Process: 118/2016-T

Date: October 28, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 118/2016-T addressed whether Stamp Tax under Verba 28 of the TGIS applies to building land designated for tourist development rather than residential housing. The taxpayer challenged a €18,021.40 stamp duty assessment on a plot valued at €1,802,140.00, arguing the lot was licensed for a tourist village, not residential construction, and therefore should not fall within the 'residential allocation' requirement of Verba 28. The Tax Authority raised two preliminary objections: procedural time-bar (caducidade) because the arbitration request was filed in February 2016 against a tax due in April 2015—well beyond the 90-day deadline under Article 10 LRAT—and material incompetence of the tribunal to review property valuation decisions. The substantive dispute centered on whether the Tax Authority could classify the plot as having residential allocation based solely on a property revaluation, despite the subdivision permit indicating tourist use. The taxpayer argued the classification lacked proper justification, while the Authority maintained the taxpayer failed to object during the revaluation process. The case illustrates critical procedural requirements for challenging stamp duty assessments and the interpretive boundaries of 'residential allocation' under Portuguese tax law, with significant implications for real estate developers and investors in the tourism sector.

Full Decision

ARBITRAL DECISION

I – REPORT

1. A..., SA, previously denominated B... SA, TID[1]..., with registered office in ..., ... ...-... - ..., submitted a request for arbitral pronouncement, pursuant to the provisions of item a) of no.1 of article 2, of no.1 of article 3 and of item a) of no.1 of article 10, all of the LRAT[2], requesting the TAS[3], with a view to assessing the legality of the tax act levying stamp duty, in the amount of € 18,021.40 relating to the year 2014, incidental to a plot of land for construction denominated lot ... of the subdivision permit no. .../88, registered in the property matrix under urban article no. ... of the Joint Parishes of ... and ... area of the Finance Office of ...,

2. Which was submitted without exercising the option of arbitrator designation, being accepted by His Excellency the President of CAAD[4] and automatically notified to the TAS on 02/03/2016.

3. In accordance with and for the purposes of the provisions in no.2 of article 6 of the LRAT by decision of His Excellency the President of the Deontological Council, duly communicated to the parties, within the legally applicable deadlines, on 27/04/2016, arbitrator of the tribunal Arlindo José Francisco was designated, who communicated acceptance of the assignment, within the legally stipulated deadline.

4. The tribunal was constituted on 12/05/2016 in accordance with the provisions contained in item c) of no.1 of article 11 of the LRAT, in the wording introduced by article 228 of Law no.66-B/2012, of 31 December.

5. With its request, the claimant seeks the annulment of stamp duty, in the amount € 18,021.40 relating to the year 2014 concerning the property already identified whose TPV[5] is € 1,802,140.00, therefore exceeding the amount of € 1,000,000.00 provided in item 28 of the GTSD[6]

6. It supports its position, in summary, in the understanding that the levy is illegal due to lack of basis, since the aforementioned lot is intended for a tourist village, denominated Equestrian and not for residential construction.

7. It believes that the concept of "residential allocation" cannot have such a broad meaning as to encompass "tourist accommodation units" and the fact that the TAS assigned residential allocation when revaluation occurred without any objection by the claimant, does not validate the levy, since such an act performed by the TAS is not substantiated.

8. Now, since no construction is implanted in the said lot and by virtue of the subdivision permit it is verified that the destination to be given to it is not residential construction, it is imperative to conclude that the levy is manifestly illegal.

9. It further requests the condemnation of the TAS to payment of € 1,072.14, relating to costs incurred with the entire process due to illegal levy.

10. In its response, the respondent, in summary, invokes the exception of expiry of the right of action, since the claimant petitions solely the declaration of illegality of the tax act levying the SD[7], relating to 2014 in the amount of € 18,021.40, issued by the TAS on 20/03/2015, with payment due date on 30/04/2015.

