Process: 111/2016-T

Date: July 29, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral case involves Stamp Tax assessments under Item 28.1 of the TGIS applied to a non-profit housing cooperative holding surface rights over 56 residential units in Porto. The Tax Authority assessed Stamp Tax at 1% by aggregating the taxable property values (VPT) of all units, which collectively exceeded €1,000,000, despite no individual unit reaching this threshold (values ranged from €27,500 to €55,200). The claimant contested this interpretation, arguing that Item 28.1 TGIS targets luxury properties exceeding €1,000,000 individually, not affordable housing units that only collectively surpass this amount. Key legal arguments include: (1) Article 67(2) of the Stamp Duty Code mandates subsidiary application of CIMI rules, which treat each fraction as an independent property for tax purposes; (2) the legislative intent behind Item 28.1 was to tax high-value luxury homes, not social housing financed by public funds; (3) procedural irregularities exist as the taxpayer only discovered the assessments through enforcement proceedings, raising issues of caducidade (statute of limitations) due to defective notification via electronic mailbox. The case raises fundamental questions about the proper interpretation of property for Stamp Tax purposes when CIMI clearly establishes each unit as independent, the scope of CAAD's jurisdiction over Item 28.1 disputes, and whether aggregating values of multiple independent dwellings violates principles of legality, tax equality, and contributive capacity enshrined in the General Tax Law.

Full Decision

ARBITRAL DECISION

1. REPORT

A..., with offices at Rua ..., no. ..., ..., ...-... ... (area of the Tax Service of ... ...), and with the NIPC ... (hereinafter referred to as the Claimant), comes, pursuant to the combined provisions of articles 2, no. 1, paragraph a), and 10, of Decree-Law no. 10/2011, of January 20, which approved the Legal Framework for Tax Arbitration (RJAT), to request the constitution of an Arbitral Court, with the intervention of a sole arbitrator, in which the Tax and Customs Authority (AT) is the Respondent, with a view to the declaration of illegality and consequent annulment of the Stamp Duty assessments (Item 28.1, of the TGIS), relating to the years 2013 and 2014 and to the various divisions of independent use and residential allocation of the urban property registered under article ... of the parish of ..., municipality of Porto, of which the Claimant is the superficiary, in the global amount of € 45,245.00.

The Claimant bases its claim on the factual and legal arguments that, briefly stated, are as follows:

a. The Claimant, as a legal entity of private law, without profit-making purposes, has as its main objective the promotion of housing conditions for its members;

b. To this end, it promoted, with the financing of the then Fund B... and in two plots of land whose right of superficies was ceded to it for a period of seventy years by the Municipal Council of ..., the construction of an urban property consisting of three residential blocks, integrating 56 units;

c. On March 14, 2014, the Claimant submitted, at the Tax Service of ... ..., a model 1 declaration for IMI for registration of the property in the register, having the 56 units been subject to evaluation and determination of their respective taxable property values (VPT), in accordance with article 38 of the CIMI;

d. The AT issued IMI assessments for the years 2010 to 2014, relating to each of the 56 units, as autonomous and independent dwellings, taxing each of them separately;

e. The Claimant, considering that the VPT attributed to the 56 units, between € 27,500.00 and 55,200.00 and calculated based on the typology and characteristics of each one, were correct, did not request a second evaluation nor presented any of the administrative or judicial means to obtain the annulment of the IMI assessments;

f. On November 10, 2015, the Claimant was notified, by mail, of the existence of tax enforcement proceedings, in which assets would be seized, since 30 days had already elapsed after the citation, and then became aware that they had been initiated for coercive collection of Stamp Duty for the years 2013 and 2014, relating to ownership of the right of superficies over the said property;

g. Until that date, the Claimant was unaware even that Stamp Duty assessments had been issued for those years, relating to the 56 units that make up the identified urban property;

h. The Claimant has an electronic mailbox, in accordance with no. 9 of article 19 of the LGT, to which notifications issued by the AT are sent, through the CTT Route, but only accessed it after receiving the postal notification, having verified that it was only in time to proceed with the voluntary payment of the 2nd installment of the Stamp Duty assessments for 2014, with the deadline for voluntary payment of the assessments for 2013 and the 1st installment of 2014 having already passed;

i. Stamp Duty was assessed at the rate of 1% on the VPT attributed to each dwelling, under item 28.1 of the TGIS, having been issued one assessment for each of them: 56 assessments for each of the stated years;

j. However, the value considered for the purpose of subjection to taxation was the sum of the VPT of all dwellings;

k. The premises of the incidence of Stamp Duty of item 28 of the TGIS are ownership, usufruct and right of superficies of residential urban properties and the VPT registered in the register, for the purpose of IMI, equal to or greater than € 1,000,000.00;

l. Now, since none of the dwellings has a VPT, for the purpose of IMI, equal to or greater than € 1,000,000.00, one of the premises of taxation is not met, although the AT justifies it by the fact that the sum of all VPT exceeds that value;

m. However, such action is contrary to the legislator's will and violates the principle of justice, as is clear from the parliamentary debate concerning the proposal for approval of the rule now contained in item 28 of the TGIS, the legislator intended to create special taxation on high-value properties, targeting "luxury homes", which is not the case of dwellings built with controlled costs, with support from Fund B... and on land of the Municipal Council of ...;

n. Article 2 of article 67 of the Stamp Duty Code provides that "To matters not regulated in this Code relating to item no. 28 of the General Table applies, subsidiarily, the provisions of the CIMI", which obliges the AT to make use of the concept of urban property imposed by article 4 of the CIMI and by article 6, which lists the various categories of urban properties;

o. On the other hand, the CIMI evaluates autonomously all fractions of a property that constitute units capable of independent use, this concept being valid also in the matriculation registration and description, as well as that which underlies the assessment and issuance of IMI collection notes, in accordance with article 12, nos. 1 and 3 of the CIMI;

p. "Now, if it is the legislator himself who, with respect to Stamp Duty, mandates consideration of the rules of the CIMI when referring to the taxable property value used for the purposes of IMI and that the tax is levied on the taxable property value recorded in the register, and if it is a fact that, if the CIMI considers as independent or individual tax units the different fractions of a property, whether or not constituted in horizontal property, it is necessary to conclude that the legislator of Stamp Duty is also obliged to do so";

