Process: 110/2016-T

Date: September 30, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 110/2016-T addresses a challenge by 12 co-owners against 2014 Stamp Duty (Imposto do Selo) assessments under item 28.1 of the General Table of Stamp Duty (TGIS). This provision, introduced by Law 55-A/2012, imposes annual Stamp Tax on urban properties with taxable patrimonial value (VPT) equal to or exceeding €1,000,000. The claimants argued the property was incorrectly classified as a single residential property, asserting it contains multiple autonomous apartments used for both commercial and residential purposes, with no individual fraction valued at €1 million or more. They also challenged the constitutionality of the Tax Authority's interpretation, alleging violation of Article 104(3) of the Portuguese Constitution. The Tax Authority countered that item 28.1 applies based on the total VPT of the property, not individual fractions, and that any alternative interpretation would violate the principle of tax legality under Article 103(2) of the Constitution, citing Constitutional Court Judgment 590/2015. The arbitration proceeded under the RJAT (Decree-Law 10/2011) framework through CAAD, with the sole arbitral tribunal constituted on May 12, 2016. The tribunal confirmed its material competence to rule on the illegality of the assessments and compensatory interest, but declared itself incompetent to order the Tax Authority to refrain from future assessments. The coalition of plaintiffs was deemed admissible under Article 104 of the Tax Procedure Code given the identical factual circumstances and legal principles applicable to all co-owners. This case exemplifies the ongoing controversy surrounding the application of Stamp Tax to high-value properties and whether the €1 million threshold applies to entire buildings or individual autonomous units.

Full Decision

ARBITRAL DECISION

REPORT

A…, TIN…, resident at Rua … … … apt., …, …-… ...; B…, TIN…, resident at Av…, Lot…, … apt., Urbanization…, …, …-…; C…, TIN…, resident at Av…, no. … - …, …, …, …-…; D…, TIN…, resident at Rua…, … … apt., …, …-…; E…, TIN…, resident at Av…., no. … -…, , …-… Lisbon; F…, TIN…, resident at Rua …, no. … … apt., …, …, …-…; G…, TIN…, resident at Av…, no.…, … D, …, …, …-…; H…, TIN…, resident at Rua …- …, …-… ; I…, TIN…, Resident at … no. … R/C, Lisbon, …-… Lisbon; J…, TIN…, resident at Rua…, no.…, …, …-…; K…, TIN…, resident at Rua … no.…, …, …, …, …-…; and Estate of L…, TIN…, with address at…, no.…, …, …-…, successor of M…, hereinafter designated as "Claimants", hereby, pursuant to the provisions of subparagraph a) of no. 1 of article 2 and article 10, both of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT"), request the establishment of an arbitral tribunal and submit the petition for arbitral determination with a view to declaring the illegality of the 2014 Stamp Duty assessments issued pursuant to item 28.1 of the General Table of Stamp Duty ("GTSD"), attached to the Stamp Duty Code ("SDC"), concerning a property described in the urban real property register under article … of the Parish of … in Lisbon, in which the Tax and Customs Authority is the Respondent (hereinafter designated as "Respondent" or "TA").

The petition for establishment of an arbitral tribunal was accepted by the Honorable President of CAAD and notified to the Respondent on 11/03/2016.

The Claimants opted not to appoint an arbitrator, and, pursuant to the provisions of subparagraph a) of no. 1 of article 6 and subparagraph b) of no. 1 of article 11 of the RJAT, the Deontological Council appointed as arbitrator of the sole arbitral tribunal the undersigned, who accepted the appointment within the legally stipulated period.

The parties were duly notified of the appointment on 27/04/2016 and did not express an unwillingness to refuse the same.

In accordance with the provisions of subparagraph c) of no. 1 of article 11 of the RJAT, the sole arbitral tribunal was constituted on 12/05/2016.

The Respondent was notified on 13/05/2016 to present a response, pursuant to the provisions of no. 1 of article 17 of the RJAT, which it did on 14/06/2016, having sustained the legality of the contested tax acts and the constitutionality of Law no. 55-A/2012 of 29 October, concluding for the total lack of merit of the petition and consequent dismissal thereof. The Respondent also presented a request for waiver of the first meeting provided for in article 18 of the RJAT and waiver of the submission of written pleadings, suggesting to the sole arbitral tribunal that it decide immediately on the petition.

Pursuant to the principle of autonomy of the arbitral tribunal in the conduct of the proceedings, the first meeting referred to in article 18 of the RJAT was waived and the production of testimonial evidence was waived by order of 15/06/2016, and, in obedience to the principle of contradictory procedure, the parties were granted a successive period of 10 days for final written pleadings.

