Process: 14/2015-T

Date: July 24, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 14/2015-T addressed a stamp tax dispute arising from Lei n.º 55-A/2012, which introduced Item 28 to the General Stamp Tax Table (Tabela Geral do Imposto do Selo - TGIS). This provision imposed stamp tax on urban properties with a patrimonial tax value equal to or exceeding €1,000,000, using the same valuation basis as Municipal Property Tax (IMI). The petitioner, A... Lda., challenged the 2012 stamp tax assessment, arguing that land for construction (terreno para construção) should not be classified as urban property with residential allocation for stamp tax purposes. The company contended that Item 28 specifically targets properties with residential use, and vacant construction land lacks present residential functionality regardless of future building potential. The petitioner emphasized that the CIMI (Municipal Property Tax Code) defines land for construction as a distinct category of urban property, but this classification does not automatically confer residential allocation. The Tax Administration was notified and filed a reply defending the assessment. The arbitral tribunal, constituted under RJAT (Regime Jurídico da Arbitragem em Matéria Tributária - Decree-Law 10/2011), proceeded without an oral hearing after both parties waived this right. The core legal question centered on interpreting whether Item 28's reference to urban properties with residential allocation encompasses construction land authorized for future residential buildings, or whether actual residential use is required. The petitioner argued for a restrictive interpretation based on Article 11 of the General Tax Law, asserting that expanding the scope beyond properties currently serving residential purposes would exceed legislative intent and violate legal interpretation principles.

Full Decision

CASE No. 14/2015-T

ARBITRAL DECISION

  1. REPORT

1.1. A…, Lda., taxpayer no. …, filed on 06/01/2015 a petition for arbitral pronouncement, in which it requests the declaration of illegality of the stamp tax assessment act for the year 2012.

1.2. His Excellency the President of the Deontological Council of the Administrative Arbitration Center (CAAD) designated, on 27/02/2015, Francisco Nicolau Domingos as arbitrator.

1.3. On 16/03/2015 the arbitral tribunal was constituted.

1.4. In compliance with the provision of article 17, no. 1 of Decree-Law no. 10/2011, of 20 January (RJAT), the Tax Administration (TA) was notified on 18/03/2015 to, if it so wished, file a reply and request the production of additional evidence.

1.5. On 23/04/2015 the Respondent filed its reply.

1.6. The tribunal, in view of the absence of exceptional matter that would prevent immediate consideration of the petition, by order of 05/05/2015, ordered the notification of the parties to state whether they intended to hold the meeting described in article 18 of the RJAT.

1.7. The Petitioner on 06/05/2015 filed a motion in which it waived the meeting referred to in article 18 of the RJAT.

1.8. The Respondent by motion of 12/05/2015 equally sustained the intention to waive the holding of the referred meeting.

1.9. The tribunal, on 29/06/2015 decided to waive the holding of the meeting to which article 18, no. 1 of the RJAT refers, on the grounds of the principle of autonomy of the arbitral tribunal in the conduct of proceedings and in the determination of rules to be observed with a view to obtaining, within a reasonable period, a pronouncement on the merits of the claims formulated, cf. article 16, paragraph c) of the RJAT, determined that the parties, if they so wished, would file written submissions and scheduled the date for the pronouncement of the final decision for 24/07/2015.

1.10. Neither party filed final written submissions.

  1. PROCEDURAL MATTERS

The case does not suffer from any nullities, no questions were raised that would prevent the consideration of the merits of the case, the arbitral tribunal is regularly constituted and is materially competent to hear and decide the petition, consequently, the conditions are met for the final decision to be delivered.

  1. POSITIONS OF THE PARTIES

There are two positions in opposition, that of the Petitioner, set forth in the petition for arbitral pronouncement, and that of the Respondent in its reply.

In summary:

The Petitioner understands, in particular, that:

a) "…having been notified of the additional assessment no. …, dated 19.07.2013, relating to Stamp Tax concerning the year 2012…";

b) "Through Law no. 55-A/2012, of 29/10, Item 28 was added to the General Table of Stamp Tax, subjecting to this tax urban properties whose tax asset value contained in the matrix, in accordance with the Code of the Municipal Property Tax (CIMI), is equal to or greater than € 1,000,000.";

c) "The taxable base consists of the tax asset value considered for the purposes of the IMI…";

d) "Passive subjects and debtors of the tax are the owners, usufructuaries or superficiaries of the properties on 31 December of the year to which the tax relates.";

