Process: 121/2017-T

Date: November 14, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 121/2017-T addressed the application of Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS) to a vertically-owned property in Lisbon with multiple independent residential units. The claimant company challenged €5,255.83 in stamp tax assessments for 2015, arguing that the tax should apply only to individual floors with patrimonial tax value (VPT) exceeding €1,000,000, not to the aggregate property value. The core dispute centered on whether vertical ownership properties should be treated like horizontal ownership (condominium) regimes, where each autonomous unit is taxed separately. The claimant invoked constitutional principles of equality and proportionality, contending that the Tax Authority's approach of aggregating all floor values violated tax fairness by treating identical economic situations differently based solely on formal property structure. The claimant argued that material reality and actual use should prevail over legal formalities, and that Municipal Property Tax Code principles should apply to unregulated aspects of item 28.1 TGIS. The case raised fundamental questions about the tax treatment of vertically-owned properties with independent units and whether the €1,000,000 threshold applies per unit or to the entire property, with significant implications for luxury property taxation in Portugal.

Full Decision

ARBITRAL DECISION

I. REPORT

On 16 February 2017, A..., S.A., NIPC ..., hereinafter referred to as the Claimant, with registered office in Portugal, requested the constitution of an arbitral tribunal and filed a request for arbitral pronouncement, pursuant to paragraph a) of section 1 of Article 2 and paragraph a) of section 1 of Article 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as LRATM), in which the Tax and Customs Authority (hereinafter referred to as TCA) is the Respondent.

The Claimant is represented, in the context of these proceedings, by its representative, Dr. B..., and the Respondent is represented by legal experts, Dr. C... and Dr. D....

The request for constitution of the arbitral tribunal was accepted by the Esteemed President of CAAD and was notified to the Respondent on 24 February 2017.

By means of the request for constitution of the arbitral tribunal and arbitral pronouncement, the Claimant seeks, as its principal claim, that the illegality be declared and the respective annulment of the tax acts of stamp tax assessment, relating to the year 2015, which are itemized as follows:

  • Doc. No. 2016..., referring to the 1st floor, in the amount of € 825.86;
  • Doc. No. 2016..., referring to the 2nd floor, in the amount of € 825.86;
  • Doc. No. 2016..., referring to the 3rd floor, in the amount of € 850.63;
  • Doc. No. 2016..., referring to the 4th floor, in the amount of € 850.63;
  • Doc. No. 2016..., referring to the 5th floor, in the amount of € 858.90;
  • Doc. No. 2016..., referring to the 6th floor, in the amount of € 858.90;
  • Doc. No. 2016..., referring to the 7th floor, in the amount of € 185.05, all totaling € 5,255.83 (five thousand, two hundred and fifty-five euros and eighty-three cents), relating to the property registered under article ... of the parish of ..., in Lisbon municipality and district, in full/vertical ownership, relating to the floors or divisions with independent use corresponding to the first, second, third, fourth, fifth, sixth and seventh floors, and as a subsidiary claim, the declaration of illegality and respective annulment of the stamp tax assessment act relating to the year 2015, in the amount of € 15,582.56 (fifteen thousand, five hundred and eighty-two euros and fifty-six cents).

After verifying the formal regularity of the request presented, pursuant to paragraph a) of section 2 of Article 6 of the LRATM, the signatory was appointed by the President of the Deontological Council of CAAD.

The Arbitrator accepted the appointment made, with the arbitral tribunal being constituted on 22 May 2017, at the headquarters of CAAD, located at Avenida Duque de Loulé, No. 72-A, in Lisbon, as evidenced by the minutes of constitution of the arbitral tribunal which was executed and which is attached to these proceedings.

After being notified for this purpose, the Respondent presented, on 23 June 2017, its response, in which it invoked an exception that the Tribunal understood should be addressed only at the time of the final decision, having consequently notified by order of 25.08.2017 the parties of this preliminary decision, as well as the waiver of the hearing provided for in Article 18 of the LRATM and the submission of arguments, requested by the Respondent, in case of agreement by the Claimant. Given the silence of the latter, the arbitral tribunal thus considered it appropriate to waive the aforementioned hearing, as well as the mentioned arguments, given the absence of any necessity for the production of additional evidence beyond that which is already incorporated in the case file, the proceedings containing all necessary elements for the rendering of the decision, for reasons of procedural efficiency and dispatch and the prohibition of useless procedural acts.

The Tribunal, in fulfillment of the provisions of section 2 of Article 18 of the LRATM, set 22 November 2017 as the date for pronouncement of the arbitral decision, having warned the Claimant, in the order of 25 August 2017, that it should proceed with payment of the subsequent arbitral fee, pursuant to section 3 of Article 4 of the Regulations on Costs in Tax Arbitration Proceedings, and communicate such payment to CAAD.

