Process: 129/2018-T

Date: September 20, 2018

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 129/2018-T) addresses whether Stamp Duty (Imposto do Selo) under item 28.1 of the General Stamp Duty Table applies to buildings held in vertical ownership (propriedade vertical) when individual units don't exceed €1,000,000 but collectively do. The Claimant owned a building with 14 independent residential units with a combined taxable property value (VPT) of €1,067,960. The Tax Authority assessed Stamp Duty at 1% by aggregating all unit values, while the Claimant argued each unit should be assessed individually, as none exceeded the €1,000,000 threshold. The dispute centers on whether vertical ownership properties should be treated similarly to horizontal property (condominium) for tax purposes, where each fraction is assessed separately. The Claimant challenged both procedural aspects (notification defects under Article 151 CPA) and substantive grounds, arguing that the Municipal Property Tax Code's subsidiary application supports individual assessment of each independent unit. The case highlights the ambiguity in Law 55-A/2012, which introduced item 28 without clarifying how buildings with multiple independent units in full ownership should be valued. This arbitration is significant for determining the correct interpretation of 'building with residential allocation' and whether the €1,000,000 threshold applies per independent unit or to the building as a whole in vertical ownership situations.

Full Decision

ARBITRAL AWARD

I – REPORT

A..., Lda., legal person no. ... (hereinafter referred to as "Claimant"), with registered office at Rua ..., no. ..., ...-... Lisbon, came, pursuant to article 2, no. 1, subsection a) and articles 10 et seq. of the Legal Framework for Tax Arbitration, provided for in Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December (hereinafter abbreviated as "RJAT") and articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, to submit a request for arbitral pronouncement for a declaration of illegality of the tax assessment notices for Stamp Duty, item 28 of the General Table of Stamp Duty, relating to the fiscal year 2015, which established a total tax amount of € 10,679.60.

The Tax Authority and Customs Authority (hereinafter referred to as "TA" or "Respondent") is the respondent.

The request for constitution of the arbitral tribunal was accepted by His Excellency the President of the Administrative Arbitration Centre (CAAD) on 21/03/2018 and was automatically notified to the Respondent in accordance with regulatory procedures.

Pursuant to the provisions of subsection a) of no. 2 of article 6 and subsection b) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council of CAAD appointed the undersigned as arbitrator of the sole arbitral tribunal, who communicated her acceptance of the appointment within the legal deadline.

On 11/05/2018, the Parties were duly notified and did not manifest, within the legal terms and deadline, any intention to challenge the appointment of the arbitrator (article 11, no. 1, subsections a) and b) of the Legal Framework for Tax Arbitration (RJAT), in conjunction with articles 6 and 7 of the Deontological Code).

In accordance with the provision contained in subsection c), no. 1, of article 11 of RJAT, the Arbitral Tribunal was constituted on 01/06/2018.

Duly notified, the Tax Authority and Customs Authority submitted a reply in which it challenged the merits of the request and provided a copy of the administrative file.

The meeting referred to in article 18 of RJAT was dispensed with and, considering the position of the parties already set out in their respective pleadings and given that there were no exceptions to address or contradictory arguments to make, the parties' arguments were also dispensed with, in compliance with the principle of procedural adequacy.

The Claimant supported its request, summarizing as follows:

  • The tax assessments subject to the present request for arbitral pronouncement relate to a building owned in full with floors or divisions capable of independent use, which comprises 14 floors or divisions capable of independent use, all of which are allocated to residential use, and is registered in the urban property register of the parish of ..., under no. ....

  • The real property in question has a total taxable real estate value (VPT) of € 1,067,960.00, which results from the sum of the taxable real estate values of each one of the divisions capable of independent use.

  • The Claimant was notified of the Stamp Duty payment assessment notices and filed a Gracious Complaint, which was rejected by the Tax Administration.

  • The Claimant alleges, in the first place, that the notifications for payment of the tax do not contain the minimum elements that must accompany administrative acts, as results from the provision of article 151 of the CPA, in order to determine unequivocally the meaning and scope of the act and its legal effects, and that in the absence thereof, the tax act should be deemed null, for a formal defect, according to the Claimant.

