within or outside an urban agglomeration for which a license or authorization has been granted, prior notification admitted or favorable preliminary information issued for subdivision or construction operation, and also those that have been so declared in the acquisition title, except for land where the competent entities prohibit any of those operations, particularly those located in green areas, protected areas or which, in accordance with municipal territorial planning plans, are devoted to spaces, public infrastructure or equipment.

3. Those included in the provision of paragraph d) of No. 1 are lands situated within an urban agglomeration that are not land for construction nor are covered by No. 2 of Article 3 and also buildings and constructions licensed or, in the absence of a license, which have as normal destination other purposes than those referred to in No. 2 and also those of the exception of No. 3.

Regarding "taxable patrimonial value," Article 7 of the IMI Code provides as follows:

1. The taxable patrimonial value of properties is determined in accordance with this Code.

2. The taxable patrimonial value of urban properties with parts classifiable under more than one of the classifications of No. 1 of the preceding article is determined:

a) In the case that one of the parts is main and the other or others merely accessory, by application of the valuation rules of the main part, taking into account the valorization resulting from the existence of the accessory parts;

b) In the case that the different parts are economically independent, each part is valued by application of the corresponding rules, and the value of the property is the sum of the values of its parts.

1. The taxable patrimonial value of mixed properties corresponds to the sum of the values of its rural and urban parts determined by application of the corresponding rules of this Code.

Under the heading "concept of real estate registers," Article 12 of the IMI Code provides as follows:

1. Real estate registers are records which include, in particular, the characterization of properties, location and their taxable patrimonial value, the identity of the owners and, where applicable, usufructuaries and surface right holders.

2. There are two registers, one for rural property and one for urban property.

3. Each floor or part of a property capable of independent use is considered separately in the registered entry, which also discriminates its respective taxable patrimonial value.

4. The registers are updated annually with reference to 31 December.

5. Registered entries, solely for tax purposes, constitute a presumption of ownership.

Still regarding real estate registers, it is important to note No. 1 of Article 13 of the IMI Code, from which it follows that the registration of properties in the register and its updating are carried out on the basis of a declaration submitted by the passive subject.

Concerning the determination of taxable patrimonial value, it is important to invoke the following provisions of the IMI Code:

• Article 38, headed Determination of Taxable Patrimonial Value:

1. The determination of the taxable patrimonial value of urban properties for housing, commerce, industry and services results from the following expression:

Vt = Vc x A x Ca x Cl x Cq x Cv

where:

Vt = taxable patrimonial value;

Vc = base value of built properties;

A = gross construction area plus area exceeding the implantation area;

Ca = Allocation coefficient;

Cl = localization coefficient;

Cq = quality and comfort coefficient;

Cv = age coefficient.

1. The taxable patrimonial value of urban properties determined is rounded to the nearest ten euros above.

• Article 45, headed Taxable Patrimonial Value of Land for Construction:

1. The taxable patrimonial value of land for construction is the sum of the value of the implantation area of the building to be constructed, which is that situated within the perimeter of fixation of the building to the ground, measured by the exterior part, added to the value of the land adjacent to the implantation.

2. The value of the implantation area varies between 15% and 45% of the value of the authorized or planned buildings.

3. In fixing the percentage of the value of the land of implantation, account is taken of the characteristics referred to in No. 3 of Article 42.

4. The value of the area adjacent to the construction is calculated in accordance with No. 4 of Article 40.

5. When the document proving constructive viability referred to in Article 37 only makes reference to the PDM indices, the assessing experts must estimate, with justification, the respective construction area, taking into account, in particular, the average construction areas in the surrounding area.

6. In light of the literal wording of item 28.1 of the TGIS, it is subject to this tax incidence rule the urban properties of taxable patrimonial value equal to or greater than €1,000,000.00, which are residential properties or land for construction with building authorized or planned for housing purposes.

Having regard to the provisions of the IMI Code cited above, we have that residential properties are buildings or constructions licensed by municipalities for such purposes or, in the absence of licensing, which have as normal destination such use (Article 6, No. 2, of the CIMI); thus, residential properties are the aforementioned buildings or constructions, and these are what are subject to item 28.1 of the TGIS.

