Process: 101/2015-T

Date: May 2, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (101/2015-T) addresses whether Stamp Tax under Item 28.1 of the General Table (TGIS) applies to properties held in vertical/full ownership when individual units fall below the €1,000,000 threshold but the combined property value exceeds it. The claimant owned an urban property in Lisbon consisting of 10 independently usable residential units, each valued between €151,600 and €153,070, totaling approximately €1,520,000. The Tax and Customs Authority (TCA) assessed Stamp Tax on the entire property for 2013-2014, arguing that vertical ownership constitutes a single property unit regardless of internal divisions. The claimant contested this interpretation, arguing that independently usable units should be treated separately like horizontal property, thus avoiding the tax since no individual unit reached €1,000,000. The claimant also raised constitutional challenges based on the principle of equality, claiming unjustified discrimination between vertical and horizontal property regimes. The TCA defended that the law clearly refers to patrimonial value of 'each property' not its distinct parts, and that different treatment of different legal institutes does not constitute arbitrary discrimination. The claimant sought annulment of the tax acts, reimbursement of amounts paid, and compensatory interest. The central legal question involves interpreting 'property' under Item 28.1 TGIS and whether the distinction between taxation of vertical ownership (assessed on total value) versus horizontal property (assessed on individual fractions) violates constitutional principles of equality and ability to pay.

Full Decision

CAAD: Tax Arbitration

Case No.: 101/2015-T

Subject: Stamp Tax - Item 28 TGIS; urban property in full ownership

Arbitral Award

Claimant: A…, S.A. (hereinafter "Claimant")

Respondent: TAX AND CUSTOMS AUTHORITY (hereinafter "TCA" and "Respondent")

  1. Report

A…, S.A., with tax identification number …, with registered office at Av. …, … – …, …-… Lisbon, hereinafter referred to as the Claimant, submitted to the Centre for Administrative Arbitration (CAAD) a request for constitution and for arbitral pronouncement with a view to annulling the tax acts levying Item No. 28.1 of the General Table of Stamp Tax (TGIS) for the year 2013 (1st and 2nd instalments), relating to the urban property registered in the urban property register under article … of the Avenidas Novas parish.

The Claimant bases the illegality of the levies and consequent annulment of the tax acts on the following defects:

  • Erroneous interpretation of the concept of "property" for purposes of taxation under Stamp Tax and in particular that provided in Item 28.1 of the TGIS;

  • Unconstitutionality, by violation of the principle of equality and of tax capacity;

Petitioning for the annulment of the tax acts, the consequent reimbursement of the sums paid by the Claimant relating to the tax acts that are the subject of these proceedings and also petitioning for the TCA to be condemned to payment of compensatory interest.

The Tax and Customs Authority, for its part, defended against the improcedence of the arguments and claims submitted, on the grounds that:

  • Item 28.1 of the General Table of Stamp Tax applies to urban properties with residential purpose;

  • The patrimonial value equal to or exceeding € 1,000,000.00 upon which the application of this legal norm depends is, as clearly results from its letter, the patrimonial value of each property and not of its distinct parts, even if susceptible of independent use;

  • The unit of the urban property in vertical ownership composed of several storeys or divisions is not, however, affected by the fact that all or part of those storeys or divisions are susceptible of independent economic use;

  • Any other interpretation violates the principle of legality enshrined in art. 103, No. 2, of the CRP;

  • The principle of tax equality only prohibits arbitrary or unjustified discriminations, but not discriminations that may be justified by the more evolved character of the institutes or by the coherence of the tax system;

  • The tax act in question thus violated no legal or constitutional provision and should be upheld.

The sole arbitrator was designated and appointed on 13.04.2015.

In accordance with that provided for in article 11, No. 1, lit. c) of the RJAT, the sole arbitral tribunal was constituted on 28.04.2015.

