Process: 1/2015-T

Date: August 24, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 1/2015-T) concerns the applicability of Stamp Tax under Item 28.1 of the General Stamp Tax Table (TGIS) to undeveloped building plots. A construction company challenged Stamp Tax assessments totaling €65,213.11 for 2013 on three urban properties classified as land for construction in the municipality. The company raised both procedural and substantive challenges. Procedurally, it argued that the Tax Authority only issued collection documents without formal assessment notifications, violating Article 23(7) of the Stamp Tax Code (CIS) which mandates notification of assessments per Articles 113-118 of the Municipal Property Tax Code (CIMI). The claimant also alleged denial of the constitutional right to prior hearing guaranteed under Article 60 of the General Tax Law (LGT). Substantively, the core dispute centered on whether Item 28.1 TGIS, which taxes 'urban properties with residential use,' applies to vacant land plots zoned for construction but lacking any built structures or occupation permits. The company argued that 'residential use' requires actual functional use, not merely theoretical or virtual potential based on subdivision permits. Despite having a 2005 subdivision permit and cadastral valuations assuming residential buildings with specific implantation areas, no construction had commenced by 2013. The claimant contended that the Tax Authority improperly applied a 'virtual use' concept when the properties remained undeveloped land without construction permits, occupation licenses, or habitable buildings. Additionally, the company challenged the assessments as creating potential double taxation since the properties were already subject to CIMI (Municipal Property Tax), arguing identical objective and subjective scope between the two levies.

Full Decision

ARBITRAL AWARD

1 STATEMENT OF FACTS

A… – Civil Construction Company, Ltd., with registered office at Rua …, …, Tax ID …, came, pursuant to paragraph a) of section 1 of Article 10 of Decree-Law 10/2011 of 20 January, as amended by Law 66-B/2012 of 31.12, to file a request for the constitution of an Arbitral Tribunal with a single arbitrator, with a view to obtaining an arbitral determination on the declaration of illegality of the following acts of assessment of Stamp Tax – Item 28.1 of the TGIS, relating to the year 2013, effected by the Director-General of the Tax and Customs Authority:

  • collection documents for the 1st, 2nd and 3rd instalments (April, July and November), documents nos. 2014 …, 2014 … and 2014 …, relating to the urban property article … of the parish of …, in the total amount of € 11,953.25 (documents one, two and three annexed);

  • collection documents for the 1st, 2nd and 3rd instalments (April, July and November), documents nos. 2014 …, 2014 … and 2014 …, relating to the urban property article … of the parish of …, in the total amount of € 19,911.60 (documents four, five and six annexed);

  • collection documents for the 1st, 2nd and 3rd instalments (April, July and November), documents nos. 2014 …, 2014 … and 2014 …, relating to the urban property article … of the parish of …, in the total amount of € 33,348.26 (documents seven, eight and nine annexed).

The request was based on the following grounds:

1st The Claimant was notified of the above-mentioned collection documents relating to Stamp Tax - item 28 of the TGIS, relating to the year 2013 (documents one to nine annexed).

2nd However, to the present date, the Claimant has not been notified of the stamp tax assessments.

3rd Notification of tax assessments which must be effected by the AT to taxpayers, in accordance with the provisions of section 7 of Article 23 of the CIS, which refers to the CIMI for the assessment part (i.e. Articles 113 to 118).

4th Tax assessment, which cannot be confused with collection documents, and which, being initiated by the AT, is previously notified to the taxpayer so that they may exercise the right of prior hearing, as provided for in Article 60 of the LGT, and which flows, moreover, from a constitutional imperative.

5th The Claimant was not notified by the AT either of the assessments, with their respective factual and legal grounds, nor, previously, to pronounce itself on the same, by way of the right of prior hearing.

6th The Claimant herein graciously appealed against the aforementioned Stamp Tax collection documents.

7th The gracious appeal was dismissed as shown in document ten annexed.

From the lack of factual and legal grounds and the violation of law in the assessments sub judice:

8th The stamp tax assessments, with collection divided into three instalments, shall have been made under item 28.1 of the General Table of Stamp Tax, applicable to the right of ownership of urban properties with cadastral articles 3095, 3096, 3097, of the parish of …, municipality of ..., with tax values of € 1,195,324.50, € 1,991,159.63 and € 3,334,825.88 respectively.

