Process: 125/2015-T

Date: October 12, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 125/2015-T addressed whether Stamp Duty (Imposto do Selo) under item 28.1 of the General Stamp Duty Table (TGIS) applies to land classified as 'land for construction' (terreno para construção). The taxpayer challenged assessments totaling €123,960.50 issued by the Tax and Customs Authority for property registered as building land, arguing that item 28.1 required 'residential allocation' (afetação habitacional) which building land lacks. The claimant contended that residential allocation represents current, effective use, not future or uncertain potential, and that merely having construction capacity does not constitute residential allocation. The taxpayer emphasized that the 2014 legislative amendment to item 28.1 by Law 83-C/2013 demonstrated the previous wording was insufficient to capture building land, and argued retroactive application would violate constitutional principles (Article 103(3) of the Constitution) and Article 12(1) of the General Tax Law prohibiting retroactive tax legislation. The claimant sought annulment of the assessments and reimbursement with compensatory interest (juros indemnizatórios) calculated from payment date at the legal rate. The Tax Authority defended the assessments, arguing the property possessed the legal nature of property with residential allocation, invoking allocation coefficients from the Municipal Property Tax Code (CIMI - Articles 41 and 45) incorporated by Article 67(2) of the Stamp Duty Code. This case represents significant taxpayer challenges to Stamp Duty expansion on high-value real estate, testing the boundaries of tax incidence on undeveloped land and establishing important precedents regarding residential allocation requirements, legislative interpretation of TGIS provisions, and the temporal application of tax law amendments affecting real estate taxation.

Full Decision

Arbitral Decision

The Arbitrators José Pedro Carvalho (Presiding Arbitrator), Maria Alexandra Mesquita and Fernando Borges Araújo, appointed by the Ethics Council of the Administrative Arbitration Centre to form an Arbitral Tribunal, hereby agree as follows:

I – Report

  1. The taxpayer A… – …, S.A., NIPC … (hereinafter "Claimant"), filed on 24 February 2015 a petition for constitution of a Collective Arbitral Tribunal, in accordance with the combined provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter "LFATM"), in which the Tax and Customs Authority (hereinafter "TCA" or "Respondent") is the respondent.

  2. The Claimant seeks arbitral determination on the illegality of the assessments of Stamp Duty (hereinafter "SD") in the total amount of €123,960.50, alleging violation of article 1 of the Stamp Duty Code (hereinafter "SDC") and item 28.1 of the General Table of Stamp Duty (hereinafter "GTSD"), requesting the annulment of said assessments and payment of compensatory interest on the total amount referred to from the date of payment of the tax, calculated at the legal rate.

  3. The petition for constitution of the arbitral tribunal was accepted by the President of the Administrative Arbitration Centre and automatically notified to the Tax and Customs Authority (hereinafter TCA) on 26 February 2015.

  4. In accordance with the provisions of item (a) of paragraph 2 of article 6 and item (b) of paragraph 1 of article 11 of the LFATM, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Ethics Council appointed the arbitrators of the Collective Arbitral Tribunal, who communicated acceptance of their office within the applicable period, and notified the parties of such appointment on 15 April 2015.

  5. The Collective Arbitral Tribunal was constituted on 30 April 2015; it was regularly constituted and is materially competent, in accordance with the provisions of articles 2, paragraph 1, item (a), 5, 6, paragraph 1, and 11, paragraph 1, of the LFATM (as amended by article 228 of Law No. 66-B/2012, of 31 December).

  6. In accordance with paragraphs 1 and 2 of article 17 of the LFATM, the TCA was notified on 4 May 2015 to submit its reply.

  7. The TCA submitted its reply on 5 June 2015, accompanied by a petition in which it requested dispensation from holding the meeting referred to in article 18 of the LFATM.

  8. In that reply the TCA alleges, in summary, the total lack of merit of the Claimant's petition.

  9. For its part, the Claimant submitted on 9 June 2015 a petition in which it likewise requests dispensation from holding the meeting referred to in article 18 of the LFATM, and declares acceptance of dispensation from final submissions.

  10. The Arbitral Order of 19 June 2015 determined dispensation from both the meeting referred to in article 18 of the LFATM and the submission of submissions by the parties, fixing 30 days as the deadline for rendering the final decision in the case.

  11. By order of 11 August 2015 it was determined that the administrative file be annexed to the case record, which was found to be missing, and the same was annexed by the TCA on 21-09-2015.

