Process: 132/2013-T

Date: April 19, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 132/2013-T addresses stamp tax (Imposto de Selo) assessments under Verba 28 of the General Stamp Tax Table (TGIS), which taxes residential properties with cadastral values exceeding €1,000,000. The claimant challenged multiple stamp tax liquidations, arguing that the Tax Authority (AT) incorrectly aggregated the cadastral values of separate floors within a single building, rather than assessing each floor individually. The claimant contended that each floor had its own cadastral inscription with values below the €1,000,000 threshold, and therefore should not be subject to the tax. The case also raised constitutional issues regarding retroactive taxation under Law 55-A/2012, which introduced the tax with effect from October 31, 2012. Following Constitutional Court Judgment 692/2015, the arbitral tribunal reformed its original December 2013 decision. The tribunal found it had jurisdiction and the parties were properly constituted. The claimant sought annulment of twelve stamp tax assessments covering multiple installments. This case established important precedents regarding the interpretation of Verba 28 TGIS, the proper determination of taxable value for stamp tax purposes, the constitutional limits on retroactive taxation, and the procedure for reforming arbitral decisions after Constitutional Court intervention. The decision demonstrates the CAAD arbitration process for challenging tax assessments, including the possibility of expanding claims to include additional installments and the impact of constitutional review on tax arbitration proceedings.

Full Decision

ARBITRAL DECISION

Following the judgment no. 692/2015, delivered by the Constitutional Court on 16 December 2015, a new arbitral decision is hereby rendered.

I – Report

1.1. A... (hereinafter designated as the "claimant"), having been notified of stamp duty tax assessments (1st instalment) contained in documents nos. 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013... and 2013..., filed on 7/6/2013 a petition for constitution of an arbitral tribunal and arbitral decision, in accordance with articles 99 of the CPPT and 2, no. 1, paragraph a), and 10, no. 2, paragraph c), of Decree-Law no. 10/2011, of 20/1 (Legal Regime of Arbitration in Tax Matters, hereinafter designated only as "RJAT"), in which the Tax and Customs Authority (AT) is cited as respondent, seeking the declaration of "illegality of the stamp duty tax assessment acts subject to this challenge and their respective annulment, with all legal consequences."

1.2. On 8/8/2013 the present Singular Arbitral Tribunal was constituted.

1.3. In accordance with article 17, no. 1, of the RJAT, the AT was served, as the respondent party, to submit a reply, in accordance with and for the purposes of the aforementioned article. The AT submitted its reply on 1/10/2013, arguing, in summary, the total lack of merit of the claimant's petition.

1.4. On 8/10/2013, the Arbitral Tribunal requested from the AT a copy of the administrative file, in accordance with and for the purposes of article 17, no. 2, of the RJAT. The said copy was sent on 18/10/2013 and attached to the present file on 22/10/2013.

1.5. On 21/10/2013, the parties were requested to submit written submissions. The claimant submitted submissions on 31/10/2013, reiterating the arguments previously presented in his petition. The respondent did not submit any submissions.

1.6. The meeting in accordance with and for the purposes of article 18 of the RJAT took place on 12/11/2013. The content of the respective minutes is hereby incorporated by reference. The date of 16/12/2013 was set for the rendering of the arbitral decision.

1.7. By arbitral order of 15/11/2013, it was determined that the petition sent on 14/11/2013 be attached to the present file, relating to the expansion of the subject matter of the present petition, so as to include stamp duty tax assessments – 3rd instalment – covered in documents nos. 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013... and 2013..., in the total amount of €4,442.22. The said assessments were made on 22/3/2013.

1.8. On 18/11/2013, the respondent was notified of the order and did not make any submission.

1.9. The Arbitral Tribunal was regularly constituted, is materially competent, the proceedings do not suffer from any defects that would invalidate them, and the Parties have legal personality and capacity, proving themselves legitimate.

1.10. Given the provisions of the Constitutional Court Judgment no. 692/2015, delivered on 16/12/2015, which originated from the decision of the present Tribunal of 16/12/2013 (Judgment which was entered in the CAAD system on 12/4/2016), the present date witnesses the reform – given the suspension of the effects of the notification of archiving until the rendering of the Constitutional Court Judgment – of the previous decision, in accordance with article 80, no. 2, of the LTC.

