Process: 116/2016-T

Date: July 14, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision (Process 116/2016-T) addresses the application of Stamp Tax under item 28.1 of the General Table (TGIS) to building land classified as terreno para construção. The claimant challenged a €13,339.90 Stamp Tax assessment for 2014 on urban property registered as land for construction, arguing the tax was illegally levied because the property was designated for agricultural facilities under a 1988 subdivision permit, not residential use. The core legal issue concerns whether item 28.1 TGIS, which imposes a 1% rate on properties with residential use, applies to undeveloped building land intended for non-residential purposes. The claimant contended that the Tax Authority lacked legal basis for the assessment, as the property's urban planning designation specified agricultural exploitation rather than residential development. The claimant also challenged the Tax Authority's position that administrative classification at revaluation determines taxability, arguing this interpretation contradicts the actual permitted use. Additional issues included: (1) jurisdiction of the CAAD Arbitral Tribunal to hear the dispute; (2) whether the right of action had lapsed (caducidade); and (3) entitlement to compensation for costs including €372.11 for mortgage constitution and €700.00 in attorney's fees. The case illustrates the tension between administrative property classifications and actual permitted uses under urban planning law. The tribunal deferred ruling on preliminary exceptions to the final decision, applying principles of procedural celerity. The arbitral proceedings were initiated on February 29, 2016, following dismissal of a gracious complaint on November 25, 2015. The dispute raises fundamental questions about the scope of Stamp Tax on urban property, the interpretation of 'residential use' for tax purposes, and the Tax Authority's burden to justify property classifications that determine tax liability.

Full Decision

ARBITRAL DECISION

I. Report

A… - …, S.A., a company with registered office at …, …, …-… …, registered at the Commercial Registry Office under the single registration number and legal entity number … (hereinafter, the "Claimant"), requested the Administrative Arbitration Center (CAAD), on 29 February 2016, the constitution of an arbitral tribunal in tax matters, pursuant to the provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Tax Arbitration, hereinafter designated as "LRTA"), in which the Tax and Customs Authority (TA) is the Respondent, with a view to the declaration of illegality and consequent annulment of the assessment act for Stamp Tax ("ST") for the year 2014, in the amount of €13,339.90 (thirteen thousand three hundred and thirty-nine euros and ninety cents) issued with reference to the urban property land for construction registered in the property register of the Union of Parishes of … and …, municipality of ..., under article …, to which correspond documents No. 2015 …, of 20.03.2015, in the amount of €4,446.64 (four thousand four hundred and forty-six euros and sixty-four cents), 2015 …, of 20.03.2015, in the same amount, and 2015 …, of 20.03.2015, in the amount of €4,446.63 (four thousand four hundred and forty-six euros and sixty-three cents).

The Claimant opted not to appoint an arbitrator.

The request for constitution of an arbitral tribunal was accepted by the President of CAAD on 2 March 2016 and automatically notified to the TA on the same date.

The undersigned was designated by the President of the Deontological Council of CAAD as arbitrator of a single arbitral tribunal, pursuant to Article 6 of the LRTA, and communicated acceptance of the appointment within the legal time limit, in accordance with Article 4 of the CAAD Deontological Code.

The Parties were notified of the designation of the undersigned on 27 April 2016, pursuant to Article 11 No. 1 subparagraphs a) and b) of the LRTA, and made no objection thereto.

The single arbitral tribunal was thus regularly constituted on 12 May 2016, in accordance with the provision of subparagraph c) of No. 1 of Article 11 of the LRTA.

The TA was notified of the arbitral order of 12 May 2016, to present its response within 30 (thirty) days.

The TA presented its response on 14 June 2016.

By arbitral order of 21 June 2016, the Arbitral Tribunal considered, pursuant to the provision of Article 16, subparagraphs c) and e) of the LRTA, unnecessary the meeting provided for in Article 18 of the LRTA. It further considered that the case was ready for decision, deferring to final decision the exceptions raised by the Respondent, pursuant to the principles of procedural celerity and the tribunal's autonomy in conducting the proceedings.

The Parties possess legal personality and capacity and are legitimate (Articles 4 and 10, No. 2 of the LRTA and Article 1 of Ordinance No. 112-A/2011, of 22 March).

The proceedings do not suffer from defects that would invalidate them.

II. Claimant's Request

The Claimant presented a request for arbitral pronouncement with a view to the declaration of illegality and consequent annulment of the assessment act for ST for the year 2014 and compensation for the costs incurred in the proceedings, following dismissal of a gracious complaint.

The Claimant presented this request based on the following grounds, briefly indicated:

  1. The ST assessment refers to the urban property land for construction located at …, in …, called lot …, with the subdivision permit No. …/88, issued on 8 November 1988 by the Municipal Council of …, described in the 1st Property Registry Office of … under file No. … and registered in the property register of the parish of … under articles …, …, … and ….