  12. The case is free from nullities and no prior or subsequent questions were raised, whether prejudicial or exceptions, that would prevent consideration of the merits of the case, with the conditions being met for rendering a final decision.

  13. The TCA proceeded to appoint its representatives in the case record and the Claimant filed a power of attorney, with the Parties thus being duly represented.

  14. The Parties have legal personality and capacity and have standing, in accordance with articles 4 and 10, paragraph 2, of the LFATM and article 1 of Order No. 112-A/2011, of 22 March.

II – Grounds: The Matter of Fact

II.A. Facts Considered Proven

a) The Claimant received documents nos. 2012…, 2013…, 2013…, 2013…, 2014…, 2014… and 2014…, issued by the TCA, which contain assessments of SD relating to the property parcel no. art. … of the Parish of ... (...), Municipality of ... and District of Porto, subsequently art. … of the Union of Parishes of ... and ….

b) These assessments, in the total amount of €123,960.50, were issued under item no. 28.1 of the GTSD, for the transitional period provided for in article 6 of Law No. 55-A/2012, of 29 October, and for the years 2012 and 2013.

c) The tax acts corresponding to documents nos. 2012…, 2013…, 2013… and 2013… were subject to administrative appeal and hierarchical review, which were wholly dismissed or terminated as moot.

d) The Claimant is the owner and legitimate proprietor of the property that was subject to the SD assessments now in question.

e) Said property, during the period to which those assessments relate, was registered in the respective property register as "land for construction."

f) The total amount of tax assessed was paid in full by the Claimant.

II.B. Facts Not Considered Proven/Or Proven

None.

III – Grounds: The Matter of Law

III.A. Position of the Claimant

a) The Claimant maintains that, since the immovable property in question is land for construction and not a property with residential allocation, item 28.1 of the GTSD in its wording in force until 31 December 2013 – that is, in the text in force on the date of the assessments contested – cannot be applied.

b) The Claimant emphasizes that the land has a tax property value that allows subsumption under item 28 of the GTSD, but not under item 28.1, given the non-fulfillment of the requirement of "residential allocation."

c) Additionally, the Claimant points to the fact that the change in wording made to item 28.1 of the GTSD, as of 1 January 2014, by virtue of article 194 of Law No. 83-C/2013, of 31 December, is revealing of the legislator's own awareness that the previous wording was not sufficient to justify a tax incidence that the assessments now contested presumed to exist – by alleged error regarding the factual assumptions.

d) On the other hand, the Claimant contests, invoking article 103, paragraph 3 of the Constitution and article 12, paragraph 1 of the General Tax Law, any possibility of applying this new wording retroactively, as of 1 January 2014, to item 28.1 of the GTSD; and further mobilizes in its support arbitral and judicial case law, doctrine, and even the preparatory works of the rules (these as indicators of the "legislative intent").

e) Furthermore, the Claimant rejects the interpretation according to which mere "land for construction" could be understood as exhibiting a "residential allocation," for purposes of subsumption under the previous wording of item 28.1 of the GTSD – particularly because, as it alleges, such "allocation" constitutes, at best, a future and uncertain reality, not a current, effective use or availability.

f) Because it has already paid the entirety of the tax assessed, the Claimant maintains, finally, its right to reimbursement of the amount paid, plus compensatory interest, as a consequence of the TCA being held liable on the petition.

III.B. Position of the Respondent

a) In its reply, the TCA maintains the understanding that the property on which the contested assessments fall has the legal nature of a property with residential allocation, and therefore item 28.1 of the GTSD was already fully applicable in the periods considered, with no error, irregularity, illegality or unconstitutionality occurring – the tax acts should therefore be maintained.

b) In support of this understanding, the TCA analyzes the circumstances of the emergence of item 28 of the GTSD, by virtue of Law No. 55-A/2012, of 29 October, and the manner in which the definition of the concepts employed was deferred (by article 67, paragraph 2 of the SDC) to the Municipal Property Tax Code (MPTC), and in particular to the allocation coefficients provided therein (particularly articles 41 and 45 of the MPTC).

c) The Respondent invokes in support of its understanding the licensing regime for urbanization operations (particularly article 77 of the Legal Framework for Urbanization and Construction, LFUC) and the instruments of territorial management, regional and national, which all of them allegedly already take into account the allocation, residential or otherwise, of lands, long before any construction or actual use.

d) Furthermore, the Respondent does not fail to emphasize that the expression "residential allocation" meant, in the original version of item 28.1 of the GTSD, the intention to specify precisely a certain type of immovable property for purposes of the incidence of SD, excluding all those immovable properties that did not meet that requirement – a normative criterion for delimiting the universe of tax incidence that has nothing illegitimate, illegal or unconstitutional about it.

e) Concluding, the TCA takes the position that the present action should be judged to lack merit, and it be absolved of the petition.