9th Assessments which are considered illegal for the following reasons:

10th First and foremost, because the urban properties with cadastral articles …, …, …, located in …, parish of …, municipality of ... are plots of land destined for construction.

11th Land for construction whose valuation was effected on the presupposition that the building(s) to be erected would be dedicated to residential use.

12th That is, at the time when the land for construction was evaluated, the total area of the land was taken into account, the percentage of maximum implantation area permitted by the municipal planning scheme for the zone and with the presupposition that buildings wholly dedicated to residential use would be constructed.

13th Now, the said areas and dedication, although based on subdivision permit no. …/2005, issued 2005-06-30, by the Municipal Council of …, no construction work was carried out nor was any construction permit issued by the competent entity.

14th Indeed, as regards properties U: …, … and …, although there is a subdivision permit, no construction has been built and there is no occupation permit issued.

15th Furthermore, even in relation to property U: …, in addition to the consideration of the percentage of implantation area of 35.00%, partial calculations were made presupposing that the land would be destined for the construction of a building with two uses – retail and residential, of € 420,655.20 and € 2,793,632.10 respectively.

16th Valuation effected by the AT, with two different uses for the same property, which contradicts the act of stamp tax assessment applying to "urban properties with residential use".

17th In any case, the fact is that, in the year 2013, and at present, there is no construction even initiated on the land plots, and in light of the real estate crisis, the Claimant herein does not intend to carry out any construction.

18th That is, on the three land plots for construction above identified, no construction has been initiated, and consequently, no construction has been completed, nor has a permit or authorization been requested, nor has any work or occupation been authorized or permitted.

19th And in the absence of a construction permit and/or occupation permit, nor any building existing, one cannot speak of residential use or dedication.

20th Whereby, the Claimant considers that the still-vacant land plots for construction are excluded from taxation under item 28 of the CIS table.

21st In summary, residential use presupposes a functional approach, and land for construction is not in itself a habitable property.

22nd Erroneously, the Tax Authority is, in the specific case of land for construction, applying a concept of virtual use, when the use currently shown in the registry is only a theoretical, hypothetical, but not effective purpose.

23rd Whereby, one cannot regard as effective the use or dedication of the land for residential purposes, and the Stamp Tax assessments are illegal, under item 28.1 of the Stamp Tax Table.

24th Furthermore, even after the legal amendment that occurred in item 28.1 of the TGIS, by Law no. 83-C/2013 of 31 December, there is no fact or legal situation that falls within the scope of this norm.

25th Indeed, the new wording of the said norm does not have an interpretative character and became effective on 1 January 2014, that is, having prospective effect only.

26th Thus, since the year to which the tax relates is 2013, the wording prior to Law no. 83-C/2013 should be applied.

27th It happens, however, as stated above, that in the prior wording of the norm in question the objective scope of the tax was on urban properties with residential use, without the Stamp Tax Code defining what was meant by "urban property with residential use".

28th And even by referral to the CIMI (pursuant to section 2 of Article 67 of the CIS), we do not find the definition of what constitutes "urban property with residential use".

29th On the other hand, the expression residential use presupposes actual use and not mere possibility, potentiality or expectation that the property may come to have.

30th Whereby, to fall within the objective scope of the tax, the urban property only reconducts to the urban property provided for in paragraph a) of section 1 of Article 6 of the CIMI, and not to construction land.

31st Given, in this way, the residential use of the property at the date of the tax event (31 December 2013, as provided for in section 1 of Article 113 of the CIMI) to be in question, item 28.1 of the TGIS could not be applied.

32nd The Claimant further considers that the assessments sub judice are also illegal because they tax the same fact or legal situation already taxed under the CIMI.

33rd That is to say that the objective and subjective scope is identical to that of the CIMI.

34th Hence there is double taxation, insofar as the Claimant, in its capacity as owner of urban properties, whose tax value exceeds € 1,000,000.00, and which are registered in the property roll with the use designation of residential, is a passive subject of two taxes on the same real property: the CIMI and the CIS (pursuant to item 28.1 of the TGIS).

35th What renders the stamp tax assessments illegal, by violation of the principle prohibiting double taxation.

36th It is also noteworthy to highlight the discrimination introduced by item 28.1 of the TGIS, in light of what the purpose of this tax is, which is based on the values of facts or legal situations at the moment of their occurrence.

