Process: 11/2014-T

Date: June 24, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 11/2014-T addressed whether Verba 28.1 of the General Table of Stamp Duty (TGIS), introduced by Law 55-A/2012, applies to construction land (terrenos para construção) with Taxable Patrimonial Value (VPT) exceeding €1,000,000. The taxpayer challenged Stamp Duty assessments on two building plots, arguing that construction land should not qualify as 'immovable property with residential use' (prédios com afetação habitacional) under Verba 28.1 TGIS, despite their high VPT. The taxpayer also contested the assessments on procedural grounds, alleging lack of clarity in reasoning because notifications indicated 'Law 55-A/2012' rather than a specific tax year, and claimed duplication of collection due to multiple notifications. The Tax Authority defended that building plots constitute immovable property with residential use because their VPT determination applied the residential use coefficient from Article 41 of the Municipal Property Tax Code (CIMI). The Authority argued assessments complied with Article 77(2) of the General Tax Law and Article 6 of Law 55-A/2012, with no duplication since two autonomous taxable events occurred in 2012. The central legal question concerned interpreting 'prédios com afetação habitacional' under the 2012 Stamp Duty reform: whether this concept encompasses undeveloped construction land valued with residential coefficients, or only completed residential properties. This case illustrates tensions between literal interpretation of tax legislation and purposive construction based on legislative intent, with significant implications for high-value land holdings in Portugal's real estate investment sector.

Full Decision

I – REPORT

1 – A..., taxpayer …, represented by the management company B... – REAL ESTATE INVESTMENT FUND MANAGEMENT COMPANY, legal entity number …, with registered office at Avenue …, Lisbon, filed on 06/01/2014 a request for constitution of the arbitral tribunal, pursuant to the provisions of paragraph a) of no.1 of article 2, of no.1 of article 3 and of paragraph a) of no.1 of article 10, all of the RJAT[1], with the Tax and Customs Authority[2] being the respondent, with a view to reviewing the legality of the tax assessment acts for Stamp Duty[3], relating to two building plots, registered in the urban property registry under articles ... and ... of the parish of …, currently articles ... and ... of the parish of …, municipality of …, of which the applicant is the owner.

2 – The request for constitution of the arbitral tribunal was made without exercing the option of arbitrator nomination, having been accepted by His Excellency the President of the Administrative Arbitration Centre[4] and automatically notified to the Tax Authority on 08/01/2014.

3 – Pursuant to the provisions of no.2 of article 6 of the RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties within the legally applicable periods, there were designated Judge Desembargador Manuel Luís Macaísta Malheiros, Professor Miguel Patrício and Dr. Arlindo José Francisco, respectively in the capacity of President and members, who communicated to the Deontological Council and to the Administrative Arbitration Centre their acceptance of the appointment within the regularly stipulated period.

4 – The tribunal was constituted on 07/03/2014 in accordance with the provisions contained in paragraph c) of no.1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December.

5 – With its request, the applicant seeks the declaration of illegality and consequent annulment of the decision refusing the claim filed, as well as of the tax assessment acts for Stamp Duty item 28 of the General Table of Stamp Duty[5] which were assessed on the patrimonial value of the building plots already identified.

6 – It invokes for this purpose the illegality of the Stamp Duty assessments, based, in its view, on the non-applicability of item 28 of the General Table of Stamp Duty to building plots, despite their individual Taxable Patrimonial Value[6] being greater than €1,000,000.00.

7 – Using Law no. 55-A/2012, which added item 28 to the General Table of Stamp Duty and referred to the Municipal Property Tax Code[7] the concepts used in the Stamp Duty Code[8], notably those of "immovable property with residential use", making various considerations on the applicability of this rule to the specific case, concluded that it is not applicable, considering there to be error regarding the legal prerequisites which affect the Stamp Duty assessments contested here, which should be totally annulled.

8 – It also considers that the assessments notified in December 2012 suffer from "lack of clarity in the statement of reasons", in that in the field intended for the tax year was placed the mention "Law 55-A/2012", which prevented the applicant from knowing which taxation period the tax relates to, concluding that the assessments in question are affected by illegality, due to defect of lack of reasons, and violate the provisions of article 6 of Law no. 55-A/2012, reason for which they should be annulled.

