Process: 134/2015-T

Date: September 29, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration case (Process 134/2015-T) concerns the application of Stamp Duty (Imposto do Selo) under Item 28.1 of the General Table of Stamp Duty (TGIS) to construction land. The claimant, A…, S.A., challenged a Stamp Duty assessment of €18,444.20 for 2013 on a plot of land for construction with a taxable property value exceeding €1,000,000. The dispute centers on whether construction land can be classified as property with 'residential dedication' for Stamp Duty purposes.

The claimant argued that a terreno para construção (construction land) is inherently dedicated to construction, not to residential use, and cannot be considered a habitable property. Therefore, it should not fall within the scope of Item 28.1 GTSDT, which was introduced by Law No. 55-A/2012 and applies to properties with residential dedication valued over €1 million. The claimant sought both the declaration of illegality of the assessment and reimbursement of bank guarantee costs incurred to suspend tax enforcement proceedings.

The Tax Authority (AT) defended the assessment, arguing that the property possesses the legal nature of property with residential dedication. The AT's position relies on the absence of specific definitions in the Stamp Duty Tax Code (CISA), necessitating recourse to the Municipal Property Tax Code (CIMI) pursuant to Article 67(2) of the CISA. The AT contended that since the property was assigned a residential dedication coefficient for property valuation purposes under CIMI, this classification must apply for Stamp Duty purposes under Item 28.1.

The case was heard through the CAAD (Administrative Arbitration Centre) tax arbitration system, with the arbitral tribunal constituted on April 30, 2015. The claimant had previously filed an unsuccessful ex officio revision request and provided a bank guarantee of €8,077.89 to suspend enforcement. The tribunal dispensed with the oral hearing, finding no procedural utility in convening one. This case presents a fundamental interpretive question about the interaction between property valuation rules and Stamp Duty taxation of construction land.

Full Decision

ARBITRAL DECISION

  1.  Report

A – General

1.1. A…, S.A., a company with registered office in …., …, with the collective person number …. (hereinafter referred to as the "Claimant"), submitted, on 26.02.2015, a request for constitution of an arbitral tribunal in tax matters, seeking, on the one hand, the declaration of illegality of the tax assessment act for Stamp Duty relating to the year 2013, in the amount of € 18,444.20 (eighteen thousand four hundred and forty-four euros and twenty cents), relating to a plot of land for construction of which it is the owner, registered in the urban property register of the parish and municipality of …, under article … (hereinafter referred to as the "Property") and, on the other hand, the reimbursement of the amounts incurred with the issuance of the bank guarantee(s) intended to suspend the tax enforcement proceeding(s) instituted against it due to its failure to pay the assessed tax.

1.2. The assessment challenged by the Claimant was based on art. 1 of the Stamp Duty Tax Code (hereinafter the "SDTC") and on item 28.1 of the respective General Table (the "GTSDT"), amended by art. 4 of Law No. 55-A/2012, of 29 October, and was duly notified to the Claimant.

1.3. Pursuant to the provisions of subparagraph a) of paragraph 2 of art. 6 and subparagraph b) of paragraph 1 of art. 11 of Decree-Law No. 10/2011, of 20 January, as amended by art. 228 of Law No. 66-B/2012, of 31 December, the Deontological Council of the Administrative Arbitration Centre appointed the undersigned as arbitrator, and the Parties, after being duly notified, raised no objection to such appointment.

1.4. By order of 11.03.2015, the Tax and Customs Authority (hereinafter referred to as the "Respondent") proceeded to appoint Dr. B… to intervene in the present arbitral proceeding, in the name and representation of the Respondent.

1.5. In accordance with the provisions of subparagraph c) of paragraph 1 of art. 11 of Decree-Law No. 10/2011, of 20 January, as amended by art. 228 of Law No. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 30.04.2015.

1.6. On 20.05.2015, the head of the Respondent's service was notified to attach to the file, within a period of 30 days, the administrative proceedings that might exist and, if so desired, to submit a reply and request the production of additional evidence.

1.7. On 23.06.2015, the Respondent submitted its reply.

B – Position of the Claimant

1.8. The Claimant was notified of the collection notices mentioned in art. 1 of the request for arbitral pronouncement, issued following the Stamp Duty tax assessment act (hereinafter "SD") now under challenge.