  1. Procedural Matters

The sole arbitral tribunal is materially competent, in accordance with the provisions of articles 2, No. 1, lit. a) of the Legal Framework for Arbitration in Tax Matters.

The parties have legal personality and capacity and have standing in accordance with art. 4 and No. 2 of art. 10 of the Legal Framework for Arbitration in Tax Matters (RJAT), and art. 1 of Ordinance No. 112-A/2011, of 22 March.

The joinder of claims made in this request for arbitral pronouncement, in which tax acts are in issue relating to levying of the same tax (Stamp Tax), based on the same factual basis and applying the same rules of law, is fully justified in light of the principle of procedural economy enshrined in article 3 of the RJAT.

The proceedings are free from any nullity and no exceptions have been raised by the parties that would prevent consideration of the merits of the case, the claim is timely, so the conditions are met for the rendering of the arbitral award.

  1. Statement of Facts

3.1. Established Facts:

Having analyzed the documentary evidence produced and the positions of the parties, the following facts are considered established and relevant for the decision of the case:

  1. The Claimant is the owner of the urban property registered in the urban property register of the Avenidas Novas parish, under article …, located at Av. …, No. …, municipality of Lisbon;

  2. The identified urban property is held in the regime of full/vertical ownership, with storeys or divisions susceptible of independent use, in accordance with the property notebook attached to the proceedings;

  3. With respect to the above-identified urban article and more specifically with respect to each of the storeys or divisions susceptible of independent use, the Respondent TCA issued collection notes for Stamp Tax relating to Item 28.1 of the TGIS for the years 2013 and 2014;

  4. Article … already identified is composed of 10 storeys or divisions of independent use and with residential purpose, with the following PTVs:

  • 1st DT - € 151,600.00;
  • 1st ES - € 151,600.00;
  • 2nd DT - € 151,600.00;
  • 2nd ES - € 151,600.00;
  • 3rd DT - € 151,600.00;
  • 3rd ES - € 151,600.00;
  • 4th DT - € 151,600.00;
  • 4th ES - € 151,600.00;
  • 5th DT - € 153,070.00;
  • 5th ES - € 153,070.00;

The patrimonial value of the urban property article … of the Avenidas Novas parish, municipality of Lisbon, barely reaches or exceeds the amount of € 1,000,000.00 when the PTVs relating to the storeys or divisions susceptible of independent use and with residential purpose that comprise this same property article are added together;

None of the storeys or divisions susceptible of independent use with residential purpose of article … has a patrimonial value equal to or exceeding € 1,000,000.00;

The collection notes for Stamp Tax relating to 2013 and 2014 were notified to the Claimant;

The Claimant paid the sums stated in the collection notes relating to 2013 and likewise those relating to Stamp Tax for 2014;

The Claimant filed a Gracious Objection with respect to the tax acts relating to 2013.

This Gracious Objection was decided by dismissal through official letter No. …, dated 14.11.2014.

On 16.02.2015 the now Claimant submitted, via electronic platform, the request for constitution of an arbitral tribunal, which was accepted on 18.02.2015;

The Claimant proceeded on 16.02.2015 to payment of the initial court fee;

On 13 July 2015, the Claimant requested an extension of the claim in these proceedings, in order to include in the object of these proceedings the collection notes relating to the 3rd instalment of 2013 and likewise those relating to 2014, more clearly identified, under Stamp Tax, Item 28.1 of the TGIS.

No other facts with relevance for the decision of the case were established.

3.2. Justification of the Established Facts:

With respect to the established facts, the arbitrator's conviction was based on the documentary evidence attached to the proceedings, as well as on the acceptance by the parties of the facts of the case brought before these proceedings.

  1. Legal Matters:

4.1. Issues to be Decided

The request for arbitral pronouncement thus has as its object, first of all, the extension of the claim requested, the declaration of illegality of the tax acts levying Stamp Tax under Item 28.1 of the TGIS for the year 2013 and 2014, due to erroneous interpretation of the concept of "property" in the matter of Stamp Tax embodied in the collection notes already identified above, as well as consideration of the alleged violation of the principle of equality and of tax capacity.

