Process: 121/2018-T

Date: May 27, 2019

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral award addresses Process 121/2018-T concerning the legality of Stamp Tax (Imposto do Selo) levied under Verba 28.1 of the General Table of Stamp Tax (TGIS). The claimant, a company engaged in purchasing land for construction and resale, challenged a 2015 Stamp Tax assessment of €16,223.70, arguing the levy violated constitutional principles of equality by discriminating against real estate development companies compared to other businesses. The core procedural issue examined was whether the CAAD arbitral tribunal possessed competence to assess the material unconstitutionality of legislative provisions. The Tax Authority raised a procedural exception, arguing that under Article 2(1) of the RJAT (Legal Framework for Tax Arbitration), arbitral tribunals lack jurisdiction to examine constitutional conformity of legislative acts, being limited to reviewing the legality of specific tax levy acts and assessment decisions. The tribunal distinguished between two matters: declaring the illegality of a specific tax assessment (which falls within CAAD competence) versus declaring unconstitutionality of legal provisions (reserved for Constitutional Court jurisdiction). While taxpayers may invoke constitutional arguments as grounds for illegality in arbitration, the tribunal cannot formally declare legislative provisions unconstitutional. The award references Constitutional Court Decision 378/2018, which had implications for Stamp Tax matters. This case illustrates the jurisdictional boundaries of tax arbitration in Portugal and the proper procedural channels for constitutional challenges in tax disputes involving real estate transactions and Verba 28.1 TGIS applications.

Full Decision

ARBITRAL AWARD

I - REPORT

A..., SA., hereinafter referred to as the "Claimant", with tax identification number..., and with tax domicile at Avenue ..., no...., ..., ..., ...-... Lisbon, filed a request for the constitution of a singular Arbitral Tribunal, in accordance with articles 2 and 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Tax Arbitration, hereinafter referred to as RJAT), in which the Tax and Customs Authority (hereinafter referred to as "Respondent") is required, with the objective of obtaining the annulment of the decision dismissing the gracious objection processed at the Tax Service of Porto ... and the subsequent declaration of illegality of the Stamp Tax levy of the year 2015, in the amount of € 16,223.70, referring to item 28.1 of the General Table of Stamp Tax (TGIS). The Claimant further alleges that the levied Stamp Tax assessment is affected by error regarding the assumptions through the application of a materially unconstitutional rule, on the grounds of violation of the principle of equality, through discrimination against companies engaged in purchasing land for construction and resale, as opposed to other companies.

The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD on 19 March 2018 and automatically notified to the Tax and Customs Authority (AT).

In accordance with the provisions of article 6(1) and article 11(1)(a) of Decree-Law no. 10/2011, of 20 January, the Deontological Council of the Administrative Arbitration Centre (CAAD) designated the signatory as arbitrator, who immediately accepted the appointment. The Parties, duly notified, raised no objection to the appointment of the arbitrator.

In compliance with the provision of article 11(1)(c) of Decree-Law no. 10/2011, of 20 January, in the wording given to it by article 228 of Law no. 66-B/2012, of 31 December, the singular Arbitral Tribunal was constituted on 30 May 2018.

On 18 June 2018, the Director-General of the Tax and Customs Authority was notified in accordance with the terms and for the purposes provided in article 17 of the RJAT.

On 27 August 2018, the Respondent submitted its response and, in accordance with article 17(2) of the RJAT, forwarded the administrative file to be attached to the proceedings. In its response, the Respondent invokes the incompetence of the arbitral tribunal (procedural exception) to examine the request for a declaration of material unconstitutionality of item 28 of the TGIS, and advocates the waiver of the meeting provided for in article 18 of the RJAT.