1.9. Not being satisfied with said assessment, the Claimant opted not to proceed with payment thereof and presented a request for ex officio revision, which was dismissed.

1.10. The Claimant presented to the competent Tax Office adequate bank guarantee to suspend the enforcement proceeding instituted against it.

1.11. The Claimant sustains its request on the erroneous qualification of the tax fact in that the Property is a plot of land for construction and cannot be considered as dedicated to any other purpose – namely residential – other than construction, and it is certain that residential dedication cannot result from a licensing act.

1.12. Consequently, the Property is not included within the scope of the objective tax base of item 28.1 of the GTSDT since a plot of land for construction is not in itself a habitable property and therefore cannot be considered, for these purposes, as a "property with residential dedication".

C – Position of the Respondent

1.13. The Respondent argues that the Property has the "legal nature of property with residential dedication", consequently defending the maintenance of the assessment act subject to the request for arbitral pronouncement.

1.14. The Respondent's position results from the circumstance that there is, in the context of Stamp Duty, no definition of the concepts of "urban property", "plot of land for construction" and "residential dedication", which requires recourse to the Municipal Property Tax Code (the "MPTC"), in compliance with the provisions of paragraph 2 of art. 67 of the SDTC, as amended by Law No. 55-A/2012, of 29 October, resulting in the necessary conclusion that the notion of dedication of an urban property "is grounded in the section relating to the valuation of properties".

1.15. If, for the purpose of determining the taxable property value of plots of land for construction, the application of the dedication coefficient in the context of valuation is clear, then "its consideration for the purpose of applying item 28 of the GTSDT cannot be disregarded".

D – Conclusion of the Report and Case Management

1.16. By order of 28.09.2015, the arbitral tribunal dispensed with the meeting provided for in art. 18 of the Legal Regime of Arbitration in Tax Matters (LRATM) considering that there was no procedural utility in its holding, having fixed 02.10.2015 as the deadline for the delivery of the final decision.

1.17. The parties have legal personality and capacity and have standing under art. 4 and paragraph 2 of art. 10 of the LRATM, and art. 1 of Ordinance No. 112-A/2011, of 22 March.

1.18. The proceeding does not suffer from any nullity and no exceptions were raised by the Parties that would prevent the examination of the merits of the case, and therefore the conditions are met for the delivery of the arbitral decision.

1.19. The cumulation of claims made in the present request for arbitral pronouncement, in deference to the principle of procedural efficiency, is justified since art. 3 of the LRATM, by expressly admitting the possibility of "cumulation of claims even if relating to different acts", accommodates, without hermeneutical abuse, the examination of a claim that results, in necessary terms, from the judgment that the arbitral tribunal reaches regarding the validity of the assessment put into question.

  1.  Factual Findings

2.1. Established Facts

2.1.1. The Claimant is the owner of the Property (doc. no. 1, attached with the request for arbitral pronouncement, the contents of which are hereby reproduced).

2.1.2. The Property is described as a plot of land for construction (docs. no. 1, attached with the request for arbitral pronouncement).

2.1.3. The Property was assigned a taxable property value exceeding €1,000,000.00 (one million euros) (doc. no. 1, attached with the request for arbitral pronouncement).

2.1.4. For the purpose of determining its taxable property value, the Property was given residential dedication (doc. no. 1, attached with the request for arbitral pronouncement).

2.1.5. The Claimant was notified of the collection notices of the SD assessment relating to the Property in the total amount of € 18,444.20 (eighteen thousand four hundred and forty-four euros and twenty cents), having opted not to proceed with payment thereof (agreement of the Parties).

2.1.6. The Claimant, aiming at the suspension of the enforcement proceeding against it instituted due to the voluntary non-payment of the tax required by the assessment now under challenge, presented to the Respondent's services a bank guarantee in the amount of € 8,077.89 (eight thousand and seventy-seven euros and eighty-nine cents), dated 18.07.2014, the issuance of which incurred costs that it had to bear (doc. no. 3, attached with the request for arbitral pronouncement, the contents of which are hereby reproduced).

2.2. Unproven Facts

The exact amount incurred by the Claimant with the issuance at its request of the bank guarantee was not proven.