The rendering of the arbitral decision was scheduled for 23/09/2016, and the Claimants were warned that they should proceed to pay the subsequent arbitral fee pursuant to no. 3 of article 4 of the Regulation of Costs in Arbitration Proceedings, and communicate its payment to CAAD.

The Claimants submitted written pleadings on 24/06/2016, requesting the annulment of the contested assessment acts.

The Respondent submitted its written pleadings on 5/07/2016, maintaining that the petition for arbitral determination should be judged totally lacking in merit.

By order of 1/09/2016, notified to the Claimants on 12/09/2016, legible copies of documents 1 to 12 attached to the petition for arbitral determination were requested, which were attached to the case file on 19/09/2016. For this reason, the rendering of the arbitral decision was postponed to 30/09/2016, by order of 23/09/2016.

SUMMARY OF THE CLAIMANTS' AND RESPONDENT'S CLAIMS

Claimants' Claim

The Claimants ground the illegality of the Stamp Duty assessments pursuant to item 28.1 of the GTSD on the following defects:

Erroneous classification of the property sub judice as a "property with residential purpose", insofar as the property, although not divided in condominium ownership, has each of its floors composed of fully autonomous apartments destined primarily to commerce, in addition to residential use, and there is no fraction whose value is equal to or greater than 1 million euros;

Unconstitutionality of the interpretation given by the TA to item 28.1 of the GTSD, by violation of no. 3 of article 104 of the Constitution of the Portuguese Republic ("CPR").

The Claimants petition for the declaration of illegality of the Stamp Duty assessments, with the consequent reimbursement of the amounts paid until the final decision, plus compensatory interest, as well as the condemnation of the TA to refrain from issuing future Stamp Duty assessments with reference to the property in question.

Respondent's Claim

The Respondent, for its part, considers that the thesis of the Claimants lacks legal support, arguing that the taxable event on which item 28.1 of the GTSD is based is the ownership of urban properties whose taxable patrimonial value recorded in the registry, pursuant to the Municipal Real Estate Tax Code (CRET), is equal to or greater than €1,000,000.00, and that the taxable patrimonial value (hereinafter "TPV") that is relevant is the total TPV and not the TPV of each of the parts that compose it, even if susceptible to independent use. Any other interpretation would be unconstitutional by violation of the principle of tax legality provided for in no. 2 of article 103 of the CPR. The Respondent thus maintains the constitutionality of item 28.1 of the GTSD, citing Judgment no. 590/2015, rendered in case no. 542/2014. The Respondent concludes that there is no right to the petitioned compensatory interest given the legality of the tax acts, with no error attributable to the services.

PRELIMINARY DETERMINATION

The arbitral tribunal is regularly constituted.

The Tribunal is materially competent, pursuant to subparagraph a) of no. 1 of article 2 of the RJAT, to rule on the petition for illegality of the 2014 Stamp Duty assessments pursuant to item 28.1 of the GTSD attached to the SDC and on compensatory interest.

With respect to the subsidiary petition presented by the Claimants for condemnation of the TA to refrain from issuing future Stamp Duty assessments with reference to the property in question, the arbitral tribunal is not competent to rule on the same, pursuant to the provisions of subparagraph a) of no. 1 of article 2 of the RJAT and article 99 of the Code of Tax Procedure and Process, by virtue of subparagraph a) of no. 1 of article 29 of the RJAT. In fact, the arbitral tribunal has competence to appreciate and decide claims relating to the declaration of illegality of tax assessment acts, self-assessment, withholding at source, advance payments, as well as acts determining the taxable matter not generating assessment and acts determining the taxable amount and acts establishing patrimonial values. The condemnation to perform or to refrain from performing any act does not fall within this enumeration of the arbitral tribunal's competencies. The sole arbitral tribunal hereby declares itself incompetent ratione materiae to rule on the subsidiary petition for condemnation of the TA to refrain from performing future Stamp Duty assessment acts on the property in question.

The Claimants cumulate petitions and present themselves in coalition of plaintiffs, which is admissible given the identity of the circumstances of fact and the application of the same principles and rules of law, pursuant to article 104 of the Code of Tax Procedure and Process and article 3 of the RJAT.

The parties have legal capacity and standing, are legitimate and are legally represented (articles 3, 6 and 15 of the Code of Tax Procedure and Process, by virtue of subparagraph a) of no. 1 of article 29 of the RJAT).