II. Arguments of the Claimant

The Claimant sustains its claims, in summary, in the following manner:

The Claimant sustains the claims (principal and subsidiary) for annulment of the stamp tax assessments relating to the year 2015, contained in the documents numbered 2016...; No. 2016..., No. 2016..., No. 2016..., No. 2016..., No. 2016... and No. 2016..., in the total value of € 5,255.83 (five thousand, two hundred and fifty-five euros and eighty-three cents), and as a subsidiary claim, "should the tribunal understand that stamp tax can only be challenged in its entirety," for annulment of the stamp tax assessment act for the year 2015, in the amount of € 15,582.56 (fifteen thousand, five hundred and eighty-two euros and fifty-six cents) to which it was subject, with respect to the floors or parts capable of independent use, allocated to residential use, of the property registered under article ... in the respective matrix, located at ..., No. ..., in Lisbon, parish of ..., municipality of Lisbon, which is in vertical ownership, as illegal, due to the following defects:

  1. Error regarding the prerequisites for application of item 28.1 of the General Stamp Tax Table, inasmuch as the Claimant understands that "[s]ubection to stamp tax contained in item No. 28.1 of the General Stamp Tax Table is determined by the combination of two criteria. Residential allocation and the TPV contained in the matrix equal to or greater than € 1,000,000.00. In the case of a property with characteristics identical to those described in these proceedings, subjection to stamp tax is determined not by the TPV of the property, but by the TPV attributed to each one of the floors or divisions. (...) Stamp tax would only be charged if any of the parts or floors with independent use presented a TPV greater than € 1,000,000.00."

The Claimant continues, stating that: "[f]or the legislator, the determining factor is the normal use of the property, that is, the purpose to which it is intended. The legislator made no distinction between properties in vertical ownership and properties subject to the horizontal ownership regime. In the case at hand, only the material truth underlying the property and its respective use can be relevant."

It further alleges that: "[t]he TCA cannot consider as the reference value of the new tax the total value of the property, since the legislator itself established a different rule under the Municipal Property Tax, being this the Code applicable to matters not regulated with respect to item 28 of the General Stamp Tax Table. The criterion sought by the TCA lacks legal foundation and is contrary to the criterion adopted under the Municipal Property Tax, applicable to cases of stamp tax that are not regulated."

  1. Defect of violation of constitutional law, particularly of the principle of equality and fiscal proportionality, as the Claimant understands that if "[c]onsidering as reference value the sum of the patrimonial values attributed to each one of the floors (...) [t]he legislator cannot treat equal situations in a differentiated manner, because if it were a property subject to the horizontal ownership regime, none of the units would be subject to the new stamp tax."

Summarizing its position, it states that "In sum, the material truth should prevail as a criterion of taxpaying capacity, and not a merely formal reality of the property," to conclude that "the tax authority's assessment acts are manifestly illegal and must be annulled."

Subsidiarily, the Claimant alleges the claim that, should it be understood "that stamp tax can only be challenged in its entirety, (...) the Claimant, from now on, requests that all stamp tax assessment acts for the year 2015 (...)" in the amount of € 15,582.56 (fifteen thousand, five hundred and eighty-two euros and fifty-six cents), be annulled, with the grounds indicated above.

III. Response of the Respondent

For its part, the TCA comes, in its response, to defend itself, by exception and by impugning:

By exception, the Respondent invokes, on one hand, the lack of material jurisdiction of the arbitral tribunal and the unimpeachability of the acts, understanding, on one hand, that "[t]he Claimant does not challenge a tax act, but rather challenges the payment of an installment (3rd) of a tax act contained in a document which is a payment notice. (...) This matter, which does not appear at all in the set of rules that delimits the jurisdiction of tax arbitral tribunals, contained in Article 2 of the LRATM. Therefore, the act subject to the request for arbitral pronouncement herein transcends the jurisdiction of the Arbitral Tribunal, as it is materially incompetent, under Article 2 of the LRATM, to assess the legality of an installment of the assessment act, which is not itself any tax act."

...and on the other hand, by considering that: "(...) the Stamp Tax referred to in item 28 of the General Stamp Tax Table is assessed annually, with payment in installments being nothing more than a collection technique for the tax and not its partial payment. For which reason, the payment of one of the installments of the assessment made under the provision of item 28.1 of the General Stamp Tax Table is not a partial payment of that assessment, but merely a collection technique for the assessed tax. (...) Thus, there is a single assessment and its payment is realized in installments, which does not permit the challenging of only one installment or payment document in that installment value."

By impugning and as regards the alleged error regarding the prerequisites of the assessments, the Respondent understands that: "[a]t the time the Claimant held full ownership of the urban property in question, evaluated under the Municipal Property Tax, within the scope of the general evaluation of urban properties, described as 'property in full ownership with floors or divisions capable of independent use,' with patrimonial tax value (PTV) greater than € 1,000,000.00."

Now, "[w]hat expressly results from the letter of the law is that the legislator intended to tax with item 28.1 in question properties as a single legal-tax reality, (...). In accordance with the rules of the Municipal Property Tax, specifically Article 113, section 1, the assessment is made on the basis of the patrimonial tax values of properties and in relation to the taxpayers listed in the matrices on 31 December of the year to which they relate (in the case of the 2015 tax)," whereby "[r]egarding properties under the full ownership regime, which do not possess autonomous units, to which tax law attributes the qualification of property (section 4 of the cited Article 2 of the Municipal Property Tax), the patrimonial value to be considered is that of the property as a whole."