  1.  Legal Issues

3.1. Questions to be Decided

It results from what has been said above that the questions to be examined are, in essence, two:

a) Whether the Property, which is a plot of land for construction, is a property "with residential dedication" for the purposes of applying art. 1 of the SDTC and item 28.1 of the GTSDT, amended by art. 4 of Law No. 55-A/2012, of 29 October; and

b) To clarify whether, should the claim for declaration of illegality be upheld and consequently the contested assessment be annulled, the Claimant may, within the scope of the present arbitral proceeding, obtain a judgment condemning the Respondent to reimburse the amounts incurred with the undue provision of a bank guarantee.

3.2. Item 28.1 of the GTSDT

Law No. 55-A/2012, of 29 October, among several amendments it made to the SDTC, added, by its art. 4, item 28 to the GTSDT, which reads as follows:

"28 - Ownership, usufruct or surface right of urban properties whose taxable property value contained in the register, in accordance with the Municipal Property Tax Code (MPTC), is equal to or greater than € 1,000,000 - on the taxable property value used for the purpose of MPTC:

28.1 - For property with residential dedication - 1%;

28.2 - For property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance - 7.5%."

As can be seen, item 28.1 refers to "properties with residential dedication". Now, not only is this concept not defined in any provision of the SDTC, but it is also not used in the MPTC, a statute to which art. 67, paragraph 2 of the SDTC expressly refers when matters not regulated in the SDTC concerning item 28 are at issue.

3.3. The Meaning and Scope of the Concept of "Property with Residential Dedication"

The meaning and scope of the concept of "property with residential dedication" cannot be determined without bearing in mind the meaning of the word "dedication" itself. And this must be found in dictionaries, drawing on the benefit of careful study by lexicographers. Thus, "dedication" (afectação), according to the Dictionary of Contemporary Portuguese Language, of the Academy of Sciences of Lisbon, is the action of destining something for a particular use, and "to dedicate" (afectar), consequently, is synonymous with devoting to a specific use or function.

a) The Rules of Interpretation of Tax Norms

The question to be examined does not dispense with, but rather implies, grasping the meaning and scope of the concept of "property with residential dedication" to which item 28.1 of the GTSDT appeals. In the absence of a legal definition, either in the SDTC or in any other statute, the interpreter-applier of this provision has the duty to invoke the norms that govern the necessary hermeneutical exercise.

There is not truly a special regime for the interpretation of tax norms. Paragraph 1 of art. 11 of the General Tax Law (the "GTL") requires that in "determining the meaning of tax norms and in qualifying the facts to which they apply", "the general rules and principles of interpretation and application of laws" be observed.

The general principles of interpretation and application of laws are those established in art. 9 of the Civil Code:

ARTICLE 9

(Interpretation of the law)

  1. Interpretation must not be confined to the letter of the law, but must reconstruct from the texts the legislative intent, taking above all into account the unity of the legal system, the circumstances in which the law was enacted, and the specific conditions of the time at which it is applied.

  2. The interpreter cannot, however, consider the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  3. In determining the meaning and scope of the law, the interpreter will presume that the legislator adopted the most appropriate solutions and was able to express its intent in adequate terms.

Note, however, that the interpretation of norms, including tax norms, is not exhausted in a lexical exercise. It does not involve merely, or even primarily, vocabulary dissection. The question is not, therefore, to know exactly what "property with residential dedication" means, but rather to grasp the meaning and scope of that concept within the framework of item 28.1 of the GTSDT. That is to say, and this should be emphasized, there will only be procedural utility for the hermeneutical effort, within the scope of this specific request for arbitral pronouncement, if it is directed at discovering whether the legislator, with the wording chosen for item 28.1 of the GTSDT, in the version in force at the time of the facts, intended to include therein urban properties classified as plots of land for construction.

b) "Residential Dedication" – Residential Properties and Properties with Residential Dedication

The Respondent argues that the dedication of the property is a coefficient that contributes to its valuation, which we think is indisputable. However, the question now is whether item 28 of the GTSDT, in the wording we must consider, encompasses both built properties and plots of land for construction.