11. Taking into account that the request for constitution of the AT[8] was submitted on 29/02/2016 and that article 10 of the LRAT establishes the deadline of 90 days for the facts provided in nos.1 and 2 of article 102 of the TCPC[9], counted from the day following the end of the voluntary payment deadline, article 102 no.1 item a) of the TCPC, it is imperative to conclude that there is failure to meet the deadline, the tribunal being unable to entertain it.

12. The time limit for challenge having been exceeded, the timeliness of the request could only be based on the existence of any means of gracious challenge of the levy act in which a decision had been rendered dismissing totally or partially the claims formulated therein, which did in fact occur in the present case, except that the claimant, despite having identified those circumstances, did not present the tribunal with any request aimed at annulling what was decided in that context.

13. Resulting from the request the direct challenge of the levy act, the request shall be declared inadmissible as untimely.

14. It further raises the material incompetence of the tribunal to pronounce on what is claimed by the claimant regarding the valuation of the property, which constitutes a dilatory exception that prevents the tribunal from entertaining the merits of the case.

15. As for the alleged absence of the factual and legal prerequisites of the levy, it considers that there is no reason supporting the claimant, since when revaluation which stipulated the allocation occurred, the claimant did not object to it, therefore the levy put in issue embodies a correct interpretation and application of law to the facts.

16. As for the indemnity interest requested, the same shall not be due since there are no errors imputable to the services.

II - CASE MANAGEMENT

The tribunal was regularly constituted, the parties have legal personality and capacity, are shown to be legitimate and are regularly represented in accordance with articles 4 and 10, no.2 of the LRAT and article 1 of Ordinance no.112-A/2011, of 22 March.

With the respondent's response presented, by exception it invokes the expiry of the right of action taking into account the specific request and also the material incompetence of the tribunal to review the valuation of the property as the claimant intends.

By order of 14/06/2016 the meeting referred to in article 18 of the LRAT was scheduled for 12/07/2016, the respondent coming on 06/07/2016 to consider the referred meeting unnecessary and waive oral or written allegations.

On the same date the tribunal issued an order notifying the claimant that, in case of not opposing and formalizing it by 11/07/2016, the tribunal would accept the respondent's proposal. The claimant came in good time to declare that it wished the meeting to take place, the same taking place on the scheduled date and time, without the presence of the respondent.

At the meeting of article 18 of the LRAT, it was agreed to produce written allegations, being granted the deadline of 15 days, with successive handling, for its production, the same being attached within the respective deadline.

In this manner, the proceedings not suffering from nullities, the exceptions shall be assessed in the first instance.

III - REASONING

1 – The questions to be settled, with interest for the case, are the following:

a) To entertain the possible expiry of the right of action of the Claimant, in view of the claim contained in the tribunal constitution request.

b) To entertain the possible incompetence of the tribunal to assess acts of valuation and property registration of the property that gave rise to the SD levy here put in issue.

c) In case the exceptions raised are declared inadmissible, to decide whether the SD levy in issue was or was not correctly issued in view of the allocation of the property in question.

d) In case of procedence of the request, whether or not the TAS should be condemned to payment of costs and indemnity interest, as requested.

2 – Matter of Fact

The matter of fact considered relevant and proven based on the elements attached to the case is the following:

a) The claimant is owner of an urban property, situated in ..., in ..., denominated lot ..., originated by permit no. .../ ... of the Municipal Chamber of ..., registered in the urban property matrix under article ... of the Joint Parishes ... and ... as land for construction;

b) The referred lot, in accordance with the cited permit, is intended for the construction of a tourist village, but in which no construction is found to be erected;

c) Its TPV is € 1,802,140.00, fixed in general valuation, in which residential allocation was established which was not subject to objection by the claimant;

d) The SD in the amount of € 18,021.40, pertains to the year 2014 and its levy was notified to the claimant by the TAS on 20/03/2015, with payment due date on 30/04/2015;

e) The claimant submitted a gracious challenge against the referred levy which came to be dismissed by order notified to the claimant on 30/11/2015;

f) The claimant did not proceed to payment of the tax in question and with a view to suspension of the enforcement proceedings, constituted a mortgage in favor of the TAS.