Concluding, thus, that "(...) the defect of violation of law due to error regarding the prerequisites of law should be judged unfounded, maintaining in the legal order the stamp tax assessments now challenged, as they constitute a correct application of the law to the facts."

Regarding the alleged defect of violation of constitutional law, the Respondent states that "[i]t is not clear how the taxation in question could have violated any principle, namely that of equality or fiscal proportionality (...)", and as regards the alleged violation of the principle of equality, the Respondent expresses the understanding that: "(...) the provision of item 28.1 of the General Stamp Tax Table does not constitute any violation of this constitutional principle, with no discrimination existing in the taxation of properties constituted in horizontal ownership and properties in full ownership with floors or divisions capable of independent use, or between properties with residential allocation and properties with other allocations, because 'they are differentiated legal institutions.'"

It further understands that "[t]he constitution of horizontal ownership implies, it is a fact, a mere legal alteration of the property, with no evaluation (official – circular No. 40.025, of 11.08.2008, of the Property Assessment Directorate), but the legislator may, however, submit to a distinct legal-tax framework, and thus discriminatory, properties under the horizontal and vertical ownership regimes, especially benefiting the legally more evolved institution of horizontal ownership, without such discrimination necessarily being considered, by itself alone, arbitrary. This discrimination may also be imposed by the need to impose coherence to the tax system. (...)". Furthermore, "[t]he separate property registration of each part capable of independent use is not autonomous, by matrix, but is shown as a notation in the matrix of the property as a whole – see the property record of this property which represent the owner's document containing the property registration elements."

Continuing its thesis, the Respondent expresses the understanding that "[t]hese rules and evaluation procedures, the rules regarding property registration, and also the rules regarding the assessment of parts capable of independent use, do not permit affirming that there should be an equivalence of property under the full ownership regime with the vertical ownership regime, this, because, and as already mentioned, would be illegal and unconstitutional. These legal-civil regimes are different, and tax law respects them."

Adding further that: "[f]or this very reason, the taxable event of the stamp tax of item 28.1 consists of ownership (or usufruct) of urban properties whose patrimonial tax value contained in the matrix, under the Municipal Property Tax, is equal to or greater than € 1,000,000.00, with the patrimonial value relevant for purposes of the incidence of the tax being the total patrimonial value of the urban property and not the patrimonial value of each one of the parts that comprise it, even when capable of independent use."

Indeed, this "(...) is a general and abstract rule, applicable indiscriminately to all cases in which the respective factual and legal prerequisites are met. Also, the different valuation and taxation of a property in full ownership as opposed to a property constituted in horizontal ownership derives from the different legal effects inherent to these two figures. Indeed, the constitution in horizontal ownership determines the division/partition of full ownership and the independence or autonomy of each one of the units that constitute it, for all legal purposes, pursuant to section 2, of Article 4, of the Municipal Property Tax, and Articles 1414 et seq. of the Civil Code, whereas a property in full ownership constitutes, for all purposes, a single legal-tax reality. Thus, one cannot conclude that there is alleged discrimination in violation of the principle of equality when, in reality, we are dealing with distinct realities, valued by the legislator differently."

For which reason, it understands it to be "necessarily necessary to conclude that the tax acts in question did not violate any legal or constitutional principle, and should thus be maintained."

IV. Preliminary Matters

The Tribunal is competent and is regularly constituted, pursuant to paragraph a) of section 1 of Article 2 and Articles 5 and 6, all of the LRATM.

The parties have legal personality and capacity, show themselves to be legitimate, are regularly represented and the proceedings do not suffer from nullities.

V. Factual Matters

With interest for the decision, the following facts are deemed proven:

  1. The Claimant, in 2015, was the owner of the urban property located at ..., No. ..., parish of ..., municipality and district of Lisbon, registered in the urban property matrix under article.... (see fls 9 to 16 of the administrative proceedings);

  2. The property comprised a total of 10 floors or divisions with independent use, with only 7 being allocated to residential use, whose patrimonial tax value (PTV), determined under the Municipal Property Tax Code, ranges between € 37,010.00 and € 257,670.00 (see fls 9 to 16 of the administrative proceedings);

  3. The property in question is in the full/vertical ownership regime. (see fls 9 to 16 of the administrative proceedings);

  4. The sum of the PTV of the aforementioned autonomous units allocated to residential use amounts to € 1,558,250.00 (one million, five hundred and fifty-eight thousand, two hundred and fifty euros), with each one of them individually having a PTV below € 1,000,000.00 (one million euros) (see fls 9 to 16 of the administrative proceedings);

  5. The property registration No. ... separately identifies each one of the autonomous units of independent use, and the respective PTV resulting from the general evaluation is also itemized (see fls 9 to 16 of the administrative proceedings);

  6. The Stamp Tax for the year 2015, levied under item No. 28.1 of the General Stamp Tax Table, on the floors and divisions with independent use allocated to residential use, in the global amount of € 15,582.56 was assessed on 05.04.2016. (see fls 1 of the administrative proceedings);

