Process: 122/2015-T

Date: October 16, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision addresses the legality of Stamp Duty assessments totaling €17,026.58 levied under item 28.1 of the General Stamp Duty Table (TGIS) on construction land owned by a real estate investment fund for the year 2013. The Claimant contested the assessments on constitutional grounds, arguing that item 28.1 TGIS violates the principles of equality (both horizontal and vertical), proportionality, and legal certainty as enshrined in Articles 13, 18(2), 104(3), and 262(2) of the Portuguese Constitution. The Tax Authority raised procedural exceptions regarding material competence, distinguishing between collection documents and assessment acts, and noting partial subsequent futility since some assessments had already been annulled administratively, reducing the disputed amount to €7,988.16. On the merits, the Tax Authority defended the constitutionality of item 28.1, citing previous arbitral precedent (Process 577/2014-T) and Constitutional Court decisions (187/2013 and 197/2013) that found no violation of the equality principle. The TA argued there was no retroactive application of tax rules that could undermine legal certainty and that the proportionality challenge lacked merit. The case illustrates the recurrent constitutional challenges to the annual Stamp Duty on high-value construction land, the admissibility of such challenges in tax arbitration proceedings, and the procedural complexities involving the distinction between assessment acts and collection documents in arbitral jurisdiction.

Full Decision

ARBITRAL DECISION

I. REPORT

A... – REAL ESTATE INVESTMENT FUND, Tax ID ..., legally represented by B... – Collective Investment Management Company, S.A., with registered office at Street …, Lisbon, holder of the unique registration and identification number for a collective person ..., hereinafter simply designated as Claimant, filed an application for the constitution of an arbitral tribunal in tax matters and an application for an arbitral award, pursuant to the provisions of articles 2 section 1(a) and 10 section 1(a), both of Decree-Law No. 10/2011, of 20 January (Legal Regime for Tax Arbitration, abbreviated as LRTA), requesting the declaration of illegality and the consequent annulment of the Stamp Duty (SD) assessments Nos. 2014 ..., 2014 ..., 2014 ... and 2014 ..., relating to the year 2013, in the total amount of € 17,026.58, as well as the condemnation of the Tax Authority (TA) to refund to the Claimant the amount of stamp duty paid and the payment of indemnity interest.

To substantiate its request, it alleges, in summary:

a) The Claimant is the owner and legitimate proprietor of the urban properties intended for building land registered in the urban property roll under article numbers ... and ..., both from the parish of ... (respectively, U-00... and U-00...);

b) The Claimant was notified of the Stamp Duty assessments relating to the year 2013, with the following numbers and amounts:

i) Assessment No. 2014 ..., in the amount of € 3,922.40, relating to the first installment of stamp duty, concerning the urban property registered in the urban property roll under article number ...;

ii) Assessment No. 2014 ..., in the amount of € 3,922.38, relating to the second installment of stamp duty, concerning the urban property registered in the urban property roll under article number ...;

iii) Assessment No. 2014 ..., in the amount of € 4,590.90, relating to the first installment of stamp duty, concerning the urban property registered in the urban property roll under article number ...;

iv) Assessment No. 2014 ..., in the amount of € 4,590.90, relating to the second installment of stamp duty, concerning the urban property registered in the urban property roll under article number ...;

c) Such assessments were made under item 28.1 of the General Stamp Duty Table (GSDT);

d) The assessments in question lack legal and constitutional basis, since the rule that is their origin – item 28.1 of the General Stamp Duty Table (GSDT) – violates the principles of equality, proportionality and legal certainty;

j) The manifest violation of the principle of fiscal equality, whether horizontal or vertical, is very evident in the situation at hand;

k) The constitutional principle of legal certainty is an inherent feature of the postulate that provides for a stable and predictable legal system, so that the citizen knows at all times what legal rules determine their daily life;

l) Item 28.1 of the GSDT violates the principles of equality and legal certainty, not safeguarding, as would be expected, any other fundamental right or constitutionally protected interest;

m) The rule concerning item 28.1 of the GSDT also violates the principle of proportionality, and therefore the assessments in question are null and void;

n) The stamp duty assessment should be annulled on the basis of its illegality, by having at its basis a rule that is manifestly unconstitutional, violative of the principles of equality, legal certainty and proportionality, as provided for in articles 262 section 2, 13, 18 section 2 and 104 section 3 of the Constitution.

The Claimant submitted ten (10) documents and did not list any witnesses.

In the application for arbitral award, the Claimant chose not to appoint an arbitrator, whereby, pursuant to the provisions of article 6 section 1 of the LRTA, the undersigned was appointed by the Deontological Council of the Administrative Arbitration Center, the appointment having been accepted in the legally prescribed manner.

The arbitral tribunal was constituted on 30 April 2015.