Let us therefore examine this.

III.C. Framework

III.C.1. Joinder of Claims

In the present case the Claimant is the owner of two plots of land for construction already previously identified and seeks to have the question of the incidence on those lands of the SD assessments provided for in item 28.1 of the GTSD examined, added by article 4 of Law 55-A/2012 of 29 October and by article 6 of the same Law; therefore, since the same factual circumstances and the same rules of law are at issue, the joinder of claims requested by the Claimant is legitimate, in accordance with paragraph 1 of article 3 of the LFATM.

III.C.1.2 Applicable Law

Transcription of the norms applicable to the matter sub judice for purposes of decision on the disputed notions of property with residential allocation (TCA) versus land for construction (Claimant) in the interpretation of item 28.1 of the GTSD of the legislative version of Law 55-A/2012 of 29 October which introduces items 28 and 28.1 in the SDC.

This law, which amended various articles of the SDC and the GTSD, added in particular a paragraph 2 to article 67 of the SDC which provides that, for matters not regulated in the present Code relating to item 28 of the General Table, the provisions of the MPTC apply subsidiarily,[1] and therefore we shall transcribe the relevant norms of the cited Law and those of interest to us from the MPTC.

Law 55-A/2012 of 29 October

Article 6 of the cited Law, under Transitional Provisions, expressly provides:

  1. In 2012, the following rules must be observed by reference to the assessment of the stamp duty provided for in item no. 28 of the respective General Table:

a) The taxable event occurs on 31 October 2012;

b) The passive subject of the tax is that mentioned in paragraph 4 of article 2 of the Stamp Duty Code[2] on the date referred to in the previous item;

c) The tax property value to be used in the assessment of the tax corresponds to that resulting from the rules provided for in the Municipal Property Tax Code by reference to the year 2011 (emphasis ours);

d) The assessment of the tax by the Tax and Customs Authority must be carried out by the end of November 2012;

e) The tax shall be paid, in a single installment, by passive subjects by 20 December 2012[3];

f) The applicable rates are as follows:

i) Properties with residential allocation (emphasis ours) evaluated in accordance with the Municipal Property Tax Code: 0.5%;

ii) Properties with residential allocation not yet evaluated in accordance with the Municipal Property Tax Code: 0.8%;

iii) Urban properties when the passive subjects that are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance: 7.5%.

2 - In 2013, the assessment of the stamp duty provided for in item no. 28 of the respective General Table must be based on the same tax property value used for purposes of assessing the municipal property tax to be carried out in that year.

3 - Failure to deliver, in whole or in part, within the indicated deadline, the amounts assessed as stamp duty constitutes a tax infraction, punished in accordance with the law.

Addition to the GTSD

Article 4

Addition to the General Table of Stamp Duty

Item 28 is added to the General Table of Stamp Duty, annexed to the Stamp Duty Code, approved by Law 159/99, of 11 September, with the following wording:

28 – Ownership, usufruct or right of superficies of urban properties whose tax property value contained in the register, in accordance with the Municipal Property Tax Code (MPTC), is equal to or greater than €1,000,000 – on the tax property value used for purposes of municipal property tax:

28.1 – For property with residential allocation – 1%

28.2 – For property, when the passive subjects are not natural persons and are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance – 7.5%.

Those sub-items i) and ii) of the statute and item 28 of the GTSD, as well as paragraph 6 of article 1 of the SDC, further appeal to the subsidiary application of the MPTC regarding the concept of properties with residential allocation, norms which we transcribe:

The Norms of the MPTC

This code enumerates in articles 2 the concept of property, in article 3 it fixes the concept of rural properties, in article 4 it fixes the concept of urban property, in article 5 it enumerates the concept of mixed properties and finally article 6 enshrines what is understood as urban property and its typologies and species.

Article 2

Concept of Property

1 - For purposes of this Code, property is any parcel of land, encompassing waters, plantations, buildings and constructions of any nature incorporated or situated thereon, with the character of permanence, provided it is part of the patrimony of a natural or legal person and, in normal circumstances, has economic value (emphasis ours), as well as waters, plantations, buildings or constructions, in the circumstances aforesaid, endowed with economic autonomy in relation to the land on which they are located, although situated on a parcel of land that constitutes an integral part of a different patrimony or does not have a patrimonial nature.