Additionally, the Claimant petitions for reimbursement of the tax paid as allegedly unduly owed and payment of compensatory interest.

In light of the above, having regard to the provision in article 124 of the TCPT, applicable by force of lit. a) of No. 1 of article 29 of the RJAT, it is necessary to consider the defects pointed out to the Stamp Tax acts that are the subject of these arbitral proceedings, in light of such criterion.

Accordingly, in the first place, the Tribunal must decide on the extension of the claim.

Secondly, the substantive or material legal issues placed before the Tribunal relate only to the interpretation and application of rules of law.

4.2. On the Extension of the Claim:

The Claimant filed a request for arbitral pronouncement with the CAAD, challenging the levies of Stamp Tax under Item 28 and 28.1 of the Tax Code that the TCA made, with respect to the 1st and 2nd instalments of the year 2013 and also regarding the levies for 2014, with respect to the urban property in full ownership with storeys or divisions susceptible of independent use.

Pending these proceedings, having the Claimant been notified of the Stamp Tax levies on the same property and year, but relating to the 3rd instalment of the year 2013 and also with respect to 2014 (1st, 2nd and 3rd instalments), the Claimant requested the extension of the claim in order to include these tax acts.

Notified that the TCA was to make a pronouncement, if it so wished, the latter did not exercise this faculty.

In accordance with article 265, No. 2 of the CPC, applicable by force of the Legal Framework for Tax Arbitration, which provides that "the claimant may, at any time, reduce the claim and may extend it until the close of the discussion in first instance if the extension is the development or consequence of the original claim".

It appears to us that the legal requirements for extension of the claim are met, particularly those of the final part of No. 2 of article 265 of the CPC, so that, given the merit of what has been alleged by the Claimant, the extension of the original claim of € 10,126.30 is admitted, altering the value of the case to € 30,378.80, thus also coming to include the tax acts embodied in the collection notes relating to the 3rd instalment of Stamp Tax for 2013 and likewise those relating to 2014.

4.3. On the Alleged Illegality of the Stamp Tax Levies, Item 28.1 of the TGIS:

In summary, the issue is whether the interpretation made by the Tax and Customs Authority of using, as a legal criterion for purposes of subjection to Item 28.1 of the TGIS, the sum of the PTVs of all storeys or divisions of independent use with residential purpose relating to the same property article is in accordance with the applicable legal framework.

In this regard, it is important to note that the tax act in question occurred during the validity of the wording conferred by Law No. 55-A/2012, of 29 October, so that the present wording given to it by article 194 of Law No. 83-C/2013, of 31 December (State Budget for 2014) is only applicable to Stamp Tax for 2014, since it entered into force on 1 January 2014.

And it is while keeping in mind the legislative context of this innovation in the area of taxation under Stamp Tax that the question relating to the assessment of the scope of the tax rule provided in article 28.1 of the TGIS should also be considered.

Let us therefore examine first the legal framework of the Stamp Tax levy in question:

a) Stamp Tax for 2013:

Law No. 55-A/2012, of 29 October, added Item 28.1 to the General Table of Stamp Tax (TGIS), with the following wording:

28 – Ownership, usufruct or right of superficies of urban properties whose patrimonial value stated in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or exceeding € 1,000,000 – on the patrimonial value used for purposes of IMI:

28.1 – For property with residential purpose – 1 % (…);"

For its part, article 67, No. 2 of the Stamp Tax Code, added by the aforementioned Law, provides that "for matters not regulated in this code relating to Item 28 of the General Table, the CIMI shall apply subsidiarily."

The rule of incidence refers to urban properties, whose basic concept of property is rooted in the provision of article 2 of the CIMI, with the determination of the PTV following the terms of article 38 and following of the same code.