e) "With regard to the date of establishment of the tax obligation, fiscal connection, assessment and payment of the stamp tax in question, the corresponding rules of the CIMI apply, by express referral of articles 5, no. 1, paragraph u), 4, no. 6, 23, no. 7, 44, no. 5, 46, no. 5 and 49, no. 3, of the CIS.";

f) "Since the rule of incidence of stamp tax refers to urban properties, it is important to bear in mind that the relevant concept is that contained in article 2 of the CIMI, as indeed provided for in article no. 6 of article 1 of the CIS.";

g) "Thus, the CIMI establishes, in its article 3, a positive definition of rustic property, defining urban and mixed property, in its articles 4 and 5 in merely residual terms: thus all those realities are classified that, integrating the fiscal concept of property, should not be classified as rustic properties.";

h) "…a plot of land for construction is an urban property, since it meets the requirements that make up the concept of property – physical reality, patrimonial nature and economic value – and, whatever the allocation or use it may have, in the case of expectant land, is expressly excluded from the concept of rustic property...";

i) "From the concepts and elements referred to in the previous points, the following conclusions can be drawn: a) The relevant criterion for the distinction between rustic and urban properties is based, in particular, on their effective allocation or, in its absence, on their normal purpose (article 3, no. 1, of the CIMI); b) Land for construction is expressly excluded from the concept of rustic properties, constituting an autonomous species of urban properties, in accordance with the concept specifically provided for in no. 3 of article 6 of the CIMI.";

j) "From the above it is concluded that a property is classified as land for construction whenever a set of circumstances is verified, usually corresponding to the application of relevant rules of the legal regime governing urban construction or the subdivision of rustic properties, which in any case indicate the intention to build on it, unless, by force of applicable legislation, such intention is not capable of effective implementation.";

k) "In defining the scope of taxation of assets to which Item 28 of the TGIS refers, the legislator considers, as a relevant element of contributive capacity, properties of high value that, in the segment relating to passive subjects resident in Portuguese territory, are held for residential purposes.";

l) "However, by making that taxation apply to urban properties "with residential allocation", the legislator of stamp tax does not establish any specific concept of what, for that purpose, should be understood as such, instead referring to the rules of the CIMI.";

m) "A plot of land for construction – whatever the type and purpose of the building that will be, or could be, erected on it – does not, of itself, satisfy any condition to be licensed as such or to be defined as having residential use as its normal purpose.";

n) "Since the rule of incidence of stamp tax refers to urban properties with "residential allocation", without any specific concept being established for that purpose, it cannot be inferred from it that it contains a future potentiality, inherent to a distinct property that may perhaps be built on the land.";

o) "The expression "with residential allocation" suggests, on a simple reading, an idea of real and present functionality. From the rule in question it is not possible to extract, by interpretation, that (…) the legislator's choice of that expression aims to integrate "other realities beyond those identified in article 6, no. 1, paragraph a), of the CIMI." Such interpretation has no legal basis, in view of the principles contained in articles 9 of the Civil Code and 11 of the General Tax Law.";

p) "Indeed, if the legislator intended to encompass within the scope of incidence of the tax other realities than those resulting from the classification governed by article 6 of the CIMI, he would have said so expressly…";

q) "Regardless of whether in determining the value of buildings authorized or provided for on a plot of land for construction a coefficient of allocation should or should not be considered, it is admitted, as it is obvious and of common knowledge, that the value of land is determinatively influenced by the type and characteristics of those buildings. However, this is a matter that goes beyond the question on which the present petition for arbitral pronouncement is based.";

r) "In the circumstances referred to, the fact that for a given plot of land for construction the building of a property intended for residential purposes, or for any other purpose, is authorized, even though it should be considered in its valuation, does not determine any change in the classification of the land which, for tax purposes, continues to be considered as such.".

Differently, the Respondent argues that:

a) "Law 55-A/2012, of 29/10/2012 amended article 1 of the CIS and added Item 28 to the TGIS.";

b) "With this legislative amendment, Stamp Tax would also be levied on the ownership, usufruct or right of superficies of urban properties whose tax asset value contained in the matrix, in accordance with the Code of the Municipal Property Tax (CIMI), is equal to or greater than € 1,000,000.00.";

c) "The notion of allocation of the urban property is found in the part relating to the valuation of properties, which is well understood since the valuation of the property (purpose) incorporates value to the property, constituting a distinguishing fact that is determinative (coefficient) for the purposes of valuation.";

d) "As results from the expression "(…)value of buildings authorized", contained in article 45, no. 2 of the CIMI, the legislator chose to determine the application of the methodology for valuation of properties in general, to the valuation of land for construction, and therefore the coefficient of allocation provided for in article 41 of the CIMI is applicable to them.";