  7. The Claimant was notified of the three installments (April, July and November) relating to the stamp tax assessment act for the year 2015, levied under item No. 28.1 of the General Stamp Tax Table, on the floors and divisions with independent use allocated to residential use, in the global amount of € 15,582.56 (agreement of the parties);

  8. In November 2016, the Claimant was notified to proceed with payment of the 3rd installment of stamp tax (see Doc. No. 1 to 7 attached with the initial petition);

  9. The Claimant proceeded with payment of the payment notices issued for payment of the Stamp Tax in question, in the global amount of € 15,582.56 (see fls 19 of the administrative proceedings);

  10. On 16 February 2017, the Claimant filed the present request for arbitral pronouncement in which it petitioned, as a principal claim, the declaration of illegality of, as denominated by it, assessments Nos. 2016...; No. 2016..., No. 2016..., No. 2016..., No. 2016..., No. 2016... and No. 2016..., in the total amount of € 5,255.83 (five thousand, two hundred and fifty-five euros and eighty-three cents), and its respective annulment, and as a subsidiary claim, the declaration of illegality of the stamp tax assessment act for the year 2015, "in its entirety," in the amount of € 15,582.56 (fifteen thousand, five hundred and eighty-two euros and fifty-six cents).

VI. Facts Deemed Not Proven

There are no facts deemed not proven, because all facts relevant to the assessment of the claim were deemed proven.

VII. Grounds for the Factual Matters Deemed Proven

For the conviction of the Arbitral Tribunal, regarding the facts proven, the documents attached to the case file were relevant, as well as the administrative proceedings, all analyzed and evaluated in conjunction with the pleadings, from which results agreement regarding the factuality presented by the Claimant in the request for arbitral pronouncement.

VIII. Preliminary Issue

The Respondent, in its response, defends itself by invoking the exception of lack of jurisdiction of the arbitral tribunal and the unimpeachability of the acts, given that, in its perspective, the third installments here challenged constitute a unitary tax value.

The Respondent argues on this matter, on one hand, that "[t]he Claimant does not challenge a tax act, but rather challenges the payment of an installment (3rd) of a tax act contained in a document which is a payment notice. (...) This matter does not appear at all in the set of rules that delimits the jurisdiction of tax arbitral tribunals, contained in Article 2 of the LRATM. Therefore, the act subject to the request for arbitral pronouncement herein transcends the jurisdiction of the Arbitral Tribunal, as it is materially incompetent, under Article 2 of the LRATM, to assess the legality of an installment of the assessment act, which is not itself any tax act."

...and on the other hand, considers that: "(...) the Stamp Tax referred to in item 28 of the General Stamp Tax Table is assessed annually, with payment in installments being nothing more than a collection technique for the tax and not its partial payment. For which reason, the payment of one of the installments of the assessment made under item 28.1 of the General Stamp Tax Table is not a partial payment of that assessment, but merely a collection technique for the assessed tax. (...) Thus, there is a single assessment and its payment is realized in installments, which does not permit the challenging of only one installment or payment document in that installment value."

Let us examine whether it is correct.

Foremost, it should be mentioned that, pursuant to Article 16 of the Code of Tax Procedure and Process (CTPP)[1], applicable by force of Article 29, section 1, paragraphs a) and e) of the LRATM:

"1. Non-compliance with the rules of jurisdiction by reason of hierarchy and subject matter determines the absolute lack of jurisdiction of the court.

  1. Absolute lack of jurisdiction is assessed ex officio and may be alleged by interested parties or raised by the Public Prosecutor or the representative of the Public Treasury up to the final judgment becoming final."

In truth, and according to doctrine[2] "questions of absolute jurisdiction are assessed ex officio and their assessment precedes that of any other question (Articles 16, section 2 of the CTPP and 13 of the Administrative Procedure Code). Thus, lack of jurisdiction by reason of subject matter and by reason of hierarchy, in judicial proceedings, should be assessed ex officio, preceding the assessment of any other questions (...)."

However, and because we are in the context of a request for arbitral pronouncement, it becomes absolutely necessary to resort to the Legal Regime for Arbitration in Tax Matters (LRATM).

Thus, by examining section 1 of Article 2 of this statute, we can verify that:

"The jurisdiction of arbitral tribunals comprises the assessment of the following claims:

a) The declaration of illegality of tax assessment acts, self-assessment acts, withholding at source acts and installment payment acts;

b) The declaration of illegality of taxable basis determination acts when they do not give rise to the assessment of any tax, taxable income determination acts and patrimonial value determination acts."

Indeed, the tax judicial process comprises, pursuant to Article 97 of the CTPP:

"a) The challenging of the assessment of taxes, including parafiscal taxes and self-assessment acts, withholding at source acts and installment payment acts;"

In truth, the first conclusion that could be drawn from reading these legal provisions is that the claim for declaration of illegality of assessment acts may be subject to judicial challenge or, alternatively, to a request for arbitral pronouncement.

However, one questions, given the case at hand, namely, as regards in particular the principal claim formulated in the present arbitral pronouncement: whether payment notices for the 3rd installment relating to stamp tax assessments for the year 2015 can be subject of the request for arbitral pronouncement?