On 23 November 2018, considering that under the principles of autonomy of the Arbitral Tribunal in conducting the proceedings, of celerity, simplification and procedural informality (articles 19(2) and 29(2) of the RJAT), and taking into account that the raised exception may be addressed in the arbitral award, and considering the evidence already produced and the nature of the issues to be decided, the arbitral tribunal issued an order in which it established the following procedural path:

  • To waive the holding of the meeting provided for in article 18 of the RJAT;

  • To determine that the proceedings continue with optional written submissions, to be presented by the parties within a period of 15 days, in accordance with article 120 of the Code of Tax Procedure and Process (CPPT) and article 91-A of the Code of Administrative Court Proceedings (CPTA), applicable by virtue of the provisions of articles 29(1)(a) and (c) of the RJAT;

  • To determine that, within the period fixed in the preceding item, the Parties shall send to CAAD their respective pleadings in editable format (word);

  • That, although various judicial decisions have already been issued on the disputed matter, as well as various arbitral pronouncements, the Tribunal intended to analyze and weigh the disputed matter, so that, taking into account the time elapsed since the constitution of the arbitral tribunal, in accordance with article 21(2) of the RJAT, the Tribunal decided to extend by two months the period for issuing the arbitral award;

  • Finally, the Tribunal warned the Claimant that by the date of the issuance of the award, it should proceed with payment of the subsequent arbitration fee, in accordance with article 4(3) of the Regulation of Costs in Tax Arbitration Proceedings, and communicate this payment to CAAD.

In light of events that subsequently occurred, namely the issuance by the Constitutional Court of Award no. 378/2018, rendered in process no. 156/2016, the tribunal deemed it appropriate to conduct a thorough study of the matter object of the present arbitral proceedings, so that, in accordance with article 21 of the RJAT, orders extending the period for issuing the arbitral award were issued, which are recorded in the procedural history of the arbitral proceedings contained in CAAD's computer system.

Given the date of the order dismissing the Gracious Objection and the subsequent notification of the claimant's representative, in light of the provision of article 10(1)(a) of the RJAT, the request for arbitral pronouncement is timely, and in accordance with the provisions of articles 4 and 10(2) of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March, the Parties have standing and capacity to sue and are represented in accordance with the law.

The arbitral proceedings are not affected by nullity, but the Respondent in its response raised the material incompetence of the arbitral tribunal to examine and assess the constitutional conformity of legislative acts or their rules. Since this constitutes a procedural exception which, in accordance with articles 576(2), 577(a) and 278(a) of the Code of Civil Procedure (CPC), applicable by virtue of article 29(1)(e) of the RJAT, prevents the examination of the merits of the request for arbitral pronouncement, it is necessary to examine and assess whether the exception invoked by the Respondent is well-founded.

The Respondent invokes the provisions of article 2(1) of the RJAT and the preamble of Decree-Law no. 10/2011, of 20 January, alleging that it was the express will of the legislator to precisely establish the matters on which the arbitral tribunal may pronounce, and which, strictly speaking, are limited to examining

  • Requests relating to the declaration of illegality of tax levy acts, self-assessments, withholding at source and advance payments, and

  • Requests relating to the declaration of illegality of acts fixing the taxable matter when not giving rise to the levy of any tax, of acts determining the collective tax base and of acts fixing property values.

Furthermore, the Respondent considers it manifest that the competence of the arbitral jurisdictional forum does not include the examination of the constitutional conformity of legislative acts or their rules, in this case based on the violation of the principle of taxable capacity, as a facet of the principle of equality, provided in articles 13 and 104(3) of the Portuguese Republic Constitution (CRP), so that absolute incompetence ratione materiae constitutes a procedural exception that prevents the continuation of the proceedings and leads to dismissal of the claim.

In assessing this matter, it is important to emphasize that, regarding the request for arbitral pronouncement, the Claimant focuses its claim on the request for a declaration of illegality of the Stamp Tax levy act of 2015, while not failing to mention the constitutional non-conformity of item 28 of the General Table of Stamp Tax due to violation of fundamental and structural principles of the tax system, not truly constituting its claim a request for a declaration of unconstitutionality of the rules relating to item 28 of the TGIS.

It being indisputable that the Respondent must exercise its functions in strict observance and compliance with the law, this fact does not, however, prejudice the right of taxpayers and other tax-obligated parties, in defense of their rights and legitimate interests, to raise in disputes submitted to the judgment of courts the unconstitutionality of certain rules, nor can it prevent courts, including arbitral courts, from examining issues of unconstitutionality placed before them, by applying or not applying the rules in question, in the exercise of the powers constitutionally conferred on those jurisdictional organs, since arbitral tribunals form part of the categories of tribunals that structure the organization of the jurisdictional system in the Portuguese system of justice (articles 203, 204 and 209 of the CRP).