There are no other nullities, and no exceptions or preliminary questions were alleged by the parties that would prevent ruling on the merits of the matter.

FACTS

a) Facts Established as Proven

Facts having relevance to the decision of the case are hereby established as proven.

The Claimants are co-owners of the urban property recorded in the urban real property register of the parish of …, municipality of Lisbon, under article ….

According to the respective property record, the property has the following description: "property composed of ground floor, 1st, 2nd, 3rd, 4th and 5th floors, intended for commerce and residential use".

The property identified above is recorded in the respective urban real property register as property in full ownership, with each of the Claimants having the following share:

| A… | 35/384 |
| B… | 36/384 |
| C… | 19/384 |
| M… | 27/384 |
| D… | 51/384 |
| E… | 33/384 |
| F… | 16/384 |
| G… | 51/384 |
| H… | 9/384 |
| J… | 32/384 |
| I… | 24/384 |
| K… | 51/384 |

The total taxable patrimonial value as of the date of the Stamp Duty assessments (2014) was €1,357,706.87.

Each of the floors is composed of apartments fully autonomous from the remaining apartments and floors.

According to the lease contracts attached to the case file, the following divisions of the property are leased, in accordance with their purpose:

| Tenant | Purpose | Address |
| N…, Lda. (Ready-to-wear) | Commerce | Rua … |
| O… (Tourist Items Shop) | Commerce | Rua … |
| P…, Lda. (Catering) | Commerce | Rua … |
| Q…, Lda. (Ready-to-wear) | Commerce | Rua … |
| R…, SA (Decoration Shop) | Commerce | Rua … |
| R…, SA (Decoration Shop) | Commerce | Rua … |
| S…, Lda. (Hostel) | Commerce | Rua … |
| S…, Lda. (Hostel) | Commerce | Rua … |
| S…, Lda. (Hostel) | Commerce | Rua … |
| T… (Medical Office) | Commerce | Rua … |
| T… (Medical Office) | Commerce | Rua … |
| U..., Lda. (Official Customs Broker) | Commerce | Rua … |
| V… | Residential | Rua … |
| W…– Editions, Lda. (Publishing House) | Commerce | Rua … |

With respect to the year 2014, the Claimants received the following Stamp Duty assessments, issued pursuant to item 28.1 of the GTSD, which they paid as described below:

| Claimant | Document Identification | | Payment Date |
| A… | 2015 … | 1st installment | 23-04-2015 |
| | 2015 … | 2nd installment | 27-07-2015 |
| | 2015 … | 3rd installment | 25-11-2015 |
| B… | 2015 …, | 1st installment | 24-04-2015 |
| | 2015 … | 2nd installment | 28-07-2015 |
| | 2015 … | 3rd installment | 18-11-2015 |
| C…. | 2015 … | 1st installment | 17-04-2015 |
| | 2015 … | 2nd installment | 08-07-2015 |
| | 2015 … | 3rd installment | 05-11-2015 |
| D… | 2015 … | 1st installment | 13-04-2015 |
| | 2015 … | 2nd installment | 20-07-2015 |
| | 2015 … | 3rd installment | 30-11-2015 |
| E… | 2015 … | 1st installment | 29-04-2015 |
| | 2015 … | 2nd installment | 30-07-2015 |
| | 2015 … | 3rd installment | 29-11-2015 |
| F… | 2015 … | 1st installment | 30-04-2015 |
| | 2015 … | 2nd installment | 31-07-2015 |
| | 2015 … | 3rd installment | 30-11-2015 |
| G… | 2015 … | 1st installment | 23-04-2015 |
| | 2015 … | 2nd installment | 24-07-2015 |
| | 2015 … | 3rd installment | 18-11-2015 |
| H… | 2015 … | 1st installment | 27-04-2015 |
| | 2015 … | 2nd installment | 09-07-2015 |
| | 2015 … | 3rd installment | 23-11-2015 |
| J…: | 2015 … | 1st installment | 23-04-2015 |
| | 2015 … | 2nd installment | 15-07-2015 |
| | 2015 … | 3rd installment | 24-11-2015 |
| K… | 2015 … | 1st installment | 30-04-2015 |
| | 2015 … | 2nd installment | 31-07-2015 |
| | 2015 … | 3rd installment | 30-11-2015 |
| M… | 2015 … | 1st installment | 30-04-2015 |
| | 2015 … | 2nd installment | 31-07-2015() |
| | 2015 … | 3rd installment | 30-11-2015() |

(*) Note: With respect to the 2nd and 3rd installments above, the payment deadline is indicated, as the collection notes attached to the case file do not indicate the payment date of each installment, but only that they are settled.