37th The introduction of item 28 in the TGIS thus raises doubts as to its constitutionality regarding its retroactivity, insofar as it comes to impose the occurrence of a legal fact (which in reality does not occur), as it involves taxing real property rights, regardless of the date of their constitution, through a law published on 29 October 2012, and effective the following day.

38th Which means that in reality the law is applied retroactively to real property rights previously acquired, although the new law is from the end of the year 2012, and will thus apply to legal situations constituted before its entry into force.

39th There are further raised issues of unconstitutionality of the taxation, as it is directed only at properties for residential purposes, violating the principle of equality of Article 13 of the CRP.

40th The principle of equality affected by the Stamp Tax assessments, as it differentiates taxation based on the aptitude of properties, excluding the taxation of valuable properties devoted to services and retail, such as banks, shopping centres.

41st Discrimination which also occurs, even within the concept of urban property with residential use, not distinguishing properties destined for rented residential use, own permanent residence or other.

42nd This situation thus violates elementary principles of justice, non-discrimination and the constitutional requirement of equality in taxation, taxing the ownership of properties which are sources of property income, taxed under IRS/IRC.

43rd Violation of the principle of equality of taxpayers and violation of non-discrimination of identical situations in tax treatment which determine unconstitutionality, and consequently determine the inapplicability of item 28.1 of the TGIS to the present case.

The Claimant requests the declaration of illegality and the annulment of the tax acts in question.

The Tribunal was constituted on 16-3-2015, following designation of the arbitrators by the Ethics Council of the CAAD, and the Director-General of the AT was notified pursuant to Article 17 of the RJAT in order to file a response and attach a copy of the administrative file.

Within the legal deadline, the AT filed a response, alleging in essence and in summary that the properties in question have the legal nature of properties with residential use, whereby the assessment acts which are the subject of this request for arbitral determination should be maintained as they embody the correct interpretation of Item 28 of the General Table amended by Law 55-A/2012, of 29/12.

PRELIMINARY EXAMINATION

This collective Arbitral Tribunal was duly constituted on 16-3-2015, with the arbitrators designated by the Ethics Council of the CAAD, all respective legal and regulatory formalities having been complied with (cf. Articles 11-1/a) and b), of the RJAT and 6 and 7, of the Ethics Code of the CAAD), and is competent ratione materiae, in conformity with Article 2, of the RJAT.

The parties have legal personality and capacity, are legitimately constituted and are duly represented (cf. Articles 4 and 10, section 2 of the RJAT and Article 1 of Ordinance no. 112-A/2011, of 22 March).

No nullities were identified in the proceedings.

By decision of the Tribunal of 20-7-2015, the hearing provided for in Article 18 of the RJAT was dispensed with and final arguments were considered unnecessary.

It remains to assess and decide the merits of the request.

2 LEGAL GROUNDS: MATTERS OF FACT

2.1 Facts deemed to be proved:

2.1.1 On 31 December 2013, the Claimant was the owner of the urban properties registered in the property roll of the parish of …, municipality of ..., under articles …, … and …;

2.1.2 The said urban properties, in accordance with the decision dismissing the gracious appeal process no. … 2014 …, notified to the Claimant through official letter no. …, of the Finance Directorate of ... – Tax Justice Division, of 15 December 2014, were described in the registry as "land for construction";

2.1.3 The Stamp Tax assessments which are the subject of the request for arbitral determination were issued by the AT, on 17 March 2014, pursuant to Item 28.1, of the TGIS, at the rate of 1%, on the tax value of € 1,195,324.50, for the amount of € 11,953.25 (article … of the parish of …, of the municipality of ...), on the tax value of 1,991,159.63, for the amount of € 19,911.60 (article … of the same aforementioned parish) and on the tax value of € 3,334,825.88, for the amount of € 33,348.26 (article … of the aforementioned parish);

2.1.4 The Claimant was notified to make the following payments of Stamp Tax, by reference to the urban properties previously identified:

2.1.4.1 Collection document no. 2014 …, for the amount of € 3,984.43 – 1st Instalment – April 2014;

2.1.4.2 Collection document no. 2014 …, for the amount of € 3,984.41 – 2nd Instalment – July 2014;

2.1.4.3 Collection document no. 2014 …, for the amount of € 3,984.41 – 3rd Instalment – November 2014;

2.1.4.4 Collection document no. 2014 …, for the amount of € 6,637.20 – 1st Instalment – April 2014;

2.1.4.5 Collection document no. 2014 …, for the amount of € 6,637.20 – 2nd Instalment – July 2014;

2.1.4.6 Collection document no. 2014 …, for the amount of € 6,637.20 – 3rd Instalment – November 2014;

2.1.4.7 Collection document no. 2014 …, for the amount of € 11,116.10 – 1st Instalment – April 2014;

2.1.4.8 Collection document no. 2014 …, for the amount of € 11,116.08 – 2nd Instalment – July 2014;

2.1.4.9 Collection document no. 2014 …, for the amount of € 11,116.08 – 3rd Instalment – November 2014;

2.2 Legal grounds for the facts proved

The Tribunal's conviction as to the matters of fact deemed as proved resulted from critical analysis of the documentary evidence submitted and not contested in conjunction with the positions of the parties in their respective pleadings.

2.3 Facts not proved

There are no facts relevant to the decision of the case which should be considered as not proved.

3 LEGAL GROUNDS – LEGAL REASONING

3.1 On the concept of urban property with residential use

As emerges from the contested discourse, the principal issue to be decided in the present proceedings is whether a plot of land for construction, with a tax value exceeding € 1,000,000.00, can be considered as an urban property with residential use, falling within the definition of the norm of scope in Item 28.1, of the General Table of Stamp Tax (TGIS), added by Article 4, of Law no. 55-A/2012, of 29 October.

In its original wording, applicable to the situation under analysis, item 28, of the TGIS, provided that the following situations were subject to Stamp Tax:

"28 — Ownership, usufruct or right of superficies of urban properties whose tax value contained in the property roll, in accordance with the Code of Municipal Property Tax (CIMI), is equal to or exceeding € 1,000,000 — on the tax value used for purposes of IMI:

28.1 — For property with residential use — 1%;

28.2 — For property, when the passive subjects that are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, shown on the list approved by order of the Minister of Finance — 7.5%."

The cumulative requirements for application of the norm contained in Item 28.1, of the TGIS, are thus that the immovable property to be taxed is an urban property "with residential use" and that its tax value, for purposes of IMI, is greater than € 1,000,000.00.

With regard to the tax value of the immovable properties on which the Stamp Tax assessments which are the subject of the request for arbitral determination were levied, there is no doubt that each was assigned a tax value exceeding the limit established by the scope norm, nor is this fact contested.

It remains, therefore, to determine whether the immovable properties to which the request relates, classified as land for construction, fall within the concept of "property with residential use", as the Respondent AT argues, an expression which, according to it, "encompasses both completed properties and land for construction, particularly having regard to the literal element of the norm (…)" – (Article 19 of the Response).

It has long been peacefully accepted by legal doctrine that tax norms are interpreted like any other legal norms, a solution which is now expressly set out in section 1 of Article 11 of the General Tax Law (LGT), by providing that "1 - In determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed".

Amongst the elements of interpretation, that which the applier of the norm must start from is, precisely, the grammatical element, that is, the text of the law, it being nevertheless important to note that, in determining the meaning and value of the norm, the interpreter cannot fail to consider the logical element or, in accordance with section 1 of Article 9 of the Civil Code, fail to "reconstruct (…) the legislative intent, paying particular attention to the unity of the legal system, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied".

The scope norm contained in item 28.1, of the TGIS, uses the expression "property with residential use", the concept of which is not defined in the Code in which it is inserted, nor in any other legislation of a tax nature.

Being a polysemous expression, which may have more than one meaning and, in order to determine its exact meaning and scope, in respect for the unity of the system, the interpreter should have recourse to the so-called "parallel provisions", that is, there should be considered "statutory provisions that regulate parallel normative problems or related institutes".

Such "parallel provisions" will necessarily be found, in the case in question, in the norms of the Code of IMI, to which application is subsidiarily referred, in block, by section 2 of Article 67, of the Stamp Tax Code, added by the same Law no. 55-A/2012, of 29 October, by providing that "2 - To matters not regulated in this Code relating to item no. 28 of the General Table, the provisions of the CIMI shall apply subsidiarily."

