Process: 129/2017-T

Date: September 14, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

In Process 129/2017-T, two taxpayers challenged Stamp Tax assessments for 2015 on properties with vertical ownership (condominiums) under item 28.1 of the General Table of Stamp Duty (TGIS). The central dispute concerns whether the €1,000,000 threshold for Stamp Tax liability should be calculated by aggregating the Tax Patrimonial Values (VPT) of all individual units within a building, or by considering each unit separately. The claimants argued that item 28.1 should only apply when an individual floor or unit exceeds €1,000,000, not when the sum of all units exceeds this threshold. The Tax and Customs Authority countered that the relevant patrimonial value is the total value of the entire urban property, regardless of its division into independent units. The arbitration tribunal, established under the RJAT framework, first addressed a preliminary exception of res judicata raised by the Tax Authority, referencing a prior decision in case 272/2016-T involving the same parties and legal issues. This case highlights critical interpretative questions regarding the application of Stamp Tax to condominium properties and the proper methodology for calculating taxable values in vertical property structures.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. A…, taxpayer no.…, resident at …, no.…, …, …-…, Lisbon and B…, taxpayer no.…, resident at Rua …, no.…, ..., …-…, Lisbon (hereinafter referred to as "Claimants"), hereby, pursuant to the provisions of paragraph a) of item 1 of article 2 and paragraph a) of item 1 of article 10, and in coalition of parties as permitted by item 1 of article 3, all of Decree-Law no. 10/2011, of January 20, which approved the Legal Framework for Arbitration in Tax Matters ("RJAT"), request the establishment of an Arbitral Tribunal for the examination of the legality of the Stamp Duty (IS) assessments relating to the year 2015, described in greater detail below.

  2. The respondent is the TAX AND CUSTOMS AUTHORITY (hereinafter referred to as "Respondent").

  3. The request for establishment of the arbitral tribunal was filed on February 20, 2017, having been accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on February 27, 2017.

  4. Given that the Claimant did not proceed with the appointment of an arbitrator, pursuant to the provisions of article 6, item 2, paragraph a), of the RJAT, the undersigned was appointed as arbitrator by the President of the Deontological Committee of CAAD, with the appointment being accepted within the timeframe and terms legally provided.

  5. On April 11, 2017, the Parties were duly notified of such appointment, and they did not express their intention to refuse the appointment of the arbitrator, pursuant to the provisions of article 11, item 1, paragraphs a) and b) of the RJAT, in conjunction with articles 6 and 7 of the Deontological Code.

  6. In accordance with the provision set forth in paragraph c), of item 1, of article 11 of the RJAT, the Collective Arbitral Tribunal was established on April 28, 2017.

  7. In the Arbitral Petition submitted by it, the Claimant invoked, in summary, the following:

a) The Claimant contends that, for a building in vertical property (condominium), and for purposes of application of the rule contained in item 28.1 of the General Table of Stamp Duty, the sum of the Tax Patrimonial Values (TPV) of each floor and unit should not be taken into account;

b) In the Claimant's view, it is contrary to law the Respondent's position, according to which the criterion for determining the scope of item 28 of the General Table of Stamp Duty is the overall TPV of the floors and units;

c) Thus, item 28.1 of the General Table of Stamp Duty should apply only if any of the parts, floors or units with independent use had a TPV exceeding €1,000,000.00, which is not the case herein;

d) Accordingly, the Claimant requests the declaration of illegality of the stamp duty assessment acts in question, and their consequent annulment, with all legal consequences, as they violate the rule contained in item no. 28.1 of the General Table of Stamp Duty;

e) The Claimant further requests condemnation of the Respondent to refund the amounts paid by the Claimant as stamp duty, item 28.1 of the General Table of Stamp Duty, for the year 2015, plus compensatory interest, and condemnation to costs against the respondent.

  1. The Respondent submitted a reply, in which it presented an exception and impugnation defense.

  2. The Respondent invokes the exception of res judicata, contending that in the present case there is an identity of parties, claim and cause of action with case no. 272/2016-T, already decided, which bars the tribunal from deciding on the merits of the case.