On 29 February 2016, the Claimants filed the present petition for establishment of the arbitral tribunal/arbitral determination.

b) Reasoning of the Established and Non-Established Facts

The determination of the facts was made based on examination of the documents submitted to the proceedings, including a copy of the arbitral decision in case 573/2013-T (document no. 27), which were not contested by the Respondent (see article 1 of the Respondent's Written Pleadings).

There are no facts relevant to the decision that have not been established as proven.

MATTER TO BE DECIDED

The main question presented to the tribunal is to decide whether item 28.1 of the GTSD is applicable to an urban property constituted in full ownership regime, comprised of diverse areas with independent use, intended for commerce and residential use, and, if so, whether one should take into account the total taxable patrimonial value of the urban property or whether, on the contrary, one should take into account the TPV attributed to each floor or division with independent use that comprises it.

LEGAL REASONING

On the Illegality of Stamp Duty Assessment Acts pursuant to Item 28.1 of the General Table of Stamp Duty

First and foremost, it is necessary to analyze the legal framework of the Stamp Duty assessments sub judice.

Under Stamp Duty, article 1 of the Code establishes that "Stamp Duty is levied on all acts, contracts, documents, securities, papers and other legal facts or situations provided for in the General Table, including gratuitous transfers of property".

Thus, the norm establishing the scope of Stamp Duty refers to the set of acts, contracts, documents, etc., enumerated in the General Table of Stamp Duty ("GTSD"), attached to the Code.

The said GTSD was amended by Law no. 55-A/2012, of 29 October, which added a new item – item 28 – with the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value recorded in the registry, pursuant to the Municipal Real Estate Tax Code (CRET), is equal to or greater than € 1,000,000 - on the taxable patrimonial value used for purposes of the Municipal Real Estate Tax:

28.1 – For property with residential purpose - 1%"

However, the above wording was only in force until the end of 2013.

Law no. 83-C/2013 of 31 December (State Budget Law for 2014) amended the said item 28.1, which then took on the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value recorded in the registry, pursuant to the Municipal Real Estate Tax Code (CRET), is equal to or greater than € 1,000,000 - on the taxable patrimonial value used for purposes of the Municipal Real Estate Tax:

28.1. For residential property or for land for construction whose building, authorized or planned, is for residential purposes, pursuant to the provisions of the Municipal Real Estate Tax Code – 1%."

This new wording entered into force on 1 January 2014, being the wording in force on the date of issuance of the contested Stamp Duty assessments.

The SDC does not define the concepts of property or residential property, referring to the definitions of the Municipal Real Estate Tax Code, pursuant to the provisions of no. 2 of article 67 of the SDC: "(…) on matters not regulated in the present code relating to item 28 of the General Table, the Municipal Real Estate Tax Code applies subsidiarily".

On the other hand, in terms of Stamp Duty assessment pursuant to this item 28.1, no. 7 of article 23 of the SDC establishes that: "Where Stamp Duty is due for the situations provided for in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the Municipal Real Estate Tax Code."

Thus, recourse must be had to the Municipal Real Estate Tax Code (CRET) for purposes of interpretation of item 28.1 of the GTSD.

The most relevant provisions of the CRET are set forth below.

Article 2 of the CRET defines property as being "1 – (…) any parcel of land, including (…) buildings and constructions of any nature incorporated or situated thereon, with a character of permanence, provided that it is part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as (…) buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land on which they are situated (…) 4 - For purposes of this tax, each autonomous fraction, in condominium ownership regime, is deemed to constitute a property."

In turn, article 4 of the CRET provides that urban properties are "(…) all those that should not be classified as rural (…)".

With respect to urban properties, no. 1 of article 6 of the CRET establishes that "(…) urban properties are divided into: a) Residential; b) Commercial, industrial or service; c) Land for construction; d) Others."

Further with respect to this classification of properties, no. 2 of the same article 6 clarifies that "Residential, commercial, industrial or service properties are buildings or constructions licensed for such use or, in the absence of a license, that have as their normal purpose each of these uses."

With utility for the decision of the case, reference should also be made to the following provisions relating to registration of properties and collection of the Municipal Real Estate Tax.

Thus, no. 3 of article 12 of the CRET establishes that "Each floor or part of a property susceptible to independent use is considered separately in the property register, which also discriminates its respective taxable patrimonial value."