Paragraph 1 of art. 6 of the SDTC, with taxonomic concern, distinguishes "residential properties" from "plots of land for construction". The former will be, in accordance with the provisions of paragraph 2 of the same article, buildings or constructions licensed for such purpose or, in the absence of such license, those having that as their normal purpose. As for plots of land for construction, paragraph 3 of the provision we have been referencing clarifies, are those for which a license or authorization has been granted, admitted prior notification or issued favorable prior information of a subdivision or construction operation, and also those declared as such in the acquisition document, with certain exceptions.

It is thus clear that a plot of land for construction is not, according to this classification, a residential property. The question now is whether "property with residential dedication", a concept used by item 28.1 of the GTSDT, corresponds, notwithstanding the literal difference, to "residential property", a notion employed in the classification just examined.

Dedication, as we have learned from lexicographers, conveys the purpose given to a certain asset. "Residential", however, is relative to housing, which is in turn, and according to the Dictionary we have been using, a place or house in which one lives or dwells. Now, residential dedication can suggest no other meaning than the action of giving to a certain asset – in this case the Property, which is, recall, a plot of land for construction – the purpose of a house or place where one lives.

It is known that the MPTC uses the expression "dedication" in various provisions. It does so, for example:

· In art. 3, when it refers, with respect to rural properties, to a use generating agricultural income;

· In art. 9, when it imposes on taxpayers the duty to report to the tax services that a plot of land for construction has been included in the inventory of a company whose purpose is the construction of buildings for sale or that a property has been included in the inventory of a company whose purpose is its sale;

· In art. 27, when it relates certain buildings and constructions to the production of agricultural income.

In all the situations presented, as can be seen, dedication is not referred to in potential terms, of vocation or expectation. It is quite the opposite. It suggests an actual or direct purpose, to use an expression to which the legislator appeals in art. 27.

However, the MPTC also makes abundant use of the expression "dedication" when it sets out the rules that must be applied to determining the taxable property value of urban properties (articles 38 and following of the MPTC). It is important, then, to see if we can extract from the rules of determination of taxable property some useful element that allows us to grasp the meaning and scope of the concept of "property with residential dedication".

c) The Relevance of the Rules for Determining Taxable Property Value

The Respondent argues that the "notion of dedication of an urban property is grounded in the section relating to the valuation of properties" and, moreover, that "for the purpose of determining the taxable property value of plots of land for construction, the application of the dedication coefficient in the context of valuation is clear, and therefore its consideration for the purpose of applying item 28 of the GTSDT cannot be disregarded".

It is true that for determining the taxable property value of plots of land for construction, regard has been had to the "dedication" of what may be built thereon.

However, as the Respondent rightly points out, "the mere grant of a right of potential construction immediately increases the value of the property in question", in function, precisely, of what may be constructed thereon. For this reason, as the Respondent explains well, art. 45 of the MPTC "requires the separation of the two parts of the land": on one side, we must consider "the part of the land where [properly, where it may come to be] the building to be constructed is to be located, and on the other the area of free land. Once the amount of the first part is determined, the value determined is reduced to a percentage between 15% and 45% (…), by reason of the construction not yet being effected". It is clear to see that the application of that percentage allows precisely for regard to be had to the circumstance that there is as yet no construction, but does not authorize the legislator to ignore the fact that the economic, or market, value of a plot of land for construction is related to its construction capacity.

To say what precedes does not mean, however, that the legislator feels the need to impose automatic and necessary taxation, in the context of Municipal Property Tax, on all plots of land for construction. It suffices to read what art. 9 of the MPTC provides:

ARTICLE 9

(Beginning of Taxation)

  1.  Tax is due from:

(…)

d) The fourth year following, inclusive, that in which a plot of land for construction has been included in the inventory of a company whose purpose is the construction of buildings for sale;

(…)

In other words, even though the legislator deems it reasonable, as it appears to be, to determine the taxable property value of a plot of land for construction taking into account its construction capacity and the nature or vocation of what may be built thereon, it is nonetheless symptomatic that it has at the same time opted to suspend that taxation in cases where those plots of land for construction are included in the inventory of a company whose purpose is the construction of buildings for sale. In cases where, one could also say, those urban properties are part of a productive process that tends to continue and produce, downstream, fruits that are themselves taxable.