With regard to a question of identical nature, we follow the decisions of CAAD, issued in processes nos. 675/2017-T and 212/2018-T, respectively, of 04.05.2018 and 13.12.2018, so it is important to emphasize that the CRP also grants courts the power to control the constitutionality of laws issued by organs with legislative power. The arbitral tribunal has constitutional accommodation and its decisions express the exercise of jurisdictional power, being incumbent on it to apply the law according to its interpretation, and is not obliged to adopt the interpretation of organs of executive power or that which organs with legislative power might eventually adopt regarding disputes pending in courts.

Furthermore, the Arbitral Tribunal, in the exercise of its jurisdictional functions, need not limit its interpretative activity to the letter of the law; rather, it should adopt all the criteria for interpretation provided by law, in particular those established in article 9 of the Civil Code and article 11 of the General Tax Law (LGT). The Claimant formulated to the arbitral tribunal a request for a declaration of illegality of a tax levy act, which falls within the scope of its material competence and which, correlatively, does not apply rules that, in substance, may violate fundamental principles of the constitutional legal order. The request formulated by the Claimant may be, and is, directed to courts in general, including arbitral courts, in the actions submitted to judgment. In this measure, the exception of incompetence alleged by the Respondent is unfounded.

I - 1 - CAUSE OF ACTION

The cause of action of the request for arbitral pronouncement consists of:

  • The act of levying Stamp Tax of 2015, in the amount of € 16,223.70, levied on the property of a plot of land for construction registered in the property matrix of the parish of the Union of Parishes of ..., ... and ..., under article..., within the jurisdiction of the Tax Service of Porto ....

  • The decision dismissing, issued by the Head of the Tax Service Porto..., dated 10.12.2017, regarding gracious objection no. ...2017..., which was processed at that Tax Service and which aimed at the annulment of the Stamp Tax levy act of 2015.

The Claimant bases its claim on:

  • Error in the interpretation of the rules of item 28.1 of the TGIS, since the latter only targets the taxation of land for construction exclusively for housing purposes;

  • Error in the interpretation of the rules of item 28.1 of the TGIS, since those rules do not aim to burden the productive sector;

  • Error regarding the assumptions of law through the application of a materially unconstitutional rule, on the grounds of violation of the principle of equality, through discrimination against companies engaged in purchasing land for construction and resale, as opposed to other companies;

  • Error regarding the assumptions of law through the application of a materially unconstitutional rule, on the grounds of violation of the principle of equality insofar as it subjects taxation to the property of land for construction for which the building, authorized or planned, does not include housing of a value equal to or greater than € 1,000,000;

  • Unconstitutionality of the rules of item 28.1 of the TGIS due to violation of the principle of equality.

I - 2 - THE RESPONDENT'S RESPONSE

In its response, the Respondent alleges that:

2.1 The Stamp Tax levy at issue results from the direct application of the rules of item 28 of the TGIS, which translates into objective elements, without any subjective or discretionary assessment.

2.2 The certificate of content of the urban property and the property register express that the land for construction that motivated the tax levy at issue is intended for housing purposes (housing).

2.3 Item 28 of the TGIS is a general and abstract rule, applicable uniformly to all cases in which the factual and legal assumptions are met.

2.4 The act of levying Stamp Tax of 2015 does not suffer from any defect or illegality, so the request for arbitral pronouncement should be judged unfounded, with the impugned tax levy act remaining in the legal order.

2.5 The AT limited itself to making a binding application of the law, so no illegality of the tax levy act can be attributed to it, nor consequently does there exist any factual or legal error imputable to the services.

2.6 The arbitral tribunal should judge well-founded the exception of incompetence and, consequently, declare the dismissal of the claim.

I - 3 - ISSUES TO BE DECIDED

The singular arbitral tribunal must decide on:

3.1 The annulment of the decision dismissing gracious objection no. ...2017..., which was processed at the Tax Service of Porto..., whose examination and decision were the subject of an order by the Head of that Tax Service under powers delegated by the Director of Finances of Porto.

3.2 The legality of the Stamp Tax levy of 2015, in the amount of 16,223.70, whose payment was made in three installments, in the unitary amount of € 5,407.90.

