Tax valuation takes into consideration whether airspace can be developed

For the purposes of tax valuation, the Tax Commissioner is able to consider whether airspace purchased can be developed. This was decided in a judgement delivered by Mr Justice Lawrence Mintoff on 14 October 2020 in PJPC Construction Limited (C 10756) v. Kummissarju tat-Taxxi.

PJPC Construction Limited appealed from a decision of the Administrative Review Tribunal which held that the applicant did not satisfactorily prove that the estimation and the consequent liquidation of tax issued against it by the Tax Commissioner were excessive.

The Administrative Review Tribunal made the following considerations. The Notice of (recte) an inter vivos transfer of immovable property that has been notified to the Tax Commissioner, provided for the transfer of an unnamed and unnumbered block of three apartments for the price of €58,234.33. After having been notified to this effect, the Tax Commissioner appointed an architect to provide an appraisal of the value of the acquired property at the time of the transfer. The first valuation amounted to €280,000. This was a best of judgment valuation since the architect did not access the property in order to carry out such appraisal.

On the basis of this valuation, the Tax Commissioner issued a tax liquidation against the appellant whereby he was asked to pay the total sum of €22,198.92.

Despite the above-mentioned notice, the applicant objected to such, claiming that the transfer concerned a transfer of air since the property was not yet built. Following this objection, the Tax Commissioner once again appointed the same architect to establish the value of the property at the time of sale. After having conducted a site inspection, the architect expressed that the real market value for such property was €200,000. On the basis of such valuation, the Tax Commissioner rejected the applicant’s demand for the entire revocation of the liquidation and instead reduced the sum of tax payable to €14,170.

The applicant felt aggrieved by this decision and lodged an appeal in front of the Administrative Review Tribunal, requesting that the Tax Commissioner’s demand for payment be declared unfounded. The applicant claimed that the amount demanded by the Tax Commissioner was excessive, particularly, but not limited to the fact that there was merely a transfer of airspace.

The Tribunal held that irrespective of whether there was the purchase of a block of apartments as described in the notice to the Tax Commissioner or the purchase of airspace as alleged by the applicant, it was evident that what was acquired was meant for development and in fact, was being developed. Hence the Tribunal concluded that the applicant’s claim that the tax liquidation issued against it was excessive due to having purchased airspace rather than a block of apartments, was superfluous.

The Tribunal further held that when property or airspace is acquired for its development or re-development, in providing an appraisal the architect has to take into consideration several elements such as the locality in which the property or the airspace is situated, the position of such, the size and the potential development that could actually be carried out.

The applicant also claimed that in light of a declaration made by a different architect appointed by the applicant itself, the valuation and the consequent tax liquidation made by the architect appointed by the Tax Commissioner were still excessive. However, the Administrative Review Tribunal did not give much weight to such declaration since it was not confirmed under oath.

Such declaration being the only evidence presented by the applicant to sustain its claims, the Tribunal concluded that the applicant did not manage to satisfactorily prove that the tax valuation and the liquidation carried out by the Tax Commissioner were excessive.

Following such decision, an appeal was lodged by PJPC Construction Limited. The appellant claimed that it felt aggrieved by the decision of the Administrative Review Tribunal since the latter merely relied on the testimony given by the architect appointed by the Tax Commissioner. The appellant further argued that the Tribunal should have appointed an independent architect to carry out such appraisal. However, these arguments were dismissed.

The Court of Appeal held that the burden of proof lies upon the applicant since it was the one contesting the valuation of the architect appointed by the Tax Commissioner as excessive. Therefore, the applicant should have insisted on the appointment of an independent architect by the Tribunal.

The Court of Appeal also dismissed the appellant’s claim that the right to a fair trial was violated since the Tribunal discarded the declaration of the architect appointed by the appellant. The Court of Appeal held that for the declaration to be given more weight, the architect should have testified under oath.

On this basis, the Court of Appeal rejected the appeal and confirmed the appealed sentence in its entirety.