Being that, in accordance with that legal provision:

"1 - For purposes of this Code, property is any portion of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated in or situated upon it, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances previously mentioned, endowed with economic autonomy in relation to the land where they are located, although situated in a portion of territory that forms an integral part of diverse assets or does not have a patrimonial nature." (emphasized by us)

And article 6 of the CIMI clarifies that:

"1 - Urban properties are divided into:

a) Residential;

2 - Residential, commercial, industrial or service buildings or constructions are those licensed for such purpose or, in the absence of a license, that have as their normal purpose each of these uses." (emphasized by us)

The legislator's concept with respect to properties and the subsequent division into urban properties is, for tax purposes, undoubtedly a criterion based on economic value and functional autonomy in relation to purpose.

That is, one is dealing with a concept of material or substantive basis and not with a concept of legal-formalistic nature, as the Respondent TCA seems to intend.

Now, in the case at hand, the Respondent TCA does not even call into question that the storeys or divisions with independent use and with residential purpose relating to the property articles do not have these same characteristics (functional autonomy and economic value) emphasized by the legislator, nor could it do so inasmuch as it is the TCA itself that confirmed as correct and had this same information inscribed in the respective property notebooks of the property articles to which the storeys or divisions susceptible of independent use relate.

Moreover, precisely because such storeys or divisions have such characteristics of autonomy, both in functional and economic terms, it is understandable that the legislator provided for the attribution of patrimonial values for each of these storeys, areas or divisions susceptible of independent use.

This contradicts the TCA's thesis that, as storeys or divisions susceptible of independent use are not expressly mentioned in No. 4 of article 2 of the CIMI, the legislator intended to exclude this figure from the concept of property.

Accordingly, as residential purpose is indisputable and likewise the functional autonomy and economic value, moreover fiscally reflected in the PTV of these same independent areas or divisions, characteristics that are reflected in the respective property notebooks of the property article under the designation of storeys or divisions susceptible of independent use, we cannot fail to conclude that on the material and substantive level these same storeys or divisions are encompassed by the notion of property contained in No. 1 of article 2 of the CIMI and of urban property contained in lit. a) of No. 1 and No. 2 of article 6, both of the CIMI.

The introduction in the tax legal order of Item 28.1 of the TGIS had as a relevant and determining factor the incidence on urban properties with residential purpose, of high value, also commonly referred to as luxury dwellings, more precisely, of value equal to or exceeding € 1,000,000.00, upon which Stamp Tax came to apply.

The legislator thus intended to introduce a principle of taxation on wealth expressed in the ownership, usufruct or right of superficies on any and all urban property with residential purpose, with the legislative criterion applying such stamp tax on urban properties with residential purpose whose PTV is equal to or exceeding € 1,000,000.00.

This conclusion may be derived from the analysis of the discussion of bill No. 96/XII in Parliament, available for consultation in the Parliament Journal, I series, No. 9/XII/2, of 11 October 2012.

The justification for the measure designated "special tax on urban residential properties of higher value" is based on the invocation of the principles of social equity and fiscal justice, calling upon those holding high-value properties intended for residential purposes to contribute in a more intensive manner, applying the new special tax to "houses of value equal to or exceeding 1 million euros."

In this way, it seems clear that the legislator understood that houses having certain characteristics assessed quantitatively through the PTV should determine a special contribution to ensure fair distribution of the fiscal burden.

But no less evident is that it reflects a line of legislative choice that intended specifically to tax urban properties with residential purpose in the high-value segment, premium or commonly called luxury segment.

Note that, irrespective of more or less subjective conceptions about the concept of luxury dwellings, high-value segment or expressions of equivalent meaning, it is certain that patrimonial value has been, since the 2003 reform of taxation on assets, measured on the basis of objective elements, such as area, location, comfort level, among others.

