Process: 11/2016-T

Date: May 20, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration case (Process 11/2016-T) concerns the application of Stamp Tax under Item 28 of the General Stamp Tax Table (TGIS) to building plots held in co-ownership. The applicant, a company owning a 1/2 share in two building plots in Aveiro (each with a Tax Assessed Value of €1,870,420), challenged stamp tax assessments totaling €18,704.20. The central legal issue is whether the €1,000,000 threshold for taxation applies to the total property value or to each co-owner's proportional share. The applicant argued that since their 1/2 share (€935,210 per plot) falls below the €1,000,000 threshold, no stamp tax should be due. They contended that Item 28 TGIS aims to tax individuals with high contributory capacity demonstrated through ownership of high-value properties, and that being a co-owner differs fundamentally from being a full owner. The applicant also invoked constitutional principles of equality and contributory capacity, arguing the assessments violated these principles. An administrative appeal was partially granted, exempting the portion of the plots intended for commercial/service use rather than housing. The Tax Authority responded that the assessments correctly applied Item 28.1 TGIS as introduced by Law 83-C/2013, arguing the law applies to the total property value regardless of co-ownership arrangements, and that this interpretation respects constitutional principles. The Authority asserted the threshold refers to the property's total Tax Assessed Value, not individual shares. The tribunal must determine whether the legislation targets high-value properties or high-wealth taxpayers, and whether applying the threshold to total value rather than proportional shares violates constitutional equality and ability-to-pay principles. The excerpt does not include the final arbitral decision.

Full Decision

ARBITRAL DECISION

I – REPORT

  1. A… Ltd., TIN[1] … with registered office at… Street… no.…, …-… …, submitted a request for arbitral pronouncement, pursuant to the provisions of paragraph a) of article 2(1), article 3(1) and paragraph a) of article 10(1), all of the Legal Framework for Tax Arbitration[2], requesting the Tax and Customs Authority[3], with a view to annulling the tax assessment acts relating to stamp tax levied on the ownership of two building plots, of which it is a co-owner with a ½ share in each of them, registered in the property record under urban articles numbers… and… of the Parish Union of… and… of the municipality and district of Aveiro according to tax collection documents 2015… and 2015… in the total amount of €18,704.20, acts against which it filed an administrative appeal which was partially granted.

  2. The request was made without exercising the option of appointing an arbitrator and was accepted by the Esteemed President of the Administrative Arbitration Centre[4] and automatically notified to the Tax and Customs Authority on 15/01/2016.

  3. Pursuant to the provisions of article 6(2) of the Legal Framework for Tax Arbitration, by decision of the Esteemed President of the Deontological Council, duly communicated to the parties within the legally applicable periods, on 11/03/2016, Arlindo José Francisco was appointed as arbitrator of the tribunal, who communicated acceptance of the appointment within the legally established period.

  4. The tribunal was constituted on 29/03/2016 in accordance with the provisions contained in paragraph c) of article 11(1) of the Legal Framework for Tax Arbitration, in the wording introduced by article 228 of Law No. 66-B/2012, of 31 December.

  5. With its request, the applicant seeks the annulment of the stamp tax[5] assessment acts in question, considering them manifestly illegal, as they do not respect the constitutional principles of equality and contributory capacity, as well as the decision that only partially granted the administrative appeal timely filed against the said assessment acts.

  6. It supports its position, in summary, on the following:

6.1 - On the fact that the Tax Assessed Value[6] of its share in the co-ownership is less than €1,000,000.00 and also on the fact that the construction foreseen/authorized for the building plots is not exclusively intended for housing, these grounds served as the basis for the administrative appeal timely filed, which was partially granted, resulting in its non-subjection to stamp tax regarding the part intended for services.

6.2 - Not accepting the decision rendered in the administrative appeal process, it requests the tribunal to annul the said assessments in their entirety, considering them illegal, since the stamp tax legislator does not intend to tax the real properties themselves, but rather the ownership, usufruct or right of superficies over certain residential properties or building plots with such constructive viability, whose Tax Assessed Value be equal to or greater than €1,000,000.00.

6.3 It understands that the legislator intends to tax taxpayers who demonstrate an increased contributory capacity through ownership of real properties of high value, being certain that it will be recognized that being the owner of a real property with a Tax Assessed Value equal to or greater than €1,000,000.00 is different from being a co-owner of the same property, as regards contributory capacity.

6.4 The application of item 28 of the General Stamp Tax Table[7] should be reconciled with the constitutional principles of equality and contributory capacity, which was not observed in the concrete case, whereby the assessments in question are illegal, due to error in the presuppositions and in the interpretation of the law, since the applicant's share in the properties in question falls short of the taxation threshold provided for in the regulatory provision.