q. "In its action, the AT is obliged to obey the principles of legality, tax equality, contributive capacity and the prevalence of material truth over legal-formal reality (see articles 5, 8 and 55 of the General Tax Law), since it is these principles that underlie taxes on assets and, in this specific case, the notion of property contained in no. 1 of article 2 of the CIMI should be the criterion to be used by the AT to decide the incidence of Stamp Duty under item 28.1 of the TGIS, which is clearly not the case";

r. "Contrary to the position taken by the AT in charging Stamp Duty to the Claimant, the taxable property value that is relevant for the purposes of the incidence of Stamp Duty when dealing with properties constituted under the regime of full ownership but composed of various dwellings with independent use, should be the taxable property value of each of the dwellings in the property and not the global taxable property value of the property, corresponding to the sum of all taxable property values of the divisions that compose it";

Affirming to be "in time to resort to the CAAD – Tax Arbitration Center in accordance with Article 10 no. 1 paragraph a) of the RJAT" and attributing to the claim the value of € 45,245.00 (forty-five thousand two hundred and forty-five euros), the Claimant concludes by formulating the following claims:

  1. For a declaration of illegality of the Stamp Duty assessments for the years 2013 and 2014, on the grounds of a defect of violation of law, due to incorrect qualification, interpretation and application of the law;

  2. For reimbursement of all amounts paid by the Claimant as Stamp Duty and interest;

  3. For the condemnation of the Respondent to the obligation to indemnify the Claimant for the provision of bank guarantees that it may have to provide;

  4. For the condemnation of the Respondent to the payment of interest on the amounts that may meanwhile be paid by the Claimant;

  5. For the condemnation of the Respondent to the payment of the costs of the arbitral process.

Notified in accordance with and for the purposes provided in article 17 of the RJAT, the AT presented administrative proceedings and response, defending itself by exception and by objection, with the following grounds:

A: By exception – of the double timeliness of the claim and the incompetence of the arbitral court:

a. The present request for arbitral pronouncement is clearly inopportune, since "The date of the assessments of the tax in question, as shown in the collection notes attached to the Case, in relation to the year 2013 is 21.10.2015 with the payment deadline of 31.01.2015 and in relation to the year 2014, the date of the tax assessment is 20.03.2015 and as for the first installment that of the payment deadline is 30.04.2015 and in relation to the second installment is 30.11.2015, in accordance with the provisions of art. 120 of the CIMI, applicable ex vi art. 3 of Law no. 55/2012, of October 29";

b. "Now, in accordance with the provisions of art. 10, no. 1, paragraph a), of Decree-Law no. 10/2011, of January 20, which approved the Legal Framework for Tax Arbitration, and art. 102, no. 1, paragraph a), of the Code of Tax Procedure and Process (CPPT), the deadline for submission of the request to constitute the arbitral court is 90 days from the end of the deadline for voluntary payment of the tax";

c. Thus, having the request for arbitral pronouncement been submitted on 26.02.2016, the AT considers it to be clearly inopportune, in relation to the tax assessments identified therein, as it considers to be admitted by the Claimant in articles 29 and 30 of the initial petition;

d. However, the Claimant alleges that it only became aware of the said assessments on 10.11.2015, after notification by mail of the seizure, "because only on that date did it access its electronic mailbox, as stated in article 26 of its Petition", although it admits to having an electronic mailbox, "with notifications being made by the Tax Authority through Via CTT";

e. The AT understands that, "taking into account the legislation in force and applicable to the case, the assessments were legally notified to the Claimant, in accordance with article 19 of the LGT and articles 39 and 43 of the Code of Tax Procedure and Process (CPPT)";

f. The tax address includes the electronic mailbox (article 19, no. 2, of the LGT), and the Claimant is obliged to have one and communicate it to the Tax Authority within 30 days from the date of the start of activity (article 19, no. 10, of the LGT), with electronic notification being considered made in accordance with nos. 9 and 10 of article 39 of the CPPT;

g. "The Claimant could only rebut the presumption of no. 10 of the said article 39, [if] by a fact that is not attributable to it, the notification occurred on a date later than the presumed one and in cases where it could prove that the communication of the change in accordance with article 43 (Obligation to notify address) of the CPPT, which it also does not prove in the present case";

h. The AT considers that the claim is further inopportune given that no. 4 of article 120 of the CIMI, applicable to Stamp Duty assessments of item 28 of the TGIS, establishes that the failure to pay one of the installments "implies the immediate maturity of the remaining installments";

i. "Now, the Claimant not having, as was its obligation, proven to have made payment of the 1st installment of the tax for the year 2014 (alleging ignorance of its notification), whose deadline ended on 30.04.2015, it means that, on that same date, the 2nd and 3rd installments of the tax would have matured, which is why we also allege inopportuneness in relation to the year 2014";

j. The AT further understands that the Claimant is not challenging a tax act, but rather the payment of the 2nd installment of Stamp Duty for the year 2014, "as the Claimant itself states in articles 29 and 30 of its Esteemed I.P.", which does not fall within the scope of the competence of Arbitral Courts, contained in article 2 of the RJAT;

k. "Not having the Claimant questioned the assessment of the tax when it was duly notified of the same (in fact the Claimant alleges ignorance of the various notifications of assessments for payment for the year 2013 and the 1st installment of 2014), it cannot later come, when it receives the 2nd collection note, and the deadline has passed and the competence of the arbitral court, come to question that assessment, which thus became final";