9 – Lastly, it considers there to be duplication of collection, since the first notifications where, in the tax field, was placed the mention "Law 55-A/2012", will be duplicated with the second assessments notified to the applicant in 2013, with express mention of the year 2012, but being the first annulled as illegal, the same illegality shall persist as regards the second and they should also be annulled, further requesting the payment of compensatory interest under article 43 of the General Tax Law[9] and 61 of the Code of Tax Procedure and Process[10].

10 – In its response, the Tax Authority considers that the building plots have the legal nature of immovable property with residential use, since in the determination of their Taxable Patrimonial Value account is taken of the residential use coefficient, provided for in article 41 of the Municipal Property Tax Code, arguing for the maintenance of the assessment acts questioned here, as determined by item 28 of the General Table of Stamp Duty added by Law no. 55-A/2012.

11 – The Tax Authority considers that the assessments in question do not suffer from lack of reasons, since these comply with the formulation stipulated in no.2 of article 77 of the General Tax Law, nor do they violate article 6 of Law no. 55-A/2012, in that the assessments were effected in the months of February and March 2013, in accordance with the applicable legal provisions (no.2 of article 113 of the Municipal Property Tax Code).

12 – Regarding the duplication of collection, in the Tax Authority's perspective, it does not exist, in that for each of the building plots in question there occurred two autonomous and different taxable events, both in the year 2012, on different dates, which gave rise to the assessments questioned, which do not meet the requirements of duplication of collection.

13 – Lastly, it refutes the possibility of payment of compensatory interest by the Tax Authority, since it made the correct application of the legal rules in force.

II – PRELIMINARY RULINGS

The tribunal was regularly constituted and is competent ratione materiae, in accordance with article 2 of the RJAT.

The parties have legal personality and capacity, show themselves to be entitled and are regularly represented in accordance with articles 4 and 10, no.2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

On 23/04/2014, the tribunal meeting took place, in accordance with article 18 of the RJAT and, having heard the parties, oral or written submissions were dispensed with as unnecessary. On 22/05/2014, the documents which the applicant had protested to attach at the end of the initial petition were annexed to the case file. The proceedings do not suffer from nullities and no issues were raised which would prevent consideration of the merits of the case, the conditions being met for final judgment to be rendered.

III – GROUNDS

1 – The issues to be resolved, with relevance to the case, are as follows:

a) To determine whether building plots, to which in the determination of their Taxable Patrimonial Value the residential use coefficient was applied and a value equal to or exceeding €1,000,000.00 was ascertained, fall within the scope of subjection to Stamp Duty provided for in item 28 of the General Table of Stamp Duty, added by Law no. 55-A/2012, of 29 October;

b) To determine whether the assessments in question are illegal due to lack of reasons as alleged in the initial petition, and due to violation of article 6 of Law no. 55-A/2012;

c) To determine whether or not there is duplication of collection, as formulated by the applicant;

d) Lastly, to determine whether, in the event the illegality of the assessments is declared, there shall be place for payment of the requested compensatory interest.

2 – Findings of Fact

The material facts relevant and proven on the basis of the elements joined to the case file are as follows:

a) The applicant is the owner of the building plots currently registered under urban articles ... and ... of the parish of …, municipality of … and previously under urban articles ... and ... of the parish of ….

b) The Taxable Patrimonial Value of each of the building plots is greater than €1,000,000.00. Specifically: article ... has a Taxable Patrimonial Value of €1,707,785.76, reported to 2013, and 1,622,599.30 reported to 2011 and 2012, and article ... has a Taxable Patrimonial Value of €2,972,450.00.

c) The applicant was notified of the Stamp Duty assessment acts for each of the plots on 05/12/2012 with a payment deadline until 20/12/2012.

d) Such notifications indicated in the field intended for the tax year "Law no. 55-A/2012" and the value of €22,975.25 of Stamp Duty to be paid, payment which duly occurred on 19/12/2012.

e) In April 2013, the applicant was notified of assessments relating to the same immovable property and the year 2012, in the amount of €45,950.49, a value which was duly paid on 26/04/2013.

f) Despite having made the aforementioned payments, the applicant, not accepting such Stamp Duty assessments, filed, on 19/04/2013, an administrative claim against such assessments, which was refused on the ground that there was immovable property with the residential use coefficient, a fact which, in the Tax Authority's view, would be sufficient for the verification of the prerequisites for the incidence of Stamp Duty provided for in item 28 of the General Table of Stamp Duty.