  • Subsidiarily, and as to the substance, the Claimant raises the illegality of the assessed tax, invoking that the real property in question is constituted in full ownership, identifying the property record of the building with 14 fractions capable of independent use, which amount, as of this date, to a VPT of € 1,067,960.00.

  • The TA issued various Stamp Duty Payment Assessment Notices relating to the year 2015, with 30/04/2016, 31/07/2016 and 30/11/2016 being the deadline dates for voluntary payment (respectively, the 1st, 2nd and 3rd instalments).

  • The aforementioned assessments are based on the Taxable Real Estate Value (VPT) of the various fractions/divisions capable of independent use that compose the building.

  • However, the VPT of each one of the divisions capable of independent use was determined separately, in accordance with the provision of article 7, no. 2, subsection b), of the Municipal Property Tax Code.

  • The assessments are based, according to the Claimant, on the position adopted by the Tax Authority that, for purposes of taxation under Stamp Duty, item 28 of the General Table, buildings constituted in full ownership are considered in their entirety as a single building, with the sum of the taxable real estate values of the divisions or floors with residential allocation being relevant.

  • Thus, the Tax Authority summed, according to the Claimant, the value of the VPT of the 14 fractions that compose the urban building, which reached the amount of € 1,067,960.00, and further assessed the Stamp Duty at the rate of 1% on the aforementioned value.

  • The Claimant does not agree with the tax assessments in question, as it considers that they are affected by defects that justify their annulment.

  • With the entry into force of the State Budget Law for 2013 (Law no. 55-A/2012, of 29 October), item no. 28 was added to the General Table of Stamp Duty (TGIS), which subjected Stamp Duty, at the rate of 1%, on the VPT, buildings with residential allocation with a value exceeding € 1,000,000.00.

  • Law no. 55-A/2012 makes no reference to the clarification of the concepts at stake, namely, as to the concept of "building with residential allocation." However, article 67, no. 2, of the Stamp Duty Code, added by the aforementioned Law, provides that "matters not regulated in this Code concerning item 28 of the General Table shall be applied, subsidiarily, the rules of the Municipal Property Tax Code."

  • The rule of incidence of item 28 thus refers to urban buildings, whose concept is that which results from the provision of article 2 of the Municipal Property Tax Code, with the determination of the VPT complying with the terms of the provision of article 38 et seq. of the same Code.

  • In accordance with article 6 of this act, among the various types of "urban buildings," specifically mentioned are "residential urban buildings" [cf. no. 1, subsection a)], adding, then, no. 2 of the same article, that these "are the buildings or structures licensed for such purpose or, in the absence of a license, that have as their normal purpose each one of these ends."

  • In assessing the criterion that should guide the determination of the value relevant for the incidence of Stamp Duty on buildings in vertical ownership, it should be taken into account that the registration in the property register of this type of real property, constituted by different parts, floors or divisions with independent use, in accordance with the Municipal Property Tax Code, follows the same registration rules of buildings constituted in horizontal ownership, and the respective Municipal Property Tax, as well as the new Stamp Duty, is assessed individually in relation to each one of the parts, so there is no doubt that the legal criterion for determining the incidence of the new tax must be the same.

  • To such an extent that the Tax Authority itself, in issuing the assessments now subject to the request for arbitral pronouncement, clearly discriminates the VPT of each fraction – with none of them exceeding the figure of € 1,000,000.00 – then applying the tax rate corresponding to item 28 to the sum of all VPT relating to the fractions that compose the building.

  • Item 28 shall only apply if one of the parts, floors or divisions with independent use presented a VPT exceeding € 1,000,000.00 – which is not the case herein.

  • The Claimant concludes that the criterion intended by the Tax Authority as being applicable finds no legal support – neither in the letter nor in the spirit of the law – and is contrary to the criterion applicable under the Municipal Property Tax Code and, by reference, under Stamp Duty.

  • In addition to the foregoing, there is a literal argument: the fact that the law itself expressly establishes, in the final part of item 28 of the TGIS, that Stamp Duty is assessed on urban buildings with a value equal to or exceeding € 1,000,000.00 – "on the taxable real estate value used for purposes of Municipal Property Tax."