II – Parties' Submissions

2.1. The claimant submits in his initial petition that: a) "the taxable value (VPT) contained in the cadastral register, for purposes of applying the tax incidence rule contained in item no. 28 of the General Table of Stamp Duty (TGIS), can only be that of the cadastral inscription corresponding to each of the parts of the property with residential use and not that corresponding to the sum of all VPTs of the floors that compose it"; b) "the VPTs of the floors that compose the property in question in these proceedings oscillate between €104,140.00 and €113,780.00, being, therefore, all of them inferior to €1,000,000.00", wherefore "the stamp duty tax referred to in item no. 28 of the TGIS does not apply to them"; c) "the application of this rule to the case at hand has no legal support whatsoever, since the AT considers, for purposes of stamp duty tax incidence, the value resulting from the sum of the VPTs of all floors of the property and not the VPTs of each one of them"; d) "the AT's interpretation of the rule contained in item no. 28 of the TGIS has no correspondence whatsoever in the letter of the law, since, it is insisted, the latter mandates attention to the VPT contained in the cadastral register and not to the sum of the VPTs of the floors of the property, which possess separate cadastral inscriptions"; e) "the same interpretation also has no correspondence whatsoever in the spirit of the same rule, insofar as it can only aim at subjecting to tax the floors with residential use existing in properties, considered separately, and not the latter, considered as the sum of those floors, for only in this way can it be understood that the tax does not apply to the part of the properties that do not have the said residential use"; f) "in delimiting the incidence of the rule of item no. 28 of the TGIS, the law does not consider the plurality of real estate or parts thereof, devoted to residential use, which may be in the ownership of the same taxpayer, but only the ownership of each residential portion, in its individuality, be it an autonomous unit or an independent part of a property not subject to the horizontal property regime"; g) "the assessment acts hereby challenged are illegal, by violating the rule of tax incidence provided for in item no. 28 of the TGIS."

2.2. The claimant further invoked the unconstitutionality: a) of item no. 28 of the TGIS, for alleged violation of articles 13 and 104, no. 3, of the CRP (an issue which has already been decided by the aforementioned Constitutional Court Judgment: see 1.10. and infra, section IV); b) of the "interpretation adopted by the AT of article 6, no. 2 of Law no. 55-A/2012, of 29 October, referring the stamp duty tax assessment to the year 2012", for alleged "offense of the prohibition of the obligation to pay taxes of a retroactive nature". With respect to this interpretation, the claimant further added that: "if, in accordance with articles 22, no. 7, of the CIS and 113, no. 1, of the CIMI, the tax is assessed annually, and if, in accordance with such legal provisions, the AT should have assessed tax in 2013, relating to the year 2012, the question arises as to what year the stamp duty tax assessment provided for in article 6, no. 1, of Law no. 55-A/2012, should have been made, in accordance with its respective rules, which notably determine the verification of the tax event on 31 October 2012. Now, in the logic resulting from the unity of the legal system, such assessment would have to relate to the year 2011, since the tax event generating the obligation to pay tax relating to the year 2012 would be that provided for in article 113, no. 1, of the CIMI. However, Law no. 55-A/2012 was published on 29 October and entered into force the following day [therefore the] interpretation that the assessment of the stamp duty tax provided for in item no. 28 of the TGIS, in accordance with the rules of article 6, no. 1, of Law no. 55-A/2012, referred to the year 2011, is equivalent to considering that a tax was created to apply to tax events already past. [...]. The author/challenger invokes this unconstitutionality [«offense of the prohibition of the obligation to pay taxes of a retroactive nature»] for all legal purposes. However, there exists another interpretation of the same rule, with correspondence in the letter and spirit of the Law, which does not lead to an unconstitutional result, which is to consider the rule in question as referring to the tax of the year 2013, and not to the assessment to be made in this year, which should be that adopted in the decision of the present challenge. In this latter interpretation, there should have been no assessments challenged, wherefore the same should be declared illegal and, in consequence, annulled."

2.3. The claimant finally concludes by seeking full merit of the petition and, by virtue thereof, requests that it be "declared the illegality of the stamp duty tax assessment acts subject to the present challenge and their respective annulment, with all legal consequences."