B. By objection:

l. At the date of the assessments, the Claimant was the holder of the right of superficies of the property in full ownership, composed of three residential blocks independent of each other, evaluated in accordance with the CIMI within the scope of the general evaluation of urban properties, with a taxable property value (VPT) exceeding € 1,000,000.00;

m. The assessments made "in accordance with the provisions of article 6, no. 2 of Law no. 55-A/2012, of 29/10, which added item no. 28 to the TGIS, with the amendment made by Law no. 83-C/2013, of 31/12" (…) "result from the direct application of the legal rule, which is translated into objective elements, without any subjective or discretionary evaluation";

n. "The concept of property is defined in article 2, no. 1 of the CIMI, being established in its no. 4 that in the regime of horizontal property, each autonomous fraction is deemed to constitute a property", and from the analysis of the rule "that a «property in full ownership with floors or divisions capable of independent use» is, unequivocally, different from property in horizontal property regime";

o. "Article 12 of the CIMI establishes the concept of property register, its no. 3 relating exclusively to how to register matriculation data", providing no. 1 of article 119 of the same Code, that the collection document be sent to the taxpayer with discrimination of the parts capable of independent use and their respective taxable property value as well as the tax charge attributable to each municipality of the location of the properties;

p. However, the assessment of IMI of properties in full ownership is calculated on the VPT that the Claimant defines as "total value of the property", although defending that there is no rule that establishes that the VPT of a property composed of three residential blocks, with 56 units capable of independent use corresponds to the sum of their respective parts;

q. The Claimant's thesis, from which the illegality of the assessments would result, due to a defect of violation of law due to error in the legal assumptions, lacks legal support, since the legislator mandates the application of the CIMI rules to the situations provided for in item 28 of the TGIS, and "reserves the aspects that need proper adjustments, namely those in which, as is the case of properties in full ownership, although with floors or divisions capable of independent use (although IMI is assessed in relation to each part capable of independent use) for the purposes of Stamp Duty the property in its entirety is relevant because the divisions capable of independent use are not deemed to be property (…)";

r. According to the AT, the legislator intended to tax properties as a single legal-tax reality: "In accordance with the rules of the CIMI, specifically article 113, no. 1, the assessment is carried out based on the taxable property values of the properties and in relation to the taxpayers listed in the registers on December 31 of the year to which they relate"; as for properties under the regime of full ownership, which do not have autonomous fractions to which the tax law attributes the qualification of property, the sum of the VPT of the divisions of independent use would be taken into account;

s. The challenged assessments should be maintained, as there is no violation of the invoked defect of violation of law due to error in legal assumptions, since they constitute a correct application of the law to the facts;

t. Nor is it understood that they have violated the principles of tax equality and contributive capacity: there is no violation of the equality principle because there is no discrimination in the taxation of properties in full ownership and horizontal property that can be considered arbitrary, as they are differentiated legal institutes, which tax law respects;

u. "What is intended to be concluded is that these rules procedures for evaluation, the rules on matriculation registration, and also the rules on the assessment of the parts capable of independent use, do not allow us to state that there should be an equalization of the property under full ownership regime to the regime of vertical property, this is because, (…) it would be illegal and unconstitutional";

v. "It is thus a consequence that the tax fact of the stamp duty of item 28.1 consists of ownership of urban properties whose taxable property value recorded in the register, in accordance with the CIMI, is equal to or greater than € 1,000,000.00, the taxable property value relevant for the purposes of the incidence of the tax is, thus, the total taxable property value of the urban property and not the taxable property value of each of the parts that compose it, even when capable of independent use";

w. "Indeed, as follows from the Decision handed down on November 11, 2015 by the Esteemed Constitutional Court, in the context of process no. 542/14, already referring to the amendments introduced by Law no. 83-C/20123 of December 31 decided: «(…) Do not declare unconstitutional the rule of item 28 and 28.1 of the General Table of Stamp Duty, added by article 4 of Law no. 55-A/20121, of October 29, insofar as it imposes annual taxation on the ownership of urban properties with residential allocation, whose taxable property value is equal to or greater than € 1,000,000.00»;

x. (…) "In these terms, the learned court concluded that the challenged rule, i.e., item 28 of the TGIS, does not suffer from any unconstitutionality, with no violation of the constitutional principles shaping tax law, specifically the principles of tax equality, contributive capacity and proportionality";

y. With regard to the claim for payment of compensatory interest, the AT argues that "(…) the right to compensatory interest provided for in no. 1 of article 43 of the LGT, arising from judicial annulment of a tax act, depends on it being demonstrated in the proceedings that this act is affected by error attributable to the services that resulted in payment of tax debt in an amount exceeding that legally due", which does not occur in the case of the present proceedings, in which the assessments were issued on the basis of applicable legislation, to which it is bound;

z. The AT further considers that Arbitral Courts lack competence to recognize the "right to indemnification for costs suffered with bank guarantees that the Claimant may have to provide, to suspend the tax enforcement proceedings pending the present process", as it is not provided for in article 2 of the RJAT.

The AT, considering that the facts upon which the decision is requested are fixed, which it does not dispute, came to request the waiver of the holding of the meeting referred to in article 18 of the RJAT, concluding its response with the request for dismissal of the instance based on the "manifest inopportuneness of the request to constitute the Arbitral Court" and the "evident incompetence of the Arbitral Court", but that, if not so understood, the request for arbitral pronouncement be judged unfounded, "given the legality of the collection notes and assessments".

The request for constitution of the Arbitral Court was filed on February 26, 2016, having been accepted by the Esteemed President of the CAAD and automatically notified to the AT, on March 11, 2016.

The Claimant informed that it did not intend to use the faculty to appoint an arbitrator, whereby, pursuant to the provisions of no. 1 of article 6 of the RJAT, the undersigned was appointed arbitrator by the Esteemed President of the Deontological Council of the CAAD, a role which it accepted within the legally provided deadline, without opposition from the Parties.

The Sole Arbitral Court was regularly constituted on May 13, 2016 to hear and decide the dispute that is the subject of the present proceedings.

The Parties have legal personality and capacity, are legitimate and are duly represented (articles 4 and 10, no. 2, of the RJAT and article 1 of Ordinance no. 112-A/2011, of March 22).

The process does not suffer from nullities that would invalidate it altogether.

By arbitral ruling notified to the Parties on June 14, 2016, the meeting referred to in article 18 of the RJAT was waived and it was determined that the process proceed with successive written arguments for a period of 10 days, with a view to the exercise of contradiction, in particular regarding the exceptions invoked by the Respondent. July 29, 2016 was set as the date for the pronouncement of the arbitral decision and the Claimant was warned that, until that date, it should proceed to the payment of the subsequent arbitral fee.