As regards land for construction, only those for which building is authorized or planned for residential purposes – in the meaning resulting from the definition of residential property given by No. 2 of Article 6 of the IMI Code – are covered by the scope of application of item 28.1 of the TGIS, which excludes from its application land for construction in relation to which building is authorized or planned for purposes other than residential, namely, for commercial, industrial or services purposes.

The correctness of this interpretation, as to the scope of application of item 28.1 of the TGIS, is confirmed by the perceptible ratio legis of the restriction of the field of application of the provision to residential properties – a restriction that was maintained regarding the allocation (housing) in the subsequent legislative amendment that came to extend the scope of application to land for construction – in the context of the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied, which Article 9, No. 1, of the Civil Code also establishes as interpretative elements.

In fact, the limitation of the application of the tax to residential properties and to land for construction where the construction of housing is provided for or authorized reveals the intention not to burden the productive sector and companies in general and, in that sense, it was not intended to cover in the scope of application of the tax neither properties devoted to services, industry or commerce, that is, properties devoted to economic activity, nor land for construction in relation to which building is provided for or authorized for these other purposes. This is understandable in a context in which the economy was in a recessionary spiral, publicly proclaimed at the highest level, with unemployment rates reaching historical levels, with an avalanche of business closures due to economic unsustainability. On the ratio legis of the introduction of item 28 of the TGIS, see, among many others, the decisions issued in cases nos. 50/2013-T, 132/2013-T, 181/2013-T, 182/2013-T, 183/2013-T, 185/2013-T, 100/2014-T, 238/2014-T, 290/2014-T, 428/2014-T, 518/2014-T, 707/2014-T and 756/2014-T of the CAAD.

Therefore, it is to be concluded that the available interpretative elements, including the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied, clearly point to the fact that it was not intended to cover in the scope of application of item 28.1 of the TGIS non-residential properties and land for construction in relation to which building is authorized or planned for purposes other than housing.

§1.3. APPLICATION OF ITEM 28.1 OF THE TGIS TO THE CONCRETE CASE

1. As stated, the Claimant invokes violation of the tax incidence rule contained in item 28.1 of the TGIS by understanding that, as regards land for construction, it is only applicable in situations where actual building has been authorized or is planned and this building is intended for housing; it further states that the property in question in this case did not have, in the years 2014 and 2015, any building, authorized or planned, for housing, and therefore the legal requirements on which the taxation enshrined in item 28.1 of the TGIS depends are not met.

The concrete question that arises here is, therefore, to determine whether the referenced land for construction can or cannot be subsumed under the concept of "land for construction the building of which, authorized or planned, is intended for housing, in accordance with what is provided in the IMI Code," to which item 28.1 of the TGIS refers, taking into account that its taxable patrimonial value is greater than €1,000,000.00.

This question is not new in the jurisprudence, having already been the subject of appraisal, in particular, in various decisions issued by arbitral tribunals constituted under the auspices of the CAAD, such as those in arbitral cases nos. 467/2015-T, 524/2015-T, 578/2015-T, 142/2016-T, 156/2016-T, 290/2016-T, 410/2017-T and 427/2018-T.

1. Because the situation is one with factual contours similar to those of the sub judice situation, we invoke the judicious considerations set forth in the arbitral decision issued on 01.09.2016 in case no. 142/2016-T which, with all due respect, we make our own:

"The references that in item 28.1 and in Article 45, No. 2, of the CIMI are made to planned buildings, in addition to authorized ones, allow us to conclude that, (…), it will not be necessary that an administrative act of approval of a construction project already exists (which would constitute 'authorization'), it being sufficient that a construction with determined characteristics be planned, at least as to the implantation area of the building to be constructed.