2.4. For its part, the AT submits in its reply: a) that, "in the present case, the taxable value (VPT) on which the incidence of the stamp duty tax of item 28.1 of the General Table depends on had to be, as it was, the global taxable value of the property and not that of each of its independent parts"; b) that "it follows [from article 2, no. 4, of the Stamp Duty Tax Code and article 3, no. 3, paragraph u), of the CIMI] that the tax event of the stamp duty tax of item 28.1 consists in the ownership, usufruct or right of superficies of urban properties whose taxable value contained in the cadastral register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000.00"; c) that "the taxable value relevant for purposes of the incidence of the tax is, thus, the total taxable value of the urban property and not the taxable value of each of the parts that compose it, even when capable of independent use [wherefore] it is not seen, thus, how the assessment of IMI [Municipal Property Tax] hereby challenged could have violated the literal content of item 28.1 of the General Table"; d) that "article 80, no. 2, of the CIMI states that, save as otherwise provided in articles 84 and 92, each property corresponds to a single entry in the cadastral register. The principle that each property corresponds to a single cadastral entry is only excepted, thus, with respect to mixed properties in which, in accordance with the aforementioned article 84, each distinct part is registered in the cadastral register in the part corresponding to it and with respect to properties constituted in horizontal property in which, despite the fact that, in accordance with article 2, no. 4, of the CIMI, each autonomous unit is deemed to constitute a property, each building under the horizontal property regime corresponds to a single cadastral entry"; e) that "the urban property is not under the horizontal property regime, in which case each of the autonomous units would be deemed to be urban property, including for purposes of subjection to the stamp duty tax of item 28.1 of the General Table, but under the vertical property regime. It has, however, as appears from its respective cadastral register of floors or independent divisions, valued in accordance with article 12, no. 3, of the CIMI, which states that each floor or property capable of independent use is considered separately in the cadastral inscription, which equally discriminates the respective taxable value on which IMI is assessed. [...]. Such legal rule is thus relevant, for purposes of cadastral registration, to the autonomy that, within the same property, can be attributed to each of its parts, economically and functionally independent"; f) that "the unity of the urban property in vertical ownership composed of several floors or divisions is, however, not affected by the fact that all or some of those floors or divisions are capable of independent economic use. Such property remains but one, and are not thus its distinct parts juridically equated to autonomous units under the horizontal property regime. [...]. In the present case, the taxable value (VPT) on which the incidence of the stamp duty tax of item 28.1 of the General Table depends had to be, as it was, the global taxable value of the property and not that of each of its independent parts"; g) that "the taxation in question [does not] violate the principle of non-retroactivity of taxes [since] the non-retroactivity of taxes applies in the case of the creation of taxes subsequent to the tax event [which,] by nature, does not apply in the present case [since] the tax event of the 2012 stamp duty tax occurs on 31 December 2012, as results from article 6, no. 2, of the Stamp Duty Tax Code, in the wording of the aforementioned Law no. 55-A/2012"; and h) that "the stamp duty tax of item 28 was, thus, created prior to 31 December 2012".

2.5. In conclusion, the AT sustained that: "a) item 28.1 of the General Table of Stamp Duty applies to urban residential properties; b) the taxable value equal to or greater than €1,000,000.00 on which the application of that legal rule depends on is, as expressly results from its letter, the taxable value of each property and not of its distinct parts, even though capable of independent use; c) in that measure, the stamp duty tax of item 28 was correctly assessed; d) the taxation in stamp duty did not equally violate the principle of non-retroactivity of taxes; e) this is what results from Law no. 55-A/2012 being prior to the occurrence of the tax event of the stamp duty tax of that year, which occurred on 31 December 2012."