It will not, therefore, be acceptable the statement of the Respondent, according to which "the legislator does not refer to 'properties destined for residential use', having opted for the notion of 'residential use' - a different and broader expression whose meaning is to be found in the need to integrate other realities beyond those identified in Article 6, section 1, paragraph a) of the CIMI" (Article 20 of the Response), first of all, because such opposition is posed by the principles of legality and typicality of tax law.

However, notwithstanding the express referral to the Code of IMI, which the legislator wished to establish in section 2 of Article 67 of the Stamp Tax Code, by reference to matters relating to Item 28, of the TGIS, the latter also does not give us the concept of "properties with residential use".

Indeed, its Article 6, inserted in Chapter I, under the heading "Scope", does not use that expression when enumerating, in section 1, the types of urban properties, which may be classified as: a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Other, with sections 2, 3 and 4, of the same article, delimiting what should be understood by each of those designations.

Thus, "Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a licence, which have as their normal destination each of these purposes" (section 2) and land for construction "are plots of land located within or outside an urban agglomeration, for which a construction or development permit or authorization has been granted, or prior notification admitted or favorable prior information issued for a development or construction operation, and also those which have been so declared in the title of acquisition, except for plots of 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 schemes, are devoted to public spaces, infrastructure or facilities" (section 3).

Comparing the content of sections 2 and 3 of Article 6 of the Code of IMI, it seems evident that the legislator wished to distinguish very clearly between residential properties and land for construction, in addition to which the type of urban property that best corresponds to the concept of "property with residential use" is that of residential properties, as buildings or constructions licensed for residential use or which, in the absence of a licence, have as their normal destination residential purposes.

However, the AT further argues that "The notion of use of urban property is grounded in the part relating to valuation of immovable properties, insofar as valuation (purpose) incorporates value into the property, constituting a distinguishing fact determinative (coefficient) for purposes of valuation" (Articles 14 and following of the Response), relying on the Judgment of the Court of Administrative Appeals (TCA) South, handed down on 14/02/2012, in case no. 04950/11, which it partially transcribes.

Now, the word "use" appears only in Articles 38 and following of the Code of IMI, systematically inserted in Chapter VI – Of the tax value of urban properties; Section II – Of valuation operations.

Specifically, Article 41 of that Code, under the heading "Use Coefficient", provides that this "depends on the type of use of the buildings erected" (emphasis added).

It may thus be concluded, certainly, that, in accordance with Article 41 of the Code of IMI, the "Use Coefficient" always refers to buildings or constructions, since it "depends on the type of use of the buildings erected", from which it also seems to result certainly that the word "use" has the meaning of "utilization".

However, as advanced above, those Articles 38 and following of the Code of IMI are systematically positioned in the Chapter relating to the determination of tax value.

Constituting the tax value the taxable matter on which the tax rate will be imposed, it can hardly be accepted that from the rules relating to the valuation of urban properties one can extract any rule of scope, as the phase which, in theory and practice of taxes, logically precedes that of the determination of the taxable matter.

And, even if such "use coefficient" may be used in the valuation of land for construction, as it may refer to future buildings, authorized or licensed for a particular type of use, as was admitted by the aforementioned Judgment of the TCA South (to the contrary, see the Judgment of the STA, of 18/11/2009, case 0765/09), this will certainly not determine that land for construction may come to be regarded as "properties with residential use", given the exhaustive classification of urban properties, established by the aforementioned Article 6 of the Code of IMI, as a norm of objective scope, which draws a clear distinction between residential properties and land for construction.

Indeed, in accordance with the repeated jurisprudence of the STA (from the Judgment of 9 April 2014, in case no. 1870/13, to the most recent Judgment of 17 June 2015, in case no. 01479/14, all available at http://www.dgsi.pt/ which, with due respect, are transcribed), "It would be strange, indeed, if the determination of the scope of the objective scope norm of item no. 28 of the General Table of Stamp Tax were to be found, in the end, in the norms for determining the tax value of the Code of IMI, and that the terminological imprecision of the legislator in drafting that rule were, after all, elucidated and finally clarified through an indirect and equivocal referral, to the use coefficient established by the legislator in relation to buildings erected (Article 41 of the Code of IMI)".