There is no indication in these provisions of the TGIS and of the CIMI of what should be understood by 'planned building,' but, having regard to the documents required for the valuation of land for construction, indicated in Article 37, No. 2, of the CIMI, it is concluded that one can only speak of authorized or planned construction when the 'building to be constructed,' referred to in No. 1 of Article 45, is defined in a subdivision permit or building license permit, or approved project, or prior notification, or favorable preliminary information or document proving constructive viability. In fact, it will only be in these situations that there will be legal consistency in foreseeing the future realization of construction with determined characteristics.

In the case in question, before the assertion of the Applicant that the properties in question 'did not have actual building potential for housing, not having the same a "building, authorized or planned" for "housing,"' the Tax and Customs Authority presented no document of one of the types referred to on which it had based its conclusion that the properties had authorized or planned construction for housing.

As the possibility of construction of buildings for housing is invoked by the Tax and Customs Authority as the basis for the acts of assessment (…) it is on it that the burden of proof of that fact falls, as is concluded from Article 74, No. 1, of the LGT, which establishes that 'the burden of proof of the facts constituting the rights of the tax administration or of taxpayers falls on whoever invokes them.'

Thus, doubt as to whether or not the possibility of construction of housing on the lands in question exists must be valued procedurally in favor of the Applicant, leading to the annulment of the acts performed, as imposed by No. 1 of Article 100 of the CPPT, subsidiarily applicable, by force of the provision in Article 29, No. 1, paragraph c), of the RJAT."

Accordingly, we have that land should be considered as "land for construction the building of which, authorized or planned, is intended for housing, in accordance with what is provided in the IMI Code" those lands in which the building to be constructed is defined as intended for housing in a subdivision permit or building license permit, or approved project, or prior notification, or favorable preliminary information or document proving constructive viability.

In the concrete case, as we have seen, it was not possible to establish the existence of any act defining the characteristics of the building(s) that could be constructed on the land for construction in question, particularly the purpose to which it is intended; thus, since the burden of proof of that fact fell on the AT (cf. Article 74, No. 1, of the LGT, applicable by virtue of Article 29, No. 1, paragraph a), of the RJAT), doubt as to whether or not the possibility of construction of building(s) intended for housing exists on the land in question must be valued procedurally in favor of the Claimant (cf. Article 100, No. 1, of the CPPT, applicable by virtue of Article 29, No. 1, paragraph a), of the RJAT).

1. Consequently, we conclude that the disputed Stamp Tax assessments that concerned the urban property in question, with reference to the years 2014 and 2015, suffer from the defect of violation of law, due to error regarding factual and legal requirements, embodied in the erroneous interpretation and application of the tax incidence rule contained in item 28.1 of the TGIS, which implies the declaration of their illegality and consequent annulment.

The aforementioned decisions denying the official revision requests, insofar as they maintained those Stamp Tax assessments, suffer from the same invalidating defect and, as such, must also be declared illegal and annulled.

§1.4. (UN)CONSTITUTIONALITY OF ITEM 28.1 OF THE TGIS

1. Since it has been concluded that item 28.1 of the TGIS does not apply to the urban property in question and, in that measure, the disputed tax acts are to be annulled based on the aforementioned defect of violation of law, the knowledge of the unconstitutionality defects argued subsidiarily by the Claimant is rendered moot, as provided by Article 554, No. 1, of the CPC, applicable by virtue of Article 29, No. 1, paragraph e), of the RJAT, the subsidiary petition being taken into consideration only in the case that the preceding petition does not succeed.

§2. REIMBURSEMENT OF PAID TAX AMOUNT

1. The Claimant further petitions for condemnation of the AT to reimburse the amount of Stamp Tax improperly paid.

2. Article 24, No. 1, paragraph b), of the RJAT provides that the arbitral decision on the merits of the claim for which there is no appeal or challenge binds the tax administration from the expiration of the period provided for appeal or challenge, and the latter must, in the exact terms of the merits of the arbitral decision in favor of the passive subject and until the expiration of the period provided for voluntary execution of the sentences of the judicial tax courts, restore the situation that would have existed if the tax act subject of the arbitral decision had not been performed, adopting the necessary acts and operations for that effect, which is in keeping with what is provided in Article 100 of the LGT (applicable by virtue of Article 29, No. 1, paragraph a), of the RJAT) which establishes that the tax administration is obliged, in the case of full or partial merit of a claim, judicial challenge or appeal in favor of the passive subject, to the immediate and full restoration of the legality of the act or situation that is the object of the dispute, including the payment of indemnity interest, if applicable, from the expiration of the period of execution of the decision.