3.3 The annulment of the tax act levying Stamp Tax of 2015 identified above.

3.4 The condemnation of the Respondent to the payment of compensatory interest, under the provisions of article 43 of the General Tax Law (LGT) and article 61 of the CPPT.

3.5 The competence of the arbitral tribunal to examine the Claimant's claim, based on the exception invoked by the Respondent.

II - ON THE MERITS

II - 1 - THE FACTS

II - 1 - 1 PROVEN FACTS

Having analyzed and scrutinized the documentary evidence produced, with interest for the examination and decision of the case, the following facts are considered proven:

  • The gracious objection against the Stamp Tax levy act of 2015 was directed to the Director of Finances of Lisbon, and presented at the Tax Service of Lisbon..., but was sent to the Tax Service Porto ... for purposes of institution, examination and decision, because the land for construction object of taxation under the rules of item 28 of the TGIS is registered in the urban property matrix, under article no..., of the Union of parishes of..., ... and ..., within the jurisdiction of the Tax Service Porto ....

  • The gracious objection was dismissed by order of 10.12.2017 by the Head of the Tax Service of Porto ..., with the said decision being notified to the representative of the Claimant.

  • The Tax and Customs Authority effected the levy of Stamp Tax of 2015, because the Claimant was the owner of the said plot of land for construction, whose tax property value registered in the property matrix is € 1,622,370.00, which determined a Stamp Tax in the amount of € 16,223.70, whose payment was made through three installments (April/2016, July/2016 and November/2016), in the unitary amount of 5,407.90. The first installment was paid, for reasons attributable to the Claimant, outside the legal period, which is why the Claimant had to bear the amount of € 83.71 in legal charges.

  • Through the Subdivision Permit, a document attached to the request for arbitral pronouncement, it is verified that the building to be constructed contemplates a construction area of 2,892.50 m2, intended for commerce/services purposes, so that the land for construction subject to taxation is simultaneously for housing and commerce/services.

II-1-2 UNPROVEN FACTS AND JUSTIFICATION FOR FACTUAL DETERMINATION

There are no essential facts with relevance for examination of the merits of the case that have not been proven.

II - 2 - MATTERS OF LAW

In order to decide on the issues to be decided, it is necessary to list and scrutinize the applicable law.

2.1 In the original wording, the rules of item 28 of the TGIS aimed to tax the property, usufruct or surface right of urban properties whose tax property value was equal to or greater than € 1,000,000, with the rate of 1% applying if the property had housing use.

2.2 Given the Statement of Reasons for Legislative Proposal no. 96/XII/2nd, the justification and motivation for the addition of item 28 of the TGIS emerged from the economic and financial situation of the country, calling for budgetary consolidation efforts. In the presentation and discussion of the Legislative Proposal in the Assembly of the Republic, the Secretary of State for Tax Affairs clarified that the Government proposed the creation of a special rate on residential urban properties of higher value.

2.3 In the original version of item 28.1 of the TGIS, its "constitutionality" in light of the principle of equality was affirmed by Constitutional Court Award no. 590/2015, of 11 November 2015, referring to the principle of social equity in austerity and, equally, to taxation only of residential urban properties of higher economic significance, externally manifesting levels of wealth corresponding to the highest standards of Portuguese society.

2.4 Item 28 of the TGIS was subject to interpretative doubts and associated with significant litigation. Indeed, the text of the rule was questioned in order to determine the concrete definition of urban property with housing use. The issue of taxation of land for construction was also discussed, in light of the understanding in this sense of the tax administration, but uniformly rejected by the Supreme Administrative Court and by abundant arbitral case law.

2.5 The reform of the text of item 28 of the TGIS aimed to dispel doubts regarding its application, so that through the State Budget Law of 2014 (Law no. 83-C/2013, of 31 December), item 28.1 was amended so as to then tax the property, usufruct or surface right of residential urban properties (changing "housing use" to "residential property") or land for construction whose building, authorized or planned, is for housing.

2.6 The new wording of the rules did not manage to dispel doubts, controversy and litigation, and in relation to the taxation of land for construction, doubt went beyond the question of the scope of item 28.1, as the scope of Stamp Tax was expanded to encompass the rights of property, usufruct or surface of such land for construction. Thus, the question of the constitutionality of this new formulation of item 28.1 of the TGIS was raised.