What means to say that and irrespective of the ideological considerations that may be made about such political choice, the legislator had a concrete and defined objective: to subject to taxation under Stamp Tax urban properties with residential purpose of higher value, which in practice translated into the fixing of a measurable threshold through the PTV: value equal to or exceeding € 1,000,000.00.

And the legislator further assured through various coefficients (minorating and majorating) the objectivity in determining this same PTV.

Now, none of the storeys or divisions susceptible of independent use in question here and upon which the levies that are the subject of this request for arbitral pronouncement fell, individually reach the value of € 1,000,000.00, with each of these storeys or independent divisions representing in the tax system a property per se, which is why the TCA erred on the facts by causing Item 28.1 of the TGIS to apply by disregarding that each one of these same areas or divisions represents, in accordance with the IMI Code and consequently under Stamp Tax, a property.

For which reason these areas or divisions relating to the same property article could not be the subject of addition for calculation of the PTV of that property article.

What the same means to say that taking into account the legislative intent just stated, the storeys or divisions susceptible of independent use do not meet the requirement relating to taxation in the scope of the rule of incidence provided in Item 28.1 of the TGIS, which is why, also in light of what has been set forth, we cannot fail to conclude the legal inconsistency of the TCA's interpretation of subjecting Item 28.1 of the TGIS to the storeys or divisions susceptible of independent use, inasmuch as they do not individually meet the minimum quantitative criterion for such subjection.

Accordingly, with respect to the collection notes issued and notified to the Claimant and the levies underlying them, a judgment of censure cannot fail to be made and, consequently, the annulment of the tax acts that are the subject of these proceedings must be determined.

b) Stamp Tax for 2014:

Item 28.1 of the TGIS was added to the General Table of Stamp Tax through Law No. 55-A/2012, of 29 October.

Subsequently, the legislator altered the normative wording initially given by the above law, through article 194 of Law No. 83-C/2013, of 31 December (State Budget for 2014), which is applicable here to the tax acts, since it entered into force on 1 January 2014, the year to which the taxes now subject to arbitral review pertain.

Let us therefore examine first the legal framework of the Stamp Tax levies in question:

Item 28.1 of the TGIS in the wording conferred by the last legislative provision mentioned provides as follows:

28 – Ownership, usufruct or right of superficies of urban properties whose patrimonial value stated in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or exceeding € 1,000,000 – on the patrimonial value used for purposes of IMI:

28.1 – For residential property or for land for construction whose authorization or planned building is for residential purposes, in accordance with the provisions of the IMI Code – 1 %"

For its part, article 67, No. 2 of the Stamp Tax Code, added by Law No. 55-A/2012, of 29 October, provides that "for matters not regulated in this code relating to Item 28 of the General Table, the CIMI shall apply subsidiarily."

The rule of incidence refers to urban properties, whose basic concept of property is rooted in the provision of article 2 of the CIMI, with the determination of the PTV following the terms of article 38 and following of the same code.

Being that, in accordance with that legal provision:

"1 - For purposes of this Code, property is any portion of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated in or situated upon it, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances previously mentioned, endowed with economic autonomy in relation to the land where they are located, although situated in a portion of territory that forms an integral part of diverse assets or does not have a patrimonial nature." (emphasized by us)

Clarifying, for its part, article 6 of the CIMI, that:

"1 - Urban properties are divided into:

a) Residential;

2 - Residential, commercial, industrial or service buildings or constructions are those licensed for such purpose or, in the absence of a license, that have as their normal purpose each of these uses." (emphasized by us)

The legislator's concept with respect to properties and the subsequent division into urban properties is, for tax purposes, undoubtedly a criterion based on economic value and functional autonomy in relation to purpose.

That is, one is dealing with a concept of material or substantive basis and not with a concept of legal-formalistic nature, as the Respondent TCA seems to intend.