e) "Contrary to the Petitioner, the TA understands that "and properties with residential allocation", for the purposes of the provision in Item 28 of the TGIS, comprises both built properties and land for construction, given the literal meaning of the rule.";

f) "Note that the legislator does not refer to "properties intended for residential purposes", having opted for the notion of "residential allocation". A different and broader expression, whose meaning must be found in the need to integrate other realities beyond those identified in article 6, no. 1 paragraph a) of the CIMI.";

g) "…the mere establishment of a right of potential construction immediately increases the value of the property in question, hence the rule contained in article 45 of the CIMI which requires the separation of the two parts of the land.";

h) "…long before the actual building of the property, it is possible to determine and establish the allocation of the land for construction.";

i) "Item 28 of the TGIS applies to the ownership, usufruct or right of superficies of urban properties with residential allocation, whose tax asset value contained in the matrix, in accordance with the CIMI, is equal to or greater than € 1,000,000.00, that is, it applies to the value of the property.";

j) "It is a general and abstract rule, applicable indiscriminately to all cases in which the material and legal requirements are met.";

k) "…the assessment in question constitutes a correct interpretation and application of the law to the facts, not suffering from the vice of violation of law, whether of the Constitution of the Portuguese Republic or of the CIS, and consequently, the claim should be judged unfounded and the Respondent Entity should be absolved from the petition".

  1. STATEMENT OF FACTS

4.1. FACTS CONSIDERED PROVEN

4.1.1. The Petitioner is the owner of the property registered in the urban property matrix of the parish and municipality of …, under article no. ….

4.1.2. On 31/10/2012, the property (urban) was registered in the matrix as "land for construction", with its tax asset value (VPT) of € 1,736,320.00.

4.1.3. There is no construction on the said property.

4.1.4. On 14/11/2013 the Petitioner filed an administrative review of the stamp tax assessment act concerning the identified property and the year 2012.

4.1.5. On 18/12/2014 the Petitioner was notified of the express rejection of the administrative review filed concerning the stamp tax assessment for the year 2012.

4.1.6. The Petitioner on 06/01/2015 filed the present petition for arbitral pronouncement.

4.2. FACTS NOT CONSIDERED PROVEN

There are no facts relevant to the decision that have not been given as proven.

4.3. SUBSTANTIATION OF THE STATEMENT OF FACTS CONSIDERED PROVEN

The statement of facts given as proven is based on the documents used for each of the facts alleged and whose authenticity was not challenged.

  1. THE LAW

The first issue that should be the subject of consideration by the tribunal consists in delimiting the scope of application of Item no. 28.1 of the TGIS in its wording as of the date of the tax event. That is, it must be determined whether land for construction falls within the scope of the rule, as the Respondent contends, or whether, on the contrary, it is excluded from it.

To accomplish this task, it is first necessary to identify the rule as to which interpretation the parties disagree.

Thus, Item no. 28 of the TGIS provides that the following are subject to taxation: "Ownership, usufruct or right of superficies of urban properties whose tax asset value contained in the matrix, in accordance with the Code of the Municipal Property Tax (CIMI), is equal to or greater than € 1,000,000 – on the tax asset value used for the purpose of IMI:

28.1 - For property with residential allocation – 1 %..."[1].

Thus, it is first necessary to determine the concept of "urban property with residential allocation" to which the rule under interpretation refers. Now, since it is not possible to resolve the issue by resorting to the CIS, by force of the provision of article 67, no. 2 of the same instrument, it is necessary to apply the rules of the Code of the Municipal Property Tax (CIMI) as to the concept and types of urban properties.

Consequently, article 4 of the CIMI provides on the concept of urban property: "…are all those that should not be classified as rustic…". And article 6, no. 1 of that instrument continues: "Urban properties are divided into: a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Others". No. 2 provides that: "Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal purpose each of these uses".

Thus, for the classification of a property in each of the enumerated categories, the nature of the use is relevant, that is, the purpose for which it is intended.

Now, Item of stamp tax under analysis includes properties that are already bound to residential purposes, that is, those to which such purpose has been given[2]. But it is legitimate to ask the following question: and with regard to those properties (land for construction) with such purpose or those in which the intended use is unknown, do they fall within "properties with residential allocation"?

The answer to that question cannot but be negative. Indeed, the literal wording of the Item under analysis makes it possible to exclude from the scope of application those plots of land for construction that have not realized any type of use, insofar as they are not yet applied or intended for residential purposes. In other words, it is not possible to classify them as "properties with residential allocation", since they do not yet have any allocation or other purpose, except construction of an unknown type[3].