2.6 Without diminishing the regulatory evolution of the provisions, it must be emphasized that in matters of constitutionality, the Constitutional Court has already issued divergent decisions, with particular emphasis on Award no. 590/2015, rendered in process no. 542/14, in which it was decided not to judge unconstitutional the rule of item 28 and 28.1 of the TGIS, added by article 4 of Law no. 55-A/2012, of 29 October, insofar as it imposes annual taxation on the property of residential urban properties whose tax property value is equal to or greater than € 1,000,000.00.

2.7 In turn, Award no. 250/2017, rendered in process no. 156/2016, established case law to the effect of judging unconstitutional the rule of item 28.1 of the TGIS, approved by Law no. 55-A/2012, of 29 October, and amended by Law no. 83-C/2013, of 31 December, insofar as it imposes annual taxation on the property of land for construction whose building, authorized or planned, is for housing, whose tax property value is equal to or greater than € 1,000,000.00.

2.7 Following this Award, and as a result of an appeal to the Constitutional Court's full bench, filed by the Tax and Customs Authority, Award no. 378/2018 was issued, related to process no. 156/2016, in which the Constitutional Court's full bench established case law to the effect of not judging unconstitutional the rule contained in item 28.1 of the TGIS, approved by Law no. 55-A/2012, of 29 October, and amended by Law no. 83-C/2013, of 31 December, insofar as it imposes annual taxation on the property of land for construction whose building, authorized or planned, is for housing, whose tax property value is equal to or greater than € 1,000,000.00.

2.8 In this light, it is necessary to proceed with the analysis of the situation in this case in which the definition of the scope of item 28.1 of the TGIS is at issue, in the wording given by Law no. 83-C/2013, of 31 December, that is, to determine whether the plot of land for construction in question in the present arbitral proceedings may fall under the concept of "land for construction whose building, authorized or planned, is for housing, in accordance with the provisions of the Property Tax Code (CIMI)" to which the said item appeals, taking into account that its tax property value exceeds € 1,000,000.00.

2.9 At the time of the facts, item 28 of the TGIS comprised the following wording:

"28 – Property, usufruct or surface right of urban properties whose tax property value contained in the matrix, in accordance with the Property Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the tax property value used for purposes of Property Tax:

28.1 – For residential property or for land for construction whose building, authorized or planned, is for housing, in accordance with the provisions of the Property Tax Code – 1%."

2.10 In light of the provisions of article 37 of the CIMI, it must be considered that the responsibility for the initial assessment of an urban property rests with the head of finances, based on the statement presented by the taxpayers or on any elements at his disposal. In relation to land for construction, a photocopy of the subdivision permit should be presented, which should be replaced, if no subdivision exists, by a photocopy of the building license permit, approved project, prior communication, favorable prior information or document proving constructive viability.

2.11 In relation to the plot of land for construction in this case, there exists a subdivision permit, in which it is expressed that the land is not intended exclusively for housing purposes, but aims, further, at the construction of an area intended for the exercise of commerce and services.

2.12 The tax property value of land for construction is the sum of the value of the area of footprint of the building to be constructed, which is that situated within the perimeter of fixing the building to the ground, measured by the outer part, added to the value of the land adjacent to the footprint (article 45 of the CIMI), and in the technical expression for determining the tax property value various indicators intervene, among which the allocation coefficient (article 38 of the CIMI), so that the purpose to which the property is intended in concrete cannot be disregarded.

2.13 The hermeneutics of item 28.1 of the TGIS must be considered as enunciating material content which, in light of the CIMI, is "land for construction whose building, authorized or planned, is for housing," not being satisfied with the mere formality of the Tax and Customs Authority, in the exercise of its administrative activity, in application of the rules of that Code (Property Tax), having qualified for matrix purposes a given property as having that use. If the legislator intends such a result, in the formulation of the legal provision, it would surely have used the expression "land whose coefficient type of location used for purposes of determining the TPV is housing," or similar.

2.14 The tribunal, in forming its conviction, took into account the vast arbitral and judicial case law that exists on the subject matter in controversy, especially adopting the positions enunciated in the arbitral decision issued in process no. 296/2018-T and in the judgments referenced therein.