  2. The tax property value assigned to the property registered under article … (currently … of the Union of Parishes of … and … and the one that gives rise to the assessment) was €1,333,990.00.

  3. Article … constitutes the non-built portion of lot … of the subdivision permit indicated, intended for construction of agricultural facilities - that is, the property in question is intended for agricultural exploitation.

  4. However, the TA proceeded to assess ST for the year 2014, based on the tax property value of the property.

  5. Such assessment is illegal due to absence of normative basis.

  6. Pursuant to Article 1 No. 1 of the Stamp Tax Code ("STC"), ST applies, inter alia, to the facts or legal situations provided for in the respective General Table ("TGIS"), namely that contained in item 28 thereof.

  7. For purposes of the STC, the concept of property is defined in the Municipal Property Tax Code ("MPTC") (Article 2), with various types of urban properties existing (Article 6).

  8. The 1% rate contained in item 28.1 of the TGIS applies to the property value of property with residential use.

  9. As is evident, the property in question does not have such use, as results from the subdivision permit, being, at most, land intended for construction of buildings for "other purposes".

  10. Therefore, there is no legal basis for the assessment of the tax.

  11. Lot … is intended for agricultural exploitation, as results from the subdivision permit.

  12. The interpretation of the concept of residential use cannot have such a broad meaning, on one hand, nor can it support the TA's thesis, conveyed in the dismissal of complaints and hierarchical appeals of assessments for 2012 and 2013 (and likewise in the dismissal of the complaint now impugned) that, having been assigned by the TA, at the time of the property's revaluation, the residential use, and having made no complaint thereto, that is the purpose that counts for taxation purposes.

  13. It is incumbent on the TA to demonstrate the grounds on which it assigned the property to residential use.

  14. And it should, pursuant to the principle of material truth, among others, rectify any possible erroneous situation.

  15. Once the non-assignment, in urban planning terms, of the land lot to residential use is demonstrated, by force of the provision of the subdivision permit, there is no reason not to immediately revoke the tax assessment object of complaint.

  16. For being manifestly illegal the assessment notified to the Claimant, the latter filed, on 27 July 2015, a gracious complaint.

  17. To guarantee the amounts required, it constituted a mortgage on property of its ownership.

  18. On 25 November 2015, the TA dismissed the Claimant's claim, of which the latter was notified on 30 November 2015.

  19. Being, consequently, the present request timely.

  20. The Claimant should be compensated for the costs incurred in the entire proceedings, which it estimates at €1,702.11, corresponding to the cost of constituting a mortgage (€372.11) and attorney's fees (€700.00), plus interest charges until full payment, so as to restore the situation that would exist if the illegality described had not been committed, in the total amount of €14,412.01.

III. Respondent's Response

The Respondent presented its Response, based on the following grounds:

By way of exception:

A. Lapse of right of action

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  21. The Claimant presents as the tax act object of the request the "Stamp Tax assessment for 2014, carried out on 20 Mar 2015, in the amount of 13,339.90€, issued by the Tax and Customs Authority pursuant to item 28.1 of the General Table of the Stamp Tax Code ("TGIS") with reference to urban property, corresponding to land for construction registered in the property register of the Union of Parishes of … and …, municipality of ..., district of Lisbon under the registration article … (extinct article … of the parish of …).

  22. The Claimant does so when explicitly referring to it, under the heading "III – IDENTIFICATION OF THE ACT AND REQUEST".

  23. The request itself formulated acknowledges and is absolutely consistent with that evidence.

  24. It happens that the legally defined period for challenging this tax assessment act has been exceeded.

  25. Article 10 of the LRTA establishes, regarding assessment/self-assessment acts, that the period to present the request for arbitral pronouncement is 90 (ninety) days, referring, as to the moment of commencement of counting, to what is prescribed in No.s 1 and 2 of Article 102, Nos. 1 and 2 of the Tax Procedure and Process Code (TPPC).

  26. The stipulated period of 90 days would have its starting point on the day following the end of the voluntary payment period for the tax obligation.

  27. Having regard to the provision in No. 2 of Article 85 of the TPPC, the deadline for payment of the tax in question occurred on 30.04.2015, the 90-day period for filing an appeal having long since elapsed.

  28. Therefore, the request is untimely and the tribunal cannot consider it.

  29. The timeliness of the request could only be based on the existence of some means of gracious challenge of the assessment act where a decision had been issued denying/dismissing, wholly or partially, the claims therein formulated by the taxpayer (which would constitute a second-degree act). This occurred in the case at hand.

  30. It happens that, notwithstanding having made allusion and identified these circumstances, the Claimant did not formulate/specify to the Tribunal any request aimed at the annulment of what was decided in that regard.