3 – Matters of Law

a) The applicant, in its request for arbitral pronouncement, argues, in essence, that, both through the means of literal interpretation, and through historical and systematic interpretation of item 28 of the General Table of Stamp Duty, added by Law no. 55-A/2012, building plots are excluded from Stamp Duty taxation, listing several arbitral decisions already rendered in this sense, concluding by the existence of error regarding the legal prerequisites from which the assessments suffer, which will lead to their annulment.

b) For its part, the respondent considers that building plots have the legal nature of immovable property with residential use, which results from an interpretation not so much limited to the letter of the law, but which encompasses other elements (logical, teleological) which combined will lead to the true meaning of the rule and, in its perspective, the legislator, upon amending item 28 of the General Table of Stamp Duty, through Law 83-C/2013 of 31 December, will have sought to give effect to this interpretation.

c) Having synthesised the positions of the applicant and the respondent, we shall next proceed to an analysis of the rule for the incidence of Stamp Duty on urban immovable property with residential use.

d) Item 28 of the General Table of Stamp Duty, added by Law no. 55-A/2012, subjects to this tax urban immovable property with residential use whose Taxable Patrimonial Value, ascertained in accordance with the Municipal Property Tax Code, is equal to or exceeding €1,000,000.00, with the transitional regime provided for in article 6 of the said Law being in force for the year 2012.

e) The Stamp Duty Code refers to the Municipal Property Tax Code the regulation of the concept of immovable property and of matters not regulated as regards item 28 of the General Table of Stamp Duty (see no.6 of article 1 and no.2 of article 67 both of the Stamp Duty Code).

f) If we examine article 6 of the Municipal Property Tax Code, it is established therein that urban immovable property is divided into residential, commercial, industrial or for services, building plots and others.

g) From its no.2 it follows that urban residential immovable property "are buildings or constructions licensed for such or in the absence of a licence, which have such as their destination" and its no.3 tells us that building plots "are those situated inside or outside an urban agglomeration, for which building or construction operation licence or authorisation has been granted, and also those which have been declared as such in the acquisition title …".

h) From these concepts we can already conclude by the existence of autonomy between urban immovable property "residential" and urban immovable property "building plots".

i) The legislator of Stamp Duty, upon establishing the taxation of urban immovable property "with residential use", did not specify the concept, so we shall, by force of the referral, have to go to the Municipal Property Tax Code and this, as has already been seen, gives autonomy to them, in relation to building plots.

j) The expression "with residential use" is in no way apparent in building plots, nor can it, as the respondent contends, be understood as an integrating expression of other realities.

k) We concur with the position advocated in case 49/2013 which is transcribed: "The expression 'with residential use' conveys, in a simple reading, an idea of real and present functionality. From the rule in question it is not possible to extract, through interpretation, that, as is stated in the respondent's reply, the legislator's choice of that expression is intended to integrate 'other realities beyond those identified in article 6, no.1, paragraph a), of the Municipal Property Tax Code.' Such interpretation has no legal support, given the principles contained in arts. 9 of the Civil Code and 11 of the General Tax Law. Indeed, if the legislator intended to encompass within the scope of incidence of the tax other realities than those resulting from the classification governed by art.6 of the Municipal Property Tax Code, it would have said so expressly. But it does not, instead referring, en bloc, to the concepts and procedures provided for in the said Code. On the other hand, neither can the respondent's understanding be accepted to the effect that the concept of 'with residential use' results from the rule of article 45 of the Municipal Property Tax Code. This article refers to the rules applicable in determining the patrimonial value of building plots establishing that this is what results from the value of the building plot area to be built added to the land adjacent to the building plot. In fixing the value of that area a percentage varying between 15% and 45% of the value of the authorised or planned buildings is considered. According to the respondent, in fixing the value of the authorised or planned buildings on the land to be evaluated, the coefficients applicable in determining the taxable patrimonial value are used, namely the residential use coefficient provided for in art. 1 of that Code. Concluding therefrom that the consideration of such a coefficient, dependent on the type of use envisaged for the immovable property to be built on the land, shall be determining for the purposes of application of Item 28 of the General Table of Stamp Duty. This conclusion is supported on the assumption that the expression 'immovable property with residential use' appeals to a classification that overlies the species provided for in no.1 of art. 6 of the Municipal Property Tax Code. It is not possible, however, to concur with such conclusion. [...]. In these terms, resulting from art. 6 of the Municipal Property Tax Code a clear distinction between urban immovable property "residential" and "building plots", these cannot be considered, for the purposes of incidence of stamp duty, as 'immovable property with residential use'."