In its arguments, the Claimant came to respond to the exceptions raised by the AT, which it does not accept:

A – Regarding the double inopportuneness of the claim:

a – The deadline for voluntary payment of the 2nd installment of the Stamp Duty assessment for the year 2014 was November 30, 2015;

b – In accordance with paragraph a) of no. 1 of article 10 of the RJAT, the deadline for submission of the request to constitute the arbitral court is 90 days from the facts provided for in article 102 of the CPPT, among which that of paragraph a) of no. 1, that is, the "end of the deadline for voluntary payment of tax installments legally notified to the taxpayer";

c – In the case of the present proceedings, the deadline for submission of the request for arbitral pronouncement began on 01.12.2015 and would end on 28.02.2016; the claim having been submitted on 26.02.2016, it is timely;

d – The notifications for payment of the second installments of the Stamp Duty assessments for the year 2014 contained the express mention that "you may lodge a claim or challenge the assessment in accordance with and within the deadlines established in articles 70 and 102 of the CPPT".

B – Regarding the alleged incompetence of the arbitral court:

e – The AT incurs in manifest error of interpretation when considering that the Claimant challenges only one installment and not the tax acts of assessment;

f – What is extracted from the initial petition, namely from articles 9, 45 and 81, is the request for annulment of the tax acts of assessment for the years 2013 and 2014, with the economic value of € 45,245.00.

In its arguments proper, the Claimant reiterates extensively the legal position already set out in the initial petition.

In its arguments, the AT states that it maintains in its entirety the entire content of its response since, in its view, the Claimant's arguments add nothing new to the initial request, and the request for arbitral pronouncement should be judged entirely unfounded, as it is unproven, absolving the Respondent of the claim.

2. FACTUAL MATTER

a. Facts considered proven:

2.1. On March 14, 2014, the Claimant submitted, at the Tax Service of ... ..., the "Declaration for registration or update of urban properties in the register" (Form 1), referred to in article 13 of the IMI Code, in the capacity of superficiary of the urban property located at Rua ..., ..., ..., ..., ..., ..., ... and ..., parish of ..., in Porto;

2.2. The said urban property, consisting of fifty-seven floors or divisions with independent use, was evaluated on June 28, 2014 and registered in the register of the aforementioned parish of ..., municipality of Porto, under article ..., appearing in the respective property record the ownership of the Claimant's temporary right of superficies, beginning in 2009 and ending in 2079, with the Municipality of ... as the owner of the soil;

2.3. Of the fifty-seven divisions capable of independent use, only one (designated by the letters BL) is not intended for housing, being allocated to "storage and storage", to which the VPT of € 143,600.00 was attributed;

2.4. The "total VPT" of the property, in accordance with the property record obtained via internet on February 24, 2016, is € 2,405,850.00, with the sum of the VPT of the divisions capable of independent use and intended for housing being € 2,262,250.00;

2.5. The VPT of each of the divisions capable of independent use and intended for housing, determined in each of the respective evaluation cards, varies between € 27,500.00 and € 55,200.00;

2.6. The fifty-six Stamp Duty assessments (item 28.1 of the TGIS) relating to the year 2013 and to each of the divisions capable of independent use, intended for housing, were issued by the AT with a date of October 21, 2014, for payment in a single installment during the month of January 2014;

2.7. In each of the collection notes relating to the year 2013, there appear, among other elements, the identification of the taxpayer, the year to which the tax relates, the identification of the document, the date of the assessment, the identification of the property/division capable of independent use, the rule of incidence, the VPT of each of the divisions of independent use, the rate and the respective tax;

2.8. In each of the said collection documents there also appears the "taxable property value of the property – total subject to tax"; however, the total VPT of the property varies between € 1,891,480.00 (for the divisions designated by the letters A, B, C, D, E, F, G, H, I, J, L, M, N, O, AA, AB, AC, AD, AE, AF, AG, AH, AI, AJ, AL, AM, AN, AO, AP, AQ, AR, AS, AT, AU, AV, AX, AZ, BA, BB, BC, BD, BE, BF, BG, BH, BI, and BJ) and € 2,262,250.00 (for the divisions designated by the letters P, Q, R, S, T, U, V, X and Z);

2.9. The Stamp Duty assessments (item 28.1 of the TGIS) relating to the year 2014 and to each of the divisions capable of independent use, intended for housing, of the identified urban property, were issued by the AT on March 20, 2015, for payment in two installments, in the months of April and November 2015 (for the divisions designated by the letters A, B, C, D, E, F, G, H, I, J, L, M, N, O, P, Q, R, S, T, U, V, X, Z, AA, AB, AC, AD, AE, AF, AG, AH, AI, AJ, AL, AM, AN, AO, AP, AQ, AR, AS, AT, AV, AZ, BB, BC, BD, BE, BG and BI) and in three installments, in the months of April, July and November 2015 (for the divisions designated by the letters AU, AX, BA, BF, BH and BJ);

2.10. In all the collection notes for the year 2014 the total VPT of € 2,262,250.00 appears;

2.11. The failure to pay the Stamp Duty assessments for the years 2013 and 2014 that are the subject of the present proceedings gave rise to the institution of tax enforcement proceedings no. ... 2015... and related and ... 2015... and related, still ongoing, with a total amount in execution of € 45,245.00;

2.12. On November 4, 2015, a notification was issued by the AT in the name of the Claimant, relating to the identification of assets for seizure in the tax enforcement proceedings no. ... 2015..., ... 2015... and ... 2015....

2.2. Grounds of the proven factual matter:

The Court's conviction regarding the factual matter given as proven resulted from critical analysis of the documentary evidence attached to the request for arbitral pronouncement (copies of the property record of the identified property, of the collection notes issued in the name of the Claimant), as well as the PA sent by the Respondent.

2.3. Facts not proven

The following facts were not proven:

2.3.1. That payments had been made on account of the assessments challenged in the present proceedings;

2.3.2. That the Claimant had provided a guarantee to suspend the tax enforcement proceedings instituted due to failure to pay the Stamp Duty assessments challenged, pending the present arbitral process;

2.3.3. The date on which the AT notified the Claimant to proceed to the payment of the Stamp Duty assessments for the year 2013, relating to the urban property identified in the present proceedings.