If the primary meaning of "dedication", as we have said, suggests an actual, direct purpose given to a certain asset, we do not see how this understanding can be refuted by the finding that the legislator, within the scope of valuation of plots of land for construction, authorizes the use of the dedication coefficient, having in mind what may come to be constructed thereon. In fact, it does not seem reasonable to admit in this scenario the recourse to norms for determining the taxable matter to expand the scope of the norms of tax incidence.

d) Position Adopted

In light of the foregoing, the arbitral tribunal considers that the interpretation of item 28.1 of the GTSDT with the wording applicable to the case before us must be understood as follows: the residential dedication of an urban property suggests that it be given that actual purpose, or that it be capable of being directly given that purpose. Since, as it appears to us, a plot of land for construction is not included in that item in terms of objective tax incidence. It therefore seems to us that a plot of land for construction, by its very nature, cannot be associated with a residential dedication such as that suggested by item 28.1 of the GTSDT.

Let it not be said that this judgment collides with the possibility of seeing the dedication coefficient to which reference is made in Section II of Chapter VI of the SDTC applied to a plot of land for construction. In fact, one thing is the rules that the legislator imposes to determine the taxable property value of plots of land for construction, it being not unusual that regard be had to their construction capacity and the nature and vocation of what may be built thereon; another, quite different, is to pretend that these rules are invoked to delimit the field of the normative scope of the rules of tax incidence.

Moreover, the interpretation adopted here is in harmony with uniform case law of the CAAD and with what appears to have been the intention of the Government, author of the proposal that resulted in this poorly drafted legislative intervention.

When presenting and discussing, in Parliament, bill no. 96/XII (2nd), the Secretary of State for Tax Affairs expressly stated[1]:

"The Government proposes the creation of a special tax on residential urban properties of higher value. It is the first time that Portugal has created special taxation on properties of high value intended for housing. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses valued at equal to or greater than 1 million euros."

Now, the Secretary of State for Tax Affairs presents this bill referring to the expressions "residential urban properties", which are those contained in subparagraph a) of paragraph 1 of art. 6 of the SDTC and "houses", and it is manifest that, in either case, these concepts do not, without more, encompass plots of land for construction, which are referred to in subparagraph c) of the cited provision.

Thus, despite the infelicity of legislative technique and without prejudice to the wording now in force, it results with meridian clarity that item 28.1 of the GTSDT, at the time of the facts, cannot be interpreted to mean that plots of land for construction are encompassed therein, for the reasons set forth above. Rather, it seems that the meaning and scope of the concept of "properties with residential dedication" is equivalent to that of "residential properties" mentioned in subparagraph a) of paragraph 1 of art. 6 of the SDTC.

3.4. Compensation for Undue Provision of Guarantee

The Claimant also presents a request for reimbursement of the amounts incurred with the undue provision of bank guarantee(s).

Requests of this nature are not novel in the CAAD, there being various decisions in the sense of admitting their cognizability by arbitral tribunals[2]. As has already been said in summary terms, this arbitral tribunal also considers itself able to examine that claim.

Subparagraph b) of paragraph 1 of the LRATM provides that "the arbitral decision on the merits of the claim that is not subject to appeal or challenge binds the tax administration from the end of the deadline provided for appeal or challenge, and the latter must, in the exact terms of the merit of the arbitral decision in favor of the taxpayer and until the end of the deadline provided for voluntary execution of sentences of tax courts, restore the situation that would have existed if the tax act subject to the arbitral decision had not been performed, adopting the necessary acts and operations for that purpose".

It is not ignored that the legislative authorization granted to the Government by art. 124 of Law No. 3-B/2010, of 28 April, on the basis of which the LRATM was approved, determines that the tax arbitration procedure constitutes an alternative procedural means to the judicial challenge procedure and to the action for recognition of a right or legitimate interest in tax matters. Even though subparagraphs a) and b) of paragraph 1 of art. 2 of the LRATM ground the jurisdiction of arbitral tribunals in "declarations of illegality", it seems reasonable to understand that their jurisdiction encompasses the powers that in judicial challenge proceedings are attributed to tax courts, and it is certain that in judicial challenge proceedings, in addition to the annulment of tax acts, claims for compensation may be examined, whether they relate to compensatory interest or to undue provision of guarantees.