The facts given as proven were based on documentary evidence and not contested by the parties.

There is no factuality given as unproven that is relevant to the decision.

3 – Matter of Law

The TAS comes in its response, in the first instance to invoke the expiry of the right of action of the Claimant, in view of the claim contained in the tribunal constitution request. It is evident that if we consider that the claim that delimits the present case relates to the first degree act (levy of the SD) and not to the dismissal of the gracious challenge (second degree act) we will have to conclude that there was expiry of the right of action.

From the analysis of the request and, although the claimant, very vaguely, refers to the gracious challenge and its dismissal, in no part formulates the request for annulment of the decision dismissing the gracious challenge, being peremptory in the identification of the request saying "The claimant intends that the illegality of the tax act levying the SD for 2014 be declared...". In the same peremptory manner it concludes the request saying: "Let the request for declaration of illegality of the tax act levying the SD relating to 2014, in the amount of 18,021.40 be judged as well-founded".

Although now, in the stage of allegations, and leaning on a recent decision of the arbitral tribunal, it says that "it results manifest that the claimant sustained its request identifying an entire process of challenge, even attaching the pertinent documents to demonstrate the facts alleged by it", it concedes that the request could have been less ambiguous and states "it nonetheless results from the entire economy of the challenge that the claimant challenges the position of the respondent on the challenge of the levy act".

The tribunal does not consider the request ambiguous, rather on the contrary, as has already been expressed, it is clearly evident, the claimant intends the declaration of illegality of the tax act levying the SD relating to 2014, in the amount of € 18,021.40 and, therefore, the deadline for presentation of the challenge had its beginning the day following the end of the term (30/04/2015) for voluntary payment.

It would be different if the request had been directed to the act of dismissal of the gracious challenge, in that case a new deadline would be opened for presentation of the challenge, and the tribunal would be enabled to assess the primary levy act, but, as has already been mentioned, in no part of the petition is there a request for annulment of the decision rendered in the challenge process.

In this manner the immediate and sole object of the request, in the terms in which it was delimited by the claimant, is the illegality of the levy act and not the dismissal of the gracious challenge.

Having delimited with precision the object of the request for arbitral pronouncement by the claimant who circumscribed it to the tax levy act, the cognitive powers of the tribunal are delimited to the request, the tribunal being unable to take decisions on questions that have not been raised by the parties, nor to condemn in object different from the request, having in view the provisions contained in articles 608 and 609 of the CPC[10], applicable ex vi article 29 no.1 item e) of the LRAT.

In these terms, the exception invoked is considered well-founded, the assessment of the remaining questions raised being prejudiced.

IV DECISION

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

a) To declare well-founded the exception of expiry of the right of action;

b) To declare the request for arbitral pronouncement inadmissible, absolving the respondent thereof;

c) To fix the value of the case at € 19,093.15 in accordance with the provisions contained in article 299, no.1 of the CPC, applicable ex vi article 29 no.1 item e) of the LRAT.

d) To fix the costs under no.4 of article 22 of the LRAT, in the amount of € 1,224.00 in accordance with the provisions of Table I referred to in article 4 of the CRTP[11], which are borne by the claimant.

Notify

Lisbon, 28 October 2016

Text prepared by computer, in accordance with article 131, no.5 of the CPC, applicable by referral of article 29, no.1, item e) of the LRAT, with blank verses and reviewed by the tribunal.