  • Concluding that the tax assessment acts for Stamp Duty should be annulled inasmuch as they are tainted by error in the legal assumptions.

  • Furthermore, the Claimant invokes that the legislator, when introducing this legislative innovation, considered as the determining element of taxable capacity urban buildings with residential allocation of high value (luxury), with the justification of the measure designated as "special tax on residential urban buildings of highest value" based on the invocation of the principles of social equity and fiscal justice, requiring the owners of property of high value intended for housing to contribute in a more intensive manner, applying the new rate established in item 28.1 of the TGIS to "houses with a value equal to or exceeding 1 million euros."

  • In this respect, according to the Claimant, the existence of a building in vertical or horizontal ownership cannot by itself be an indicator of the taxable capacity of the taxpayer holding ownership thereof, so according to its position, it is illegal and unconstitutional to consider as the reference value that corresponding to the sum of the VPT attributed to each part or division, since it would frontally violate the principles of equality and proportionality in tax matters.

  • Concluding, in this manner, the Claimant, that there should be rendered a declaration of illegality of the Stamp Duty assessment notices relating to the fiscal year 2015 – 1st, 2nd and 3rd instalments, which established a tax amount of € 10,679.60.

For its part, the Respondent supports its position, summarizing as follows:

  • As to the matter of form, the Respondent alleges that from the joint reading of Law 55-A/2012, of 29 October, of the articles of the Stamp Duty Code amended thereby and of the Municipal Property Tax Code, it results that the Stamp Duty provided for in item 28.1 of the TGIS has a periodic character and its assessment is effected officially and bindingly by the TA, based on pre-determined elements in the property register.

  • As to the notification of periodic taxes, effected by simple postal means in accordance with article 38, no. 4 of the Tax Procedure and Process Code, such as the Stamp Duty assessments under analysis in the present action, "although (…), the designation of notifications (…) is attributed, these are not acts with the nature of the notifications provided for in article 36 of the TCPC, as they do not have underlying any procedural decision of the tax administration, any act in tax matters, but rather are issued mechanically by the services," as per the understanding of Councillor Jorge Lopes de Sousa (in Tax Procedure and Process Code, annotated and commented, 6th edition, 2011, vol. I, page 376).

  • Concluding that the notifications sent to the Claimant are nothing more than the collection documents underlying the assessments processed, with the necessary adaptations, in accordance with the provision of article 6 of Law 55-A/2012, of 29 October and article 119, no. 1 of the Municipal Property Tax Code, applicable by virtue of article 46, no. 5 of the Stamp Duty Code.

  • As to the substantive matter, the Respondent alleges that the real property is described in the property register under the regime of full ownership, constituted by various floors and 14 floors or divisions capable of independent use, all allocated to residential use.

  • For the calculation of the VPT, the coefficient varies depending on its destination, and the total taxable real estate value of the real property relating to the divisions intended for residential use being greater than € 1,000,000.00, the allocation coefficient applied was 1.00.

  • Given this property register information, in accordance with article 23, no. 7 of the Stamp Duty Code, the Stamp Duty assessment in question was effected by the Tax Administration, taking into account the nature of the urban building, namely its divisions allocated to residential use, as of the date of the taxable event, applying, with the necessary adaptations, the rules contained in the Municipal Property Tax Code.

  • Thus, taking into account the property register information contained in the property record, the Claimant does not succeed, with the documents that it presently attaches to the case, in proving that which contradicts the nature of the divisions with residential character.

  • Therefore, the Stamp Duty assessments contested were issued in accordance with the information contained in the property record of the building, and therefore are valid and do not suffer from any illegality.

  • As to the taxable value of the urban building registered in the property register being equal to or exceeding € 1,000,000.00, the Respondent raises that as of the date the Claimant held full ownership of the urban building in question, assessed in accordance with the Municipal Property Tax Code, within the scope of the general assessment of urban buildings, described as "building in full ownership with floors or divisions capable of independent use," with taxable real estate value (VP) exceeding € 1,000,000.00.