Notified in accordance with and for the purposes of the provisions of article 17 of the LRTA, the Respondent filed a reply, defending itself by way of exception and by way of objection, alleging, in summary, the following:

By way of exception:

a) The application for arbitral award has as its subject matter the annulment of collection documents (1st and 2nd installments) relating to Stamp Duty assessments in the total amount of € 25,539.86;

b) The Claimant only brings to the procedural discussion the amounts appearing in the collection notes relating to the 1st and 2nd installments of stamp duty of the year 2013, which amount to € 17,026.58;

c) The acts subject to assessment in arbitral proceedings are only and solely assessment acts and not collection documents;

d) The arbitral tribunal must recognize itself as materially incompetent to assess applications for arbitral awards that concern tax collection notes;

e) If this is not the case, the arbitral tribunal should recognize that the law does not provide, neither in arbitral proceedings nor in judicial review proceedings, for the annulment claim of the payment of installments per se, since such effect shall only result from the annulment of the tax assessment act;

f) Having the Claimant brought only collection notes to the consideration of the tribunal, this instance should recognize the unassailability of the acts brought before the tribunal;

g) The assessment acts that gave rise to the collection documents challenged were wholly (in the case of the assessment relating to the urban property registered in the roll under article ...) or partially (in the case of the assessment relating to the urban property registered in the roll under article ...) annulled;

h) Thus, the arbitral tribunal should recognize the partial subsequent futility of the dispute, with the amount at issue being only € 7,988.16.

By way of objection:

a) The Claimant's application is based solely and exclusively on the invocation of the unconstitutionality of the rule embodied in item 28 of the Stamp Duty Code (SDC), on the basis of the violation of the principles of equality, proportionality and legal certainty;

b) The arbitral tribunal is only competent to decide on this constitutional non-conformity, under penalty of excess of arbitral award;

c) The constitutional validity of item 28 of the SDC has already been subject to arbitral assessment – as in the context of proceedings No. 577/2014-T – in which, based on Constitutional Court decisions Nos. 187/2013 and 197/2013, it is concluded that there is no violation of the principle of equality;

d) The Claimant's arguments to the effect of unconstitutionality by violation, whether of the principle of equality or of the principle of proportionality, cannot be accepted;

e) The same applies to the violation of the principle of legal certainty, because there is not at issue the retroactive application of tax rules that could unduly postpone the expectations of citizens;

f) The decision of the arbitral tribunal should be nothing other than to dismiss the Claimant's claim.

The Respondent submitted a copy of the administrative file and did not list any witnesses.

In reply to the exceptions raised by the TA, the Claimant came to allege, in summary, that the application for the constitution of the arbitral tribunal is based on the illegality of the decision rendered in gracious complaint proceedings and of the stamp duty assessments that were at its origin, adding that there is no official issuance of any annual assessment and that the first contact with the amount of tax was made only at the time of notification of payment of the first installment. Furthermore, even though, by mere oversight, the total amount of the assessment may not have been indicated, what is sought is the annulment of the stamp duty assessments relating to the year 2013, and the total amount indicated should be corrected.

In case this is not understood, it maintains what was initially alleged, arguing for the dismissal of the exception raised.

Finally, given the complete annulment of the stamp duty assessment relating to the urban property registered in the roll under article ... and the partial annulment of the stamp duty assessment relating to the urban property registered in the roll under article ..., the Claimant reduces the claim to a declaration of illegality of the stamp duty assessment relating to the year 2013 on the urban property registered in the roll under article ... for the amount of € 11,982.25, or if this is not understood, for the amount of € 7,988.16, relating to the assessment of the 1st and 2nd installments of stamp duty.

Given the position taken by the parties and there being no need for additional production of evidence, the holding of a hearing to which article 18 of the LRTA refers was dispensed with, the Claimant having presented written submissions in which it maintained the position initially defended.

II. CASE MANAGEMENT

The Arbitral Tribunal is regularly constituted.

The parties enjoy legal personality and legal capacity, are entitled and are regularly represented.

The proceedings do not suffer from defects that affect its validity.

III. ISSUES TO BE DECIDED

In these proceedings the issues to be decided are:

a) To decide on the modifications to the claim requested by the Claimant;

b) To decide on the exception of material incompetence of the arbitral tribunal;

c) To determine whether, for the purposes of application of item 28.1 of the GSDT attached to the SDC, in the version in force at the date of the facts, building land is considered as a property with residential use.