Even so, one could ask: does Item no. 28.1 of the TGIS include within its scope land for construction that is not yet applied for residential purposes and already has a determined right, such as a subdivision license? We believe not. In truth, article 6, no. 2 of the CIMI, subsidiarily applicable, points to the need for an effective allocation.

In truth, the legislator did not use the expression "residential properties", but on the contrary "properties with residential allocation", that is, the property must already have effective allocation for that purpose.

Now, this interpretive sense is made clear by recourse to a summary of the words of His Excellency the Secretary of State for Fiscal Affairs, at the time of the presentation and discussion in the Assembly of the Republic of the bill[4], in that he argued that the same: i) aimed to create a special rate on residential urban properties of higher value; ii) created special taxation on high-value properties intended for residential use; and iii) the rate would apply to houses valued at equal to or greater than 1 million euros. Or, in other words, the category to which the legislator refers with the expression "properties with residential allocation" are "houses".

This same interpretive sense is maintained, even if it is considered that in determining the VPT of urban properties, classified as land for construction, account should be taken of the allocation that the building authorized or provided for such land will have, with a view to determining the value of the implantation area. This does not mean that land for construction should be classified as "properties with residential allocation", since this intended use refers in the context of the CIMI to properties and constructions that can be inhabited[5].

It is also important to add that the assessment in question relates to the year 2012 and, consequently, what is provided for in article 6 of Law no. 55-A/2012, of 29 October must be applied. More specifically, such rule provides that: "1 - In 2012, the following rules must be observed with reference to the assessment of stamp tax provided for in Item no. 28 of the respective General Table: a) The tax event occurs on 31 October 2012; b) The passive subject of the tax is that mentioned in no. 4 of article 2 of the Code of Stamp Tax on the date referred to in the preceding paragraph; (…)". Thus, the tax event in the case at hand occurred on 31 October 2012.

Reverting this interpretive sense to the present case, it is necessary to state that the land for construction which is the subject of these proceedings does not fall within the category of "properties with residential allocation" and, as such, the stamp tax assessment for 2012 must be declared illegal.

Still, this interpretation could be considered challenged by the entry into force of Law no. 83-C/2013, of 31 December (Budget Law for 2014), in the segment in which it gave new wording to Item 28.1 of the TGIS, in which it now refers to the categories described in article 6 of the CIMI, that is, "residential property" and "land for construction". However, we understand that it does not, because, as sustains the counselor ISABEL MARQUES DA SILVA[6]: "…the legislator did not give interpretive character (…), it only makes clear for the future that land for construction whose authorized or provided building is for residential purposes are covered by the scope of Item 28.1 of the General Table of Stamp Tax". That is, nothing is specified in relation to acts carried out under the previous wording and demonstrates another legislative choice with the reference to the types of urban property, i) residential and ii) land for construction. Consequently, such legislative amendment in no way modifies the decision stated in the preceding paragraph.

For this sum of reasons, if the Petitioner's property was registered in the matrix as land for construction on the date of the tax event for the year 2012[7], the rule of incidence under challenge cannot be applicable to the case sub judice, under penalty of illegality. For this reason, the stamp tax assessment for 2012 must be annulled, with all legal consequences.

  1. DECISION

In these terms and with the substantiation described above, it is decided to judge the petition well-founded, with the consequent annulment of the act which is the subject of the arbitral pronouncement.

  1. VALUE OF THE CASE

The value of the case is set at € 10,676.50, in accordance with article 97-A of the CPPT, applicable by force of the provision in article 29, no. 1, paragraph a) of the RJAT and article 3, no. 2 of the Regulation on Costs in Tax Arbitration Proceedings (RCPAT).

  1. COSTS

Costs to be borne entirely by the Respondent, in the amount of € 918, cf. article 22, no. 4 of the RJAT and Table I attached to the RCPAT.

Notify.

Lisbon, 24 July 2015

The Arbitrator,

Francisco Nicolau Domingos

[1] In the wording in force on the date of the tax event.

[2] See in this sense, in particular, the judgment of the Supreme Administrative Court, delivered within the scope of appeal 048/14, of 09/04/2014, in which counselor ISABEL MARQUES DA SILVA was the rapporteur; the judgment of the Supreme Administrative Court, delivered in appeal 046/14, of 14/05/2014, in which counselor ASCENSÃO LOPES was the rapporteur and the arbitral judgment delivered within the scope of case 53/2013-T, of 02/10/2013, in which counselor JORGE LOPES DE SOUSA assumed the function of president-arbitrator.

[3] See judgment delivered within the scope of case 53/2013-T, of 02/10/2013, in which counselor JORGE LOPES DE SOUSA assumed the function of president-arbitrator.