Now, in the case at hand, the Respondent TCA does not even call into question that the storeys or divisions with independent use and with residential purpose relating to the property article do not have these same characteristics (functional autonomy and economic value) emphasized by the legislator, nor could it do so inasmuch as it is the TCA itself that confirmed as correct and had this same information inscribed in the respective property notebook of the property article to which the storeys or divisions susceptible of independent use relate.

Moreover, precisely because such storeys or divisions have such characteristics of autonomy, both in functional and economic terms, it is understandable that the legislator provided for the attribution of patrimonial values for each of these storeys, areas or divisions susceptible of independent use.

This contradicts the TCA's thesis that, as storeys or divisions susceptible of independent use are not expressly mentioned in No. 4 of article 2 of the CIMI, the legislator intended to exclude this figure from the concept of property.

Accordingly, as the Respondent does not even call into question that we are dealing with a residential property and likewise does not question the functional autonomy and economic value of these same independent areas or divisions, moreover fiscally reflected in the respective PTVs and whose characteristics are reflected in the respective property notebooks of the property article under the designation of storeys or divisions susceptible of independent use, we cannot fail to conclude that on the material and substantive level these same storeys or divisions are encompassed by the notion of property contained in No. 1 of article 2 of the CIMI and of urban property contained in lit. a) of No. 1 and No. 2 of article 6, both of the CIMI.

The introduction in the tax legal order of Item 28.1 of the TGIS had as a relevant and determining factor the incidence on residential urban properties, of high value, also commonly referred to as luxury dwellings, more precisely, of value equal to or exceeding € 1,000,000.00, upon which Stamp Tax came to apply.

The legislator thus intended to introduce a principle of taxation on wealth expressed in the ownership, usufruct or right of superficies on any and all residential urban property, with the legislative criterion applying such stamp tax on urban properties with residential purpose whose PTV is equal to or exceeding € 1,000,000.00.

This conclusion may be derived from the analysis of the discussion of bill No. 96/XII in Parliament, available for consultation in the Parliament Journal, I series, No. 9/XII/2, of 11 October 2012.

The justification for the measure designated "special tax on urban residential properties of higher value" is based on the invocation of the principles of social equity and fiscal justice, calling upon those holding high-value properties intended for residential purposes to contribute in a more intensive manner, applying the new special tax to "houses of value equal to or exceeding 1 million euros."

In this way, it seems clear that the legislator understood that houses having certain characteristics assessed quantitatively through the PTV should determine a special contribution to ensure fair distribution of the fiscal burden.

But no less evident is that it reflects a line of legislative choice that intended specifically to tax residential urban properties in the high-value segment, premium or commonly called luxury segment.

Note that, irrespective of more or less subjective conceptions about the concept of luxury dwellings, high-value segment or expressions of equivalent meaning, it is certain that patrimonial value has been, since the 2003 reform of taxation on assets, measured on the basis of objective elements, such as area, location, comfort level, among others.

What means to say that and irrespective of the ideological considerations that may be made about such political choice, the legislator had a concrete and defined objective: to subject to taxation under Stamp Tax residential urban properties of higher value, which in practice translated into the fixing of a measurable threshold through the PTV: value equal to or exceeding € 1,000,000.00.

And the legislator further assured through various coefficients (minorating and majorating) the objectivity in determining this same PTV.

Now, none of the storeys or divisions susceptible of independent use in question here and upon which the levies that are the subject of this request for arbitral pronouncement fell, individually reach the value of € 1,000,000.00, with each of these storeys or independent divisions representing in the tax system a property per se, which is why the TCA erred on the facts by causing Item 28.1 of the TGIS to apply by disregarding that each one of these same areas or divisions represents, in accordance with the IMI Code and consequently under Stamp Tax, a property.

For which reason these areas or divisions relating to the same property article could not be the subject of addition for calculation of the PTV of that property article.