l) Neither should it be said that the amendment made to item 28 of the General Table of Stamp Duty by Law no. 83-C/2013, of 31 December, proves this integrating sense, since, from the tribunal's perspective, it proves precisely the opposite.

m) In fact, what is proven is that in the formulation of Law no. 55-A/2012, building plots were excluded from taxation under Stamp Duty by item 28 of the General Table of Stamp Duty and now, through Law no. 83-C/2013, they have become subject to taxation, from which it can be concluded that the legislator considers that the expression 'with residential use' did not permit the taxation of building plots under Stamp Duty in the formulation contained in item 28 of the General Table of Stamp Duty, in the version of Law no. 55-A/2012.

n) Neither should it be said that the fact that article 45 of the Municipal Property Tax Code provides for the application of a residential use coefficient in determining the Taxable Patrimonial Value of building plots, shall be a sufficient condition, in itself, to permit their inclusion in the rule of incidence of item 28 added by Law no. 55-A/2012, nor indeed alter their nature as building plots, given that what is at issue here is only to ascertain the Taxable Patrimonial Value which shall be influenced by the type of buildings to be carried out (which, it should be said, are not always realised and, in the current circumstances realisation is an exception).

o) Now, as has already been seen, there results from article 6 of the Municipal Property Tax Code an unmistakable distinction between residential immovable property and building plots, which prevents the latter from being taxed under Stamp Duty in the terms sought by the respondent.

p) In this sense several arbitral decisions have already been rendered, namely cases 42, 48, 49 and 75, all of 2013.

q) Having reached this point, the tribunal considers that the knowledge of the lack of reasons of the assessments, the violation of article 6 of Law no. 55-A/2012 and the duplication of collection in the terms formulated by the applicant, is prejudiced, given that from the above it clearly results the illegality of the assessments questioned in the present proceedings.

4 – Compensatory Interest

The applicant requests, under article 43 of the General Tax Law and 61 of the Code of Tax Procedure and Process, payment of compensatory interest as a result of the unduly payment of the tax liability, which must be assessed.

Thus, given the manifest illegality of the assessment acts attributable to the Tax Authority, which carried them out without legal support, and given the proven payment of the tax liability by the applicant, the latter has the right to payment of compensatory interest in the precise terms of no.1 of article 43 of the General Tax Law and article 61 of the Code of Tax Procedure and Process.

IV – DECISION

Given the above, the tribunal decides as follows:

a) To declare the request for arbitral pronouncement well-founded, with the consequent annulment of the act of refusal of the administrative claim filed ... and of the Stamp Duty assessment acts;

b) To declare the obligation of the Tax Authority to reimburse the applicant of the Stamp Duty unduly paid, increased by compensatory interest calculated at the legal rate, from the date on which the tax liability payments occurred and the date on which reimbursement occurs;

c) Case value €68,925.74 in accordance with the provisions contained in article 299, no.1, of the Civil Procedure Code[11], article 97-A of the Code of Tax Procedure and Process, and article 3, no.2, of the Regulation of Costs in Tax Arbitration Proceedings[12];

d) Costs to be borne by the respondent, under no.4 of article 22 of the RJAT, fixing the respective amount at €2,448.00, in accordance with the provisions of table I referred to in article 4 of the Regulation of Costs in Tax Arbitration Proceedings.

Notify.

Lisbon, 24 June 2014

Document prepared by computer, pursuant to article 131, no.5 of the Civil Procedure Code, applicable by referral of article 29, no.1, paragraph e) of the RJAT, with blank lines and reviewed by the tribunal.

The drafting of this decision is governed by the spelling prior to the orthographic agreement.