[4] Assembly of the Republic Records, I Series, no. 9/XII – 2, of 11 October, p. 32.

[5] Judgment of the Supreme Administrative Court, delivered within the scope of appeal 048/14, of 09/04/2014 in which counselor ISABEL MARQUES DA SILVA was the rapporteur.

[6] Within the scope of judgment 048/14, of 09/04/2014 reported by her.

[7] That is, 31 October 2012, the date on which the VPT of the property was € 1,736,320.00.

Frequently Asked Questions

Automatically Created

What is Verba 28 of the Tabela Geral do Imposto do Selo and how does it apply to properties valued at or above €1,000,000?
Item 28 of the General Stamp Tax Table (Verba 28 da TGIS) was introduced by Lei n.º 55-A/2012 of October 29, 2012. This provision subjects urban properties to annual stamp tax when their patrimonial tax value (valor patrimonial tributário - VPT) recorded in the property matrix for Municipal Property Tax (IMI) purposes equals or exceeds €1,000,000. The tax applies to owners, usufructuaries, or surface rights holders as of December 31 of the relevant tax year. The taxable base is the VPT used for IMI calculation, and the tax obligation follows CIMI rules regarding establishment, assessment, and payment. For properties valued at €1,000,000 or above with residential allocation, Item 28 imposes this annual wealth tax on high-value real estate holdings.
Can taxpayers challenge Stamp Tax (Imposto do Selo) assessments on high-value urban properties through tax arbitration at CAAD?
Yes, taxpayers can challenge Stamp Tax assessments on high-value urban properties through tax arbitration at CAAD (Centro de Arbitragem Administrativa). Process 14/2015-T demonstrates this right, where A... Lda. filed an arbitration petition on January 6, 2015, requesting declaration of illegality of the 2012 stamp tax assessment under Item 28 TGIS. The arbitral procedure follows RJAT (Decreto-Lei n.º 10/2011 of January 20), providing an alternative dispute resolution mechanism to judicial courts. The arbitral tribunal has material competence to hear and decide stamp tax disputes, offering taxpayers a faster, specialized forum for contesting tax assessments on properties valued at or above €1,000,000.
How did Lei n.º 55-A/2012 change Stamp Tax obligations for urban properties with high patrimonial tax values (VPT)?
Lei n.º 55-A/2012 of October 29, 2012, fundamentally changed stamp tax obligations by adding Item 28 to the TGIS, creating a new annual tax on high-value urban properties. Before this legislation, no recurring stamp tax existed based solely on property value. The law established that urban properties with patrimonial tax values of €1,000,000 or more became subject to annual stamp tax, using the VPT from IMI matrices as the taxable base. The legislation incorporated CIMI provisions by reference for determining tax obligations, passive subjects (owners, usufructuaries, superficiaries), and payment procedures. This represented a significant expansion of stamp tax beyond traditional transactional taxes to include wealth-based taxation on valuable real estate holdings.
What is the arbitral procedure under RJAT (Decreto-Lei n.º 10/2011) for disputing Stamp Tax liquidations in Portugal?
The arbitral procedure under RJAT (Decreto-Lei n.º 10/2011) for disputing Stamp Tax liquidations involves several stages. First, the taxpayer files a petition for arbitral pronouncement with CAAD. The President of the Deontological Council designates an arbitrator, and the arbitral tribunal is constituted. Under Article 17(1) RJAT, the Tax Administration is notified to file a reply and request additional evidence. Following the reply, the tribunal determines whether to hold an oral hearing per Article 18 RJAT or proceed based on written submissions—parties may waive this meeting. The tribunal exercises autonomy in conducting proceedings pursuant to Article 16(c) RJAT, balancing procedural efficiency with fair consideration of claims. Final written submissions may be requested before the arbitral decision is issued within the scheduled timeframe.
What was the outcome of CAAD Process 14/2015-T regarding the 2012 Stamp Tax assessment on urban property?
The provided excerpt of CAAD Process 14/2015-T does not include the final arbitral decision or outcome regarding the 2012 Stamp Tax assessment. The case record shows that A... Lda. challenged the assessment on grounds that land for construction should not be classified as urban property with residential allocation under Item 28 TGIS. The arbitral tribunal was properly constituted with Francisco Nicolau Domingos as arbitrator, the Tax Administration filed its reply, both parties waived the oral hearing, and neither filed final written submissions. The decision was scheduled for July 24, 2015, but the excerpt concludes before presenting the tribunal's reasoning or ruling on whether the stamp tax assessment was legal or should be annulled.