Now, the response to this question, its respective logical reasoning and legal basis, – in the case at hand, not as to the 3rd installment, but as to the 1st of the Stamp Tax for the year 2015, where the Claimant was already a party – was already provided in the arbitral decision rendered in case 358/2016-T, of 16.01.2017, which we bring to bear here for its manifest interest and application to the case at hand, which we adopt in its entirety.

Thus, for the full response to the question posed above, that arbitral decision established the necessity of narrowing the concept of assessment to gauge the tribunal's jurisdiction, having done so as follows:

"In concretization of such concept, VÍTOR FAVEIRO taught: '...it concerns an administrative act, of application of the rule of incidence and its respective rate of quotity, to the previously or supposedly determined taxable basis; the arithmetic expression of the pecuniary value of the tax obligation corresponding, and its attribution to the person of the taxpayer; and the declaration, substantive and formal, of such operation and its notification to the taxpayer, with definitive and executive effects of effective obligation of the taxpayer and subjective right of credit of the State.'

In this line, BRAZ TEIXEIRA adds: 'It is necessary not to confuse periodic installments, which, although realized through successive acts at diverse moments, have their origin in a single obligation and constitute the various portions of a single installment that was divided, with installments that must be performed periodically, not due to a division of the global installment, but rather to the birth, also periodic, of new obligations, due to the permanence of the factual prerequisites of taxation.'"

In this sequence, that decision considered that "(...) such definitions share a common denominator, that is, that there will exist a single assessment for each taxable event, through which the amount of the collection will be determined. Consequently, if so, each assessment may be subject to a single challenging."

It happens that, pursuant to section 7 of Article 23 of the Stamp Tax Code, in effect at the time of the facts, according to which: "Where the tax is due for the situations provided in item No. 28 of the General Table, the tax is assessed annually, in relation to each urban property, (...) applying, with necessary adaptations, the rules contained in the Municipal Property Tax Code."

Providing for this effect, section 1 of Article 113 of the Municipal Property Tax Code: "The tax is assessed annually..." and section 2 adds that: "The assessment referred to in the preceding section is made in the months of February and March of the following year."

Indeed, it results from the combination of these rules that, notwithstanding the fact that the value resulting from the assessment may be paid in installments, the truth is that this "does not mean that, as a general rule, several assessments were performed. In all rigor, the assessment is singular and, if so, can only support a single challenging claim"[3].

Now, in the case at hand, the Claimant formulates as principal claim that "[i]t be declared the illegality of the tax assessment acts of stamp tax (No. 2016...; No. 2016...; No. 2016...; No. 2016...; No. 2016...; No. 2016... and No. 2016... on the floors which constitute an urban property located at ..., number ..., under file No. ... of the parish of ... registered in the urban property matrix under article ... of the parish of... of Doc. 1 to Doc 7"., which, after reviewing the mentioned documents, we verified that they relate to the 3rd installment of the Stamp Tax for the year 2015.

Furthermore, and in order to demonstrate its claim regarding the declaration of illegality, and respective annulment, of the payment notices relating to the 3rd installment of Stamp Tax, the Claimant alleges, in articles 30 to 32 of the initial petition that: "The Claimant may independently challenge the assessment of each one of the installments of stamp tax, as to the same property and as to the same stamp tax. (Article 30)

In November 2016 the Claimant was notified to proceed with payment of the 3rd installment of stamp tax, which does not fail to constitute a tax act. (Article 31)

Upon being notified for payment of each one of the installments (1st, 2nd and 3rd installments), the Claimant is notified of the assessment of isolated tax acts and with autonomous periods for challenging;" (Article 32 of the learned initial petition)."

Thus, it is clear that the Claimant subsumes the 3rd installment of tax to an assessment, seeking its annulment, as illegal, when in reality it is the notification for proceeding with payment of the last installment of the stamp tax assessment act for the year 2015.

In this manner, and considering this position of the Claimant – a claim which is embodied in the declaration of illegality, and respective annulment, of a payment notice relating to the 3rd installment of Stamp Tax, the tribunal finds that the dilatory exception of absolute lack of jurisdiction exists, by way of lack of jurisdiction ratione materiae, due to the fact that the acts underlying the request for arbitral pronouncement do not constitute "tax assessment acts," in the meaning of paragraph a) of section 1 of Article 2 of the LRATM, for which reason the identified and alleged dilatory exception is declared, pursuant to section 1 of Article 16 of the CTPP, which determines, as consequence, the absolution of the Respondent from the instance, cfr. Article 99, section 1 and Article 576, section 2 of the Code of Civil Procedure, applicable by way of Article 29, section 1, paragraph e) of the LRATM.

Thus, the recognition of the incompetence of this tribunal prevents the assessment of the merits of the case, as regards the principal claim.