  31. Not having done so, there is no support that could establish the timeliness of the request and, consequently, the possibility of the Tribunal considering the request formulated regarding the assessment act, a fact supported by arbitral case law which it cites.

  32. Now, considering that a judge cannot condemn in something that has not been requested (Article 609 No. 1 of the Code of Civil Procedure), in the concrete case of the proceedings, the Tribunal, in the decision it will issue, cannot condemn in something that has not been requested.

  33. In sum, resulting, clearly and unequivocally from the learned initial application, the direct challenge of the ST assessment act, the request formulated (conducive to the declaration of illegality of the act and, consequently to its annulment) should be declared inadmissible, for being untimely, and, consequently, the Respondent Entity should be absolved of the instance – cf. subparagraph e), of No. 1, of Article 278 of the currently applicable Code of Civil Procedure, applicable ex vi Article 29, No. 1, subparagraph e) of Decree-Law No. 10/2011, of 20 January.

B. Material incompetence of the arbitral tribunal

  1. The Claimant seeks that in light of the assessment the valuation of the property in question be reviewed by the tribunal, which constitutes the fact subject to the tax assessment in question, a matter that is not capable of being discussed in arbitral proceedings, as better explained above in the reproduction of the Respondent's response.

  2. Now, the nature of a property is not capable of being discussed in arbitral proceedings; there are procedures specifically for that, and the nature of the property is fixed documentally in the case file.

  3. On the other hand, the facts about which the Claimant now seeks to question, without having done so in a timely manner and in the appropriate forum, allowing all the periods available to it to lapse, are settled in the legal order.

  4. It is not consistent with the LRTA, nor with any tax procedural norms, that the Claimant proposes and attempts to challenge that which is contained in official documents and whose reaction periods have all lapsed.

  5. And even if the fact in question were susceptible to review in CAAD, the same would have to, pursuant to No. 7 of Article 134 of the TPPC, have exhausted all the gracious means provided for in the valuation procedure, which has not occurred.

  6. It appears from the documentary evidence in the case file that at no time did the Claimant timely question the valuation (duly notified) of the property in question and the nature conferred upon it in that valuation, and therefore any attempt by the Claimant to, through this means, uselessly, to review any valuation should be prevented.

  7. In fact, the property certificate – which is part of the documentary evidence in the case file – contains the results of the valuation, which was not challenged through the respective means of reaction available to the now Claimant, namely: a) request for 2nd valuation (cf. Article 76 of the MPTC), b) its challenge (cf. Article 77 of the MPTC), or c) complaint of the register (cf. Article 130 of the MPTC), or even d) challenge of the acts fixing the tax property values (cf. Article 134 of the TPPC), and therefore became consolidated in the tax legal order.

  8. And if the property certificate delivered by the Claimant is disregarded, the Tribunal overlooks and made a clean slate of the references in that certificate to the Form. 1 declaration and the corresponding valuation form which determined that the property be assigned a TPV equal to or greater than €1,000,000 and that the same property be described and registered as land for construction with residential use.

  9. Any potential decision that expunges these elements that were never challenged would have the effect of eliminating from the legal order the valuations made by the TA that were never challenged by the taxpayer, and in doing so, clearly exceed the material competence of this Tribunal.

  10. We are dealing with an administrative act in tax matters which, by not assessing or discussing the legality of the assessment act, cannot be subject to judicial challenge, pursuant to the provision in subparagraph a) of No. 1 of Article 97 of the TPPC.

  11. The arbitral tax process is established by reference and with an object entirely similar to the process of judicial challenge, in relation to which "it should constitute an alternative procedural means".

  12. So that there is identity of the fields of application of the judicial challenge process and the arbitral process, which means that the possibility of using the arbitral process is excluded when, in the judicial tax process, judicial challenge is not usable.

  13. The review of the act in question is outside the competence of the Arbitral Tribunal.

  14. By the foregoing, there is, in the concrete case, a dilatory exception which translates to material incompetence of the arbitral tribunal, which prejudices consideration of the merits of the case and should determine the absolution of the Respondent Entity from the instance, having regard to the provision in Articles 576, No. 1 and 577, subparagraph a) of the CPC, applicable ex vi Article 29, No. 1, subparagraph e) of the LRTA.

By way of substantive defense:

  1. The Claimant considers that the concept of land for construction contained in the registration documents, valuation documents and Form 1 of the Property Tax do not integrate the concept of property for residential purposes under No. 1 of Article 1 of the STC and item 28.1.

  2. The Claimant alleges that the property does not possess, nor could possess, an occupation license for residential use, the TA's understanding being erroneous.

  3. However, the assignment of the land was stipulated at the time of the property's revaluation and the Claimant never complained about it, and therefore it is that assignment that counts for purposes of subsumption to the norm of item 28.1.