III – Proven Facts, Unproven Facts and Respective Grounds

3.1. The following facts are considered proven:

i) On 1/4/2013, the AT notified the claimant of twelve assessments of the 1st instalment of stamp duty tax, relating to the year 2012.

ii) The said assessments were based on the following VPTs (taxable values): 1) €104,140.00 - relating to two cadastral inscriptions, respectively, ... ... – U –...– RC D and ... ...– U –...– RC E; 2) €111,550.00 - relating to four cadastral inscriptions, respectively, ... ...– U –...– 1 D, ... ...– U – ... – 1 E, ... ...– U –...– 2 D and ... ...– U –...– 2 E; 3) €112,660.00 - relating to four cadastral inscriptions, respectively, ... ...– U –...– 3 D, ... ...– U –...– 3 E, ... ...– U –...– 4 D and ... ...– U –...– 4 E; 4) €113,780.00 - relating to two cadastral inscriptions, respectively, ... ...– U –...– 5 D and ... ... – U –...– 5 E.

iii) All the aforementioned cadastral inscriptions correspond to the urban property located at ..., no. ..., in Lisbon (parish of ...). The said property comprises twelve floors, each with independent use and residential purpose, not being constituted under the horizontal property regime.

iv) The taxable value of the said twelve floors with independent use and residential purpose, that compose the urban property, was determined separately, in accordance with article 7, no. 2, paragraph b), of the Municipal Property Tax Code (CIMI). The value corresponding to the sum of the VPTs of the twelve floors equals €1,332,680.00.

v) The AT assessed the stamp duty tax provided for in item nos. 28 and 28.1 of the General Table of Stamp Duty (TGIS), in the wording given to it by article 4 of Law no. 55-A/2012, of 29/10, at the rate of 1%, considering as "VPT – total subject to tax" the aforementioned value of €1,332,680.00.

vi) By arbitral order of 15/11/2013, it was determined that the petition sent on 14/11/2013 be attached to the present file, relating to the expansion of the subject matter of the present petition, so as to include stamp duty tax assessments – 3rd instalment – covered in documents nos. 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013..., 2013... and 2013..., in the total value of €4,442.22. The said assessments were made on 22/3/2013. On 18/11/2013, the respondent was notified of the arbitral order of 15/11/2013 and did not make any submission.

vii) The expansion of the subject matter of the petition resulted in the alteration of the value of the case, which became €17,769.02 (€13,326.80 + €4,442.22).

3.2. There are no unproven facts relevant to the decision of the case.

IV – Preliminary Issue

From the decision of this Tribunal, delivered on 16/12/2013, an appeal was, in due course, filed with the Esteemed Constitutional Court, which decided in the following terms, which are hereby transcribed (Constitutional Court Judgment no. 692/2015, of 16/12/2015, delivered in Appeal Case no. 51/14):

"«In the present appeal, the principle of tax equality is precisely in issue, especially in its aspect of uniformity, that is, insofar as it requires that the duty to pay taxes (in this case, stamp duty tax) be measured by the same criterion, expressed by the principle of contributive capacity. It is necessary to examine whether, by subjecting to special tax urban residential properties in full ownership composed of parts capable of independent use and considered separately in the cadastral inscription, taking into account for such purpose the sum of the taxable values attributed to the various parts of the property, contrary to what occurs in properties constituted in horizontal ownership, the said rule treated in a differentiated manner situations revealing identical contributive capacity and, if so, whether that inequality of treatment proves arbitrary, by introducing discriminations between taxpayers devoid of sufficient rational foundation.

It is therefore necessary, first and foremost, to compare the two situations under analysis, namely the situation of urban residential properties in full ownership composed of parts capable of independent use and considered separately in the cadastral inscription and the situation of properties under the horizontal ownership regime, beginning, for such purpose, by making a brief reference to the institutes of ownership proper sensu and horizontal ownership. [...].

We are, therefore, faced with realities with a distinct legal status, in which the ownership of the real rights referred to in item 28.1 of the General Table of Stamp Duty that apply to the units of a property constituted in horizontal ownership may belong to different persons, whereas in a property composed of units capable of independent use, but not constituted in horizontal ownership, such ownership is necessarily of the same person or persons.

Thus, while it is undeniable that, in the field of civil law, we are faced with two legally different situations, it is nevertheless necessary to question whether such differences justify different treatment in the tax sphere, that is, whether such legal differences exist and are also relevant in the substantive sphere for tax purposes, to the point that it can be stated that, in economic terms, we are faced with different manifestations of contributive capacity.