2 - Buildings or constructions, even if movable by nature, are deemed to have the character of permanence when devoted to non-transitory purposes.

3 - The character of permanence is presumed when the buildings or constructions have been in place for a period exceeding one year.

4 - For purposes of this tax, each autonomous fraction, under the horizontal property regime, is deemed to constitute a property.

Article 3

Rural Properties

1 - Rural properties are lands situated outside an urban agglomeration that are not to be classified as land for construction, in accordance with paragraph 3 of article 6, provided that:

a) They are devoted or, in the absence of concrete allocation, have as their normal destination a use generating agricultural income, such as are considered for purposes of income tax on natural persons (IRS);

b) Not having the allocation indicated in the previous item, they are not constructed or have only buildings or constructions of an accessory character, without economic autonomy and of reduced value.

2 - Rural properties also include lands situated within an urban agglomeration, provided that, by virtue of a legally approved provision, they cannot have a use generating any income or can only have a use generating agricultural income and are in fact having this allocation.

3 - Rural properties further include:

a) Buildings and constructions directly devoted to the production of agro-pastoral income, when situated on the lands referred to in the previous paragraphs; (Wording of Law No. 83-C/2013 - 31/12)

b) Waters and plantations in the situations referred to in paragraph 1 of article 2.

4 - For purposes of this Code, urban agglomerations are considered to include, in addition to those situated within legally fixed perimeters, the nuclei with a minimum of 10 housing units served by public use roads, with their perimeter delimited by points at a distance of 50 m from the axis of the roads, in the transverse direction, and 20 m from the last building, in the direction of the roads.

Article 4

Urban Properties

Urban properties are all those that should not be classified as rural, without prejudice to the provisions of the following article.

Article 5

Mixed Properties

1 - Whenever a property has rural and urban parts it is classified, in its entirety, in accordance with the principal part.

2 - If neither part can be classified as principal, the property is deemed to be mixed.

Article 6

Species of Urban Properties

1 - Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Land for construction;

d) Other.

2 - Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal destination each of these purposes.

3 - Land for construction is understood to be lands situated within or outside an urban agglomeration, for which a license or authorization has been granted, a prior notice admitted or favorable prior information issued for a subdivision or construction operation, and also those that have been so declared in the acquisition title, excepting lands in which the competent entities prohibit any of those operations, namely those located in green areas, protected areas or that, in accordance with municipal land use plans, are devoted to public spaces, infrastructure or facilities. (Wording given by article 93 of Law 64-A/2008, of 31 December)

4 - Item (d) of paragraph 1 includes lands situated within an urban agglomeration that are not land for construction nor are covered by the provision of paragraph 2 of article 3, as well as buildings and constructions licensed or, in the absence of a license, that have as their normal destination other purposes than those referred to in paragraph 2 and also those of the exception of paragraph 3.

III. D Questions to be Decided

III.D.1 Questions Which the Tribunal Must Consider

Summarily:

The Claimant comes to assert in its initial petition that the lands described are land for construction, for tax purposes and therefore do not have residential allocation, for purposes of applying item 28.1 of the GTSD, and are therefore not subject to taxation in Stamp Duty under item 28.1, in the wording in force until 31 December 2013 and structures its position by citing abundant case law both from the Arbitral Tribunal and from the Supreme Administrative Court, which form an integral part of this judgment, ultimately requesting the declaration of the illegality of the Stamp Duty assessment acts now in question, in the total amount of € 123,960.50, with all questions having been fixed at point III.A. of this Report - Position of the Claimant.

The Reply of the TCA maintains the understanding that the property on which the contested assessments fall has the nature of a property with residential allocation provided for in item 28.1 of the GTSD, with no error, irregularity, illegality or unconstitutionality[4] occurring in the assessments now in dispute.

It further refutes that the provision of item 28 of the GTSD constitutes a violation of any constitutional command, since it applies to the ownership, usufruct or right of superficies of urban properties with residential allocation, is a general and abstract norm, applicable in an indifferent manner to all cases in which the factual and legal assumptions are met, which would only be censurable, in light of the principle of proportionality, if it resulted manifestly indefensible, which does not occur, and therefore, proceeding from the assumption that the assessments in question embody a correct interpretation and application of law to the facts, it does not thereby suffer from a vice of violation of law, whether of the Constitution or of the SDC, and should therefore be judged to lack merit the claim made by the Claimant, with all questions having been fixed at point III.B of this report - Position of the Respondent.