3. LEGAL MATTER – GROUNDS

3.1. Of the exceptions invoked by the AT.

In its response, the Tax and Customs Authority comes to invoke exceptions which, if verified, will lead to dismissal of the instance. These are procedural matters of priority knowledge, in accordance with no. 1 of article 608 of the Civil Procedure Code (CPC), of subsidiary application to the tax arbitral process, ex vi article 29, no. 1, paragraph e), of the RJAT.

Let us see then.

3.1.1. Of the double inopportuneness of the claim

The first issue raised by the AT is the inopportuneness of the request for arbitral pronouncement, because as of the date of its entry at the CAAD, on February 26, 2016, the 90-day deadline referred to in article 10, no. 1, paragraph a), of the RJAT, had been exceeded regarding the deadline for voluntary payment of the Stamp Duty assessments for the year 2013 and the first installment for the year 2014.

As for the 2014 assessments, the AT argues that, in accordance with no. 4 of article 120 of the IMI Code, applicable ex vi article 3 of Law no. 55-A/2012, of October 29, to the deadline for payment of Stamp Duty assessments of Item 28 of the TGIS, failure to pay one installment of the tax within the established deadline implies the immediate maturity of the remaining installments. Thus, the first installment of each of the assessments for that year not having been paid by April 30, 2015, all the remaining installments of the tax would have matured on that date, which would determine the inopportuneness of the request for arbitral pronouncement.

Indeed, article 3 of Law no. 55-A/2012, of October 29, introduced amendments to various articles of the Stamp Duty Code, approved by Law no. 150/99, of September 11, among which its article 44, whose no. 5 provides:

"5 — If there is a place to assess the tax referred to in item no. 28 of the General Table, the tax is paid within the deadlines, terms and conditions defined in article 120 of the CIMI."

And, in turn, article 120 of the IMI Code, with the amendments introduced to it by article 215 of Law no. 66-B/2012, of December 31 (State budget for 2013), has the following wording:

"Article 120 - Payment deadline

1 - The tax must be paid:

a) In one installment, in the month of April, when its amount is equal to or less than € 250;

b) In two installments, in the months of April and November, when its amount is greater than € 250 and equal to or less than € 500;

c) In three installments, in the months of April, July and November, when its amount is greater than € 500.

2 - Whenever the assessment should take place outside the deadline referred to in no. 2 of article 113, the taxpayer is notified to proceed to the payment, which must take place by the end of the month following the month of notification.

3 - Whenever in the same year, for reasons attributable to the services, an assessment is made for two or more years and the total amount to be collected exceeds € 250, the tax relating to each of the years in default is paid at six-month intervals counted from the month following inclusive the month of notification referred to in the previous number, with the oldest tax being paid first.

4 - In the cases provided for in nos. 1 and 3, failure to pay an installment or an annuity, within the established deadline, implies the immediate maturity of the remainder.

5 - If the delay in assessment is attributable to the taxpayer, the latter is notified to proceed to the payment of the tax relating to all years in default."

As appears from the evidence above (2.9), some of the Stamp Duty assessments (item 28.1 of the TGIS) issued in the name of the Claimant for the year 2014, by reference to the divisions of independent use of the identified urban property, should be paid in two and others in three installments. And, the first installment of each of the mentioned assessments not having been paid by the end of the month of April 2015, the second and third installments would immediately mature.

However, such maturity proves ineffective relative to the Claimant, due to the fact that the AT notified it again, granting it a new deadline for payment (voluntary) of the remaining installments of those assessments.

Thus, having the deadline for voluntary payment of the second and/or third installments of the Stamp Duty assessments ending on November 30, 2015 and the request for arbitral pronouncement having been submitted before the expiration of the 90-day period from that date, the exception of its alleged inopportuneness cannot prevail.

As for the 2013 assessments, to be paid in a single installment, there is no doubt in the AT's mind regarding the inopportuneness of the claim, since, having been issued on 21.10.2015, with a payment deadline of 31.01.2015, the deadline for, in relation to them, requesting the constitution of the arbitral court, was long exceeded.

Now, according to the copies of the collection notes of the 2013 assessments, whose falsity the Respondent has not alleged, these were issued on 21.10.2014, with a payment deadline in January of the same year; however it is irrelevant for the purposes of the present case to consider the dates contained in the collection notes attached to the request to constitute the arbitral court or those indicated by the AT, as in both cases it is verified that the deadline for voluntary payment of the assessments for the year 2013 is prior to the date of their issuance.

As the assessment is an administrative act issued by the AT through which the quantitative amount of the tax to be paid is determined, it will be difficult to accept that the notification of the assessment contains a reference to a payment deadline prior to its own issuance. Especially since, if the validity of such notification were accepted, the right to effective judicial protection would be irremediably precluded, since on the date the assessments were issued (21.10.2014) the deadlines for claim or challenge had already elapsed (cf. articles 70 and 102 of the CPPT), whose initial term coincides with the end of the deadline for voluntary payment (31.01.2014).

This is not, therefore, merely a defect in the notification, which may be remedied in the absence of recourse by the taxpayer to the means provided for in no. 1 of article 37 of the CPPT, but rather a situation that can be characterized in the final segment of no. 12 of article 39 of the CPPT (12 - The notification act shall be null in the event of failure to indicate the author of the act and, in the event that the author performed it in the exercise of delegated or sub-delegated powers, the capacity in which the decision was made, its content and its date" – emphasis ours).

The nullity of the notification, of official knowledge (cf. no. 2 of article 162 of the current CPA), as an act necessarily subsequent to and external to the assessment act, does not affect its validity, but only its efficacy; the question that arises is whether an assessment that was not validly notified to the taxpayer, because the null notification produces no legal effects (article 162, no. 1, of the CPA), can be challenged and, if so, what is the initial term of the deadline for its challenge.

On this question, Counselor Jorge Lopes de Sousa writes that, "(…) the tax act subject to notification cannot be challenged by its addressees before its notification is made or its execution begins.