  4. There is therefore no basis whatsoever for the alleged illegality that the Claimant seeks to attribute to the assessment.

  5. The assessments at issue constitute a correct interpretation and application of the law to the facts, suffering no defect of violation of law.

  6. There being no error attributable to the services (Article 43 of the General Tax Law), there can be no condemnation of the TA in payment of interest charges.

  7. As for compensation of costs, these are merely estimated, without factual or documentary support.

  8. As for attorney's fees, for example, payment thereof is not demonstrated, as was required.

  9. Furthermore, condemnation of the TA in payment of compensation for attorney's fees does not constitute a matter within the competence of arbitral tribunals, insofar as it is not listed in Article 2 of the LRTA, according to the ruling of the Central Administrative Court of the South of 12.6.2014 in the context of case 6224/12.

  10. The same applies to the costs of constituting a mortgage, as follows from the arbitral decision issued in case No. 48/2013-T, cited by the Respondent.

  11. So that the exception of lapse of right of action should proceed, or, if not so understood, the tribunal should refrain from knowing and pronouncing on the valuation already settled in the legal order, with the request for declaration of illegality and annulment of the disputed assessment to be considered inadmissible, and the request for compensation of costs to be dismissed.

IV. Questions to be Decided

Considering the facts and legal matters contained in the request for arbitral pronouncement presented by the Claimant and the response of the Respondent, the disputed question to be decided by the Arbitral Tribunal is whether the ST assessment at issue was or was not correctly issued in light of the assignment of the property owned by the Claimant.

Before, however, such assessment, and by force of the provision in Article 29 No. 1 subparagraphs a) and e) of the LRTA, Article 13 of the Code of Procedure in Administrative Courts (CPAC) and Article 608 No. 1 of the CPC, the Arbitral Tribunal will consider the exceptions raised by the TA:

  1. To consider whether there is eventual lapse of the Claimant's right of action, in light of the request contained in the application for constitution of arbitral tribunal;

  2. To consider whether there is eventual incompetence of the Arbitral Tribunal for the matter in question, if it translates to the definition of the nature of the property in question.

V. Matters of Fact

With relevance for assessment of the Claimant's request, the following facts are taken as proven, based on documents attached to the case:

  1. The Claimant is the owner of the urban property located at …, lot …, …, registered in the property register under article … of the Union of Parishes of … and …, former article … of the extinct parish of ….

  2. The property is registered in the property register as land for construction.

  3. The tax property value of the property is €1,333,990.00.

  4. For the property and others, subdivision permit No. …/… was issued by the Municipal Council of … on 08.11.1988.

  5. According to such permit, lot … (of which the property in question is a part) has an area of 59,390 m² and is intended for agricultural exploitation.

  6. The property in question was the subject of valuation, by force of the general valuation, on 11.03.2013, in which the residential assignment and respective tax property value are established.

  7. The valuation indicated was not challenged by the Claimant.

  8. The Claimant was notified of the ST assessment act, item 28.1, for the year 2014, in the amount of €13,339.90 (thirteen thousand three hundred and thirty-nine euros and ninety cents), to which correspond documents No. 2015 …, of 20.03.2015, in the amount of €4,446.64 (four thousand four hundred and forty-six euros and sixty-four cents), 2015 …, of 20.03.2015, in the same amount, and 2015 …, of 20.03.2015, in the amount of €4,446.63 (four thousand four hundred and forty-six euros and sixty-three cents).

  9. The Claimant filed a gracious complaint of that assessment act on 27.07.2015.

  10. The gracious complaint was dismissed, by order notified to the Claimant on 30 November 2015.

  11. The Claimant did not proceed to pay the assessed tax.

  12. To suspend the coercive collection process for the tax (as well as other taxes not subject to this case), the Claimant constituted a mortgage in favor of the TA.

The conviction regarding the facts taken as proven was based on the documentary evidence attached and not challenged by the Parties.

There are no other facts with relevance for the proceedings that are not considered proven.

VI. Matters of Law

As results from the matters of fact, assessments for ST are in question for the year 2014, referring to item 28.1 of the TGIS, which was applied to the tax property value of the property owned by the Claimant.

The TA considered, for purposes of applying that item 28.1 of the TGIS, the residential assignment of the land lot for construction contained in the urban property certificate of the property.

The Claimant considers that the TA could not have validly issued that ST assessment, insofar as the property does not, in fact, have residential assignment, challenging its legality.

It is therefore important to understand whether the TA acted with error in the prerequisites for applying, to the case, item 28.1 of the TGIS.

Without prejudice, and before entering the matter indicated, it appears necessary, by force of the provision in Article 29 No. 1 subparagraphs a) and e) of the LRTA, Article 13 of the Code of Procedure in Administrative Courts (CPAC) and Article 608 No. 1 of the CPC, to consider the exceptions raised by the Respondent which the Arbitral Tribunal deferred to final decision.