  3. In its impugnation defense, the Respondent argues, toward the rejection of the request for an arbitral decision, in summary, the following:

a) Item 28.1 of the General Table of Stamp Duty applies to all urban properties with residential use and value exceeding €1,000,000.00;

b) The patrimonial value relevant for purposes of tax incidence is the total patrimonial value of the urban property and not the patrimonial value of each of the parts that compose it, even when susceptible to independent use;

c) In the present case, the tax patrimonial value upon which the incidence of stamp duty item 28.1 of the General Table depends had to be, as it was, the overall patrimonial value of the property and not that of each of its independent parts;

d) What is at issue here are assessments that result from the direct application of the legal rule, which translate into objective elements, without any subjective or discretionary assessment;

e) The principles of tax equality and contributory capacity prohibit only arbitrary discriminations, but not discriminations that may be justified by the more evolved character of the institutions or by the coherence of the tax system;

f) The tax act in question did not violate any legal or constitutional rule, and should, thus, be maintained in the legal order.

g) There was no error in this case imputable to the services, and the legal requirements that confer the right to compensatory interest are not met.

  1. By order of May 30, 2018, this Tribunal dispensed with the holding of the meeting provided for in article 18 of the RJAT, as well as the submission of final arguments, in application of the principles of autonomy in the conduct of the proceedings, celerity, simplification and procedural informality. September 28, 2017 was set as the deadline for rendering the arbitral decision.

  2. The Claimant was given a period to state its position on the exception invoked by the Respondent.

  3. The Claimant did not state its position on the exception invoked.

  4. By order of August 28, 2017, the Respondent was requested to attach to the file the arbitral decision rendered in case no. 272/2016-T, which supports the exception of res judicata invoked.

  5. That arbitral decision was attached to the file by the Respondent.

II. PRELIMINARY DETERMINATION

  1. The present request for establishment of an arbitral tribunal is submitted in coalition of parties.

  2. Pursuant to article 3, item 1, of the RJAT, the joinder of claims and coalition of parties is admissible when "(…) the admissibility of the claims depends essentially on the examination of the same factual circumstances and the interpretation and application of the same principles or rules of law".

  3. At issue in the present case is the legality of the IS assessments for 2015 relating to the ownership of two urban properties in total ownership, with floors or units susceptible to independent use, which were issued pursuant to item 28.1 of the General Table of Stamp Duty (TGIS).

  4. Considering that the Claimants are co-owners of the properties in question, and considering further that the IS assessments in question relate to the same tax period and rest on the same factual and legal basis, the requirements for joinder of claims established in the aforementioned article 3, item 1, of the RJAT are thus met.

  5. In the case sub judice, the legal requirements for joinder of claims are thus met.

  6. It is appropriate to examine and decide on the exception of res judicata invoked by the Respondent.

  7. Res judicata constitutes a dilatory exception, provided for in paragraph i) of article 577 of the Code of Civil Procedure (CPC).

  8. Pursuant to item 1 of article 580 of the CPC, "[…] if the repetition [of the cause] occurs after the first cause has been decided by a judgment that no longer admits an ordinary appeal, the exception of res judicata shall lie".

  9. For the exception of res judicata to exist, there must be an identity of parties, claim and cause of action.

  10. In case no. 272/2016-T, the present Claimants challenged the IS assessments for the year 2015, by application of item 28.1 of the General Table of Stamp Duty, relating to each of the floors with independent use that make up the urban property registered in the property register of the parish of … under article U-…, requesting their annulment, the restitution of the amounts unduly paid and the payment of compensatory interest.

  11. In the case sub judice, the identity of parties, claim and cause of action is thus verified with respect to case no. 272/2016-T, which has already been subject to an arbitral decision.

  12. On the basis of the grounds set forth, the exception of res judicata invoked by the Respondent is upheld.

  13. The verification of the dilatory exception of res judicata prevents the tribunal from deciding on the merits of the case and gives rise to dismissal of the action (art. 576, item 2, of the Code of Civil Procedure).