No. 2 of article 80 of the CRET stipulates that "(…) each property corresponds to a single article in the register", with the exceptions provided for in articles 84 (mixed properties) and 92 (property in condominium ownership regime) of the same code, in which it is provided that one same property may have more than one property registration (mixed properties) or that a building have a single registration in the register, with each of the autonomous fractions described and individualized by the capital letter corresponding to it (property in condominium ownership regime).

No. 1 of article 119 of the CRET, relating to the collection document, clarifies that "The services of the Tax Directorate send to each taxpayer, before the end of the month preceding that of payment, the respective collection document, with discrimination of the properties, their parts susceptible to independent use, respective taxable patrimonial value and the tax attributable to each municipality of the location of the properties."

In light of the above, it is necessary to decide on which interpretation should be given to item 28.1 of the GTSD, whether that of the Claimants who defend its non-applicability to the property in question, given that the same, although constituted in full ownership, is composed of apartments autonomous from the remaining apartments and floors, intended primarily for commerce, in addition to residential use, or whether, on the contrary, the interpretation followed by the Respondent should be followed, which maintains that, in the case of properties in full ownership, for purposes of Stamp Duty, what is relevant is the property in its entirety, given that the said divisions susceptible to independent use are not deemed to be properties pursuant to the CRET, a fact which is only relevant for properties in condominium ownership.

For this purpose, recall the norm establishing the scope of item 28.1 of the GTSD, which imposes Stamp Duty on:

Ownership, usufruct or right of superficies;

Of residential property;

With taxable patrimonial value equal to or greater than € 1,000,000.00.

On the concept of residential property relevant for purposes of item 28.1 of the GTSD, as referred to above, with the entry into force of the new wording given by Law no. 83-C/2013 of 31 December, it became clear that the concept of residential property is that which results from article 6 of the CRET.

The Judgment of the Supreme Administrative Court no. 01870/13, 9 April 2014, synthesizes in this manner the doubts resulting from the original wording of item 28.1 and the clarification provided by the current wording: "The concept of 'property (urban) with residential purpose' was not defined by the legislator. (…). And it is a concept which, probably due to its imprecision – a fact all the more serious insofar as it is in function of it that the scope of objective incidence of the new taxation is cut out –, had a short life, as it was abandoned upon entry into force of the State Budget Law for 2014 (Law no. 83-C/2013, of 31 December), which gave new wording to item no. 28 of the General Table, and which now cuts out its scope of objective incidence through the use of concepts that are legally defined in article 6 of the Municipal Real Estate Tax Code."

Thus, for purposes of incidence of item 28.1 of the SDC, there should exist a residential property, pursuant to no. 2 of article 6 of the CRET, that is, a property licensed for residential use or, in the absence of a license, a property whose normal purpose is residential use.

Pursuant to the CRET, the classification of a property as residential or commercial does not result only from verification of the formal element (the existence of a municipal license for use), but may also result from verification of other elements that indicate use of the property for another purpose.

In the case at hand, we are dealing with a property in full ownership regime, although with divisions or floors susceptible to independent use, which are intended for residential use, commerce and services, as appears from both the property register certification (which refers to use for residential and commercial purposes) and the lease contracts attached to the case file.

In light of the above, it is necessary to conclude whether one should take into account only the formal aspect and understand, as the Respondent does, that for purposes of the norm establishing the scope one need only verify the existence in the property register of a property whose purpose is residential use and whose total taxable patrimonial value is greater than €1,000,000, with nothing else being relevant to the analysis, given that, as the Respondent adds, the divisions susceptible to independent use are not deemed to be properties, but only the autonomous fractions in the case of properties in condominium ownership regime.

In this regard, see among others the arbitral decision rendered in the context of Case no. 724/2014-T, cited by the Judgment of the Supreme Administrative Court 047/2015 of 9 September 2015, which we agree with: "Having consulted the Municipal Real Estate Tax Code, it is verified that its article 6 only indicates the different species of urban properties, among which it mentions residential properties (…) From this we can conclude that, in the perspective of the legislator, what matters is not the juridical-formal rigor of the concrete situation of the property but rather its normal use, the purpose to which the property is destined. We further conclude that for the legislator the situation of the property in vertical ownership or in condominium ownership did not matter, as no reference or distinction is made between one and the other. What matters is the material truth underlying its existence as an urban property and its use."[1][2]

The argument of the Respondent does not therefore hold that, for purposes of item 28.1 of the GTSD, contrary to the rules of the CRET, applicable to Stamp Duty and more specifically to this item by referral from article 67 of the CRET, what would matter is the property in its entirety, independently of the existence of divisions or parts susceptible to independent use, given the existence of property in full ownership and not property in condominium ownership.