A. Exception of lapse of right of action

It is uncontestable what the Respondent alleges regarding the period to challenge a tax act. In fact, Article 10 of the LRTA establishes, regarding assessment/self-assessment acts, that the period to present the request for arbitral pronouncement is 90 (ninety) days, referring, as to the moment of commencement of counting, to what is prescribed in No.s 1 and 2 of Article 102, Nos. 1 and 2 of the Tax Procedure and Process Code (TPPC). The 90-day period would have its starting point on the day following the end of the voluntary payment period for the tax obligation. Having regard to the provision in No. 2 of Article 85 of the TPPC, the deadline for payment of the tax in question occurred on 30.04.2015.

Consequently, if it is considered that the request that defines the present proceedings refers to the first-degree act (the assessment), as the Respondent claims, and not to the dismissal of the gracious complaint (a second-degree act), then there is no doubt that the period of action has lapsed.

However, given that the scope of the tribunal's powers of cognition is bound by the request, the fact is that the tribunal is also able to understand and interpret such request by force of what is alleged by the Claimant.

For what was referred to above, there is no doubt that the Arbitral Tribunal would have to consider, in this situation, and as the immediate object of the proceedings, the act of dismissal of the gracious complaint presented and not the assessment act itself. Of course, in any case, the consideration of the immediate object will have as a direct consequence the consideration of its respective mediate object.

Now, following the learned doctrine and case law cited by the Respondent, the Claimant's request must be clarified. And for this Arbitral Tribunal, having regard to the principle of salvage of acts, on one hand, to the interpretation that must be made of the parties' will, in accordance with the standard of a prudent person, on the other, as well as to the express indications of the Claimant:

"(...) this request is timely insofar as the Claimant was notified on 30NOV2015 of the dismissal of the Complaint filed by it in a timely manner".

"The Claimant seeks that the illegality of the assessment act (...) whose gracious complaint was subject to dismissal, as shown by notification on 30NOV15 - Annex II, be declared"

"Nor does the thesis of the Tax Authority hold, namely for purposes of dismissal of complaints and hierarchical appeals regarding stamp tax assessments for the years 2012 and 2013 (and of this same complaint now being challenged)" (underlined by us)

"On 25NOV15, notwithstanding the arguments and evidence presented by the Claimant, the Tax Administration wrongly and illegally decided to dismiss the Claimant's claim (Annex II), which the Claimant cannot accept"

It does not appear reasonable to accept the Respondent's allegations on this matter. The Claimant, although in a deficient manner, it is acknowledged, clearly presents this request as a consequence of the dismissal of the gracious complaint, within the legal period granted for this purpose, making reference to this fact several times throughout the request, assessing (although sparsely) the grounds of such dismissal act.

In these terms, the Claimant brought to the Arbitral Tribunal the necessary elements for assessment of the immediate object (the dismissal of the gracious complaint) and, consequently, of the mediate object (the assessment act).

By the foregoing, the Arbitral Tribunal decides to consider the exception of untimeliness raised by the Respondent inadmissible.

B. Exception of incompetence of the Arbitral Tribunal

According to the Respondent, with this request, the Claimant seeks that the Arbitral Tribunal consider the valuation of the property in question and which constitutes the tax fact that is subsumed to the assessment in question, a matter that is not capable of being discussed in arbitral proceedings, as better explained above in the reproduction of the Respondent's response.

Assessing: the Claimant "seeks that the illegality of the assessment act be declared", insofar as "it happens that such assessment is illegal, due to the absence of a normative basis".

Without further ado, and saving better judgment, the Claimant does not request that the Arbitral Tribunal consider the property in question as to its respective assignment: rather, it seeks that the Arbitral Tribunal pronounce on the existence (or not) of normative basis for the issuance of the assessment in question. And according to Article 2 No. 1 subparagraph a) of the LRTA, the competence of arbitral tribunals comprises consideration of the claim for declaration of illegality of tax assessment acts (in this case, consisting of consideration of a second-degree act, as previously referred to).

This will be the crux of the decision to be taken. Which already allows the conclusion that the exception of incompetence raised by the Respondent is not well-founded.

C. Disputed question

The Claimant holds that the property owned by it cannot fall within the normative provision of item 28.1 of the TGIS, insofar as it is not land for construction whose authorized or planned construction is for residential purposes.

Having examined the documents attached to the case file and the facts taken as proven:

a. According to the urban property certificate, the property is land for construction, with residential assignment;

b. The subdivision permit determines that the property is land intended for agricultural exploitation.