The arbitrators,

Manuel Luís Macaísta Malheiros
(President)

Miguel Patrício
(Member)

Arlindo Francisco
(Member)

[1] Acronym for Legal Regime for Arbitration in Tax Matters
[2] Acronym for Tax and Customs Authority
[3] Acronym for Stamp Duty
[4] Acronym for Administrative Arbitration Centre
[5] Acronym for General Table of Stamp Duty
[6] Acronym for Taxable Patrimonial Value
[7] Acronym for Municipal Property Tax Code
[8] Acronym for Stamp Duty Code
[9] Acronym for General Tax Law
[10] Acronym for Code of Tax Procedure and Process
[11] Acronym for Civil Procedure Code
[12] Acronym for Regulation of Costs in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

Does Verba 28.1 of the Tabela Geral do Imposto do Selo apply to terrenos para construção (construction land)?
The applicability of Verba 28.1 TGIS to terrenos para construção depends on whether construction land qualifies as 'prédios com afetação habitacional' (immovable property with residential use). The taxpayer argued that undeveloped building plots should not be considered residential properties merely because a residential use coefficient was applied in calculating their VPT. The Tax Authority contended that the application of the residential coefficient under Article 41 CIMI in determining VPT confers residential character to the land, bringing it within Verba 28.1's scope. This interpretation hinges on whether 'afetação habitacional' refers to actual residential use or potential residential destination reflected in the valuation methodology.
Can construction land with a VPT above €1,000,000 be subject to Imposto do Selo under Verba 28 TGIS?
Construction land with VPT above €1,000,000 can potentially be subject to Imposto do Selo under Verba 28 TGIS if it meets the definition of 'prédios com afetação habitacional'. Law 55-A/2012 introduced Verba 28 targeting high-value residential properties (VPT ≥ €1,000,000). The controversy in Process 11/2014-T centered on whether terrenos para construção fall within this category. The Tax Authority's position that building plots valued using residential coefficients constitute properties with residential use would subject them to the tax. However, the taxpayer's argument that only completed residential buildings, not vacant land, should be taxed under Verba 28 presents an alternative interpretation based on the ordinary meaning of 'afetação habitacional' and the legislative purpose of taxing residential wealth.
What is the meaning of 'prédios com afectação habitacional' for Stamp Tax purposes under Lei 55-A/2012?
'Prédios com afetação habitacional' for Stamp Tax purposes under Lei 55-A/2012 refers to immovable property with residential use or destination. Law 55-A/2012 incorporated Municipal Property Tax Code (CIMI) concepts into Stamp Duty legislation. The Tax Authority interpreted this broadly to include any property whose VPT calculation uses the residential use coefficient (Article 41 CIMI), encompassing construction land destined for residential development. The taxpayer advocated a narrower interpretation limiting the concept to properties actually used for housing, excluding undeveloped building plots. The definitional dispute reflects whether 'afetação' (allocation/dedication) refers to actual use, intended future use reflected in valuation, or legal classification. This interpretation significantly impacts the Stamp Duty burden on real estate investment funds and developers holding high-value construction land.
How did CAAD Process 11/2014-T rule on the legality of Stamp Tax assessments on construction land?
CAAD Process 11/2014-T examined the legality of Stamp Tax assessments on construction land under Verba 28.1 TGIS. The tribunal considered three main issues: (1) substantive applicability of Verba 28 to building plots valued above €1,000,000 using residential coefficients; (2) procedural validity of assessments allegedly lacking clear reasoning because they referenced 'Law 55-A/2012' instead of a specific tax year; and (3) whether duplication of collection occurred due to multiple notifications for the same property in 2012. The Tax Authority defended the assessments arguing that construction land valued with residential coefficients constitutes 'prédios com afetação habitacional', assessments complied with Article 77(2) of the General Tax Law, and two separate taxable events justified multiple assessments. The decision required interpreting Verba 28's scope and evaluating whether procedural defects warranted annulment.
What constitutes obscure reasoning (obscuridade na fundamentação) in Portuguese tax assessment notifications?
Obscure reasoning (obscuridade na fundamentação) in Portuguese tax assessment notifications occurs when the statement of grounds fails to provide clear, comprehensible justification enabling the taxpayer to understand the assessment basis and exercise defense rights. In Process 11/2014-T, the taxpayer alleged obscurity because the tax year field stated 'Law 55-A/2012' rather than identifying the specific taxation period (2012). Article 77(2) of the General Tax Law requires assessments to state the taxable amount, legal grounds, and applicable rate. The taxpayer argued this prevented knowing which tax period was assessed. The Tax Authority countered that assessments complied with legal requirements and the reference to Law 55-A/2012 was sufficiently clear given the legislative context. Obscurity differs from complete lack of reasoning—it involves deficient clarity that impedes the taxpayer's ability to understand and challenge the assessment, potentially constituting an annullable defect under Portuguese administrative law principles.