II – Of the Subsidiary Claim

Preamble:

The Claimant filed the request for constitution of the arbitral tribunal on 16.02.2017, seeking, as regards what concerns the subsidiary claim, the annulment of the stamp tax assessment act relating to the year 2015, in the amount of € 15,582.56 (fifteen thousand, five hundred and eighty-two euros and fifty-six cents), relating to the urban property registered under article ..., units to which correspond the first, second, third, fourth, fifth, sixth and seventh floors, of the parish of ..., which it itemizes as follows:

  • € 825.88 relating to the first floor (No. 2016...);

  • € 825.88 relating to the second floor (No. 2016...);

  • € 850.64 relating to the third floor (No. 2016...);

  • € 850.64 relating to the fourth floor (No. 2016...);

  • € 858.90 relating to the fifth floor (No. 2016...);

  • € 858.90 relating to the sixth floor (No. 2016...);

  • € 185.05 relating to the seventh floor (No. 2016...);

  • € 825.86 relating to the first floor (No. 2016...);

  • € 825.86 relating to the second floor (No. 2016...);

  • € 850.63 relating to the third floor (No. 2016...);

  • € 850.63 relating to the fourth floor (No. 2016...);

  • € 858.90 relating to the fifth floor (No. 2016...);

  • € 858.90 relating to the sixth floor (No. 2016...);

  • € 185.05 relating to the seventh floor (No. 2016...);

  • € 825.86 relating to the first floor (No. 20160...);

  • € 825.86 relating to the second floor (No. 2016...);

  • € 850.63 relating to the third floor (No. 2016...);

  • € 850.63 relating to the fourth floor (No. 2016...);

  • € 858.90 relating to the fifth floor (No. 2016...);

  • € 858.90 relating to the sixth floor (No. 2016...);

  • € 185.05 relating to the seventh floor (No. 2016...)."

Indeed, the Claimant formulates the subsidiary claim which it states as follows:

"Pursuant to the provisions and for the purposes of Article 2, section 1 of the Legal Regime for Arbitration in Tax Matters, the arbitral tribunals have jurisdiction to decide on tax assessment acts and on taxable basis determination acts.

Based on the assessment act issued, it performs three acts:

  • The determination of the collection;
  • The determination of the patrimonial value of the property; and
  • The assessment of a tax (although in 3 installments).

(...)

Holding a period of 90 days, counted from the notification of each one of the installments of stamp tax for this purpose – cfr. Article 10 of the Legal Regime for Arbitration in Tax Matters and sections 1 and 2 of the Code of Tax Procedure and Process.

Should the tribunal understand that stamp tax can only be challenged in its entirety – which is only equated with professional caution – the Claimant from now on requests that all stamp tax assessment acts for the year 2015 (...)" itemized above be annulled.

Let us examine whether it is correct.

From the factual matters deemed proven with interest:

  1. The Stamp Tax for the year 2015, levied under item No. 28.1 of the General Stamp Tax Table, on the floors and divisions with independent use allocated to residential use, in the global amount of € 15,582.56 was assessed on 05.04.2016. (see fls 1 of the administrative proceedings);

  2. The Claimant was notified of the three installments (April, July and November) relating to the stamp tax assessment act for the year 2015, levied under item No. 28.1 of the General Stamp Tax Table, on the floors and divisions with independent use allocated to residential use, in the global amount of € 15,582.56 (agreement of the parties);

  3. In November 2016, the Claimant was notified to proceed with payment of the 3rd installment of stamp tax (see Doc. No. 1 to 7 attached with the initial petition);

  4. The Claimant proceeded with payment of the payment notices issued for payment of the Stamp Tax in question, in the global amount of € 15,582.56 (see fls 19 of the administrative proceedings);

  5. On 16 February 2017, the Claimant filed the present request for arbitral pronouncement in which it petitioned...

Assessment:

It is true, as rightly states the Claimant, that, pursuant to paragraph a) of section 1 of Article 2 of the LRATM, the arbitral tribunal has jurisdiction to assess the "declaration of illegality of tax assessment acts, self-assessment acts, withholding at source acts and installment payment acts," and that pursuant to paragraph a) of section 1 of Article 10 of the same statute, "[t]he request for constitution of an arbitral tribunal is presented: within the period of 90 days, counted from the facts provided in sections 1 and 2 of Article 102 of the Code of Tax Procedure and Process, as to the facts susceptible to autonomous challenging and, as well as, from the notification of the decision or the lapse of the legal period for decision of hierarchical appeal."

This legal provision clearly refers to the provision of Article 102 of the CTPP, which provides, in turn, in paragraph a) of its section 1 that: "The challenging shall be presented within the period of 3 months counted from the following facts: a) Lapse of the period for voluntary payment of the installments notified to the taxpayer."

Being manifest that the legislator intended with this legal rule to grant a period of 3 months for the passive subject to challenge an assessment act from which it is notified and with which it does not agree, and should for this purpose ground it in an illegality provided in Article 99 of the CTPP.

In truth, in the case at hand, the Claimant seeks, as a subsidiary claim as mentioned, the declaration of illegality of the stamp tax assessment act relating to the year 2015, in the amount of € 15,582.56, which was notified to it in April 2016, the period for proceeding with its voluntary payment ended on 30.04.2016.

Indeed, and as provides the aforementioned section 7 of Article 23 of the Stamp Tax Code, at the time of the facts, that: "Where the tax is due for the situations provided in item No. 28 of the General Table, the tax is assessed annually, in relation to each urban property, (...) applying, with necessary adaptations, the rules contained in the Municipal Property Tax Code."