As we have seen, with the legislative amendment on which the interpretation sub iudicio was based, as results both from the statement of reasons of Bill Proposal no. 96/XII, which was the origin of Law no. 55-A/2012, of 29 October, as well as from its general discussion in the Assembly of the Republic, the legislator had the purpose of «strengthening the principle of social equity in austerity, guaranteeing an effective distribution of the sacrifices necessary to comply with the adjustment program» and to «ensure that the distribution of such sacrifices will be made by all and not only by those living on the income from their work». For such purpose, it decided through the aforementioned law to broaden «the taxation of capital income and property» and, among other measures, proceeded to the «creation of a special rate to tax urban residential properties of higher value».

Thus, with respect to the taxation of property, the legislator understood, based on the aforementioned «principle of social equity in austerity», that it was necessary to require an increased contribution from the holders of real estate of high value intended for housing. Hence the fact to which it attributed relevance as a determining element of the incidence of this new «special rate» and as a manifestation of contributive capacity has been the ownership, usufruct or right of superficies of urban residential properties whose taxable value is equal to or greater than €1,000,000.00. That is, the legislator understood that the availability, based on the holding of a property right, usufruct or superficies right, of a residential unit of this value (to be calculated on the basis of the taxable value that is taken into account for purposes of IMI), constitutes an element revealing an increased contributive capacity in relation to other taxpayers, apt to justify this special taxation, intended to guarantee the aforementioned «distribution of the sacrifices necessary to comply with the adjustment program» made by all and not only by those who live on the income from their work. Thus, the holding of a residential property unit with a value exceeding €1,000,000.00, with that value resulting from that which is calculated for purposes of collection of IMI, was selected as the taxable reality.

Now, if in a property constituted in horizontal ownership, such holding can only refer to each of the autonomous units, since each of the different units may be the object of its own real legal situation, the same does not apply in a property in which, although physically divided into units capable of independent use, its holding necessarily refers to the whole corresponding to the sum of the different units, and the real rights referred to in item 28.1 of the General Table of Stamp Duty cannot have as their object in isolation one of those units.

Thus, for purposes of the tax here under scrutiny, while the value of an entire property not constituted in horizontal ownership, despite being composed of different units capable of having independent use, reveals the contributive capacity of its single holder, the same does not apply to a property identical to it constituted in horizontal ownership, since, as each of the units is capable of its own real legal situation, only the value of each of them is suitable to reveal the contributive capacity of its holder.

The differences arising from the different property regimes constitute sufficient grounds for, with respect to the incidence of stamp duty tax in the case of buildings in horizontal ownership, account be taken of the individualized taxable value of each of the units, which does not apply in the case of urban residential properties in full ownership composed of parts capable of independent use and considered separately in the cadastral inscription.

Hence, an interpretation of the rule of tax incidence contained in item 28.1 of the General Table of Stamp Duty, in the sense of including therein urban residential properties in full ownership, composed of parts capable of independent use and considered separately in the cadastral inscription, proceeding for such purpose to the sum of the taxable value of each of the independent units with residential purpose, does not prove to violate the principle of tax equality and the principle of contributive capacity, as set forth above.»" [End of quotation.]

As was stated in the text of the previous decision of this Arbitral Tribunal, three issues were to be decided: 1) whether the subjection to stamp duty tax, in accordance with what item no. 28 of the TGIS provides, is determined by the VPT corresponding to each of the parts of the property with residential purpose, or whether, instead, it is determined by the global VPT of the property, which would correspond to the sum of all VPTs of the floors that compose it; 2) whether item no. 28 of the TGIS is unconstitutional by violation of the principle of equality, as well as of article 104, no. 3, of the CRP; and 3) whether "the interpretation adopted by the AT of article 6, no. 2, of Law no. 55-A/2012, of 29 October, referring the stamp duty tax assessment to the year 2012" is unconstitutional, by "offense of the prohibition of the obligation to pay taxes of a retroactive nature".

Having the aforementioned Constitutional Court Judgment decided, in a definitive manner, the above-referenced issue 2) ("whether item no. 28 of the TGIS is unconstitutional by violation of the principle of equality, as well as of article 104, no. 3, of the CRP") – concluding, in summary, that "an interpretation of the rule of tax incidence contained in item 28.1 of the General Table of Stamp Duty, in the sense of including therein urban residential properties in full ownership, composed of parts capable of independent use and considered separately in the cadastral inscription, proceeding for such purpose to the sum of the taxable value of each of the independent units with residential purpose, does not prove to violate the principle of tax equality and the principle of contributive capacity" – it remains, now, for the present Tribunal to rule on the above-referenced issues 1) and 3), which have already been the subject of extensive contradictory debate between the parties, wherefore, given the provisions of article 3, no. 3, of the CPC, the promotion of new procedural steps appears manifestly unnecessary.