As referred to above, this distinction does not matter for purposes of the Municipal Real Estate Tax and should not matter for purposes of Stamp Duty, under penalty of violation of the principle of tax legality established constitutionally.

In fact, pursuant to no. 3 of article 12 of the CRET, each floor or part susceptible to independent use is considered separately in the property register, which discriminates its respective taxable patrimonial value, and pursuant to no. 1 of article 119 of the CRET, the collection document is sent with discrimination of the properties, their parts susceptible to independent use and respective taxable patrimonial value.

Thus, the Respondent cannot give relevance to the divisions or parts susceptible to independent use in the case of property in full ownership for purposes of issuing the Stamp Duty collection document, but consider that it is a single property for verification of the remaining requirements of the norm establishing the scope, namely the relevant TPV.

Returning to the aforementioned decision to conclude: "(…) Now, article 12, no. 3 of the Municipal Real Estate Tax Code establishes that 'each floor or part of a property susceptible to independent use is considered separately in the property register, which also discriminates its respective taxable patrimonial value'. (…) It should be noted that the TA itself seems to agree with the criterion set forth, which is why the assessments that it itself issues are very clear in their essential elements, from which it results that the value of incidence is the corresponding to the TPV of each one of the floors and the assessments individualized. Therefore, if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner in which it establishes for properties in condominium ownership, it clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of the new tax. Thus, Stamp Duty (within the scope of Item no. 28 of the GTSD) would only be incurred if any of the parts, floors or divisions with independent use presented a TPV greater than € 1,000,000.00. The TA cannot consider as the value of reference for the incidence of the new tax the total value of the property, when the legislator itself established a different rule under the Municipal Real Estate Tax (and, as previously mentioned, this is the code applicable to matters not regulated as regards Item no. 28 of the GTSD). In conclusion, the current legal regime does not impose the obligation to establish condominium ownership, whereby the action of the TA translates into arbitrary and illegal discrimination. In fact, the TA cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the tax system, as well as the principle of tax legality provided for in article 103 of the Constitution of the Portuguese Republic, and also the principles of justice, equality and tax proportionality."

Thus, in the case at hand, the property in question was, on the date relevant to the facts, constituted in full ownership, but had parts, floors or divisions with independent use, intended for commerce and residential use.

None of those parts, floor or division with independent use and intended for residential use possessed a taxable patrimonial value equal to or greater than €1,000,000.00, as appears from the documents submitted to the case file.

Therefore, the norm establishing the scope provided for in item 28.1 of the GTSD cannot be satisfied.

We thus agree with the arbitral decision taken in case no. 573/2014-T with respect to the 2013 Stamp Duty assessments relating to the property sub judice:

"(…) The subjection of the property in question to Item 28.1 of the GTSD would be equivalent to taxing purposes different from those which the legislator expressly intended to tax and which are urban properties with residential purpose and land for construction, both provided that they have a TPV equal to or greater than € 1,000,000.00.

And that result - taxation of properties with purpose different from those contained in Item 28.1 of the GTSD - is precisely what the legislator intended to keep outside the scope of the norm, but what is obtained through the assessments now subject to arbitral review, in that measure in which, by taking into consideration the totality of the urban property article in question and its TPV, one is inexorably and indiscriminately taxing purposes distinct from that provided for in the versed norm, with the aggravating circumstance that those same non-residential areas concur in the measure of their quantitative proportion (which concretely is unknown) to the TPV of the property, and it is even questionable whether the areas with residential purpose could or could not, on their own, make up a TPV equal to or greater than the minimum legal threshold set by the legislator in Item 28.1 of the GTSD for purposes of subjection - €1,000,000.00.

One is thus faced with a property with two distinct purposes, as appears from the information contained in the register (as gathered from the property record), in which the active subject of the tax legal relationship does not effect the determination of which part has residential purpose or commerce.

If to this factuality we add the facts established as proven which go in the unequivocal direction that, in fact, the majority of the floors or divisions, in addition to substantially being susceptible to independent use (through autonomous entrances), are intended for commerce and services, a fact which, moreover, the Respondent did not contest, it does not appear sustainable that the TA intends over a reality that it itself recognizes has two different purposes, as if to pretend that such commercial purpose does not exist and on the basis of that falsehood, to tax an urban property with respect to the area with commercial and service purpose.

What, as we have already set forth above, is precisely a result contrary to that which the legislator intended in drafting the legal norm in question.