For assessment of the question in issue, it is first important to analyze the wording of items 28 and 28.1 of the TGIS:

"28. Ownership, usufruct or right of superficies of urban properties whose tax property value contained in the register, pursuant to the Municipal Property Tax Code (MPTC), is equal to or greater than (euro) 1,000,000 - on the tax property value used for purposes of the Property Tax:

28.1 For property with residential assignment or for land for construction whose authorized or planned construction is for residential purposes, pursuant to the provision of the Municipal Property Tax Code – 1%"

For application of the norm to the property, there must be three cumulative requirements (in addition to ownership):

(i) the tax property value contained in the register, pursuant to the MPTC, is equal to or greater than €1,000,000.00;

(ii) it is a matter of land for construction; and

(iii) the authorized or planned construction thereupon is for residential purposes, pursuant to the MPTC.

As to the first requirement: the Claimant does not contest (nor has contested), at any time, the tax property value of the property. Therefore, the requirement is satisfied: the property has a tax property value of more than €1,000,000.00.

As to the second requirement, the Claimant does not contest the qualification of the property as land for construction, nor its fit within the definition contained in Article 6 No. 3 of the MPTC: "Land for construction shall be considered as land situated within or outside an urban area, for which a license or authorization has been granted, advance notification admitted or favorable prior information issued for a subdivision or construction operation". It is thus satisfied.

There remains to analyze the third requirement: that the construction, authorized or planned, is for residential purposes, pursuant to the provision of the Municipal Property Tax Code.

The wording of item 28.1 of the TGIS now under consideration, as given by Article 194 of Law No. 83-C/2013, of 31 December, innovatively broadened the scope of the objective incidence of the norm, by explicitly including land for construction for which construction for residential purposes has been authorized or planned.

What the Claimant contests is the issuance of the stamp tax assessment on its property which, according to it, cannot have residential assignment, because it results from the subdivision permit, even if such is the indication contained in the property certificate (set as a consequence of the property's respective valuation).

Now, and without it being necessary to enter into the discussion of what constitutes the "authorization or planning of construction for residential purposes", whether in urban planning or tax terms (cf. arbitral ruling issued in case 467/2015-T), there is no doubt in this concrete case: even if it were considered that the subdivision permit allows conferring upon the property the planning of it having construction built thereupon, a question into whose analysis we do not enter in the present case, as it is unnecessary, the fact is that, in the case, the subdivision permit (whose tenor, it is reiterated, was not contested by the Respondent) is clear: the intended purpose (if it be considered planned) of the land is agricultural exploitation - not residential use.

Given that this fact is evident, then the third requirement contained in the norm of tax incidence is not satisfied. The land does not have construction, authorized or planned, assigned to residential use.

Consequently, the Claimant is correct when it alleges that the factual and legal prerequisites for the assessment in question are not satisfied, and the property owned by it cannot be subsumed into the norm contained in item 28.1 of the TGIS. There is, therefore, error attributable to the services in the issuance of the tax assessment.

The foregoing does not conflict with the allegation of the TA, in raising an exception, that the tax property value of the property was already fixed previously. In fact, the Claimant does not even argue against the tax property value of the property defined as a result of its valuation. The residential assignment contained in that valuation is one of the elements that would have contributed to the tax property value found - and from that value, as the Respondent rightly notes, the Claimant could have complained, pursuant to the terms that the MPTC provides for this purpose. But it did not. And it does not in the present proceedings either. On this point, it should be noted that the complaint regarding the valuation will always refer to the result thereof, a result which translates into the tax property value (Articles 14, 45 and 76 of the MPTC).

D. Interest charges:

According to Article 43 of the General Tax Law, interest charges are due when it is determined, in a gracious complaint or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount higher than what is legally due.

In the case, the Claimant did not proceed to pay the tax debt assessed. Consequently, it was not deprived of the financial availability of the amount assessed, a deprivation which the General Tax Law aims to compensate. For this reason, even though error attributable to the services was determined, the same did not result in the actual payment by the Claimant of any tax debt.

The requirements defined in Article 43 of the General Tax Law are therefore not satisfied, and the Claimant has no right to interest charges.

E. Other costs

As to the other costs requested by the Claimant (attorney's fees and expenses inherent to the constitution of a mortgage for suspension of coercive collection of the tax debt object of the present case), the Tribunal can only agree with what the TA alleges in its response.

Following the ruling issued by the Central Administrative Court of the South on 2014-06-12 in the context of case No. 6224/12, pursuant to Article 2 of the LRTA, which defines the scope of its competence, "tax arbitral tribunals are assigned competence to declare the illegality of tax assessment acts, self-assessment acts, withholding at source acts and acts of payment on account (subparagraph a) of that article), and to declare the illegality of acts establishing the taxable matter when it does not give rise to the assessment of any tax, acts of determination of the taxable basis and acts fixing tax property values (subparagraph b) thereof). And even regarding the challenge of acts carried out within the scope of tax procedures, the competence of these arbitral tribunals "is restricted to activity connected with tax assessment acts".