  1. In its response, the respondent, also in summary, states the following:

7.1 As a preliminary matter, it raises that the value attributed to the action of €18,704.20 should be reduced to €14,589.28, taking into account the partial grant of the administrative appeal.

7.2 That the Tax and Customs Authority must comply with law and right and that the assessment acts in question result from the application of item 28.1 of the General Stamp Tax Table, in the wording given to it by Law 83-C/2013 of 31 December, whereby they constitute a correct interpretation and application of law to the facts.

7.3 It considers that item 28 of the General Stamp Tax Table respects the constitutional principles of equality and contributory capacity and that from its application, in the concrete case, no illegal assessment acts resulted.

7.4 It further refers to the request for interest damages which, in its perspective, will not be due, given that the basis of the claim is founded on the constitutional non-conformity of the rule, concluding that it should be absolved of the request.

II - CASE MANAGEMENT

The tribunal was regularly constituted and is competent ratione materiae, in accordance with article 2 of the Legal Framework for Tax Arbitration.

The parties have legal personality and capacity, are deemed legitimate and are regularly represented in accordance with articles 4 and 10(2) of the Legal Framework for Tax Arbitration and article 1 of Ministerial Order No. 112-A/2011, of 22 March.

The parties agreed to waive the hearing referred to in article 18 of the Legal Framework for Tax Arbitration and to the unnecessary submission of written or oral arguments.

The respondent understands that the value of the case should be reduced given that there was, prior to the filing of the present action, a partial grant of an administrative appeal, however, the applicant intends not only the declaration of illegality of the assessments in question, but also of the decision that partially granted its administrative appeal, attributing to the case the value of €18,704.20 which the tribunal maintains.

The respondent also refers to the request for interest damages eventually due but we do not see that these have been requested, and the tribunal refrains from ruling on this issue.

Seeing the coinciding positions regarding the waiver of the hearing of article 18 of the Legal Framework for Tax Arbitration and the unnecessary nature of the submission of written or oral arguments and, the case not being affected by nullities nor having been raised issues that prevent the examination of the merits of the case, the tribunal deems the conditions met to render a decision.

III - REASONING

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

a) To determine whether subjection to stamp tax pursuant to item 28.1 of the General Stamp Tax Table, in the case of co-ownership, should regard the total Tax Assessed Value of the property and whether the application of this understanding will violate the principles of equality and contributory capacity, or whether it should regard the Tax Assessed Value corresponding to the share of the co-ownership

b) To determine whether or not there are grounds for the revocation of the partial grant of the administrative appeal timely filed by the applicant against the assessments in question in the present proceedings

2 – Statement of Facts

The statement of facts considered relevant and proven based on the elements attached to the case file is as follows:

a) The applicant was, in the year 2014, the owner of 1/2 of the building plots registered in the property record of the Parish Union of… and… municipality of Aveiro, under articles… and…, each one with a Tax Assessed Value of €1,870,420.00

b) It was notified in March 2015 of the respective assessments according to documents 2015… and 2015…, each in the amount of €9,352.10 to proceed with the payment of the 1st installment in April 2015, each in the amount of €3,117.38.

c) Against the said assessments, it filed an administrative appeal on 05 August 2015, on the grounds of violation of the principles of equality, proportionality and contributory capacity, since its share, per property, has a Tax Assessed Value less than €1,000,000.00 provided for in item 28 of the General Stamp Tax Table and also because the foreseen construction is housing and services.

d) The administrative appeal was partially granted with the exclusion from taxation of the Tax Assessed Value corresponding to the area of implantation of the construction intended for services

There is no factuality given as not proven that is relevant to the decision.

3 – Statement of Law

3.1 - Regarding the Tax Assessed Value subject to stamp tax in the case of co-ownership

a) The applicant, in its request for arbitral pronouncement considers, in the first place and in summary, that item 28 of the General Stamp Tax Table incides on the ownership, usufruct or right of superficies of residential properties or building plots whose foreseen or authorized construction be for housing, provided that its Tax Assessed Value be equal to or greater than €1,000,000.00.

b) It maintains that the tax facts provided were considered to reveal an increased contributory capacity, justifying that the holders of the properties in question be called upon to make a more intense contribution with a view to the effort of budgetary balance.

c) It understands however that in the case of co-ownership, it will depend on the Tax Assessed Value of its share being equal to or greater than €1,000,000.00, considering that it is different to be the owner of a building plot with a Tax Assessed Value equal to or greater than €1,000,000.00, or to be its co-owner.

d) As each one of the plots has a Tax Assessed Value of €1,870,420.00 which is equivalent to the Tax Assessed Value of its ideal share being only €935,210.00, less than the legally required minimum for there to be stamp tax taxation.