2.15 Thus, at the time of the tax event there existed a subdivision permit expressing authorization for the plot of land for construction in question to have a building whose use is intended for housing and also the exercise of commerce and services. It is thus demonstrated that the use of the property whose Stamp Tax levy was impugned is not exclusively housing, having been attributed different uses, namely housing and commerce, whose uses, in light of the provisions of article 38 of the CIMI, cannot fail to influence the determination of the tax property value. In this vein, it must be mentioned the holding of the STA Award rendered in process no. 080/18, of 06.06.2018, in which it is established that (I) [i]n the present situation in which a subdivision permit was granted in accordance with which the properties are intended "for collective housing and commerce/services," a property whose sole purpose is housing is not at issue. (ii) The item 28 under analysis does not establish any criterion or need for evaluation of the percentage for which the property is intended for housing or for commerce/services so that we can consider that the legislator took such reality into account and, nothing having been said about it, conclude that it intends to dissolve it in the housing use. (iii) Law 83-C/2013, of 31 December, clarified that the properties previously denominated by it as having housing use were, in fact, urban properties or land for construction whose building, authorized or planned, is for housing. (iv) For these properties to be included in this normative, it was absolutely necessary that there be an indication that they are also taxed in this regard the urban properties or land for construction whose building, authorized or planned, is, predominantly, for housing."

2.16 In this measure, establishing the rule of item 28.1 of the TGIS the scope over "residential property or land for construction whose building, authorized or planned, is for housing," and having the plot of land for construction subject to the present arbitral decision been attributed different uses, cannot, for all the reasons stated, such land be subject to taxation in the manner performed by the impugned levy.

2.17 It being demonstrated that the plot of land for construction in this case was not attributed exclusively residential use, filling a reality that the rule of scope does not provide for nor reach, so that there exists error regarding the assumptions of law, the levy of Stamp Tax of 2015 impugned in the present arbitral proceedings should thus be annulled, with the subsequent legal effects.

II - 3 - COMPENSATORY INTEREST

3.1 Compensatory interest is due when it is determined, in a gracious objection or judicial impugnation, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due (article 43(1) of the LGT). Under article 24(5) of the RJAT, the right to payment of compensatory interest may be recognized in arbitral proceedings.

3.2 Payment of compensatory interest presupposes that the tax subject to the levy placed at issue has been paid, which is confirmed in relation to the Stamp Tax levy of 2015, whose payment was made by the Claimant through three installments.

3.3 In this measure, having considered the success of the Claimant's request regarding the declaration of illegality of the act levying Stamp Tax identified in the proceedings, in the amount of 16,223.70, compensatory interest must be paid in accordance with article 43 of the LGT and article 61 of the CPPT, in relation to that amount, with the levying of compensatory interest covering the time period elapsed between the undue payment of each installment and the date of issuance of the respective tax credit note.

III - AWARD

In accordance with and on the grounds set forth above, and having the Tribunal formed its conviction based on the facts evidenced in the documentary evidence presented by the Parties and the reasons advanced, as well as the case law and case law analyzed and related to the subject matter object of the arbitral proceedings, the Arbitral Tribunal awards:

  • Judgment in favor of the request for arbitral pronouncement regarding the declaration of illegality of the act levying Stamp Tax of 2015, in the amount of 16,223.70, with the consequent and corresponding annulment of the said tax levy act;

  • Judgment in favor of the request for annulment of the decision dismissing gracious objection no. ...2017..., presented to examine the illegality of the said Stamp Tax levy act;

  • That, as a result of the annulment of the Stamp Tax levy of 2015, the AT must proceed to refund to the Claimant the amounts of tax unduly paid;

  • Judgment in favor of the request for condemnation of the Tax and Customs Authority to the payment of compensatory interest, in accordance with article 43 of the LGT and article 61 of the CPPT, in relation to the amounts of Stamp Tax unduly paid, depending on the time period elapsed between the payment of each installment and the issuance of the respective tax credit note;

  • Judgment in disfavor of the exception of incompetence alleged by the Respondent.