V – On the Law

Consequently, the previous decision is hereby reformed, and the following two disputed issues of law remain, in light of the above, (which, as noted, have already been the subject of contradictory debate): 1) whether the subjection to stamp duty tax, in accordance with what item no. 28 of the TGIS provides, is determined by the VPT corresponding to each of the parts of the property with residential purpose, or whether, instead, it is determined by the global VPT of the property, which would correspond to the sum of all VPTs of the floors that compose it; and 2) whether "the interpretation adopted by the AT of article 6, no. 2, of Law no. 55-A/2012, of 29 October, referring the stamp duty tax assessment to the year 2012" is unconstitutional, by "offense of the prohibition of the obligation to pay taxes of a retroactive nature".

Let us then proceed.

  1. At the origin of the first issue is item no. 28 of the TGIS, added by article 4 of Law no. 55-A/2012, of 29/10, which provides as follows:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable value contained in the cadastral register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000.00 – on the taxable value for purposes of IMI: 28.1 – For property with residential purpose – 1%. 28.2 – For property, when the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favourable tax regime, contained in the list approved by order of the Minister of Finance – 7.5%."

Law no. 55-A/2012, which entered into force on 30/10/2012, did not carry out the qualification of the concepts contained in item no. 28, namely, the concept of «property with residential purpose». However, observing what is provided in article 67, no. 2, of the Stamp Duty Tax Code (CIS), also added by the aforementioned Law no. 55-A/2012, it is verified that «matters not regulated in the present code relating to item 28 of the General Table shall be governed subsidiarily by the CIMI.» Given the existence of doubt as to the scope of item no. 28, it is thus justified to observe what the CIMI provides.

From a reading of the CIMI it is perceived that the concept of «property with residential purpose» refers naturally to the concept of «urban property» which is defined in the respective articles 2 and 4. For its part, it is found that the determination of VPT is governed by articles 38 et seq. of the same Code.

Among the various types of «urban properties» (article 6), there are expressly mentioned «urban residential properties» [see no. 1, paragraph a)], and article 2 of the same article of the CIMI further adds that these "are buildings or constructions licensed for such purpose or, in the absence of a license, which have as their normal purpose each of these ends."

If it is true that no. 4 of article 2 of the CIMI refers that, "for purposes of this tax, each autonomous unit, under the horizontal property regime, is deemed to constitute a property", it is equally true that there is nothing in the law that points to discrimination between properties in horizontal and vertical ownership with respect to their identification as «urban residential properties». From this it is concluded that autonomous parts of properties in vertical ownership with residential purpose should be considered as «urban residential properties».

Indeed, it makes no sense to distinguish in the law what the law itself does not distinguish (ubi lex non distinguit nec nos distinguere debemus). Indeed, nothing indicates, either in item no. 28, or in the provisions of the CIMI, any justification for that particular differentiation. Note, for example, what article 12, no. 3, of the CIMI provides: "each floor or part of property capable of independent use is considered separately in the cadastral inscription, which equally discriminates the respective taxable value."

The uniform criterion that is thus necessary is that which determines that the incidence of the rule in question only takes place when one of the parts, floors or divisions with independent use of property in horizontal or full ownership with residential purpose, possesses a VPT exceeding €1,000,000.00. To establish as the reference value for the incidence of the new tax the global VPT of the property in question does not find a basis in the applicable legislation, which is the CIMI, considering the reference made by the above-mentioned article 67, no. 2, of the CIS.

Thus, and observing now the case under analysis, it is found that the VPTs of the floors (autonomous units) of the property with residential purpose vary between €104,140.00 and €113,780.00, wherefore any of them has a VPT less than €1,000,000.00. From this it is concluded, as a result of what was aforementioned, that stamp duty tax referred to in item no. 28 of the TGIS should not apply to them, and thus the assessment acts hereby challenged by the claimant are illegal.