  • In compliance and in accordance with the provision of article 6, no. 2 of Law no. 55-A/2012, of 29/10, which added item no. 28 to the TGIS, with the amendment effected by Law no. 83-C/2013 of 31/12 and whose respective rule of incidence refers to urban buildings, assessed in accordance with the Municipal Property Tax Code, with VP equal to or exceeding € 1,000,000.00, and in accordance with its item 28.1, residential allocation, the TA proceeded with the notification of the collection documents for payment of the assessment in question.

  • The concept of building is defined in article 2, no. 1 of the Municipal Property Tax Code, with it being established in its no. 4 that in the regime of horizontal ownership, each autonomous fraction is deemed to constitute a building.

  • It follows from the analysis of the normative provision that a "building in full ownership with floors or divisions capable of independent use" is, unequivocally, different from a real property under the horizontal ownership regime, constituted by autonomous fractions, that is, several buildings.

  • Article 12 of the Municipal Property Tax Code establishes the concept of property register, with its no. 3 relating exclusively to the manner of registering property register data.

  • As to the assessment of Municipal Property Tax, in the case of buildings in full ownership, the VP that serves as the basis for its calculation shall, indisputably, be the VP that the now-Claimant defines as the "global value of the building."

  • In compliance with the provision of article 119, no. 1 of the Municipal Property Tax Code, the collection document is sent to the taxpayer with a breakdown of the parts capable of independent use, respective taxable real estate value and the tax collected attributable to each municipality of the location of the buildings.

  • According to the Respondent, the thesis defended by the Claimant lacks legal support, as although the assessment of Stamp Duty in the situations provided for in item no. 28.1 of the TGIS is processed in accordance with the rules of the Municipal Property Tax Code, the truth is that the legislator reserves the aspects that require the necessary adaptations, namely those in which, as is the case of buildings in full ownership, even though with floors or divisions capable of independent use (even though the Municipal Property Tax is assessed in relation to each part capable of independent use) for purposes of Stamp Duty what is relevant is the building in its entirety, since the divisions capable of independent use are not deemed to be buildings, but only autonomous fractions in the horizontal ownership regime, as per no. 4 of article 2 of the Municipal Property Tax Code.

  • What expressly results from the letter of the law is that the legislator intended to tax with item 28.1 in discussion buildings as a single legal-tax reality, as referred to hereinafter.

  • In accordance with the rules of the Municipal Property Tax Code, specifically article 113, no. 1, assessment is effected based on the taxable real estate values of the buildings and in relation to the taxpayers that appear in the respective property registers.

  • With the buildings in the full ownership regime, not possessing autonomous fractions to which the tax law attributes the qualification of building, because from the notion of building in article 2 of the Municipal Property Tax Code, only autonomous fractions of buildings in the horizontal ownership regime are deemed to be buildings – no. 4 of the cited article 2 of the Municipal Property Tax Code.

  • The Respondent maintains that, in accordance with its position, the defect of violation of law by error as to the legal assumptions should be judged unfounded, with the assessments challenged remaining in the legal order by constituting a correct application of the law to the facts.

  • It does not further envision that the taxation in question could have violated the principle of equality.

  • As to the violation of this principle, the TA understands that the provision of item 28.1 of the TGIS does not constitute any violation of the principle of equality, with there being no discrimination in the taxation of buildings constituted in horizontal ownership and buildings in full ownership with floors or divisions capable of independent use, or among buildings with residential allocation and buildings with other allocations.

  • Horizontal and vertical ownership are differentiated legal institutions.

  • This discrimination can also be imposed by the need to impose coherence to the tax system.

  • The TA maintains that the property register inscription of each part capable of independent use is not autonomous, by property register, but is contained in a breakdown in the property register of the building in its entirety, as appears from the property record.

  • Concluding that these procedural assessment rules, the rules on property register inscription, and also the rules on the assessment of the parts capable of independent use, do not permit one to affirm that there should be an equation of the building under the full ownership regime to the vertical ownership regime, this being because, and as already mentioned, it would be illegal and unconstitutional.

  • One cannot conclude, according to the TA, by an alleged discrimination in violation of the principle of equality when, in fact, we are dealing with distinct realities, valued by the legislator in a different manner.