IV. FACTUAL FINDINGS

a. Proven Facts:

With relevance to the decision to be rendered in these proceedings, the following facts were established as proven:

  1. Registered in favor of the Claimant are the urban properties intended for building land registered under articles ... and ... of the urban property roll of the parish of ... (U – 00... and U – 00...);

  2. On 17 March 2014, the TA assessed, under item 28.1 of the GSDT attached to the SDC, stamp duty on the properties registered in the urban property roll under articles ... and ..., relating to the year 2013, in the total amount of, respectively, € 11,767.16 and € 13,772.70;

  3. The Claimant was notified of the first and second installments to pay of the SD assessed by the TA, relating to the properties identified above, corresponding to collection documents Nos. 2014 ..., in the amount of € 3,992.40; 2014 ..., in the amount of € 3,992.40; 2014 ... and 2014 ..., in the amounts of € 4,590.90;

  4. On 29 April 2014, the Claimant proceeded to pay the 1st installments of Stamp Duty relating to the year 2013, which fell upon the urban properties registered in the urban property roll under articles ... and ..., in the amounts of, respectively, € 3,922.40 and € 4,590.90;

  5. The payment deadline for the 1st installments of stamp duty relating to the year 2013, which fell upon the urban properties identified above, was April 2014;

  6. On 28 July 2014, the Claimant proceeded to pay the 2nd installments of Stamp Duty relating to the year 2013, which fell upon the urban properties registered in the urban property roll under articles ... and ..., in the amounts of, respectively, € 3,922.40 and € 4,590.90;

  7. The payment deadline for the 2nd installments of stamp duty relating to the year 2013, which fell upon the urban properties identified above, was July 2014;

  8. On 28 August 2014, the Claimant filed a gracious complaint at the Tax Office of Seixal - 2, to which was assigned the number ..., with a view to the annulment of the assessments referred to in the preceding point;

  9. By official letter dated 14 October 2014, the Claimant was notified of the proposal for dismissal of the gracious complaint filed and to, if it wished, exercise the right to prior hearing;

  10. By official letter dated 20 November 2014, notified to the Claimant on 25 November 2014, the draft decision of dismissal of the request was converted into final;

  11. On 27 November 2014, the Claimant paid the 3rd installment of Stamp Duty assessed on the urban property registered in the roll under article ..., in the amount of € 4,590.90;

  12. The application for the constitution of the arbitral tribunal in tax matters and for arbitral award was filed on 23 February 2015;

  13. Following the complaint proceedings No. ..., by order dated 23 April 2015, the ex officio review of the SD of item 28 of the GSDT for the years 2011, 2012, 2013, 2014 was ordered, relating to the properties registered in the urban property roll under articles ... and ...;

  14. The Stamp Duty assessment relating to the year 2013, which fell upon the urban property registered in the roll under article ..., was completely annulled, the Claimant having received its refund in the amount of € 11,767.16 on 27 May 2015;

  15. The Stamp Duty assessment relating to the year 2013, which fell upon the urban property registered in the roll under article ..., was partially annulled, the Claimant having received its refund in the amount of € 1,790.45 on 27 May 2015.

b. Unproven Facts:

There is no factuality of interest to the proceedings that was not proven.

c. Basis for Factual Findings:

The conviction regarding the facts established as proven was based on documentary evidence submitted by the Claimant, indicated in relation to each of the points, whose authenticity and conformity with reality were not questioned by the Respondent.

V. ON THE LAW

Prior to the assessment of the merits of the case, it is first necessary to consider ex officio the timeliness of the application for arbitral action made by the Claimant.

Now, by way of the application for arbitral award submitted, the Claimant comes to request the annulment of the stamp duty assessments relating to the year 2013 that fell upon the urban properties registered in the roll under articles ... and ..., making no reference with respect to the annulment of the decision of dismissal of the gracious complaint equally presented by it.

Having said this, it results from the proven facts – see points 5 and 7 – that the payment deadlines for the stamp duty assessed on the urban properties at issue in these proceedings were April and July 2014.

In turn, it is proven that the Claimant filed the application for the constitution of the arbitral tribunal on 23 February 2015 – see point 12.

According to the provisions of article 10 section 1(a) of the LRTA, the time limit for filing the application for the constitution of an arbitral tribunal is 90 days, calculated from the events provided for in sections 1 and 2 of article 102 of the Code of Tax Procedure and Process, among which is included the expiry of the period for voluntary payment of the tax installments legally notified to the taxpayer.

From which it is established that, having the Claimant limited its request to the annulment of the tax assessment acts of stamp duty relating to the year 2013, it had for that purpose the period of 90 days calculated from the deadline for voluntary payment of those assessments, and not, as actually occurred, the period of 90 days calculated from the date of notification of the decision of dismissal of the gracious complaint.

Therefore, at the date of filing the application for the constitution of an arbitral tribunal, the legally prescribed period for that purpose had already expired.

This would not be the case – considering the application for the constitution of an arbitral tribunal to be timely – if the Claimant had requested a declaration of illegality of the decision of dismissal of the gracious complaint underlying these proceedings – which did not occur.

Thus, the respective period having expired, the Claimant's right to challenge by means of the filing of the application for arbitral constitution the assessments at issue has lapsed.