III.D 1.2 Consideration of the Questions Which the Tribunal Must Resolve

It is important to begin by noting that the core question of the present case is not new, having been subject to consideration both in the arbitral jurisdiction and in the case law of the Supreme Administrative Court, always to the contrary of what the Tax Administration sought. We shall follow closely the Decisions 49/2013-T of 18 September 2013, 53/2013-T of 2 October, 231/2013-T of 3/2/2014, 56/2014-T of 31 July, 210/2014-T of 30 July, all of the Administrative Arbitration Centre and the Decision of the Supreme Administrative Court of 9 April 2014, P1870/2013, which were followed by several others of similar tenor, available at http://www.dgsi.pt/jsta.

The Concepts of the Law Now in Question - Properties with Residential Allocation, Land for Construction and Residential Properties

Sub-items i) and ii) of item (f) of article 6 of Law 55/2012 of 29 October and item 28.1 of the GTSD used a term that is not used in any other tax legislation – property with residential allocation - and which gave rise to abundant litigation, which culminated in decisions both for the Supreme Administrative Court and for the Arbitral Jurisdiction, always to the effect that, the legislator not having defined the concept of "properties (urban) with residential allocation" and it resulting from article 6 of the MPTC – subsidiarily applicable to SD provided for in the new item 28 of the GTSD – a clear distinction between "residential urban properties" and "land for construction" these cannot be considered, for purposes of the incidence of SD, item 28.1 of the GTSD, in the wording of Law 55-A/2012, of 29 October, as urban properties with residential allocation, with the consequent annulment of the assessment on the basis of error regarding the legal assumptions on which it is based.

This Law, without a preamble that would "illuminate" its interpretation and proper application, will only have some meaning and comprehension, after consideration, succinctly, of the draft law that was discussed by the members of Parliament, for which purpose one must have recourse to the legislative intent of the cited Law, in accordance with paragraph 3 of article 9 of the Civil Code, which provides: In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most correct solutions and was able to express its thought in the most appropriate terms and of the norms, both of Law 55-A/2012 of 29 October and of the MPTC. Let us see.

  1. From a reading of the norms of the MPTC, see articles 2, 3, 4, 5 and 6, transcribed above, one does not discern in the various concepts of "properties," the concept of "property with residential allocation" enshrined in the controversial item 28.1 of the GTSD now in question.

The starting point of the expression "properties with residential allocation" is naturally the text of Law 55/2012 of 29 October, it being on the basis of it that the legislative thought must be reconstructed, as imposed by paragraph 3 of article 9 of the Civil Code, applicable to tax situations by virtue of the provision of article 11, paragraph 1 of the General Tax Law (GTL) for determining the meaning of the tax norms in question.

  1. "The fact that it can be considered that in determining the tax property value of urban properties classified as land for construction (emphasis ours) one should take into account the allocation that the construction authorized or planned for it will have for determining the respective value of the area of implantation (see paragraphs 1 and 2 of article 45 of the MPTC)[5], does not determine that land for construction can be classified as 'properties with residential allocation', because 'residential allocation' always appears in the Municipal Property Tax Code referred to 'buildings' or 'constructions', existing, authorized or planned, because only these can be inhabited."

  2. This is not the case with land for construction, which is one of the species of urban properties provided for in item (c) of article 6 of the MPTC, which do not have, in themselves, conditions for such, and are not capable of being used for residence except if and when construction authorized and planned for them is erected on them, and in that case they will no longer be 'land for construction' but one of the other species of urban properties – and which are: a) 'residential', b) 'commercial, industrial or for services', or 'other', provided in the code and article cited.

  3. This controversy regarding the Law now under review of properties with residential allocation and, concerning the position of the TCA in invoking articles 41 (the allocation coefficient (AC) depends on the type of use of constructed properties) and article 45 of the MPTC which refers, for what interests us, to the value of the implantation of buildings to be constructed, value of authorized or planned constructions, location coefficient (LC), as the basis of the concept in Law 55-A/2012, the Decision in case 53/2013-T on this point notes that this article 45 has no relation whatsoever to the classification of properties, serving only to indicate the factors to be weighed in evaluating land for construction and we cite: "What is weighed there, when making reference to the 'building to be constructed' is the weighing of the destination of the land, which, as was seen, is something that, in the context of the MPTC, does not imply allocation and occurs before it."