For its part, as has been referred to by the jurisprudence both of the STA and of the CAAD (cf. the Arbitral Decision rendered by the CAAD on 12/12/2013, in case no. 144/2013-T, available at https://caad.org.pt/ and the references made to it in the Judgments of the STA aforementioned), "When presenting and discussing, in Parliament, bill no. 96/XII (2nd), the Secretary of State for Tax Matters expressly stated: 'The Government proposes the creation of a special rate on residential urban properties of higher value. It is the first time in Portugal that special taxation has been created on high-value properties destined for residential use. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to homes valued at € 1 million or more.'"

In accordance with what has been set forth, if the letter of the law – of Item 28.1 of the TGIS – (grammatical element) is not sufficiently clear to, without difficulty, establish the concept of "property with residential use", already the logical element ("the systematic element and the unity of the legal system, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied"), to which points section 1 of Article 9 of the Civil Code, allows the conclusion, anticipating the decision, as has been concluded by the Supreme Administrative Court in the aforementioned Judgment, that, "(…) resulting from Article 6 of the Code of IMI a clear distinction between "residential" urban properties and "land for construction", these cannot be considered as "properties with residential use" for purposes of the provision in item no. 28.1 of the General Table of Stamp Tax, in its original wording, as given by Law no. 55-A/2012, of 29 October", which justifies the annulment of the contested assessments, for error in the assumptions on which their issuance was based, in line, moreover, with the jurisprudence that is practically unanimous on this matter.

3.2 Questions beyond the cognizance of the Tribunal

In the decision, the judge must pronounce on all issues that should be assessed, abstaining from pronouncing on issues which should not be within its cognizance (final segment of section 1 of Article 125 of the CPPT), and the issues which fall within the powers of cognizance of the tribunal are, in accordance with section 2 of Article 608 of the CPC, applicable subsidiarily to tax arbitration proceedings, by referral of Article 29, section 1, paragraph e) of the RJAT, "the issues which the parties have submitted to its assessment, excepted those whose decision is prejudiced by the solution given to others (…)".

In light of the solution given to the issue relating to the concept of "property with residential use", the cognizance of the remaining issues raised by the parties is prejudiced, namely that of the invoked unconstitutionality of the scope norm contained in Item 28.1 of the TGIS, as it is not capable of the interpretation which, in the case, was made by the AT.

4 DECISION

In accordance with the foregoing, this Tribunal decides:

  • To declare the illegality of the assessments which are the subject of these proceedings, for lack of legal basis and violation of Articles 4 and 6 of Law no. 55-A/2012, of 29 October in the interpretation hereby defended, and, in consequence, finding the request well-founded on this ground, decides to annul the aforementioned assessment acts.

4.1 Value of the proceedings

In accordance with the provisions of Article 306, sections 1 and 2, of the CPC and 97-A, section 1, paragraph a), of the CPPT and section 3, section 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is set at € 65,213.11.

4.2 Costs

Pursuant to Article 22, section 4, of the RJAT, the amount of costs is set at € 2,448.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, entirely at the expense of the Tax and Customs Authority.

Lisbon, 24-8-2015

The Collective Arbitral Tribunal,

José Poças Falcão

(President)

Maria Forte Vaz

(Member)

Mariana Vargas

(Member)