What the same means to say that taking into account the legislative intent just stated, the storeys or divisions susceptible of independent use do not meet the requirement relating to taxation in the scope of the rule of incidence provided in Item 28.1 of the TGIS, which is why, also in light of what has been set forth, we cannot fail to conclude the legal inconsistency of the TCA's interpretation of subjecting Item 28.1 of the TGIS to the storeys or divisions susceptible of independent use, inasmuch as they do not individually meet the minimum quantitative criterion for such subjection.

4.4. Prejudiced Issues: Alleged Unconstitutionality

As the sole arbitral tribunal has accepted the position that Item 28.1 of the TGIS is not applicable to the present case, consideration of the remaining defects alleged and that may affect the contested levies is foreclosed as procedurally moot.

The consideration of the question of the unconstitutionality of the norm introduced in the TGIS (Item 28/28.1) by Law No. 55-A/2012, of 28 October is thus foreclosed.

4.5. On Reimbursement to the Claimant of Stamp Tax Paid, Plus Payment of Compensatory Interest:

In light of all that has been set forth and concluded in section 4.3, the judgment of illegality that has fallen on the tax acts that are the subject of this arbitral pronouncement requires the reconstitution of the Claimant's tax situation, which is why the Respondent TCA cannot fail to effect the reversal of the amounts paid by the Claimant either voluntarily or in tax enforcement proceedings, including, as set forth, the restitution of Stamp Tax paid, but also the amounts relating to interest and other charges that have been coercively collected for such purpose.

Likewise, it is important to consider and assess the claim also submitted by the Claimant for payment of compensatory interest.

In accordance with No. 1 of art. 43 of the LGT, "Compensatory interest is due when it is determined, in a gracious objection or judicial challenge, that there was error attributable to the services as a result of which the tax debt was paid in an amount exceeding that legally owed."

Article 2 of the LGT further provides that "Error attributable to the services is also considered to exist in cases where, although the levy was made on the basis of the taxpayer's return, the latter followed, in completing it, the generic guidelines of the tax authority, duly published."

Now, in the concrete case, the legitimacy of the aforementioned claim for payment of compensatory interest in favor of the Claimant is unequivocally established, since the levies sub judice are shown to be affected by illegality, the issuance of the tax acts constituting error attributable to the services, so that compensatory interest cannot fail to be considered as due from the day following payment of the amount unduly owed until the date of issuance of the respective credit note, in accordance with that established in art. 43 of the LGT and art. 61 of the TCPT.

The Claimant is, therefore, a creditor of the Respondent TCA for the amount corresponding to Stamp Tax unduly paid, to which are added the interest of delay and other charges that have been paid in tax enforcement proceedings relating to the tax acts that are the subject of these proceedings, as well as compensatory interest is due to the Claimant, on the sum of such stated items, the respective accrued and future compensatory interest to be calculated until the issuance of the respective credit note.

  1. Award:

Accordingly, and with the justification set forth, this arbitral tribunal awards as follows:

To judge the claim for declaration of illegality of the tax acts levying Stamp Tax for 2013 and 2014 relating to the property identified by the urban property article referred to in 1., for the defect of violation of law as to the norm contained in Item 28.1 of the TGIS, due to error on the legal facts and the consequent reimbursement by the Respondent of the amounts actually paid by the Claimant relating to the tax acts annulled by this award;

To judge the claim for payment of compensatory interest by the Respondent to the Claimant from the date of unduly payment until the date of issuance of the credit note, in accordance with that established in article 43 of the LGT and in article 61 of the Tax Procedure and Procedural Code;

Value of the case: € 30,378.80 – arts. 97-A of the TCPT, 12 of the RJAT (DL 10/2011), 3-2 of the Rules of Costs in Tax Arbitration Proceedings (RCPAT).

Costs in accordance with Table I of the RCPTA, calculated on the basis of the aforesaid value of the claim, to be borne by the Respondent - arts. 4-1 of the RCPTA and 6-2/a) and 22-4 of the RJAT.

The parties shall be notified of this arbitral award and, in due course, the proceedings shall be filed.

Lisbon, 2 May 2016.