  4. The Arbitral Decision 49/2013-T of 18/9/2013, regarding what the concept of land for construction is concerned, states: "Land for construction – which is the case now sub judice – whatever be the type and purpose of the building that will, or may be, erected on it – does not satisfy, on its own, any condition for being licensed as such or for being defined as having residence as its normal destination, and since the norm for incidence of the stamp duty now contested refers to urban properties with 'residential allocation', without any specific concept being established for the purpose, one cannot extract from it that it contains a future potentiality, inherent in a distinct property that may possibly be constructed on the land."

  5. It would be strange, moreover, if the determination of the scope of the tax incidence norm of item 28 of the GTSD were to be found, ultimately, in the norms for determining the tax property value of the Municipal Property Tax Code, and the terminological imprecision of the legislator in the wording of that rule were, after all, elucidated and finally clarified through an indirect and equivocal reference to the allocation coefficient established by the legislator in relation to constructed properties (article 41 of the Municipal Property Tax Code)[6].

  6. Given that the literal incongruity of the concept of residential allocation of item 28.1 is established, reconstructing the legislative thought from the articulation of the texts of the law previously cited, we must further inquire into the circumstances in which the Law was drafted in order to be able to conclude whether the legislator was able to express its thought in adequate terms.

  7. The legislative intent "discernible in the Explanatory Memorandum of the Draft Law that is the origin of Law No. 55-A/2012 (Draft Law No. 96/XII – 2nd, Parliamentary Journal, series A, no. 3, 21/09/2012, p. 44, available at www.parlamento.pt) "is nothing more than the concern to raise new tax revenue, from sources of wealth that had been spared in the past from the ravages of taxation more than labor income, in particular capital income, movable capital gains and property, reasons which bring no relevant contribution to the clarification of the concept of 'properties (urban) with residential allocation', since it is given as established, without any concern to clarify it."

  8. And the Secretary of State for Tax Affairs, in defending this Draft Law 96.XII, in the Parliamentary forum, stated: First, the Government proposes the creation of this additional special rate to tax residential urban properties (emphasis ours) of higher value. This is the first time in Portugal that special taxation is created for properties of high value intended for residence. This rate, which will be 0.5 to 0.8 in 2012, and 1% in 2013, will apply to residential properties of value equal to or greater than 1 million euros. With the creation of this additional rate, the tax burden required of these proprietors will be significantly increased in 2012 and 2013.

  9. Without reluctance the meaning of the legislative intent can be interpreted as being that what was proposed to the members of Parliament and they approved was the creation of taxation of high-value real estate property, which does not include land for construction or, in the more clarifying words of the Secretary of State for Tax Affairs, special taxation of properties of high value intended for residence and special taxation that will apply to residential properties of value equal to or greater than 1 million, that is, taxation of the residential properties referred to in paragraph 2 of article 6 of the MPTC.

  10. The concept most closely aligned with the literal tenor of this expression, property with residential allocation, is manifestly that of residential properties, defined in paragraph 2 of article 6 of the MPTC, as encompassing buildings and constructions licensed for residential purposes or, in the absence of a license, that have as their normal destination residential purposes.

And so it has been decided,

  1. As is stated in Arbitral Decision 231/2013-T of 3/2/2014, "the recognized lack of coherence of Stamp Duty is particularly exuberant in the case of item 28.1, hastily included at the margins of the General State Budget, by a tax legislator without perceptible overall tax guidance, who has implemented successively norms of fiscal aggravation as circumstances of budgetary execution setbacks, impositions of international creditors (represented by the "troika") and oversight of the Constitutional Court <….> In this context, as there are no secure interpretive elements that permit detection of legislative coherence in the solution adopted in the said item 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretive purposes in light of paragraph 3 of article 9 of the Civil Code), the tenor of the legal text must be the primary element of interpretation, in conformity with the presumption, imposed by the same paragraph 3 of article 9, that the legislator was able to express its thought in adequate terms."

  2. Indeed, the concept introduced by Law 55-A/2012, probably due to its imprecision – "a fact all the more serious as it is in function of this that the scope of the objective incidence of the new taxation is delineated" – had a short life, as it was abandoned upon the entry into force of the State Budget Law for 2014 (Law No. 83-C/2013, of 31 December), which gave new wording to that item 28.1 of the General Table, and now delineates its scope of objective incidence through the use of concepts that are legally defined in article 6 of the MPTC." No longer the allocation coefficient for residential but, residential property or land for construction whose construction, authorized or planned, is for residence, in accordance with the Municipal Property Tax Code. And here the legal controversy is brought to an end as the present matter now under review is concerned.