  • It further emphasizes that taxation under Stamp Duty complies with the criterion of adequacy, in the precise sense in which it aims at the taxation of wealth embodied in the ownership of real property of high value, arising in a context of economic crisis that cannot at all be ignored.

  • The option for this mechanism of revenue collection is legitimized, which would only be censurable, in light of the principle of proportionality, if it resulted manifestly indefensible, according to the position of the TA.

  • Thus, the TA understands that the provision of item 28 of the TGIS does not constitute any violation of the principle of equality of article 13 of the Constitution of the Portuguese Republic.

  • Concluding that the notifications effected of payment of tax installment did not violate any legal or constitutional principle, and should therefore be maintained.

  • The TA believes that the Stamp Duty assessments, item 28 of the TGIS, challenged in the present action, remain entirely valid and legal, concluding that they are legal.

II – PRELIMINARY RULING

The Parties possess legal standing and capacity, are legitimate as to the request for arbitral pronouncement, are duly represented and the tribunal is competent, in accordance with the provisions of articles 4 and 10 of RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

No objections exist to be raised and the case does not suffer from any nullities, so it is necessary to now proceed to the merits of the case.

III. MERITS

SUBSTANTIVE FACTS

Proven and unproven facts

It is incumbent upon the tribunal to select the facts that matter for the decision of the case and to discriminate between proven and unproven matters (as per article 123, no. 2, of the TCPC and article 607, no. 3 of the CPC, applicable by virtue of article 29, no. 1, subsections a) and e), of RJAT).

Accordingly, the facts pertinent to the judgment of the case are selected and delineated as a function of their legal relevance, which is established in attention to the various plausible solutions of the legal question(s) (as per prior article 511, no. 1, of the CPC, corresponding to the current article 596, applicable by virtue of article 29, no. 1, subsection e), of RJAT).

Thus, having regard to the positions assumed by the parties, the documentary evidence attached to the case, the following facts were considered proven, with relevance for the decision:

  • The Claimant, at the date of the occurrence of the taxable event (relating to the fiscal year 2015), was the owner of the urban building registered in the property register of the parish of ..., municipality of Lisbon, under article ..., with the total taxable real estate value (VPT) of € 1,067,900.00, which results from the sum of the taxable real estate values of each one of the divisions capable of independent use (as per copies of the property records attached to the case with the administrative file).

  • The building in question, in full ownership, with floors or divisions capable of independent use, was constituted by 14 floors or divisions capable of independent use, all of which were allocated to residential use (as per copies of the property records attached to the case with the administrative file).

  • The Claimant was notified for payment of the Stamp Duty assessments of item 28.1 of the General Table of Stamp Duty relating to the fiscal year 2015, at the rate of 1%, on the global VPT of the divisions of independent use intended for residential use, in the global amount of € 10,679.60, and collection documents were issued, as per the information and extract that results from the administrative file and documents nos. 2 to 15 attached with the initial petition.

  • None of the divisions capable of independent use has a value equal to or exceeding one million euros (as per copies of the property records attached to the case with the administrative file).

  • The Claimant filed a Gracious Complaint, which was rejected by the Tax Administration on 22/12/2017, as per documentary support attached to the case in the administrative file and document no. 1 attached with the initial petition.

  • The Claimant submitted a request for arbitral pronouncement on 20 March 2018.

No other facts with relevance for the decision of the case were proven, considering the possible legal solutions.

There are no facts given as unproven.

Justification as to the substantive facts

The proven facts, on which there is no controversy, are based on the documents attached by the Claimant with the request for arbitral pronouncement and the administrative file attached by the Respondent.

2. SUBSTANTIVE LAW

2.1. Main issues

From that petitioned by the Claimant result the following substantive issues to be addressed in this case, which we list hereinafter:

  • Whether the notifications for payment of the Tax are null for defects of form.

  • Whether the expression "taxable real estate value contained in the property register, in accordance with the Municipal Property Tax Code," to which item no. 28 of the General Table of Stamp Duty (TGIS), added by Law no. 55-A/2012, of 29 October, refers, relates to the VPT of each one of the economically independent parts with residential allocation of an urban building not constituted in horizontal ownership, or is determined by the global VPT of the building, which would correspond to the sum of all VPT of the floors or divisions of independent use and with residential allocation that compose it.