In fact, as can be seen from art. 59 of the CPTA [subsidiarily applicable, by virtue of the provisions of art. 2, paragraph c), of the CPPT] «the deadline for challenge by the addressees to whom the administrative act must be notified only runs from the date of notification, even if the act has been subject to mandatory publication» (no. 1) but does not «prevent the challenge, if the execution of the act is initiated without notification having taken place» (no. 2).

From this latter provision it can be inferred, a contrario, that, before notification, challenge is only admissible if execution is initiated (understood as any form of use of the act by the tax authority).

(…)

Being so, the petition for challenge presented before notification occurs or execution begins shall be rejected (…)"[1]

In the case of the present proceedings, although the tax acts in question (the Stamp Duty assessments for the year 2013) were not validly notified to the taxpayer as required by paragraph a) of no. 1 of article 102 of the CPPT, tax enforcement proceedings were instituted for their coercive collection.

And, regardless of the date on which the notification/citation of the Claimant occurred, in its capacity as the executed party, it is the same that admits not having accessed the electronic mailbox, an integral part of its tax address and to which notifications/citations issued by the AT are sent (cf. no. 10 of article 19 of the LGT, no. 9 of article 38, nos. 9 and 1 of article 39 and no. 1 of article 41 of the CPPT), only doing so after the postal notification sent by the Tax Service of ... ..., dated 04.11.2015, which it states to have received on 10.11.2015.

Thus, even if that latter date were considered as the starting term of the deadline for challenging the Stamp Duty assessments for the year 2013, it would nevertheless be necessary to conclude that the right to challenge would be barred, by inopportuneness, as regards them, of the request for arbitral pronouncement submitted on 26.02.2016, as the 90-day period from that date (10.11.2015), established by paragraph a) of no. 1 of article 10 of the RJAT, had already elapsed.

3.1.2. Of the incompetence of the arbitral court

With respect to the Stamp Duty assessments for the year 2014, the AT invokes the exception of incompetence of the arbitral court, holding that the Claimant is not challenging a tax act, but rather the payment of the second installment of Stamp Duty for the year 2014, "as the Claimant itself states in articles 29 and 30 of its Esteemed I.P.", which does not fall within the scope of the competence of Arbitral Courts, as provided for in article 2 of the RJAT.

Thus, the AT continues, "Not having the Claimant questioned the assessment of the tax when it was duly notified of the same (in fact the Claimant alleges ignorance of the various notifications of assessments for payment for the year 2013 and the 1st installment of 2014), it cannot later come, when it receives the 2nd collection note, and the deadline has passed and the competence of the arbitral court, come to question that assessment, which thus became final".

To which the Claimant counters that the Respondent incurs in manifest error of interpretation when it states that only one of the installments of the 2014 assessments is being challenged, when, in fact, it expressly petitions for the declaration of illegality of the tax assessment acts, as is evident from the arguments it invokes in the initial petition in that sense.

Let us then see the content of articles 29 and 30 of the initial petition:

"29.

Being certain that, the deadline for payment of Stamp Duty relating to the year 2013 and for payment of the 1st installment relating to Stamp Duty relating to the year 2014 had already been exceeded as of the date on which the Claimant became aware of the assessments." and,

"30.

In truth, when the Claimant accessed its mail Via CTT, it was only in time to proceed with the payment of the 2nd installment of Stamp Duty relating to the year 2014, whose deadline was set at the end of November 2015" (emphasis in the original).

Now, nothing in the transcribed text indicates the intention to challenge only one of the installments into which the Stamp Duty assessment for the year 2014 was subdivided, for the Claimant merely acknowledges that, on the date it accessed the electronic mailbox, the deadline for voluntary payment of the 1st installment of the assessments it seeks to challenge had already elapsed, but that it would still be in time to challenge the same assessments, since the end of the deadline for voluntary payment of the last installment of each of them had not yet been exceeded.

What is understood to be what the Respondent intends to state is that, not having the Claimant challenged the assessment within 90 days after the end of the deadline for voluntary payment of the 1st installment of the Stamp Duty assessments for the year 2014, it would no longer be in time to challenge the same assessments upon notification of the payment of the 2nd installment.

However, this issue ultimately comes down to the invoked exception of inopportuneness of the request for arbitral pronouncement analyzed in the preceding number and which was considered not to be verified, with respect to the 2014 assessments.

Similarly, the exception of incompetence of the arbitral court to know of the claim for declaration of illegality of the 2014 assessments is unfounded, as it clearly emerges from the initial petition that this is the Claimant's claim.

For the reasons set out above, considering it inopportune the request for annulment of the 2013 assessments, the process should proceed for examination of the legality of the Stamp Duty assessments (item 28.1 of the TGIS) relating to the year 2014.

3.2. The question to be decided: on the merits of the Stamp Duty assessments for the year 2014

Item 28.1 of the TGIS, in the wording given to it by Law no. 83-C/2013 of December 31 (State Budget for 2014), applicable to the 2014 assessments, establishes the subjection to Stamp Duty of ownership, usufruct or right of superficies of residential urban properties, whose taxable property value recorded in the register, in accordance with the IMI Code (CIMI), is equal to or greater than € 1,000,000.00.

The concepts of urban property and residential urban property are defined in the CIMI, of subsidiary application to matters relating to item 28 of the TGIS, by virtue of the referral made by no. 2 of article 67 of the Stamp Duty Code.

Property is, in the definition of article 2 of the CIMI, "any fraction of territory, including waters, plantations, buildings and constructions of any kind incorporated or based on it, of a permanent nature, provided that it is part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the previous circumstances, endowed with economic autonomy in relation to the land on which they are implanted, although located in a fraction of territory that constitutes an integral part of a different asset or does not have a patrimonial nature" (no. 1) and, furthermore, the autonomous fractions of properties constituted under the regime of horizontal property (no. 4).

Properties may be rural, urban or mixed, with urban properties being defined, in a comprehensive manner, by article 4 of the CIMI, as being all those that should not be classified as rural, without prejudice to what is provided regarding mixed properties.