Consequently, it is not within the availability/competence of the arbitral tribunal to condemn in the payment/compensation of attorney's fees paid for the proceedings, and therefore the Claimant's request is not admitted.

The same will apply to the request for compensation of costs of constituting a mortgage. As stated in the arbitral decision issued in case No. 48/2013-T, which is followed:

"Regarding the request for condemnation in payment of indemnification for the providing of an unwarranted guarantee, Article 171 of the TPPC establishes that "indemnification in case of an unwarranted guarantee being provided shall be requested in the proceedings in which the legality of the executable debt is contested" and that "the indemnification must be requested in the complaint, challenge or appeal or, in case its basis is subsequent, within 30 days after its occurrence".

Thus it is unequivocal that the judicial challenge process encompasses the possibility of condemnation in payment of an unwarranted guarantee and is even the appropriate procedural means for formulating such request, which is justified by clear reasons of procedural economy, since the right to indemnification for an unwarranted guarantee depends on what is decided about the legality or illegality of the assessment act.

The request for constitution of the arbitral tribunal has as a corollary that it will be in the arbitral proceedings that the legality of the executable debt will be discussed, and therefore, as results from the express tenor of that No. 1 of the aforesaid Article 171 of the TPPC, it is also the arbitral process that is appropriate for considering the request for indemnification for an unwarranted guarantee.

Furthermore, the cumulation of requests regarding the same tax act is implicitly presupposed in Article 3 of the LRTA, when speaking of "cumulation of requests even if related to different acts", which makes it clear that the cumulation of requests is also possible regarding the same tax act, and requests for indemnification for compensatory interest and for condemnation for an unwarranted guarantee are capable of being encompassed by that formula, and therefore an interpretation in this sense has, at least, the minimum of verbal correspondence required by No. 2 of Article 9 of the Civil Code.

The regime for the right to indemnification for an unwarranted guarantee is contained in Article 53 of the General Tax Law, which establishes the following: (...)

From this legal provision results, for what is relevant here, that the right to indemnification for the unwarranted guarantee provided, to be attributed without depending on the period to which the above-cited article refers, depends on the verification of the following factual prerequisites:

a) the providing of a bank guarantee or equivalent (with a view to suspension of tax enforcement which has as its object the collection of a debt arising from the disputed assessment;

b) the existence of damage arising from the providing of that guarantee and;

c) success in the gracious complaint, judicial challenge, or opposition where error attributable to the services is verified.

On the concept of guarantee equivalent to a bank guarantee, reference can be made to Jorge de Sousa, in Tax Procedure and Process Code annotated and commented, 6th edition 2011, p. 242, where he argues that "Equivalent to a bank guarantee, for purposes of this article, will be all forms of guarantee that require the interested party to bear an expense whose amount increases as a function of the period during which it is maintained. Of the means of guarantee expressly provided for in Article 199 of the TPPC, this would be the case for guarantee insurance (...)".

In the case in the file, there is at issue a voluntary mortgage which in principle will only have notarial fees for constitution and registration. It cannot be said that, in the present case, we are dealing with a guarantee equivalent to a bank guarantee.

It is however certain that the respondent may have other damages beyond the damage resulting from the payment of notarial fees. We must admit the possibility of the indemnification request being made in autonomous proceedings where the damages which the interested party may have suffered can be ascertained with greater accuracy. Thus, we believe that Article 171 of the TPPC cannot be interpreted in the sense of excluding the possibility of the indemnification request being made in autonomous proceedings, in fact in a manner similar to what is stipulated in Article 53 No. 3 of the General Tax Law in providing: "the indemnification referred to in No. 1 has as its maximum limit the amount resulting from the application to the guaranteed amount of the rate of interest charges provided for in this law and may be requested in the very proceedings of complaint or judicial challenge, or autonomously."

In this sense, António Lima Guerreiro refers (General Tax Law, p. 245) that "this provision comprises only the damage suffered by the providing of a bank guarantee or equivalent (guarantee insurance).

It does not encompass the damage suffered by the providing of another type of guarantee (...) which results from the much greater difficulty in then configuring the existence of an actual damage suffered by the executed in such circumstances, which does not mean that this cannot occur, the compensation of the injured party must then be done through the general indemnification means.".

Having reached this point, we must conclude that the providing of a voluntary mortgage to suspend enforcement confers the right to indemnification on the taxpayer who provided it as a consequence of an unwarranted demand by the Tax Administration. It could not be otherwise given the provision in Article 22 of the Constitution of the Portuguese Republic.

Nor could the fixing of indemnification be requested under the quantifying norm of Article 53 No. 3 of the General Tax Law, as we have seen.