  • The unconstitutionality of the tax regime and the interpretation of the TA as to the same.

With the Claimant indicating an order of subsidiarity in the imputation of defects to the assessments challenged, this order must be observed in its examination, as follows from subsection b) of no. 2 of article 124 of the TCPC, applicable to tax arbitration proceedings by force of the provision of article 29, no. 1, subsection c), of RJAT.

It is necessary to decide:

As to formal validity

In this matter, the Claimant alleges that the notifications for payment of the tax do not contain the minimum elements of any tax assessment act, namely, and as per its enumeration, the indication of the authority that carried it out and the mention of the delegation or subdelegation of powers, when it exists; the enunciation of the facts or acts that gave rise to it; the minimum substantiation of the act; the content or meaning of the decision and its respective object; and the signature of the author of the act.

Which, for the Claimant, the tax act should be declared null, for a formal defect.

As to this matter, we agree with the understanding of the TA as regards the notification of periodic taxes effected by simple postal means in accordance with article 38, no. 4 of the TCPC, as occurred in the present case, dealing with collection documents underlying the assessments processed.

Since, and as is transcribed, "although (…), the designation of notifications (…) is attributed, these are not acts with the nature of the notifications provided for in article 36 of the TCPC, as they do not have underlying any procedural decision of the tax administration, any act in tax matters, but rather are issued mechanically by the services," as per the understanding of Councillor Jorge Lopes de Sousa (in Tax Procedure and Process Code, annotated and commented, 6th edition, 2011, vol. I, page 376).

But, even if this were not so, it would still result that, "the deficiencies of notification that affect the validity thereof lead to the notified act not being effective in relation to the notified party, as is expressly provided in no. 1 of this article. However, the deficiencies that affect the validity of notification do not affect the validity of the notified act. In fact, the notification of an act is an act external to this and, for this reason, the defects that affect the notification, being able to determine the invalidity of the notification and the consequent ineffectiveness of the notified act, do not affect the validity of this." (TCPC annotated and commented by Jorge Lopes de Sousa, 6th ed., 2011, Vol. I, (page 345), in annotation to article 36 of the TCPC).

As results from the Decision of the STA of 8 July 2015 rendered in the course of Case no. 389/15-30 (consulted on the website www.dre.pt):

"I - The insufficiency of the notification act by lack of indication of the means of defense does not lead to the nullity of the act, but grants the notified party the right to request the notification of the omitted elements or the issuance of a certified copy containing them, within the deadline set in no. 1 of article 37 of the TCPC; using this right, the deadline for reacting against the tax act is counted from the notification of the omitted requirements or the issuance of a certified copy containing them.

II - If the right provided for in article 37, no. 1 of the TCPC is not exercised, the aforementioned omission is irrelevant for removing the normal effects of the notification already carried out."

In the case at hand, the now-Claimant petitions that the illegality of the tax assessments be declared after having filed a Gracious Complaint, rejected by the TA, so it is evident that, in no case, the deficiency, if it exists, could, at this point, place in question the effectiveness of the notified act.

Thus, without need for further considerations, this allegation by the Claimant lacks merit.

As to the merits of the Stamp Duty assessments

Item 28.1, of the TGIS, in the wording given to it by Law no. 83-C/2013 of 31 December (State Budget for 2014), applicable to the assessments challenged, established the subjection to Stamp Duty of the ownership, usufruct or right of superficies of residential urban buildings or lands for construction whose authorized or planned building was for residential use and whose VPT contained in the property register, in accordance with the Municipal Property Tax Code, was equal to or exceeding one million euros.

The concept of building, beyond the distinction between rural, mixed and urban buildings (the latter, in accordance with article 4, being all that are not rural or mixed) establishing the criterion and types of urban buildings are found in articles 2 to 6 of the Municipal Property Tax Code.