There are, however, several types of urban properties, whose classification is contained in article 6 of the CIMI, whose no. 1 classifies them as a) residential, b) commercial, industrial or for services, c) land for construction and, d) others, with nos. 2, 3 and 4 of the same article delimit what should be understood by each of those designations.

Residential properties are, therefore, buildings or constructions licensed for housing or that, in the absence of a license, have housing as their normal destination (housing purposes).

The property of which the Claimant is superficiary is an urban property composed of three buildings or blocks that integrate fifty-six divisions of independent use, intended for housing and one division intended for "storage and storage", in whose evaluation the coefficient of allocation provided for in article 41 of the CIMI, of 0.35, was used.

The main issue brought to this Court by the Claimant is whether the subjection to Stamp Duty, under item no. 28 of the TGIS, of an urban property not constituted in horizontal property, is determined by the Taxable Property Value (VPT) that corresponds to each of the parts of the property, economically independent and with residential allocation, as it argues, or whether it is determined by the global VPT of the property, which would correspond to the sum of all VPT of the floors or divisions of independent use and with residential allocation that compose it, in accordance with the interpretation given by the AT to the said rule.

3.2.1. Of the taxable property value of urban properties in full ownership

The taxable property value of urban properties is determined by the rules contained in articles 38 and following of the CIMI, taking into account, in particular, the allocation coefficient.

As regards the determination of the taxable property value of properties not constituted in horizontal property, article 7, no. 2 of the IMI Code applies, but only as regards "urban properties with parts that can be classified in more than one of the classifications of no. 1 of the previous article", in which case, in accordance with its paragraph b) "(…) each part is evaluated by applying the corresponding rules, and the value of the property is the sum of the values of its parts".

And this is the only rule in the IMI Code in which reference is made to the "[global] value of the property", without, however, this having any relevance at the level of tax assessment.

From the combination of the rules of no. 2 of article 7 and no. 1 of article 6, both of the IMI Code, it follows that, if an urban property not constituted in horizontal property integrates, exclusively, parts or divisions of residential allocation, the value of the property does not equate to the sum of the VPT attributed individually to each of those parts or divisions.

All the more so, since, in accordance with no. 3 of article 12 of the CIMI, "Each floor or part of a property capable of independent use is considered separately in the matriculation registration, which also discriminates its respective taxable property value".

Which is equivalent to saying that each of those parts is autonomous and that, not having been attributed a VPT equal to or greater than € 1,000,000.00, will be excluded from the incidence of Stamp Duty – item 28.1 of the TGIS.

Thus, nothing would justify, therefore, the legislator intending to tax parts or divisions of independent use and residential allocation of an urban property in vertical or total property, also integrating parts or divisions intended for purposes other than housing, as these are substantially identical situations.

As this does not appear to be the legislative intention, it cannot be accepted that the AT formulates a rule of incidence ex novo, different from that created by the legislator, intending to tax parts of properties, even if economically and functionally independent and, as such, separately registered in the register, as the law is clear in subjecting to stamp duty of item 28.1 of the TGIS, urban properties of residential allocation, whose VPT, for the purposes of IMI, exceeds € 1,000,000.00.

What is understood to result from the ratio legis underlying the rule of item 28 of the TGIS, introduced by Law no. 55-A/2012 of October 29, is that the legislator intended to tax ownership, usufruct and right of superficies of residential units with VPT equal to or greater than € 1,000,000.00, an index of high contributive capacity.

Hence, when the bill that was the origin of Law no. 55-A/2012, of October 29, was presented and discussed in the Parliament, the Secretary of State for Tax Affairs expressly stated, as appears from the Parliamentary Assembly Records (DAR I Series no. 9/XII – 2, of October 11, p. 32) that «The Government proposes the creation of a special tax on residential urban properties of the highest value. It is the first time that in Portugal a special taxation on high-value properties intended for housing has been created. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses with a value equal to or greater than 1 million euros" (emphasis ours), from which it can be gathered that the reality to be taxed in mind is, after all, and notwithstanding the terminological imprecision of the law, "residential (urban) properties", in current language "houses", and not other realities" (cf. the Decision of the STA, Process no. 0498/16, of 29/06/2016, available at http://www.dgsi.pt/).

In light of the foregoing, it remains to conclude by adherence to the jurisprudence uniformly dictated by the STA on the matter, in the scope of the initial wording of item 28.1 of the TGIS (for which no reason for divergence is seen for the situations covered by the current wording), according to which "I - With respect to properties in vertical property, for the purposes of the incidence of Stamp Duty (Item 28.1 of the TGIS, in the wording of Law no. 55-A/2012, of October 29), the subjection is determined by the combination of two factors: residential allocation and the VPT recorded in the register equal to or greater than € 1,000,000.

II - In the case of a property constituted in vertical property, the incidence of Stamp Duty should be determined, not by the VPT resulting from the sum of the VPT of all divisions or floors capable of independent use (individualized in the matriculation article), but by the VPT attributed to each of those floors or divisions intended for housing." – cf. the summary of the recent Decision of the STA, Process no. 0498/16, of 29/06/2016, and further jurisprudence cited therein.

For the reasons set out above, having established the defect of violation of law, due to error in the application of the law, arising from the incorrect interpretation of the rules provided for in item no. 28.1 of the TGIS, it is necessary to conclude that the challenged assessments cannot be maintained in the legal order.

3.3. Questions of prejudiced knowledge

In the decision, the judge must pronounce on all the issues that must be heard, refraining from pronouncing on issues that must not be heard (final part of no. 1 of article 125 of the CPPT), and the issues on which the court's cognition powers fall are, in accordance with no. 2 of article 608 of the CPC, applicable subsidiarily to the tax arbitral process, by referral of article 29, no. 1, paragraph e), of the RJAT, "the issues that the parties have submitted to its hearing, except those whose decision is prejudiced by the solution given to others (…)".

In light of the solution given to the issue relating to the determination of the VPT relevant for application of the rule of incidence contained in item 28.1 of the TGIS, regarding the 2014 assessments, the hearing of the remaining issues is prejudiced, in particular those of the unconstitutionality of the said rule, as it is not capable of the interpretation that, in this case, was given by the AT.