  3. Thus, as all the elements of interpretation of the law concur to the effect that property with residential allocation meant residential property, it is manifest that the assessments now contested suffer from error regarding the legal assumptions, since all the properties relative to which Stamp Duty was assessed under item 28.1 by the claimant are land for construction, without any building or construction, required to meet that concept of residential properties.

  4. The Respondent entity further invokes in support of its understanding the Licensing Regime for Urbanization Operations (particularly article 77 of the Legal Framework for Urbanization and Construction, LFUC). As this has nothing to do with the matter under review, as well as with the solution found by the legislator of 2013 with the new wording given to item 28.1 for the State Budget Law for 2014 to which we have already referred, further discussion in such terms becomes pointless.

  5. To be noted, finally, that compensatory interest is owed to the Claimant, provided for in the articulated terms of paragraph 5 of article 24 of the LFATM, paragraph 4 of article 43 of the GTL and paragraphs 4 and 5 of article 61 of the Code of Administrative Procedure and Tax Procedure.

  6. As a consequence, what emerges from the foregoing is the declaration of illegality of the assessments subject of the present case, with knowledge of the remaining vices imputed by the Claimant being rendered moot.

  7. In effect, article 124 of the Code of Administrative Procedure and Tax Procedure, applied subsidiarily by virtue of paragraph 1 of article 29 of the LFATM, in establishing an order of examination of vices, presumes that once a vice is judged to exist that ensures effective protection of the rights of the impugning party, it is not necessary to examine the remaining ones, for if it were always necessary to consider all the vices imputed to the act, the order of examination thereof would be immaterial."

In these terms, the assessments whose declaration of illegality is sought suffer from the vice of violation of item 28.1 of the GTSD, introduced by article 6 of Law 55/2012 of 29 October, by error regarding the legal assumptions, which justifies the declaration of its illegality and annulment, in accordance with the provisions of article 163 of the Administrative Procedure Code.

IV - Decision

In these terms, judging the claim of the Claimant entirely well-founded, the Collective Arbitral Tribunal decides as follows:

a) To annul the Stamp Duty assessment acts identified;

b) To order the reimbursement of the Stamp Duty in the amount of 123,960.50, plus compensatory interest from the date of payment of the tax, at the legal rate;

V. Value of the Case

The value of the case is fixed at €123,960.50, in accordance with the provision of article 97-A of the Code of Administrative Procedure and Tax Procedure, applicable ex vi article 29, paragraph 1, item (a), of the LFATM and article 3, paragraph 2, of the Regulations on Costs in Tax Arbitration Proceedings.

VI. Costs

Costs to be borne by the Respondent, given that the present petition was judged to have merit, in the amount of € 3,060 in accordance with Table I of the Regulations on Costs in Tax Arbitration Proceedings, and in compliance with the provisions of articles 12, paragraph 2, and 22, paragraph 4, both of the LFATM.

Notify parties.

Lisbon, 12 October 2015

The Presiding Arbitrator

(José Pedro Carvalho)

The Arbitrator Member

(Maria Alexandra Mesquita - Rapporteur)

The Arbitrator Member

(Fernando Borges Araújo)

[1] In the SDC, paragraph 6 of article 1 already determines that the concept of property is that defined in the Municipal Property Tax Code.

[2] In the situations provided for in item 28 of the General Table, the passive subjects of the tax are those referred to in article 8 of the MPTC. Wording added by the State Budget Law No. 66-B/2012, of 31 December.

The Law 83-C/2013, state budget law for 2014, put an end to this controversy by altering the wording of item 28.1 in accordance with the unanimous case law both of the Supreme Administrative Court and of the tax arbitral jurisdiction of the Administrative Arbitration Centre.

Article 194

Amendment to the General Table of Stamp Duty. Item 28.1 of the General Table of Stamp Duty, annexed to the Stamp Duty Code, approved by Law No. 150/99, of 11 September, is amended to read as follows:

"28.1 — For residential property or for land for construction whose construction, authorized or planned (emphasis ours), is for residence, in accordance with the Municipal Property Tax Code."

[3] The first installment of the year 2012 relating to 2011, which results from the Law under review.

[4] Mentioning them but not examining the vices raised by the Claimant.