In fact, the principle of cognizability of compensation claims, in administrative complaint or in judicial proceedings, is justified whenever the damage sought to be redressed results from conduct attributable to the tax and customs authority. Manifestations of this principle can be found in paragraph 1 of art. 43 of the GTL and in paragraph 4 of art. 61 of the Code of Tax Procedure and Process (CTPP).

Specifically regarding compensation in the case of undue provision of guarantee, art. 171 of the CTPP refers to it, and it is clear from that provision that the claim for compensation can be examined in the proceeding in which the legality of the enforceable debt is disputed, which is required for reasons of procedural economy, since the right to compensation for undue guarantee provision depends on what is decided regarding the legality or illegality of the assessment act. Thus, it must be concluded that the arbitral procedure should also be considered appropriate for examining the claim for compensation for undue provision of guarantee.

The regime of the right to compensation for undue provision of guarantee is contained in article 53 of the GTL, which establishes the following:

Article 53

Guarantee in Case of Undue Provision

  1. The debtor who, to suspend enforcement, provides a bank guarantee or equivalent shall be compensated wholly or partially for the damages resulting from its provision, should it have maintained it for a period exceeding three years in proportion to success in administrative appeal, judicial challenge or opposition to enforcement that have as their object the guaranteed debt.

  2. The period referred to in the preceding paragraph does not apply when it is verified, in administrative complaint or judicial challenge, that there was error attributable to the services in the tax assessment.

  3. The compensation referred to in paragraph 1 has as its maximum limit the amount resulting from the application to the guaranteed amount of the rate of compensatory interest provided for in this law and may be requested in the administrative complaint or judicial challenge proceeding itself, or autonomously.

(…)

In the case sub judice, as has been said, the contested assessment act is illegal, since the norms on which it is based do not appear applicable to the facts of the case, an error that cannot but be imputed to the Respondent since said assessment is of its sole initiative and responsibility.

Consequently, the arbitral tribunal understands that the Claimant has the right to be compensated for the damages suffered with the issuance of the undue guarantee provided, being these equivalent to the costs it had to bear with that issuance, costs that it is naturally not possible, at the present time, to fix.

Thus, the amount of compensation to which the Claimant is entitled shall be determined in execution of the present decision, in accordance with the provisions of art. 609 of the Code of Civil Procedure, applicable by force of subparagraph e) of paragraph 1 of art. 29 of the LRATM.

  1.  Decision

Based on the foregoing grounds and considerations, the arbitral tribunal decides:

a) That the claim in the request for arbitral pronouncement is well-founded, with the consequent annulment of the contested assessment, with all legal consequences; and

b) That the claim for compensation for undue provision of guarantee is well-founded, condemning the Respondent to pay to the Claimant the compensation to be determined in execution of the herein delivered decision.

  1.  Value of the Proceeding

In accordance with the provisions of paragraph 2 of art. 306 of the Code of Civil Procedure, subparagraph a) of paragraph 1 of art. 97-A of the CTPP, and also paragraph 2 of art. 3 of the Regulation of Costs in Tax Arbitration Proceedings, the proceeding is assigned a value of € 18,444.20 (eighteen thousand four hundred and forty-four euros and twenty cents).

  1.  Costs

For the purposes of the provisions of paragraph 2 of art. 12 and paragraph 4 of art. 22 of the LRATM and paragraph 4 of art. 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 1,224.00 (one thousand two hundred and twenty-four euros), in accordance with Table I attached to said Regulation, to be borne in full by the Respondent.

Lisbon, 29 September 2015

The Arbitrator

(Nuno Pombo)

Text prepared by computer, in accordance with paragraph 5 of art. 131 of the Code of Civil Procedure, applicable by reference of subparagraph e) of paragraph 1 of Decree-Law No. 10/2011, of 20 January and with the spelling prior to the Orthographic Agreement of 1990.

[1] See DAR I Series no. 9/XII -2, of 11 October, p. 32.