Frequently Asked Questions

Automatically Created

Does Verba 28.1 of the General Stamp Tax Table (TGIS) apply to land classified as building plots (terrenos para construção)?
Based on the taxpayer's arguments in this case, Item 28.1 of the TGIS should not apply to undeveloped building plots (terrenos para construção) because the provision specifically taxes 'urban properties with residential use.' The claimant argued that residential use requires actual, functional use of a habitable building, not merely theoretical potential based on zoning or subdivision permits. Land for construction, without completed buildings, construction permits, or occupation licenses, lacks the 'residential use' characteristic required by Item 28.1. The taxpayer distinguished between land classified for future construction (subject only to CIMI) and built properties with actual residential occupation. While cadastral valuations may assume future residential buildings based on implantation percentages and zoning, such virtual or hypothetical use does not constitute the effective residential use contemplated by the pre-2014 wording of Item 28.1 TGIS. The subsequent 2014 amendment to Item 28.1 by Law 83-C/2013 had only prospective effect and did not apply to the 2013 tax year in dispute.
What are the taxpayer notification requirements for Stamp Tax (Imposto do Selo) assessments under Article 23(7) of the CIS?
Article 23(7) of the Stamp Tax Code (CIS) establishes that notification of Stamp Tax assessments must follow the procedures set forth in the Municipal Property Tax Code (CIMI), specifically Articles 113 to 118 regarding the assessment component. This means taxpayers must receive formal notification of the tax assessment (liquidação) itself, not merely collection documents (documentos de cobrança). The assessment notification must include the factual and legal grounds supporting the tax calculation, enabling taxpayers to understand the basis for taxation. Furthermore, Article 60 of the General Tax Law (LGT) guarantees taxpayers the right to prior hearing (audição prévia) before final assessment decisions that affect their rights. In this case, the claimant alleged receiving only collection documents divided into three installments without prior notification of the underlying assessments or opportunity to be heard beforehand—a procedural violation that constitutes grounds for challenging the assessment's legality independently of substantive arguments about tax applicability.
Can a Stamp Tax assessment be challenged if the taxpayer was not granted the right to a prior hearing (direito de audição) under Article 60 of the LGT?
Yes, a Stamp Tax assessment can be challenged and potentially invalidated if the taxpayer was not granted the right to prior hearing (direito de audição prévia) guaranteed under Article 60 of the General Tax Law (LGT). The right to prior hearing is a constitutional and administrative law principle requiring tax authorities to notify taxpayers of proposed assessments and allow them to present their position before final decisions are made. This procedural safeguard is particularly important for assessments initiated by the Tax Authority (AT) rather than self-assessments. Failure to provide prior hearing constitutes a procedural illegality that can render the assessment invalid, regardless of the substantive merits of the tax claim. In this arbitration, the claimant specifically argued that they received no notification of assessments with factual and legal grounds, nor any opportunity to be heard beforehand, violating both Article 60 LGT and the notification requirements of Article 23(7) CIS. Such procedural defects provide independent grounds for annulment through administrative appeals or arbitration proceedings before CAAD.
What is the difference between a tax assessment notification (liquidação) and a collection document (documento de cobrança) in Portuguese Stamp Tax proceedings?
In Portuguese tax proceedings, a tax assessment notification (liquidação) and a collection document (documento de cobrança) are distinct legal acts with different purposes and requirements. The assessment (liquidação) is the administrative act by which the Tax Authority determines the amount of tax due, applying the law to specific facts. It must be formally notified to the taxpayer with complete factual and legal grounds explaining the calculation basis, applicable rates, and legal provisions. The assessment notification enables the taxpayer to understand and challenge the tax determination. In contrast, a collection document is merely an instrument for payment, issued after the assessment becomes final, demanding payment by specified deadlines (often in installments). It does not contain the detailed reasoning behind the tax calculation. This distinction is critical because taxpayers can only effectively exercise their rights of defense—including prior hearing and administrative appeals—if they receive proper assessment notifications, not just payment demands. In this case, the claimant argued receiving only collection documents for three installments without the underlying assessment notifications, constituting a fundamental procedural violation.
How can a construction company dispute Stamp Tax charges on urban properties through CAAD arbitration under Decree-Law 10/2011?
A construction company can dispute Stamp Tax charges on urban properties through CAAD (Centro de Arbitragem Administrativa) arbitration under Decree-Law 10/2011 by filing a request for constitution of an arbitral tribunal pursuant to Article 10(1)(a). This procedure provides an alternative to judicial courts for resolving tax disputes. The request must identify the contested administrative acts (specific collection documents or assessments with their reference numbers), state the legal and factual grounds for illegality, and specify the relief sought (typically annulment of the assessments). The claimant can choose between a single arbitrator or a three-member panel. Key advantages include faster resolution than traditional courts, specialized tax law expertise, and binding decisions equivalent to court judgments. Before arbitration, the taxpayer typically must exhaust administrative remedies (such as gracious appeals/reclamação graciosa), though this is not always mandatory depending on circumstances. In this case, the construction company challenged nine collection documents totaling €65,213.11 related to three properties, arguing both procedural violations (lack of assessment notification and prior hearing) and substantive grounds (building plots lacking residential use do not fall within Item 28.1 TGIS scope). The arbitration process examines both procedural compliance and substantive tax law application to determine assessment legality.