[5] Article 45

Tax Property Value of Land for Construction

1 - The tax property value of land for construction (emphasis ours) is the sum of the value of the area of implantation of the building to be constructed (emphasis ours), which is that situated within the perimeter of fixation of the building to the ground, measured by the external part, added to the value of the land adjacent to the implantation.

2 - The value of the area of implantation varies between 15% and 45% of the value of the authorized or planned constructions.

[6] Article 41

Allocation Coefficient

The allocation coefficient (Ac) depends on the type of use of constructed properties, (emphasis ours) in accordance with the following table:

Coefficients

Commerce 1.20

Services 1.10

Residence 1.00

Social housing subject to legal regimes of controlled costs 0.70

Warehouses and industrial activity 0.60

Commerce and services in industrial type construction 0.80

Covered and closed parking 0.40

Covered and unclosed parking 0.15

Uncovered parking 0.08

Unlicensed properties, in very deficient habitability conditions 0.45

Storage areas and closets 0.35

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS apply to building land (terrenos para construção)?
Based on CAAD Process 125/2015-T, the application of Stamp Tax under Verba 28.1 of the TGIS to building land (terrenos para construção) was contested on the grounds that the provision, in its wording until December 31, 2013, required 'residential allocation' (afetação habitacional). The taxpayer successfully argued that land registered merely as 'land for construction' lacks actual residential allocation, which represents current effective use rather than future uncertain potential. The subsequent 2014 legislative amendment to item 28.1 by Law 83-C/2013 effectively acknowledged this interpretative gap, though retroactive application was rejected on constitutional grounds under Article 103(3).
What were the grounds for challenging the Stamp Tax assessments totaling €123,960.50 in CAAD Process 125/2015-T?
The grounds for challenging the €123,960.50 Stamp Tax assessments in Process 125/2015-T included: (1) violation of Article 1 of the Stamp Duty Code and improper application of item 28.1 of the GTSD to property lacking residential allocation; (2) the property's registration as 'land for construction' rather than residential property; (3) residential allocation constituting a future uncertain reality rather than current use; (4) the 2014 legislative change to item 28.1 revealing the previous wording's insufficiency; and (5) constitutional prohibition against retroactive tax application per Article 103(3) and Article 12(1) of the General Tax Law, supported by arbitral jurisprudence and doctrine regarding legislative intent.
How does CAAD arbitration work for disputes involving Stamp Tax on high-value real estate in Portugal?
CAAD arbitration for Stamp Tax disputes on high-value real estate operates under the Legal Framework for Arbitration in Tax Matters (RJAT - Decree-Law 10/2011). Process 125/2015-T demonstrates the procedure: taxpayers file a petition for collective arbitral tribunal constitution; the Ethics Council appoints three arbitrators; the Tax Authority submits a reply within established deadlines; parties may request dispensation from hearings (Article 18 RJAT); the tribunal examines legality of tax assessments, including compliance with constitutional principles and proper interpretation of tax incidence rules; and decisions address both annulment requests and compensatory interest claims. The process provides specialized, expedited resolution compared to traditional administrative courts.
Can taxpayers claim compensatory interest (juros indemnizatórios) when Stamp Tax liquidations are annulled?
Yes, taxpayers can claim compensatory interest (juros indemnizatórios) when Stamp Tax liquidations are annulled. In Process 125/2015-T, the claimant specifically requested compensatory interest on the total amount of €123,960.50 from the date of tax payment, calculated at the legal rate. This right derives from unlawful tax collection - when the State collects tax without legal basis and the taxpayer is deprived of those funds, compensatory interest compensates for the financial loss during the period between payment and reimbursement. The legal framework governing compensatory interest ensures taxpayers are made whole when administrative tax assessments are subsequently determined to be illegal or unconstitutional.
What is the legal basis under Article 1 of the Código do Imposto do Selo for contesting Stamp Tax on land intended for construction?
The legal basis under Article 1 of the Código do Imposto do Selo for contesting Stamp Tax on land for construction centers on the requirement that tax incidence must correspond to transactions, acts, contracts, documents, titles, books, or other situations specifically enumerated in the TGIS. In Process 125/2015-T, the taxpayer argued that item 28.1 of the GTSD, as worded until December 31, 2013, applied only to properties with 'residential allocation' - a requirement not met by land merely designated for future construction. The challenge invoked the principle that tax incidence requires strict legal definition and cannot be extended by analogy or broad interpretation to situations not clearly contemplated by the taxable events listed in the GTSD, particularly when the property's classification and actual use differ from residential properties.