Therefore, it is considered that the application for arbitral award filed is untimely due to expiry of the right of action, thus being prejudiced the determination of the merits.

VI. DECISION

In light of the foregoing, it is decided to find the application for arbitral award filed untimely due to expiry of the right of action, thereby absolving the Respondent of the claim.

It is fixed that the value of the case is € 17,026.58, pursuant to subparagraph (a) of section 1 of article 97-A of the Code of Tax Procedure and Process, applicable by virtue of subparagraphs (a) and (b) of section 1 of article 29 of the LRTA and of section 2 of article 3 of the Costs Regulation in Tax Arbitration Proceedings.

It is fixed that the amount of the arbitration fee is € 1,224.00, in accordance with Table I of the Costs Regulation of Tax Arbitration Proceedings, as well as the provisions of section 2 of article 12 and of section 4 of article 22, both of the LRTA, and of section 3 of article 4 of the cited Regulation, to be paid by the Claimant as it is the losing party.

Register and notify.

Lisbon, 16 October 2015.

The Arbitrator,

Alberto Amorim Pereira

Document prepared by computer, pursuant to section 5 of article 131 of the Civil Procedure Code, applicable by reference of subparagraph (e) of section 1 of Decree-Law No. 10/2011, of 20/01.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28.1 TGIS applicable to construction land (terrenos para construção) valued over €1,000,000?
Yes, Stamp Tax under Verba 28.1 of the Tabela Geral do Imposto do Selo is applicable to construction land (terrenos para construção) with a taxable value exceeding €1,000,000. This provision establishes an annual stamp duty on urban properties classified as building land when their taxable patrimonial value surpasses this threshold. The tax is calculated based on the property's registered value and is paid in installments, as evidenced by the assessments in this case involving two urban properties registered as construction land.
Does Verba 28.1 of the Tabela Geral do Imposto do Selo violate the constitutional principles of equality, proportionality, and legal certainty?
The constitutional validity of Verba 28.1 TGIS has been subject to extensive debate. While taxpayers frequently challenge it as violating the principles of equality (Article 13), proportionality (Article 18(2)), and legal certainty (Articles 2 and 262(2) of the Constitution), the Tax Authority and several arbitral tribunals have upheld its constitutionality. The Tax Authority referenced Constitutional Court decisions 187/2013 and 197/2013 and arbitral precedent (Process 577/2014-T) supporting the provision's compliance with equality principles. However, the substantive merits depend on each tribunal's assessment of whether the differential treatment of high-value construction land and the tax burden imposed are justified and proportionate.
Can a real estate investment fund (fundo de investimento imobiliário) challenge Stamp Tax assessments through CAAD tax arbitration?
Yes, a real estate investment fund (fundo de investimento imobiliário) can challenge Stamp Tax assessments through CAAD (Centro de Arbitragem Administrativa) tax arbitration. Under Article 2(1)(a) and Article 10(1)(a) of Decree-Law 10/2011 (RJAT - Legal Regime for Tax Arbitration), taxpayers including investment funds legally represented by their management companies have standing to request arbitral review of tax assessment acts, including Stamp Duty liquidations. In this case, the fund was represented by its collective investment management company and successfully initiated arbitral proceedings, demonstrating that institutional investors have access to this alternative dispute resolution mechanism for tax matters.
What are the time limits (tempestividade) for filing a request for arbitral pronouncement (pedido de pronúncia arbitral) under RJAT?
The time limits (tempestividade) for filing a request for arbitral pronouncement under RJAT depend on the nature of the challenged act. For tax assessments, the request must generally be filed within 90 days from notification of the final administrative decision (such as rejection of a complaint or hierarchical appeal) or, if no prior administrative challenge was filed, within the deadline for filing such administrative challenge. The issue of timeliness (tempestividade) was specifically mentioned in the case theme, indicating it was a relevant procedural matter. Failure to observe these statutory deadlines may result in rejection of the arbitral request as untimely, making compliance with procedural time limits critical for accessing tax arbitration.
Are taxpayers entitled to reimbursement and compensatory interest (juros indemnizatórios) when Stamp Tax liquidations on construction land are annulled?
Yes, taxpayers are entitled to reimbursement and compensatory interest (juros indemnizatórios) when Stamp Tax liquidations on construction land are annulled. Under Portuguese tax law, when a tax assessment is declared illegal and annulled, the Tax Authority must refund any amounts paid, plus compensatory interest calculated from the date of payment until reimbursement. In this case, the Claimant specifically requested not only annulment of the assessments totaling €17,026.58 but also condemnation of the Tax Authority to refund the stamp duty paid and payment of compensatory interest. This right to interest compensates taxpayers for the financial loss resulting from the illegitimate deprivation of funds during the period the unlawful tax was collected.