...and, following, by referral of that rule, to the provision of section 1 of Article 113 of the Municipal Property Tax Code, pursuant to which: "The tax is assessed annually...", its payment, pursuant to paragraph c) of section 1 of Article 120 of the Municipal Property Tax Code, applicable by force of the provision of section 2 of Article 67 of the Stamp Tax Code, at the time of the facts, – attending to the value of the tax calculated in the case at hand – is performed, "in three installments, in the months of April, July and November (...)".

The present tribunal understands that, pursuant to the provision of paragraph a) of section 1 of Article 10 of the LRATM, the period to challenge the stamp tax assessment act notified to the Claimant in April 2016 began with the lapse of the period for voluntary payment, that is, on 30.04.2016.

...whereby, and attending to the fact that "I – The period for judicial challenging is of substantive nature and not a judicial period, being counted pursuant to Article 279 of the Civil Code, as expressly stated in section 1 of Article 20 of the CTPP, running continuously, without any interruption or suspension.

II – In counting the period, the day on which the event from which the period begins to run occurs is not included (notification, summons or formation of tacit dismissal), (...)"[4]

...the period of 90 days provided in that legal rule began on day 01.05.2016, and its end on day 29.07.2016.

Now, having in mind that the filing of the request for constitution of the arbitral tribunal took place only on 16.02.2017, the right to challenge long ago expired, by exceeding the 90 days provided in Article 10 of the LRATM.

In truth, and notwithstanding the fact that the expiration of the right to challenge was not alleged by the Respondent in its response, the truth is that it is the same of official knowledge, as states Jorge Lopes de Sousa[5], in annotation to its Article 102 CTPP, with application to the present request for arbitral pronouncement, by force of the provision of Article 29 of the LRATM:

"Official knowledge of the expiration of the right to challenge annullable acts

In the absence of the submission of judicial challenging within the legal period applicable, the interested parties lose the right to challenge the respective act, if the defect of the act is generative of annullability. As results from the provision of Article 135 of the Administrative Procedure Code, the sanction of annullability is residual, being applicable whenever the law does not provide another sanction for administrative acts (which include tax acts) performed in violation of applicable legal principles or rules.

The challenging of annullable acts must be performed within the period provided by law for each case. If the challenging is not submitted within that period, the right to challenge expires due to a defect generative of annullability.

The expiration of the right to challenge is assessed officially by the court and may be alleged at any phase of the proceedings, once the rights of the State embodied in tax acts are not rights available and the expiration is assessed officially by the court and may be alleged at any phase of the proceedings, if established in a matter excluded from the availability of the parties (Article 333, section 1 of the Civil Code)."

Furthermore sustaining this author that[6]:

"Consequence of the intempestuousness of the petition – Absolution from the instance and absolution from the claim.

In case the petition was presented outside the legal period, it should be summarily dismissed, when the proceedings are presented to the judge for purposes of the provision of Article 110, section 1 of the CTPP.

However, if the decision in the sense of intempestuousness (expiration of the right to challenge) is not rendered summarily, there is no obstacle to it being assessed later, designedly in the final decision, as there is no prohibition on knowledge, after the sanation order, of questions that may obstruct the knowledge of the merits provided, for special administrative action, in section 2 of Article 87 of the Administrative Procedure Code.

The consequence of the intempestuousness of the petition, when not subject to summary disposition, appears to be, in tax judicial proceedings, absolution from the instance and not absolution from the claim.

The dilatory exceptions obstruct the court from knowing the merits of the case and give rise to absolution from the instance or the remission of the proceedings to another court (Article 493, section 2 of the Code of Civil Procedure)".

In this manner, and considering that the Claimant filed the request for constitution of the present arbitral tribunal on 16.02.2017, seeking the declaration of illegality of the stamp tax assessment act relating to the year 2015, in the amount of € 15,582.56, notified in April 2016, the period for proceeding with its voluntary payment ended on 30.04.2016.

Beginning, in consequence, the right to challenge on 01.05.2016, the arbitral tribunal cannot fail to conclude that the period of 90 days provided in paragraph a) of section 1 of Article 10 of the LRATM was verified on 29.07.2016, having on that date expired the right of the Claimant to challenge that assessment act, determining, in consequence, the absolution of the Respondent from the instance, cfr. Article 102 of the CTPP, applicable by way of Article 29, section 1, paragraph e) of the LRATM.

DECISION

In harmony with the foregoing, the decision is as follows:

  1. To consider well-founded the exception of "lack of jurisdiction of the arbitral tribunal and unimpeachability of the acts" invoked by the Respondent, given the absolute lack of jurisdiction of the tribunal, and in consequence, to absolve the Respondent from the instance, as regards the principal claim.

  2. To deem the expiration of the right to challenge the stamp tax assessment act challenged by the Claimant, relating to the year 2015, in the amount of € 15,582.56 proven, and in consequence, to absolve the Respondent from the instance, also, as regards the subsidiary claim.