IV - 1 VALUE OF THE PROCEEDINGS

The value of the proceedings is fixed at € 16,223.70 (sixteen thousand two hundred twenty-three euros and seventy cents), in accordance with article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), article 97-A(1)(a) of the CPPT and article 306 of the Code of Civil Procedure (CPC).

IV - 2 COSTS

The amount of costs is fixed at € 1,224.00 (one thousand two hundred twenty-four euros) under article 22(4) of the RJAT and Table I attached to the RCPAT, at the charge of the Respondent, in accordance with the provisions of article 12(2) of the RJAT and article 4(4) of the RCPAT.

Let notice be given.

Lisbon, 27 May 2019

The Arbitrator

Jesuíno Alcântara Martins

Frequently Asked Questions

Automatically Created

What is Verba 28.1 of the Portuguese Stamp Tax General Table (TGIS) and how does it apply to real estate?
Verba 28.1 of the Portuguese Stamp Tax General Table (TGIS) applies to certain real estate holdings and operations. It establishes stamp tax obligations on property ownership or transactions, particularly affecting companies that hold real estate assets in their balance sheets. In this case, it was applied to a company engaged in purchasing land for construction and resale, generating a 2015 assessment of €16,223.70. The provision has been subject to numerous legal challenges regarding its constitutionality and scope of application to different types of real estate businesses.
Can a company challenge the constitutionality of Stamp Tax (Imposto do Selo) through CAAD arbitration proceedings?
A company cannot directly request a declaration of unconstitutionality through CAAD arbitration proceedings. According to Article 2(1) of the RJAT (Legal Framework for Tax Arbitration), arbitral tribunals have limited jurisdiction to declare the illegality of specific tax levy acts, self-assessments, and valuation decisions, but cannot formally assess the material unconstitutionality of legislative provisions. However, taxpayers may invoke constitutional arguments (such as violation of equality principles) as grounds for illegality of the specific tax assessment. Direct constitutional review remains the exclusive competence of the Portuguese Constitutional Court, not the CAAD arbitral tribunal.
Does the Stamp Tax under Verba 28.1 TGIS violate the equality principle for companies engaged in property construction and resale?
The claimant argued that Verba 28.1 TGIS violates the constitutional principle of equality under Articles 13 and 104(3) of the Portuguese Constitution by discriminating against companies engaged in property construction and resale compared to other businesses. The argument invoked violation of taxable capacity as a facet of equality, suggesting the tax creates unjustified differential treatment for real estate development companies. The tribunal's decision was influenced by Constitutional Court Decision 378/2018, which addressed similar issues. While constitutional arguments can support claims of illegality in arbitration, formal declarations of unconstitutionality require Constitutional Court proceedings.
What is the procedure to contest a Stamp Tax assessment through a gracious complaint (reclamação graciosa) and subsequent arbitration?
To contest a Stamp Tax assessment, taxpayers must first file a gracious complaint (reclamação graciosa) with the competent Tax Service. If the gracious complaint is dismissed, the taxpayer may then request arbitration through CAAD within the legal deadline specified in Article 10(1)(a) of the RJAT. The arbitration request must be submitted to the Administrative Arbitration Centre (CAAD), identifying the contested levy act and grounds for illegality. Upon acceptance, an arbitrator is designated, the tribunal is constituted (typically within specific timeframes), and the Tax Authority submits its response with the administrative file. The proceedings follow principles of celerity and procedural informality under Article 29(2) RJAT.
Is the CAAD arbitral tribunal competent to assess the material unconstitutionality of provisions in the Stamp Tax General Table?
The CAAD arbitral tribunal is not competent to assess and declare the material unconstitutionality of provisions in the Stamp Tax General Table. This limitation stems from Article 2(1) of the RJAT, which restricts arbitral jurisdiction to examining requests for declaration of illegality of specific tax levy acts, self-assessments, and valuation decisions. Constitutional review of legislative acts is reserved exclusively for the Portuguese Constitutional Court under the constitutional framework. However, arbitral tribunals may consider constitutional arguments as grounds supporting claims that a specific tax assessment is illegal, without formally declaring the underlying legislative provision unconstitutional. This distinction preserves the Constitutional Court's monopoly on constitutional review while allowing taxpayers to invoke constitutional principles in tax arbitration.