A regime that we apply subsidiarily to matters relating to item 28 of the TGIS, considering the legal reference in no. 2 of article 67 of the Stamp Duty Code, in the wording in force at the date of the facts:

2 - Matters not regulated in this Code relating to item no. 28 of the General Table shall have subsidiarily applied the provisions of the Municipal Property Tax Code.

From the reading of article 6 of the Municipal Property Tax Code there are various types of urban buildings, whose classification is established, in accordance with the provision, in its no. 1, as residential, commercial, industrial or for services, lands for construction, with the following nos. providing what should be understood by each one of those designations, most notably, in its no. 2 establishing that

"Residential, (…) are the buildings or structures licensed for such purpose or, in the absence of a license, that have as their normal purpose each one of these ends."

From the foregoing, the Claimant is the owner – as far as the date of the facts is concerned – of an urban building not constituted under the horizontal ownership regime, with floors or divisions of independent use all intended for residential use.

At the level of tax assessment, each floor or part capable of independent use "is considered separately in the property register inscription, which also discriminates the respective taxable real estate value" (article 12, no. 3, of the Municipal Property Tax Code).

Indeed, to such an extent that the TA issued individualized assessments for each floor or division capable of independent use and not a single assessment on the "global value" of the building.

Thus, the urban building of which the Claimant is the owner and of which the present case treats, incorporating floors or divisions capable of independent use, intended for residential use, cannot, globally, be considered an urban residential building.

Which, thus being, does not appear to be configurable, in light of the regime described, that the floors or divisions allocated to residential use and that compose the urban building can be aggregated so that, in their aggregate, they integrate the notion of urban residential building provided for in the rule of incidence of item 28.1 of the TGIS.

Following the decision rendered in the course of Case no. 19/2018-T (in www.caad.org.pt):

"It cannot therefore be accepted that, by so proceeding, the TA formulates a rule of incidence ex novo, different from that which was created by the legislator, under penalty of violation of the principle of tax legality, inherent in article 103, no. 2, of the Constitution of the Portuguese Republic."

"What appears to result from the ratio legis underlying the rule of item 28 of the TGIS, introduced by Law no. 55-A/2012 of 29 October, is that the legislator intended to tax the ownership, usufruct and right of superficies of residential units with VPT equal to or exceeding € 1,000,000.00, as an index of high taxable capacity."

Following the decision of the STA rendered on 29/03/2017 in the course of Case no. 0593/16 (in www.dgsi.pt):

"I - Item 28 of the General Table of Stamp Duty (TGIS) added by article 4 of Law no. 55-A/2012, of 29/10, does not apply to urban buildings with a single property register article but constituted by parts with allocation and independent use to which independent VPT were attributed, each one of these with a value of less than one million euros.

II - Having item 28 of the General Table made no distinction between buildings in the horizontal ownership regime and full/vertical ownership and referring to the taxable real estate value used for purposes of Municipal Property Tax, it will not be the responsibility of its applicator to introduce any distinction, all the more so since it is a rule of incidence.

III - If it was the intention of the legislator to tax real properties that, having a single property register article, because they are constituted by parts capable of independent use have attributed various taxable real estate values, and intended that for purposes of taxation under Stamp Duty, in this case, the sum of those various taxable real estate values be taken into account, it would not have added the final part of the provision: on the taxable real estate value used for purposes of Municipal Property Tax.

IV - Nothing in the law imposing the consideration of any sum of all or part of the VPT attributed to the various parts of a building with a single property register article, it also appears non-conforming with the law to carry out such arithmetic operation only for purposes of the taxation established in item 28 of the General Table of Stamp Duty."

Thus, in accordance with the terms mentioned and the factuality given as proven, none of the floors or divisions capable of independent use and with residential allocation that are the object of the assessments under analysis had a VPT equal to or exceeding that defined in the rule of incidence, and it must be concluded that they are excluded from it.

For the reasons set forth, having verified the defect of violation of law, by error in the application of the law, resulting from the erroneous interpretation of the rule of incidence of item no. 28.1 of the TGIS, it is unavoidable to conclude that the assessments challenged cannot be maintained in the legal order.

Considering the decision on the merits makes it prejudicial, as being useless [article 130 of the Code of Civil Procedure (CPC)], knowledge of the other issues raised.