Value of the Proceedings

Although the Claimant formulated its principal claim through the payment notices of the 3rd installment of Stamp Tax for the year 2015, levied under item 28.1 of the General Stamp Tax Table, the truth is that the economic utility of the claim is determined by the value of the assessment, as established by Article 97-A of the CTPP, applicable ex-vi of the provision of Article 29, section 1, paragraph a) of the LRATM, being, in the case at hand, the value of € 15,582.56 (fifteen thousand, five hundred and eighty-two euros and fifty-six cents), contained in the subsidiary claim.

Thus being, this should be the amount to be considered for purposes of determination of the value of the proceedings, and respective economic utility of the claim, given the duty of the tribunal to attend to all elements contained in the case file, cfr. Article 308 of the Code of Civil Procedure, applicable by referral of Article 29, section 1, paragraph e) of the LRATM.

It is fixed, in this manner, the value of the proceedings in € 15,582.56, pursuant to Article 97-A of the CTPP, applicable by force of the provision of Article 29, section 1, paragraph a) of the LRATM and of Article 3, section 2 of the Regulations on Costs in Tax Arbitration Proceedings.

Costs

Costs to be borne by the Claimant in accordance with Article 22, section 4 of the LRATM, of Article 4 of the Regulations on Costs in Tax Arbitration Proceedings, and of Table I attached hereto, which are fixed in the amount of € 918.00.

Notice to be given.

Lisbon, 14 November 2017

The Arbitrator

(Jorge Carita)

[1] Content equally contained in Articles 577, paragraph a) and 578, both of the Code of Civil Procedure, also applicable here by force of paragraphs a) and e) of section 1 of Article 29 of the LRATM.

[2] In Code of Tax Procedure and Process, Annotated and Commented, Vol. I, 6th Edition, 2011, Jorge Lopes de Sousa, page 218

[3] Position assumed in the arbitral decision rendered in the context of cases No. 358/2016-T, 346/2015-T and 736/2014-T

[4] Decision of the Supreme Administrative Court, rendered in case No. 01213/12, of 27.02.2013

[5] In Code of Tax Procedure and Process Annotated and Commented, Volume II, 2011, 6th Edition, Áreas Editora, page 155

[6] In cited work, page 163

Frequently Asked Questions

Automatically Created

What is Verba 28.1 of the General Stamp Tax Table (TGIS) and how does it apply to high-value properties in Portugal?
Item 28.1 of the General Stamp Tax Table (Verba 28.1 TGIS) imposes annual stamp tax on residential properties with a patrimonial tax value (valor patrimonial tributário) equal to or exceeding €1,000,000. This provision targets high-value residential real estate and applies based on two cumulative criteria: residential allocation and VPT at or above the €1,000,000 threshold. The tax is calculated annually based on the property's registered tax value in the tax matrix.
How is Stamp Tax (Imposto do Selo) calculated for properties held in vertical ownership (propriedade vertical)?
For properties held in vertical ownership (propriedade vertical), the Portuguese Tax Authority (AT) traditionally calculates Stamp Tax by aggregating the patrimonial values of all floors or independent units to determine if the €1,000,000 threshold is met. However, this approach is contested, as taxpayers argue that vertical ownership properties with autonomous units should be taxed like horizontal ownership (condominium) properties, where each independent unit is assessed separately against the threshold, with only units individually exceeding €1,000,000 subject to tax.
Can individual floors or independent units in a vertical property be taxed separately under Portuguese Stamp Tax law?
The central legal question in CAAD Process 121/2017-T was whether individual floors or independent units in a vertically-owned property can be taxed separately under item 28.1 TGIS. Claimants argue that when a property has floors with independent use allocated to residential purposes, each unit should be evaluated independently against the €1,000,000 threshold, applying Municipal Property Tax Code principles by analogy. The Tax Authority's position aggregates all unit values, but taxpayers contend this creates unconstitutional discrimination compared to horizontal ownership regimes.
What is the CAAD arbitration procedure for challenging Stamp Tax assessments issued by the Portuguese Tax Authority (AT)?
The CAAD (Centro de Arbitragem Administrativa) arbitration procedure for challenging Stamp Tax assessments under RJAT (Decree-Law 10/2011) begins with filing a request for arbitral tribunal constitution within the legal deadline. The Tax Authority responds, and a sole arbitrator or panel is appointed. The procedure includes written submissions, optional hearings (which may be waived by agreement or tribunal decision), and culminates in a binding arbitral decision. CAAD arbitration provides a faster alternative to judicial courts for resolving tax disputes, with specific rules on costs, deadlines, and evidence.
What was the outcome of CAAD Process 121/2017-T regarding Stamp Tax on independent units in a vertically owned building in Lisbon?
CAAD Process 121/2017-T involved a company challenging €5,255.83 in stamp tax assessments (and subsidiarily €15,582.56) for 2015 on seven independent residential floors in a Lisbon property held in vertical ownership. The claimant argued that item 28.1 TGIS should apply only to units individually exceeding €1,000,000 VPT, not to aggregated property value, and that differential treatment versus horizontal ownership violated constitutional equality and proportionality principles. The arbitral tribunal was constituted on May 22, 2017, with a decision deadline of November 22, 2017. The complete decision outcome is not provided in the available excerpt.