Thus, such a solution finds no support in the legal norm establishing the scope under analysis, whereby one cannot but conclude, in light of the existence of two different purposes, indetermination as to the part or parts to which these same purposes correspond for purposes of quantification of the eventual taxable base subject to the GTSD and indiscriminate taxation on the three existing purposes, that the norm establishing the tax scope under appreciation is violated in this case - Item 28.1 of the GTSD of the Stamp Duty Code."

In that measure, as the requirements of the norm establishing the scope contained in Item 28.1 of the GTSD are not satisfied, the contested assessments suffer from a defect of violation of law, by error in the legal presuppositions as to the provisions of item 28.1 of the GTSD, which implies the declaration of its illegality and consequent annulment.

On the Unconstitutionality of the Interpretation Given by the TA to Item 28.1 of the General Table of Stamp Duty

Considering the above understanding, of non-applicability of item 28.1 of the GTSD to the case sub judice, the appreciation of the remaining defects alleged and which may affect the contested assessments is prejudiced as procedurally moot.

The analysis of the question of unconstitutionality is thus prejudiced as procedurally moot, by violation by item 28.1 of the GTSD, introduced by Law no. 55-A/2012, of 28 October, of no. 3 of article 104 of the CPR.

On Compensatory Interest

With respect to the petition formulated by the Claimants for compensatory interest, note the provisions of article 43 of the General Tax Law ("GTL"):

"1 – Compensatory interest is due when it is determined, in administrative reconsideration or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due. 2 – Error attributable to the services is also deemed to exist in cases in which, although the assessment is made on the basis of the taxpayer's declaration, the latter followed, in its completion, the general guidelines of the tax administration duly published."

In the case at hand, as the Stamp Duty assessments are illegal, in addition to the reimbursement of the amounts unduly paid by the Claimants, compensatory interest shall be due to the Claimants.

Article 61, no. 5 of the Code of Tax Procedure and Process ("CTPP") adds that the said "(…) interest is calculated from the date of unduly paid tax until the date of processing of the respective credit note, in which they are included."

Thus, in addition to the reimbursement of the total amount of the Stamp Duty assessments, the TA is condemned to calculate compensatory interest, calculated from the day following the date of unduly paid tax until the date of issuance of the respective credit note.

DECISION

In light of the above, this arbitral tribunal decides:

  1. To judge as having merit, as established as proven, the petition for declaration of illegality of the tax acts of assessment under Stamp Duty relating to the year 2014, in which a total amount of tax to be paid of €13,577.07 was determined, by defect of violation of law as to the norm contained in item 28.1 of the GTSD, by error in the legal presuppositions and consequent reimbursement by the Respondent to the Claimants of the tax paid by the latter relating to the tax acts which are the subject of these proceedings;

  2. To judge as having merit, as established as proven, the petition for payment of compensatory interest by the Respondent to the Claimants from the date of unduly paid tax until the date of issuance of the credit note, in accordance with that provided for in article 43 of the GTL and article 61 of the Code of Tax Procedure and Process;

  3. Not to rule on the subsidiary petition for condemnation of the TA to refrain from performing future Stamp Duty assessment acts on the property in question, by reason of incompetence of the sole arbitral tribunal.

Value of the case: € 13,577.07 (thirteen thousand, five hundred and seventy-seven euros and seven cents), pursuant to subparagraph a) of no. 1 of article 97-A of the CTPP, applicable by virtue of subparagraphs a) and b) of no. 1 of article 29 of the RJAT and no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings (RCPTA).

Costs pursuant to Table I of the RCPTA, calculated based on the value of the petition, charged to the Respondent, pursuant to no. 2 of articles 12 and no. 4 of article 22, both of the RJAT, and article 4, no. 4, of the said Regulation.

Let this arbitral decision be notified to the parties and the case be filed.

Lisbon, 30 September 2016

The Sole Arbitrator,

(Vera Figueiredo)

Text prepared by computer, pursuant to no. 5 of article 131 of the Civil Procedure Code, applicable by referral from subparagraph e) of no. 1 of article 29 of the RJAT, drafted according to the spelling of the Orthographic Agreement of the Portuguese Language, approved by Resolution of the Assembly of the Republic no. 26/91 and ratified by Decree of the President of the Republic no. 43/91, both of 23 August.

[1] Judgment of the Supreme Administrative Court 047/2015, of 9 September 2015, published at www.dgsi.pt.