Thus, and without prejudice to the right which the taxpayer has to enforce its rights in this matter, should it do so in due time, we must conclude that the Arbitral Tribunal cannot condemn the Respondent in payment of the indemnification requested related to the costs of the voluntary mortgage."

The arbitral tribunal does not have competence for such assessment/fixing, and therefore cannot admit that request.

VII. Decision

In these terms, and based on the grounds set out, the Arbitral Tribunal decides to judge well-founded the request for arbitral pronouncement, except as to the request for interest charges and compensation for costs with the proceedings and the guarantee provided, annulling the disputed assessment.

Value of the proceedings: €14,412.01 (fourteen thousand four hundred and twelve euros and one cent)

Costs: Pursuant to the provision in Article 22 No. 4 of the LRTA, and in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the value of costs is fixed at €918.00 (nine hundred and eighteen euros), to be borne by the Respondent.

Lisbon, 14 July 2016

The Arbitrator

Ana Pedrosa Augusto

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) applicable to building land (terreno para construção) under Verba 28.1 of the TGIS?
Stamp Tax under item 28.1 of the TGIS applies specifically to urban properties with 'residential use' (uso habitacional). Building land classified as terreno para construção is not automatically subject to this tax unless it is demonstrably intended for residential purposes. Where land is designated under subdivision permits for other purposes, such as agricultural facilities or commercial construction, the 1% Stamp Tax rate under item 28.1 does not apply. The classification depends on the actual permitted use under urban planning regulations, not merely the administrative categorization by the Tax Authority. Taxpayers can challenge assessments by demonstrating that the property's legal designation does not constitute residential use as required by the statute.
What are the grounds for challenging a Stamp Tax assessment before the CAAD Tax Arbitral Tribunal?
Taxpayers can challenge Stamp Tax assessments before CAAD on grounds including: (1) absence of legal basis (falta de fundamento legal) when the tax provision does not apply to the specific property type; (2) incorrect property classification by the Tax Authority; (3) misapplication of the TGIS rates; (4) violation of the principle of legality in taxation; and (5) errors in property valuation. Challenges must follow the hierarchical complaint procedure first, and arbitration requests must be filed within 90 days of notification of the complaint dismissal decision. The taxpayer must establish that the assessment violates applicable law, while the Tax Authority bears the burden of justifying its classification decisions under the principle of material truth (princípio da verdade material).
Does the expiry of the right of action (caducidade do direito de ação) affect Stamp Tax disputes at CAAD?
The expiry of the right of action (caducidade do direito de ação) is a preliminary procedural exception that can affect Stamp Tax disputes at CAAD. The Tax Authority may raise this defense if the arbitration request is filed outside the statutory 90-day deadline following notification of the gracious complaint dismissal. However, the tribunal has discretion to defer ruling on such exceptions to the final decision under principles of procedural celerity and tribunal autonomy. The timeliness calculation begins from the notification date of the administrative decision dismissing the complaint, not from the original assessment date. Compliance with deadlines is strictly enforced, as arbitral jurisdiction depends on timely invocation of the right to arbitration under the RJAT framework.
Can taxpayers claim compensation for legal fees and mortgage costs in tax arbitration proceedings?
Yes, taxpayers can claim compensation for costs incurred in tax arbitration proceedings under the principle of restitutio in integrum. Claimable costs may include: (1) attorney's fees (honorários de advogado) for representation throughout gracious and arbitral proceedings; (2) costs of constituting mortgages or bank guarantees required to suspend enforcement of contested assessments; and (3) interest charges on amounts paid or secured. To succeed, the taxpayer must establish a causal link between the illegal assessment and the costs incurred, demonstrating these expenses were necessary to protect their rights. The compensation aims to restore the taxpayer to the position they would occupy had the illegal tax assessment not occurred. The tribunal evaluates reasonableness of claimed amounts based on documented expenses.
What is the jurisdiction of the CAAD Arbitral Tribunal in Stamp Tax cases involving urban property valuations?
The CAAD Arbitral Tribunal has jurisdiction over Stamp Tax disputes involving urban property valuations under Articles 2 and 10 of Decree-Law 10/2011 (RJAT). Jurisdiction extends to: (1) legality of tax assessments based on property classifications; (2) correct application of TGIS provisions to specific property types; (3) challenges to administrative property use determinations that affect tax liability; and (4) questions of statutory interpretation regarding residential versus non-residential use. The tribunal does not directly revise property valuations (valor patrimonial tributário) but can annul assessments where the Tax Authority incorrectly applies tax provisions based on property characteristics. The tribunal must respect parties' legal personality, capacity, and legitimacy, and proceedings follow the autonomous procedural rules established in the RJAT framework, distinct from judicial tax court procedures.