IV. DECISION

On these grounds, the Arbitral Tribunal decides:

  • To declare the illegality of the Stamp Duty assessments (item 28.1 of the TGIS) challenged, by error in the legal assumptions, determining their annulment.

  • To condemn the Respondent in the costs of the proceedings.

V. VALUE OF THE CASE

In harmony with the provision of article 306, no. 2 of the CPC, 97-A, no. 1, subsection a) of the TCPC and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 10,679.60.

VI. COSTS

In accordance with article 22, no. 4 of 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, being the responsibility of the Respondent.

Notify the parties.

Lisbon, 20 September 2018

The arbitrator,

Marisa Almeida Araújo

Frequently Asked Questions

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Does Stamp Tax (Imposto do Selo) under Verba 28.1 of TGIS apply to properties held in vertical ownership (propriedade vertical)?
Stamp Duty under Verba 28.1 of TGIS applies to buildings with residential allocation exceeding €1,000,000 VPT. The central issue in vertical ownership is whether the threshold applies to each independent unit separately or to the building as a whole. The Tax Authority's position aggregates all unit values, while taxpayers argue that vertical ownership should follow horizontal property rules where each fraction is assessed individually under the Municipal Property Tax Code's subsidiary application per Article 67(2) of the Stamp Duty Code.
How is the taxable value determined for a building with independent units under Verba 28 of the General Stamp Tax Table?
For buildings with independent units under Verba 28 TGIS, the taxable value determination depends on the ownership structure. The Municipal Property Tax Code (applied subsidiarily) provides that each independent unit's VPT is determined separately under Article 7(2)(b). The controversy arises when a building in full ownership contains multiple independent units: whether to sum all VPTs or assess each unit individually. Registration practices treat vertical ownership similarly to horizontal property, with separate VPT assessments for each fraction, supporting individual taxation arguments.
Can a property in total ownership with floors susceptible to independent use be treated differently from horizontal property for Stamp Tax purposes?
The CAAD arbitration procedure for challenging Stamp Tax liquidations follows the Legal Framework for Tax Arbitration (RJAT - Decree-Law 10/2011). Taxpayers submit requests under Articles 2(1)(a) and 10 et seq., identifying the contested tax acts and grounds for illegality. The CAAD President accepts the request, appoints an arbitrator (Article 6(2) and 11(1)(b)), and parties may challenge the appointment within legal deadlines. The tribunal constitutes formally, the Tax Authority submits a reply with the administrative file, and the arbitrator may dispense with hearings under procedural adequacy principles, issuing a binding arbitral award on the tax assessment's legality.
What is the CAAD arbitration procedure for challenging Stamp Tax liquidations under the RJAT framework?
Individual units in vertically owned buildings present a threshold determination challenge under Verba 28.1 TGIS. The Claimant's position argues for separate assessment: each of the 14 units had individual VPTs below €1,000,000, thus no Stamp Duty should apply. The Tax Authority's approach aggregates all unit values (totaling €1,067,960), treating the building as a single taxable entity exceeding the threshold. This interpretation conflict stems from ambiguity in Law 55-A/2012, which doesn't explicitly address vertical ownership. The resolution depends on whether vertical ownership with independent units is analogous to horizontal property (separate taxation per fraction) or constitutes a single building (aggregated valuation).
Are individual units in a vertically owned building assessed separately or as a whole for the €1,000,000 threshold under Verba 28.1 TGIS?
Properties in total ownership with floors capable of independent use raise classification questions for Stamp Tax purposes. While horizontal property (propriedade horizontal) clearly involves separate fractions taxed individually, vertical ownership (propriedade vertical) maintains full ownership of the entire building despite containing independent units. The Municipal Property Tax Code treats both similarly for registration and IMI purposes, with separate VPT determinations per unit. However, Verba 28.1's application remains disputed: whether 'building with residential allocation' means the entire structure (favoring aggregation) or each independent unit (favoring separate assessment). The subsidiary application of CIMI rules under Article 67(2) of the Stamp Duty Code supports treating vertical ownership like horizontal property for threshold purposes.