4. DECISION

Based on the factual and legal grounds set out above and, in accordance with article 2 of the RJAT, it is decided:

4.1. Not to hear the claim for declaration of illegality and consequent annulment of Stamp Duty assessments for the year 2013, due to barring of the right to challenge;

4.2. To declare the illegality of Stamp Duty assessments for the year 2014, due to error in legal assumptions, determining their annulment.

VALUE OF THE CASE: In accordance with the provisions of article 306, nos. 1 and 2, of the CPC, 97-A, no. 1, paragraph a), of the CPPT and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is set at € 45,245.00 (forty-five thousand two hundred and forty-five euros).

COSTS: Calculated in accordance with article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached thereto, in the amount of € 2,142.00 (two thousand one hundred and forty-two euros), to be borne equally by the Tax and Customs Authority and the Claimant, in proportion to their respective default.

Lisbon, July 29, 2016

The Arbitrator,

/Mariana Vargas/

Text prepared by computer, in accordance with no. 5 of article 131 of the CPC, applicable by referral of paragraph e) of no. 1 of article 29 of Decree-Law 10/2011, of January 20.

The wording of this decision is governed by the 1990 spelling agreement.

[1] See the Author cited in "Code of Tax Procedure and Process", Annotated and Commented, vol. II, 6th Edition, Áreas Editora, 2011, p. 146.

Frequently Asked Questions

Automatically Created

What is the scope of Verba 28.1 of the TGIS for Stamp Tax on residential properties held under surface rights?
Item 28.1 of the TGIS imposes a 1% annual Stamp Tax on ownership, usufruct, or surface rights (direito de superfície) over residential urban properties with a taxable property value (VPT) registered for IMI purposes of €1,000,000 or more. The critical interpretive question is whether 'property' means each independent housing unit or the aggregate of all units when multiple dwellings exist on a single plot. Article 67(2) of the Stamp Duty Code mandates subsidiary application of CIMI rules for matters relating to Item 28.1, which under Article 12 of the CIMI treats each fraction capable of independent use as a separate property unit for registration and assessment purposes. The legislative intent behind Item 28.1 was to target luxury residential properties, not to aggregate affordable housing units to artificially meet the €1,000,000 threshold.
Can the right of action (caducidade) expire when a taxpayer is not properly notified of Stamp Tax assessments?
Yes, the right of action (direito de ação) can expire through caducidade when proper notification procedures are not followed. Under Portuguese tax law, notification is a constitutive requirement for tax assessments to become effective and for procedural deadlines to commence. If a taxpayer only becomes aware of assessments through enforcement proceedings rather than proper notification (whether by mail or electronic mailbox), the validity of the assessment itself may be challenged. Article 19 of the General Tax Law establishes notification requirements, and defective notification can result in procedural invalidity. In this case, the claimant discovered assessments for 2013 and 2014 only in November 2015 through enforcement notices, suggesting potential notification defects that could affect caducidade deadlines. The taxpayer argued they had an electronic mailbox but only accessed it after postal notification of enforcement, indicating possible issues with the effectiveness of electronic notifications.
Does the CAAD Arbitral Tribunal have competence to rule on Stamp Tax disputes under Verba 28.1 of the TGIS?
The CAAD (Centro de Arbitragem Administrativa) has jurisdiction over Stamp Tax disputes under Item 28.1 of the TGIS pursuant to Article 2(1)(a) and Article 10 of Decree-Law 10/2011 (RJAT - Legal Framework for Tax Arbitration). The RJAT grants arbitral tribunals competence to resolve disputes concerning the legality of tax acts, including assessments (liquidações) of Stamp Tax. There is no exclusion of Item 28.1 disputes from arbitral jurisdiction. The claimant specifically invoked Article 10(1)(a) of the RJAT, which allows taxpayers to request arbitration for the declaration of illegality and annulment of tax acts. The competence extends to reviewing whether the Tax Authority correctly interpreted and applied Item 28.1, including questions of legal interpretation regarding what constitutes a 'property' for purposes of the €1,000,000 threshold and whether aggregation of multiple independent units is legally permissible.
How are individual housing units in a multi-unit building assessed for Stamp Tax under Verba 28.1 when held by a non-profit entity?
Individual housing units in a multi-unit building should be assessed separately for Stamp Tax under Item 28.1 when each unit constitutes an autonomous fraction with independent use, consistent with CIMI principles. Article 67(2) of the Stamp Duty Code explicitly provides that matters not regulated in the Stamp Duty Code relating to Item 28 are governed subsidiarily by CIMI provisions. Under Article 4 and Article 12 of the CIMI, each fraction capable of independent use constitutes a separate property unit for registration, evaluation, and taxation purposes. When a non-profit entity holds surface rights over multiple units that were individually evaluated and registered (as occurred here with 56 separate IMI assessments), each unit's VPT should be considered independently. The fact that the entity is non-profit and built affordable housing with public financing supports the interpretation that Item 28.1's €1,000,000 threshold applies per unit, not to aggregated values, since the legislative purpose was targeting luxury properties, not social housing programs.
What procedural remedies are available when Stamp Tax liquidations are discovered only through enforcement proceedings?
When Stamp Tax assessments are discovered only through enforcement proceedings, several procedural remedies are available: (1) Challenge the validity of the underlying assessment based on defective notification, arguing that proper notification is a constitutive requirement and its absence renders the assessment invalid or prevents caducidade from running; (2) File a hierarchical appeal (reclamação graciosa) if within the applicable time limits, though notification defects may extend these deadlines; (3) Request tax arbitration under Article 10 of the RJAT to declare the illegality and obtain annulment of the assessments, as occurred in this case; (4) Challenge the enforcement proceedings themselves (oposição à execução fiscal) on grounds including defective notification of the underlying assessment; (5) Request suspension of enforcement proceedings pending resolution of the substantive challenge by providing a bank guarantee or demonstrating that collection would cause irreparable harm; (6) Seek reimbursement of amounts paid under protest, including interest and compensation for costs incurred (such as bank guarantees). The discovery of assessments through enforcement rather than proper notification raises serious procedural irregularities that may invalidate the entire collection process.