[2] See, by way of example, the decisions rendered in the context of proceedings numbered 233/2013-T, 112/2013-T and 36/2013-T.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) applicable to construction land under Verba 28.1 of the TGIS?
The applicability of Stamp Tax to construction land under Item 28.1 TGIS is the central issue in dispute. Item 28.1, introduced by Law 55-A/2012, imposes Stamp Duty on properties with 'residential dedication' valued over €1,000,000. The controversy arises because construction land (terreno para construção) is not yet habitable. The taxpayer's position is that construction land cannot be considered to have residential dedication since it is inherently dedicated to construction purposes only. However, the Tax Authority argues that if the property receives a residential dedication coefficient for Municipal Property Tax valuation purposes under CIMI, this classification extends to Stamp Duty obligations. The resolution depends on whether 'residential dedication' refers to the property's current use or its intended future use as determined through valuation procedures.
Can taxpayers challenge Stamp Tax assessments on urban property through CAAD tax arbitration?
Yes, taxpayers can challenge Stamp Tax assessments on urban property through CAAD (Centro de Arbitragem Administrativa) tax arbitration. This case demonstrates the procedural framework: the taxpayer submitted an arbitration request under Article 1 of Portaria No. 112-A/2011 and the Legal Regime of Arbitration in Tax Matters (RJAT - Decree-Law No. 10/2011). The process involves constitution of an arbitral tribunal, appointment of arbitrators by the CAAD Deontological Council, submission of replies by the Tax Authority, and issuance of a binding arbitral decision. Taxpayers can cumulate claims, including both the declaration of illegality of the assessment and reimbursement of costs incurred (such as bank guarantee fees). CAAD arbitration provides an alternative to judicial courts for resolving tax disputes, offering a faster and more specialized forum for tax matters.
How does Law 55-A/2012 affect Stamp Tax liability on high-value construction land in Portugal?
Law 55-A/2012, of October 29, 2012, introduced significant changes to Stamp Tax liability by amending Item 28.1 of the General Table of Stamp Duty (TGIS). This law created a new annual Stamp Duty obligation on properties with 'residential dedication' whose taxable property value (valor patrimonial tributário) exceeds €1,000,000. For high-value construction land, the impact depends on whether such land is classified as having residential dedication. The law also amended Article 67(2) of the Stamp Duty Tax Code (CISA), establishing that concepts relating to urban property, construction land, and dedication must be interpreted by reference to the Municipal Property Tax Code (CIMI). This cross-reference creates interpretive challenges when construction land is assigned a residential dedication coefficient for valuation purposes under CIMI, potentially triggering Stamp Duty liability even though the land is not yet developed or habitable.
What are the grounds for declaring the illegality of a Stamp Tax assessment on terrenos para construção?
The primary ground for declaring illegality of a Stamp Tax assessment on terrenos para construção is the incorrect qualification of the taxable fact (qualificação errada do facto tributário). Specifically, taxpayers argue that construction land cannot be legally classified as property with 'residential dedication' for purposes of Item 28.1 TGIS. The argument rests on the principle that construction land is dedicated exclusively to construction activity and is not a habitable property capable of residential use. Additional grounds include: (1) construction land lacks the essential characteristics of residential property since it cannot be occupied or inhabited in its current state; (2) residential dedication should not result merely from a licensing act or valuation coefficient assignment; and (3) the literal interpretation of 'residential dedication' cannot encompass undeveloped land. Taxpayers contend that extending Stamp Duty to construction land based solely on its intended future use violates the principle of legality in taxation and exceeds the scope intended by the legislator when enacting Law 55-A/2012.
Can a taxpayer claim reimbursement of bank guarantee costs when contesting a Stamp Tax liquidation at CAAD?
Yes, taxpayers can claim reimbursement of bank guarantee costs when successfully contesting a Stamp Tax liquidation at CAAD. In this case, the claimant explicitly requested reimbursement of amounts incurred for issuing bank guarantees required to suspend tax enforcement proceedings. When a taxpayer opts not to pay a contested assessment, tax enforcement begins automatically. To suspend enforcement during arbitration, Article 169 of the Tax Procedure Code (CPPT) requires provision of a bank guarantee. Financial institutions charge fees for issuing these guarantees. The CAAD arbitration rules permit cumulation of claims under Article 3 of the RJAT, allowing taxpayers to request both the principal relief (declaration of illegality of the assessment) and consequential damages (reimbursement of guarantee costs). If the arbitral tribunal rules in favor of the taxpayer and declares the assessment illegal, the taxpayer is entitled to reimbursement of costs necessarily incurred to exercise their right of defense, including bank guarantee issuance fees, as these represent financial harm directly caused by an unlawful tax assessment.