Indeed, and as correctly noted in the Arbitral Decision rendered in case no. 552/2015-T, of 27/1/2016, in a case identical to the one under analysis, "the main issue brought to the proceedings [...] is whether the subjection to Stamp Duty Tax (item 28 of the TGIS) of an urban property not constituted in horizontal ownership is determined by the VPT that corresponds to each of the divisions with independent use and residential purpose [...], or whether it is determined by the global VPT of the property, which would correspond to the sum of all VPTs of the floors or divisions with independent use and residential purpose that comprise it [...]. Effectively, from a formal perspective, the AT rightly notes that a property constituted in horizontal ownership is a distinct legal-tax reality of an urban property in vertical or full ownership. However, if no. 4 of article 2 of the CIMI establishes the legal fiction that each of the autonomous units of a property constituted in horizontal ownership embodies a property, it does not necessarily follow therefrom that a part with independent use of an urban property not constituted in horizontal ownership should be considered property. If the legislator used, in the rule of item 28.1 of the TGIS, the expression «urban property with residential purpose», it does not appear legitimate that the AT should therein seek to include the floors or divisions with independent use of properties not constituted in horizontal ownership which, as it itself recognizes, are not properties, and thus cannot be equated to the autonomous units of properties constituted in the horizontal property regime. With respect to the determination of the taxable value of properties not constituted in horizontal ownership, article 7, no. 2, of the CIMI applies, but only with respect to «urban properties with parts that can be classified under more than one of the classifications of no. 1 of the previous article», in which case, in accordance with its paragraph b) «(…) each part is valued by application of the corresponding rules, and the value of the property is the sum of the values of its parts». And this is the only rule of the CIMI in which reference is made to the «value [total] of the property», without, however, this having any relevance at the level of tax assessment. Thus, from the combination of the rules of no. 2 of article 7 and no. 1 of article 6, both of the CIMI, it follows that, if an urban property not constituted in horizontal ownership is composed exclusively of parts or divisions intended for housing [as occurs in the case of the present proceedings], the value [total] of the property does not equal the sum of its parts."

It should be noted, lastly, that this understanding (of an infra-constitutional order), which has been defended here, has been affirmed by the Supreme Administrative Court (STA), as can be seen from the recent Judgment no. 47/15, of 9/9/2015, in which it was clearly indicated that, "in the case of a property constituted in vertical ownership, the incidence of Stamp Duty should be determined, not by the VPT resulting from the sum of the VPT of all divisions or floors capable of independent use (individualized in the cadastral entry), but by the VPT attributed to each of those floors or divisions intended for housing."

  1. Given that the understanding of the present claimant with respect to the issue of legality of the assessments (an issue decided in point 1) is upheld, it becomes unnecessary to verify the merit of the allegation of other defects pointed out to them.

VI – Decision

In light of the above, the following is decided:

– To declare the illegality of the stamp duty tax assessments hereby challenged, due to error in the legal grounds, determining their annulment, with all legal effects.

The value of the case is hereby fixed at €17,769.02 (seventeen thousand seven hundred and sixty-nine euros and two cents), (€13,326.80 + €4,442.22), in accordance with article 32 of the CPTA and article 97-A of the CPPT, applicable by virtue of the provisions of article 29, no. 1, paragraphs a) and b), of the RJAT, and article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

Costs are charged to the respondent, in the amount of €1,224.00 (one thousand two hundred and twenty-four euros), in accordance with Table I of the RCPAT, given that the present petition was judged to have merit, and in compliance with the provisions of articles 12, no. 2, and 22, no. 4, both of the RJAT, and the provision in article 4, no. 4, of the aforementioned Regulation.

Notify.

Lisbon, 19 April 2016.

The Arbitrator

(Miguel Patrício)

Document prepared on computer, in accordance with the provisions of article 131, no. 5, of the CPC, applicable by reference in article 29, no. 1, paragraph e), of the RJAT.