e) Therefore, if it were a sole owner of a building plot with a Tax Assessed Value of €935,210.00 and the foreseen or authorized construction was housing, it would not be subject to stamp tax.

f) It considers its contributory capacity, as a co-owner, similar to that of the sole owner referred to in the preceding paragraph and, if this is not understood thus, there will be a clear violation of the principle of equality.

g) Therefore, an application of the rule must be made in conformity with the constitution, so as to reconcile the provision of item 28 of the General Stamp Tax Table with the principles of equality and contributory capacity, to conclude that the stamp tax assessments in question are illegal, due to error in the presuppositions and in the interpretation of the law, since the applicant's share in the properties in question falls short of the taxation threshold provided for in the rule, reason for which they should be annulled, the same happening with the decision that ruled on the administrative appeal.

h) On the other hand, the respondent considers that the normative framework that supports the disputed assessments corresponds to the stamp tax taxation contained in item 28.1 of the General Stamp Tax Table, in the wording given to it by Law 83-C/2013 of 31 December, from which results that taxation is levied per residential property or building plot whose authorized or foreseen construction be housing.

i) The Tax and Customs Authority must comply with law and right, law being the foundation and limit of administrative activity, as follows from the principle of legality, with the assessments in question being supported by it.

j) It understands that the rule denotes a clear respect for the constitutional principles of equality and contributory capacity as exemplified by both constitutional regulations and doctrine, concluding that the request should be declared unfounded.

k) Having summarized the positions of the applicant and respondent, we will proceed next to an analysis of the rule of incidence of stamp tax on urban properties with residential use, or building plots whose foreseen or authorized construction be housing.

l) Item 28.1 of the General Stamp Tax Table, in the wording conferred by Law No. 83-C/2013 of 31 December, subjects to stamp tax the ownership, usufruct or right of superficies per residential property or per building plot whose foreseen or authorized construction be for housing, when its Tax Assessed Value be equal to or greater than €1,000,000.00.

m) The legislator considered that a building plot with a Tax Assessed Value equal to or greater than €1,000,000.00 externalizes wealth susceptible to generating a higher contributory capacity in its holders, determinative for a special contribution at the same time that it will allow for a more just distribution of the fiscal burden required.

n) See, for example, that for purposes of declaration of assets the General Tax Law in its article 89-A establishes an amount of €250,000.00, which allows us to conclude that the legislator of item 28.1 of the General Stamp Tax Table intended to create an exceptional taxation on building plots whose Tax Assessed Value evidences a contributory capacity of its holders superior to the normal.

o) Taxation is per property, with the total Tax Assessed Value of each one being relevant, when equal to or greater than €1,000,000.00, there is subjection to stamp tax regardless of whether ownership is singular or in co-ownership.

p) Item 28.1 of the General Stamp Tax Table, in its final part, establishes that stamp tax incides on the Tax Assessed Value used for purposes of Municipal Property Tax[8].

q) In the case of co-ownership, each co-owner is responsible for payment of stamp tax in the proportion of its share, as results from article 1405(1) of the Civil Code[9], which ensures that its contribution is compatible with its rights over the property in question.

r) If the legislator intended to levy taxation per holder, it would have opted for another formulation for the rule, but, as already stated, it is perfectly clear that the intended taxation is per property, when its Tax Assessed Value be equal to or greater than €1,000,000.00.

s) The tribunal understands that the principle of contributory capacity, in the concrete situation, is not being violated, not only because the value chosen by the legislator for taxation is manifestly high and indicative of a high contributory capacity, at the same time that the co-owner is only called upon to pay that corresponding to its share in the property.

t) As for the principle of equality, the tribunal also understands that there is no violation, insofar as the same must be compatible with the fundamental duty to pay taxes, with the principle of social equity and that of fiscal justice, being legitimate for the State, with respect for the principle of legality, to create taxes with a view to the pursuit of the purposes of common interest.

u) Regarding the partial grant of the administrative appeal timely filed by the applicant, the tribunal understands that there is nothing to criticize in the Tax and Customs Authority's procedure since the Tax Assessed Value corresponding to the construction relating to services was excluded from taxation.

IV – DECISION

In view of the above, the tribunal decides as follows:

a) To declare entirely unfounded the request filed by the applicant both as to the legality of the assessments and as to the partial grant of the administrative appeal timely filed by the applicant.

b) To fix the value of the case at €18,704.20 in accordance with the provisions contained in article 299(1) of the Civil Procedure Code[10], article 97-A of the Tax Procedure Code[11], and article 3(2) of the Costs Regulation in Tax Arbitration Procedures[12].

c) To fix the costs, pursuant to article 22(4) of the Legal Framework for Tax Arbitration, in the amount of €1,224.00 in accordance with the provisions of Table I referred to in article 4 of the Costs Regulation in Tax Arbitration Procedures, at the charge of the respondent.