[2] Decision of CAAD in case no. 724/2014, of 29 April 2015, published at https://caad.org.pt/tributario/decisoes/

Frequently Asked Questions

Automatically Created

What is verba 28.1 of the Tabela Geral do Imposto do Selo (TGIS) and how does it apply to high-value urban properties?
Item 28.1 of the General Table of Stamp Duty (TGIS) establishes an annual Stamp Tax on the ownership of urban properties whose taxable patrimonial value (valor patrimonial tributário - VPT), as registered according to the Municipal Real Estate Tax Code (CIMI), equals or exceeds €1,000,000. Introduced by Law 55-A/2012 of October 29, 2012, this provision creates a recurring tax obligation based solely on property ownership rather than transactions. The central interpretative issue is whether the €1 million threshold applies to the total property value or to individual autonomous fractions within a property. The Tax Authority maintains that the total VPT is determinative, while taxpayers frequently argue that properties containing multiple autonomous units should be evaluated fraction-by-fraction.
Can multiple co-owners jointly challenge Imposto do Selo liquidations through CAAD tax arbitration?
Yes, multiple co-owners can jointly challenge Stamp Tax (Imposto do Selo) assessments through CAAD tax arbitration. Under Article 104 of the Code of Tax Procedure and Process (CPPT) and Article 3 of the RJAT (Decree-Law 10/2011), coalition of plaintiffs is expressly permitted when there exists identity of factual circumstances and application of the same legal principles and rules. In Process 110/2016-T, the arbitral tribunal explicitly recognized the admissibility of 12 co-owners presenting themselves as joint claimants, as they all shared ownership of the same property subject to identical Stamp Duty assessments under item 28.1 of the TGIS. This procedural mechanism allows co-owners to efficiently contest assessments affecting their common interests while avoiding duplicative proceedings.
How did Lei n.º 55-A/2012 change Stamp Tax obligations for properties valued above one million euros?
Law 55-A/2012 of October 29, 2012, introduced item 28.1 to the General Table of Stamp Duty, fundamentally altering tax obligations for high-value real estate owners. This legislation created a new annual Stamp Tax levied on ownership of urban properties with taxable patrimonial value equal to or exceeding €1,000,000. Unlike traditional Stamp Tax triggered by transactions or specific legal acts, this provision imposes a recurring annual obligation based purely on property ownership and registered value. The law represented a significant fiscal policy shift, effectively creating a wealth tax on high-value real estate. Its implementation has generated substantial controversy, with numerous constitutional challenges alleging violations of principles including non-retroactivity, legitimate expectations, and tax legality, though Constitutional Court Judgment 590/2015 upheld its constitutionality.
What is the procedure for requesting arbitral tribunal constitution under Decreto-Lei n.º 10/2011 (RJAT)?
Under the RJAT (Regime Jurídico da Arbitragem em Matéria Tributária - Decree-Law 10/2011), taxpayers initiate arbitration by filing a petition for arbitral determination with CAAD (Centro de Arbitragem Administrativa). The CAAD President reviews and accepts the petition, then notifies the Tax Authority. Pursuant to Article 6(1)(a) and Article 11(1)(b) of RJAT, claimants may appoint an arbitrator or allow the Deontological Council to make the appointment. Parties receive notification of the appointed arbitrator and have the right to object. Following the acceptance period, the tribunal is formally constituted per Article 11(1)(c) of RJAT. The Tax Authority then submits a response under Article 17 of RJAT. The tribunal may waive preliminary meetings under Article 18 if parties consent, and establishes a schedule for written pleadings and decision-rendering. Claimants must pay the subsequent arbitral fee per the Regulation of Costs in Arbitration Proceedings.
What are the legal grounds for contesting the legality and constitutionality of Stamp Tax assessments on urban real estate in Portugal?
Legal grounds for contesting Stamp Tax assessments on urban real estate include: (1) Incorrect property classification - challenging whether a property constitutes a single taxable unit or multiple autonomous fractions, particularly relevant when determining if the €1 million VPT threshold under item 28.1 TGIS is met; (2) Improper valuation - disputing the taxable patrimonial value calculation or registration; (3) Unconstitutionality under Article 104(3) of the Portuguese Constitution - alleging violation of principles of non-retroactivity and protection of legitimate expectations in tax matters; (4) Violation of Article 103(2) of the Constitution - challenging breaches of the tax legality principle requiring clear legislative authorization for taxation; (5) Misinterpretation of item 28.1 TGIS - contesting how the Tax Authority applies the provision to specific property configurations. Challenges typically proceed through CAAD arbitration under Article 2(1)(a) of RJAT or administrative/judicial courts, with claimants bearing the burden of demonstrating illegality of the contested assessments.