The preparation of this decision is governed by the spelling prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

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What is Verba 28 of the Tabela Geral do Imposto do Selo (TGIS) and how does it apply to stamp tax (Imposto de Selo) assessments?
Verba 28 of the Tabela Geral do Imposto do Selo (TGIS) imposes an annual stamp tax on residential properties with cadastral values (VPT) exceeding €1,000,000. The tax applies to properties or autonomous fractions for residential use. In this case, the dispute centered on whether the Tax Authority should assess each floor of a building separately based on its individual cadastral inscription, or aggregate all floors' values. The claimant argued that since each floor had a separate cadastral inscription with values below €1,000,000, the tax should not apply. The proper interpretation requires examining the VPT contained in the cadastral register for each separately inscribed unit, not the sum of multiple units within the same building.
Can an arbitral decision be reformed following a ruling by the Portuguese Constitutional Court (Tribunal Constitucional)?
Yes, an arbitral decision can be reformed following a ruling by the Portuguese Constitutional Court (Tribunal Constitucional). This case demonstrates the procedure under Article 80(2) of the Constitutional Court Law (LTC). After the original arbitral decision of December 16, 2013, the Constitutional Court issued Judgment 692/2015 on December 16, 2015, addressing constitutional questions raised in the case. The effects of the archiving notification were suspended pending the Constitutional Court's judgment. Once the Constitutional Court ruling was entered into the CAAD system on April 12, 2016, the arbitral tribunal reformed its previous decision to comply with the constitutional interpretation. This ensures harmony between tax arbitration and constitutional review, allowing arbitral decisions to align with constitutional jurisprudence.
What is the procedure for challenging stamp tax (Imposto de Selo) liquidations through CAAD tax arbitration in Portugal?
Challenging stamp tax liquidations through CAAD tax arbitration follows the procedure established in the RJAT (Decree-Law 10/2011). The taxpayer files a petition for arbitral tribunal constitution under Articles 2(1)(a) and 10(2)(c) of RJAT, citing the challenged liquidation acts. After tribunal constitution, the Tax Authority submits a reply within the statutory period (Article 17(1) RJAT). The tribunal requests the administrative file (Article 17(2) RJAT), and parties may submit written statements. An Article 18 hearing follows, after which the decision is rendered. Importantly, claimants can expand the arbitral claim to include additional related assessments (such as subsequent installments) during proceedings, as occurred here when third-installment assessments totaling €4,442.22 were added to the original claim. The entire process from petition to decision typically occurs within months.
How does the expansion of the arbitral claim to include additional stamp tax installments work under the RJAT (Regime Jurídico da Arbitragem Tributária)?
Under the RJAT (Regime Jurídico da Arbitragem Tributária), expansion of an arbitral claim to include additional assessments is permitted during proceedings. In this case, after the initial petition challenging first-installment stamp tax assessments, the claimant submitted a petition on November 14, 2013, to expand the proceeding's object to include third-installment assessments. By arbitral order of November 15, 2013, the tribunal determined these additional assessments (twelve documents totaling €4,442.22, issued March 22, 2013) should be attached to the file and included in the arbitration. The respondent Tax Authority was notified of the expansion order on November 18, 2013, and did not object. This procedural flexibility allows taxpayers to consolidate related disputes efficiently, avoiding multiple arbitration proceedings for sequential installments of the same tax obligation, promoting judicial economy and consistent resolution of interconnected tax issues.
What was the outcome of CAAD process 132/2013-T regarding the annulment of stamp tax liquidations under Verba 28 TGIS?
The reformed arbitral decision in CAAD Process 132/2013-T addressed the legality of stamp tax liquidations under Verba 28 TGIS, with the outcome following Constitutional Court Judgment 692/2015. The claimant sought annulment of twelve stamp tax assessments arguing that the Tax Authority improperly aggregated cadastral values of separately inscribed floors rather than assessing each individually. The tribunal confirmed its jurisdiction, the regularity of proceedings, and the parties' legitimacy. The case raised two main issues: (1) whether Verba 28 applies to aggregated values of multiple floors or each floor separately when each has distinct cadastral inscription below €1,000,000; and (2) constitutional challenges regarding retroactive taxation under Law 55-A/2012 and equality principles. The Constitutional Court's intervention on the constitutional issues necessitated reforming the original December 2013 decision. While the full substantive outcome is incorporated by reference to the reformed decision, the case established important precedents for interpreting cadastral value determination under Verba 28 and the interplay between tax arbitration and constitutional review.