The Sole Arbitrator

(Luís Ricardo Farinha Sequeira)

Text prepared by computer in accordance with article 138, No. 5 of the Code of Civil Procedure (CPC), applicable by reference to article 29, No. 1, lit. e) of the Tax Arbitration Framework, with blank verses and revised by me.

Frequently Asked Questions

Automatically Created

What is Verba 28.1 of the Portuguese Stamp Tax General Table (TGIS) and how does it apply to urban properties valued over €1,000,000?
Verba 28.1 of the Portuguese Stamp Tax General Table (TGIS) imposes annual stamp tax on urban properties with residential purpose that have a patrimonial tax value equal to or exceeding €1,000,000. The tax applies based on the property's official patrimonial value as registered. The key dispute in this case involves whether 'property' means the entire building held in vertical ownership or each independently usable unit within it. According to the TCA's interpretation, the threshold applies to the patrimonial value of each registered property article, not to its distinct internal divisions, even when those divisions are capable of independent economic use.
How does CAAD define 'property' for Stamp Tax purposes when a building in total ownership has independently usable units?
CAAD must determine whether 'property' for Stamp Tax purposes under Item 28.1 TGIS refers to the entire property held in vertical/full ownership or to each independently usable unit. The TCA argues that a building in vertical ownership constitutes a single property unit for taxation purposes, with the relevant patrimonial value being the total value of the entire property article as registered, regardless of internal divisions. The claimant contends that independently usable units should be treated separately, similar to horizontal property regimes. The case turned on interpreting the statutory language 'each property' and whether the unit of taxation is the registered property article or its functionally independent components.
Does applying Stamp Tax to total ownership properties but not horizontal property units violate the constitutional principle of equality?
The claimant argued that applying Stamp Tax to properties in vertical ownership based on total value, while horizontal property units are taxed individually, creates unconstitutional discrimination violating the principle of equality and ability to pay. Properties with similar economic configurations face different tax treatment based solely on their legal ownership structure. The TCA countered that the constitutional principle of tax equality prohibits only arbitrary or unjustified discriminations, not distinctions justified by the different nature of legal institutes (vertical versus horizontal ownership) or by tax system coherence. The TCA argued that different legal forms legitimately support different tax treatment without constituting prohibited discrimination under Article 103(2) of the Portuguese Constitution.
Can a taxpayer claim reimbursement and compensatory interest after challenging a Stamp Tax assessment at CAAD?
Yes, a taxpayer can claim both reimbursement and compensatory interest after successfully challenging a Stamp Tax assessment at CAAD. In this case, the claimant petitioned for annulment of the tax acts, consequent reimbursement of sums paid relating to the contested Stamp Tax assessments for 2013-2014, and payment of compensatory interest. This is standard procedure in Portuguese tax arbitration. If the arbitral tribunal rules in favor of the taxpayer and annuls the tax acts, the Tax and Customs Authority must reimburse the amounts unduly paid, plus compensatory interest calculated from the payment date until reimbursement, compensating the taxpayer for the time value of money during the period the administration held funds that were not legally due.
What is the difference between total vertical ownership and horizontal property for Stamp Tax (Imposto do Selo) liability under Verba 28 TGIS?
Total vertical ownership (propriedade total/vertical) means a single owner holds an entire building with multiple floors or divisions that may be independently usable, but the property remains legally unified as one registered article. Horizontal property (propriedade horizontal) divides a building into autonomous fractions, each separately owned and registered. For Stamp Tax under Verba 28 TGIS, this distinction is crucial: the TCA's position is that vertical ownership properties are taxed on their total combined patrimonial value, while horizontal property units are taxed individually. In this case, the vertical ownership property's total value exceeded €1,000,000, triggering the tax, whereas if structured as horizontal property, each fraction (valued around €151,600) would fall below the threshold and avoid taxation entirely, creating significantly different tax outcomes for economically similar situations.