Although Article 2, No. 1, paragraphs a) and b), of the RJAT uses the expression "declaration of illegality" to define the competence of the arbitral tribunals functioning in the CAAD, not making reference to condemnatory decisions, it should be understood that it includes in its competencies the powers that in judicial impugnation proceedings are attributed to the tax courts, this being 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 a first guideline, that "the arbitral tax process should constitute an alternative procedural means to the judicial impugnation process and to the action for recognition of a right or legitimate interest in tax matters."

The judicial impugnation process, although essentially a process for annulment of tax acts, admits the condemnation of the Tax Administration to the payment of indemnity interest, as is inferred from what is provided in Article 43, No. 1, of the LGT and Article 61, No. 4, of the CPPT.

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

On the other hand, as the right to indemnity interest depends on the right to reimbursement of amounts improperly paid, which are its basis of calculation, inherent in the possibility of recognition of the right to indemnity interest is the possibility of appraisal of the right to reimbursement of those amounts.

1. Following the declaration of illegality and annulment of the disputed Stamp Tax assessment acts, it is necessary to conclude that the Claimant bore improper tax payments, and therefore there is grounds for reimbursement of the tax improperly paid, which amounts to the total sum of €30,195.00 (thirty thousand one hundred ninety-five euros), by force of what is provided in Articles 24, No. 1, paragraph b), of the RJAT and 100 of the LGT (applicable by virtue of Article 29, No. 1, paragraph a), of the RJAT), as such appears essential to restore the situation that would have existed if those tax acts had not been performed.

1. To conclude, it is important to note that the relevant questions submitted for appraisal by this Tribunal were known and appraised, as were not those whose decision was rendered moot by the solution given to others.

IV. DECISION

In the terms stated above, this Arbitral Tribunal decides:

a) To find the request for arbitral pronouncement to have merit and, consequently:

i. To declare illegal and annul the following Stamp Tax assessments that concerned the urban property located at... (...)..., Lot..., Place of..., parish of..., municipality of Oeiras, registered in the respective urban real estate register under article no...:

• Assessment No.... and collection notices nos. 2015..., no. 2015... and no. 2015..., relating to the year 2014;

• Assessment No.... and collection notices nos. 2016..., no. 2016... and no. 2016..., relating to the year 2015;

ii. To declare illegal and annul the acts denying the official revision requests nos. ...2018... and ...2018...;

iii. To condemn the Tax and Customs Authority to reimburse to the Claimant the tax improperly paid, which amounts to the total sum of €30,195.00 (thirty thousand one hundred ninety-five euros).

b) To condemn the Tax and Customs Authority to the payment of the costs of the case.

VALUE OF THE CASE

In accordance with what is provided in Articles 306, No. 2, of the CPC by virtue of Article 29, No. 1, paragraph e), of the RJAT, 97-A, No. 1, paragraph a), of the CPPT by virtue of Article 29, No. 1, paragraph a), of the RJAT and 3, No. 2, of the Regulation of Costs in Tax Arbitration Cases, the value of the case is fixed at €30,195.00 (thirty thousand one hundred ninety-five euros).

COSTS

In accordance with what is provided in Articles 12, No. 2, and 22, No. 4, of the RJAT and in Article 4, No. 4, and Table I attached to the Regulation of Costs in Tax Arbitration Cases, the amount of costs is fixed at €1,836.00 (one thousand eight hundred thirty-six euros), to be borne by the Tax and Customs Authority.

Notify.

Lisbon, 27 May 2019.

The Arbitrator,

(Ricardo Rodrigues Pereira)