III. VALUE OF THE CASE

In accordance with the provisions of article 306, item 2, of the CPC, article 97-A, item 1, paragraph a), of the CPPT and article 3, item 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €10,750.92.

IV. COSTS

Pursuant to article 22, item 4, of the RJAT, the amount of costs is fixed at €918.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Claimants.

Let notice be given.

Lisbon, September 14, 2017

The Arbitrator

Paulo Nogueira da Costa

Frequently Asked Questions

Automatically Created

How is the taxable value (VPT) calculated for Stamp Tax under Verba 28.1 of the TGIS for properties in vertical ownership?
For Stamp Tax under Verba 28.1 TGIS, there are two competing interpretations: taxpayers argue the VPT should be calculated separately for each independent unit, with the €1,000,000 threshold applied individually to each floor or unit. The Tax Authority maintains that the taxable value must be the aggregate VPT of the entire urban property, including all floors and units, regardless of their capacity for independent use. The resolution of this dispute determines whether condominium properties face Stamp Tax liability based on total building value or individual unit values.
Can the Portuguese Tax Authority aggregate the VPT of individual units in a building to exceed the €1,000,000 threshold for Stamp Tax?
Yes, the Portuguese Tax Authority's position is that it can and must aggregate the VPT of individual units within a building to determine if the €1,000,000 threshold is exceeded for Stamp Tax purposes under Verba 28.1 TGIS. The Tax Authority argues that the law references the patrimonial value of 'urban properties' as a whole, not their constituent parts. This interpretation means that a building with multiple units, each valued below €1,000,000 but collectively exceeding this amount, would be subject to Stamp Tax. Taxpayers have challenged this aggregation methodology before CAAD arbitration tribunals, arguing it contradicts the legal framework for vertical property ownership.
What is the legal basis for challenging Stamp Tax (Imposto do Selo) assessments before the CAAD arbitration tribunal?
The legal basis for challenging Stamp Tax assessments before CAAD is established in Decree-Law 10/2011 (RJAT - Legal Framework for Arbitration in Tax Matters). Article 2(1)(a) and Article 10(1)(a) permit taxpayers to request arbitral tribunal establishment to examine the legality of tax assessments. The request must be filed within the statutory timeframe following notification of the contested assessment. Coalition of parties is permitted under Article 3(1) when claims depend on examination of the same factual circumstances and legal principles, as occurred in Process 129/2017-T where co-owners jointly challenged assessments on commonly-owned properties.
Are property owners entitled to a refund of Stamp Tax paid under Verba 28.1 TGIS if the assessment is declared illegal?
Yes, property owners are entitled to a refund of Stamp Tax paid under Verba 28.1 TGIS if the assessment is declared illegal by the arbitral tribunal. The refund includes the principal amount unduly paid plus compensatory interest calculated from the payment date. However, compensatory interest is only due when specific legal requirements are met, particularly when there is an error attributable to tax services. The Tax Authority has argued that assessments resulting from direct application of legal rules without discretionary assessment do not constitute service errors warranting compensatory interest, even if subsequently deemed illegal.
What procedural steps are required to file an arbitration claim under the RJAT (Decree-Law 10/2011) against the Tax Authority?
To file an arbitration claim under RJAT against the Tax Authority, taxpayers must: (1) submit a formal request for establishment of an arbitral tribunal to CAAD, identifying the contested tax assessments and legal grounds; (2) meet filing deadlines specified in Article 10 RJAT; (3) appoint an arbitrator or allow the President of CAAD's Deontological Committee to make the appointment; (4) submit an arbitral petition detailing factual and legal arguments; (5) await the Tax Authority's reply and address any preliminary exceptions raised; and (6) participate in procedural steps as directed by the tribunal. The process includes automatic notification to the Tax Authority, tribunal constitution, and follows principles of procedural autonomy, celerity, and informality.