Notify.

Lisbon, 20 June 2016

Text prepared by computer, pursuant to article 131(5) of the Civil Procedure Code, applicable by referral of article 29(1), paragraph e) of the Legal Framework for Tax Arbitration, with blank spaces and revised by the tribunal.

The Arbitrator

Arlindo José Francisco

[1] Tax Identification Number for Legal Persons
[2] Legal Framework for Tax Arbitration (Regime Jurídico da Arbitragem em Matéria Tributária)
[3] Tax and Customs Authority (Autoridade Tributária e Aduaneira)
[4] Administrative Arbitration Centre (Centro de Arbitragem Administrativa)
[5] Stamp Tax (Imposto do Selo)
[6] Tax Assessed Value (Valor Patrimonial Tributário)
[7] General Stamp Tax Table (Tabela Geral do Imposto do Selo)
[8] Municipal Property Tax (Imposto Municipal sobre Imóveis)
[9] Civil Code (Código Civil)
[10] Civil Procedure Code (Código de Processo Civil)
[11] Tax Procedure Code (Código de Processo e Procedimento Tributário)
[12] Costs Regulation in Tax Arbitration Procedures (Regulamento de Custas nos Processos de Arbitragem Tributária)

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) due on building land when the co-owner's share has a VPT below €1,000,000?
The core dispute in this case is whether Stamp Tax under Verba 28 TGIS applies when a co-owner's proportional share has a VPT below €1,000,000 but the total property value exceeds this threshold. The applicant argued that the €1,000,000 threshold should apply to their 1/2 share (€935,210), exempting them from taxation. The Tax Authority maintained that the threshold applies to the property's total VPT (€1,870,420), making the tax due regardless of the co-owner's share percentage. This interpretation issue is central to determining whether the law targets high-value properties or individuals with high contributory capacity through property ownership.
How does Verba 28 of the Tabela Geral do Imposto do Selo apply to building plots not exclusively intended for housing?
Verba 28 of the TGIS applies to ownership of residential properties or building plots with residential construction potential valued at €1,000,000 or more. In this case, the administrative appeal was partially granted because the authorized construction on the plots was not exclusively for housing but included commercial/service areas. The Tax Authority exempted the non-residential portion from stamp tax, acknowledging that Verba 28 targets residential property ownership. This partial exemption reduced the total assessed amount from €18,704.20 to €14,589.28, though the applicant challenged even this reduced assessment.
Can the constitutional principles of equality and ability to pay override Stamp Tax assessments on high-value properties?
The applicant invoked constitutional principles of equality and contributory capacity, arguing that applying Stamp Tax based on total property value rather than co-ownership shares violates these principles. They contended that a co-owner with a €935,210 share does not demonstrate the same contributory capacity as a full owner of a €1,000,000+ property. The Tax Authority countered that Item 28 TGIS complies with constitutional principles and represents a correct application of law. The tribunal must assess whether the legislative interpretation violates constitutional norms, though Portuguese tax law generally presumes statutes are constitutional unless clearly incompatible with fundamental rights.
What happens when a partial deferral of a tax complaint (reclamação graciosa) is challenged before the CAAD arbitral tribunal?
When a partial deferral (grant) of an administrative appeal is challenged before the CAAD arbitral tribunal, the applicant can request full annulment of both the original tax assessments and the administrative decision that only partially granted relief. In this case, the applicant contested not only the stamp tax assessments but also the administrative decision that maintained taxation on the residential portion while exempting the commercial portion. The Tax Authority argued the case value should be reduced to reflect the partial grant, but the tribunal maintained the original value of €18,704.20 since the applicant sought complete annulment of all contested acts, including the administrative decision itself.
How is the taxable value determined for co-owned building land under Portuguese Stamp Tax rules?
Under Portuguese Stamp Tax rules, the critical question for co-owned building land is whether the taxable value is determined by the property's total Tax Assessed Value (VPT) or by each co-owner's proportional share. The Tax Authority's position is that Verba 28.1 TGIS applies the €1,000,000 threshold to the property's total VPT as registered in the property records, regardless of ownership structure. Under this interpretation, each co-owner is taxed on their proportional share of the stamp tax calculated on the total value. The applicant's position is that the threshold should apply individually to each co-owner's VPT share, so a 1/2 co-owner would only be taxed if their share exceeds €1,000,000. This fundamental interpretive question determines the tax's scope and application to co-ownership situations.