The Arbitrator

Arlindo José Francisco

[1] Acronym for Tax Identification
[2] Acronym for Legal Regime of Arbitration in Tax Matters
[3] Acronym for Tax and Customs Authority
[4] Acronym for Center for Administrative Arbitration
[5] Acronym for Patrimonial Tax Value
[6] Acronym for General Stamp Duty Table
[7] Acronym for Stamp Duty
[8] Acronym for Arbitral Tribunal
[9] Acronym for Tax Code of Procedure and Process
[10] Acronym for Civil Procedure Code
[11] Acronym for Regulation of Costs in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto do Selo) under Verba 28 of the TGIS apply to building land designated for tourist developments rather than residential housing?
The application of Stamp Tax under Verba 28 of the TGIS to building land designated for tourist developments depends on whether the property has 'residential allocation' (afetação habitacional). In Process 118/2016-T, the taxpayer argued that land licensed for a tourist village should not be classified as residential, as tourist accommodation units are distinct from residential housing. The Tax Authority countered that the residential allocation was established during property revaluation and not contested by the taxpayer. The case highlights that the concept of 'residential allocation' and whether it extends to tourist developments is subject to interpretation, and taxpayers should object to classifications during revaluation proceedings if they dispute the allocation assigned by the Tax Authority.
What is the deadline for filing an arbitration claim to challenge a Stamp Tax assessment at the CAAD?
Under Article 10 of the LRAT (Legal Regime of Tax Arbitration), the deadline for filing an arbitration claim to challenge a Stamp Tax assessment at CAAD is 90 days, counted from the day following the end of the voluntary payment deadline, in accordance with Article 102 of the TCPC (Tax Procedure and Process Code). In Process 118/2016-T, the stamp duty was issued on 20 March 2015 with payment due on 30 April 2015, meaning the 90-day deadline would have expired in late July 2015. The taxpayer's filing in February 2016 was challenged as time-barred (caducidade do direito de ação), demonstrating the strict enforcement of these procedural deadlines in Portuguese tax arbitration.
Can the Portuguese Tax Authority classify a building plot as having habitational use solely based on a property revaluation without proper justification?
In Process 118/2016-T, the Tax Authority classified a building plot as having residential allocation based on a property revaluation, despite the subdivision permit indicating the land was for tourist development. The taxpayer challenged this classification as lacking proper substantiation, arguing that the mere administrative act of assigning residential use during revaluation, without factual basis, cannot validate the stamp duty levy. The Tax Authority argued that since the taxpayer did not object to the residential allocation when the revaluation occurred, the classification became valid. This case emphasizes the importance of taxpayers actively challenging property classifications during revaluation proceedings, as failure to object may preclude later challenges to tax assessments based on those classifications.
What happens when the licensed purpose of a building lot under an urban subdivision permit differs from the tax classification assigned by the Tax Authority?
When the licensed purpose of a building lot under an urban subdivision permit differs from the tax classification assigned by the Tax Authority, a conflict arises regarding which designation should prevail for tax purposes. In Process 118/2016-T, the subdivision permit authorized construction of a tourist village, yet the Tax Authority classified the property as having residential allocation for Stamp Tax purposes under Verba 28 of the TGIS. The taxpayer argued that since no construction existed on the lot and the subdivision permit clearly indicated tourist use, the residential classification was erroneous. This case illustrates that taxpayers should ensure consistency between municipal licensing documentation and tax classifications, and should challenge discrepancies promptly during property revaluation or assessment proceedings to avoid adverse tax consequences.
Is a taxpayer entitled to recover costs incurred in challenging an illegal Stamp Tax assessment before the CAAD arbitration tribunal?
A taxpayer may be entitled to recover costs incurred in challenging an illegal Stamp Tax assessment before the CAAD arbitration tribunal if the challenge is successful. In Process 118/2016-T, the claimant requested €1,072.14 in costs related to the arbitration process. However, recovery depends on several factors: the tribunal must first overcome procedural obstacles such as time-bar exceptions (caducidade), find in favor of the taxpayer on the merits, and determine that the error was attributable to the Tax Authority's services. The Tax Authority argued that no costs should be awarded as there were no errors imputable to its services. Portuguese tax arbitration law generally allows cost recovery for successful claims, but procedural compliance and substantive merit are prerequisites.