Process: 140/2015-T

Date: October 8, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 140/2015-T addresses the application of Stamp Tax under Verba 28.1 of the General Stamp Duty Table (TGIS) to properties with multiple independent divisions. Two co-owners challenged 2013 stamp duty assessments issued by the Tax Authority at 1% of the overall taxable property value (VPT) for a Lisbon property containing divisions capable of independent use. The taxpayers argued that pursuant to Articles 31 and 34 of the Property Instruction, each independently usable fraction should be assessed separately rather than collectively. They contended the Tax Authority's methodology violated constitutional principles including tax legality (Article 103(2) of the Portuguese Constitution), fairness, equality, and proportionality. The applicants referenced prior favorable CAAD decisions (205/2014-T and 203/2014-T) for their 2012 assessments involving the same property. The Tax Authority raised procedural exceptions, including non-challengeability of payment installments and res judicata based on prior decisions in Cases 566/2014-T and 568/2014-T that had already annulled the same assessments. The arbitral tribunal accepted the joinder of parties and cumulation of claims given the complete identity of factual circumstances. The case illustrates the fundamental interpretive conflict regarding Verba 28.1: whether stamp duty on high-value properties applies to the global property value or to each autonomous fraction when divisions have independent registry capacity. This distinction is critical because assessing individual fractions may result in none exceeding the taxable threshold established in Verba 28.1, thereby avoiding taxation entirely, whereas collective assessment of the overall property value would trigger the 1% stamp duty.

Full Decision

ARBITRAL DECISION

Case No. 140/2015-T

I. REPORT

  1. A…, holder of Tax Identification Number …, with residence at Avenue …, No. …, … Floor, …-… Lisbon, and B…, holder of Tax Identification Number …, with residence at Avenue …, …, …, …-… …, came, pursuant to and for the purposes of the provisions of paragraph a) of section 1 of Article 2 and Article 10, both of Decree-Law No. 10/2011, of 20 January (Legal Framework for Tax Arbitration), to request the constitution of an Arbitral Tribunal.

  2. The Respondent is the Tax and Customs Authority.

  3. The Applicants seek the declaration of illegality and annulment, with all legal consequences, of the stamp duty assessment acts under item 28 of the General Stamp Duty Table, all issued on 17/03/2014, relating to the year 2013, at the rate of 1%, of the taxable property value (VPT) of the divisions or parts capable of independent use of the property, in full ownership, located at …, Lot …, parish of …, municipality of Lisbon, registered under the urban property matrix with No. …, to which correspond the following collection documents for payment of the second installments:

a) Documents numbered 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 21014 …, 2014 …, 2014 …, 2014 … and 2014 …, notified to Applicant A…; and

b) Documents numbered 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 .., 2014 …, 2014 …, 2014 …, 2014 … and 2014 …, notified to Applicant B….

  1. The Applicants allege, in summary and essentially, that:

a) "[e]ach fraction or part of property capable of independent use shall be considered separately in the property registration" (Article 31 of the Property Instruction), and that "given that the property of the Applicant herein comprises divisions with independent use, the subjection to stamp duty should have been determined, not by the overall VPT of the property, but rather by the VPT of those divisions" (Article 34 of the Property Instruction).

b) and that "[i]t is abundantly clear that the interpretation of the charging provision of item 28.1 of the General Stamp Duty Table attached to the Stamp Duty Code made by the Tax Authority and the issuance of the assessment notices is unconstitutional and arbitrary in that it constitutes a frontal violation of the principle of fairness, the principle of tax legality provided for in section 2 of Article 103 of the Portuguese Constitution as well as the principles of justice, equality and tax proportionality also provided for in the Constitution of the Portuguese Republic, for which reasons such assessment notices should be revoked.

Moreover, the Administrative Arbitration Center (CAAD) itself in a decision in Case 205/2014-T and likewise in Case 203/2014-T, concluded that the stamp duty assessments relating to the year 2012, prior to the assessments now being challenged, applied to the applicants should be annulled inasmuch as the fractions in question are independent fractions and in none of them is the limit established in item 28.1 of the General Stamp Duty Table reached, also understanding that there is a non-conformity of the said assessments with the charging provision of items 28 and 28.1 of the General Stamp Duty Table, being for that very reason illegal".

  1. The Applicants present themselves as joined parties and formulate a cumulation of claims.

  2. The Applicants opted for non-designation of an arbitrator.

  3. Pursuant to the provisions of paragraph a) of section 2 of Article 6 and paragraph b) of section 1 of Article 11 of the Legal Framework for Tax Arbitration, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Ethics Council designated the arbitrator of the arbitral tribunal, who communicated acceptance of the designation within the applicable time period.

  4. The Parties were notified of such designation, having manifested no will to refuse the designation of the arbitrator, pursuant to the combined provisions of Article 11, section 1, paragraphs a) and b) of the Legal Framework for Tax Arbitration and Articles 6 and 7 of the Code of Ethics of the CAAD.

  5. Thus, in accordance with the provisions of paragraph c) of section 1 of Article 11 of the Legal Framework for Tax Arbitration, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the singular arbitral tribunal was constituted on 07-05-2015.

  6. The Respondent presented a Response on 15-06-2015, in which it raised the exception of non-challengeability of the subject matter of the claim and the exception of res judicata, alleging, essentially, the following:

a) "given the non-challengeability autonomous to the installments of the assessment acts contained in the collection notes which constitute the subject matter of the present request for arbitral decision, there occurs the dilatory exception provided for in paragraph c) of section 1 of Article 89 of the Code of Administrative Tax Procedure, subsidiarily applicable by Article 29, section 1, paragraph c), of the Legal Framework for Tax Arbitration, which prevents knowledge of the merits and results in the discharge of the Tax Authority from the instance";

b) "the tax assessment acts challenged by the Applicants in the present request for arbitral decision, although relating to second installments, were declared illegal and annulled in the decisions issued in Cases Nos. 566/2014-T and 568/2014-T, already final and conclusive, and in the execution phase, there occurs the exception of res judicata provided for in paragraph i) of section 1 of the aforementioned Article 89 of the Code of Administrative Tax Procedure, which likewise prevents knowledge of the merits and leads to the discharge of the Tax Authority from the instance".

  1. By order of 08-07-2015, under the principles of the autonomy of the Arbitral Tribunal in conducting the proceedings, expedition, simplification and procedural informality (Articles 19, section 2, and 29, section 2, of the Legal Framework for Tax Arbitration), the Tribunal decided to dispense with the holding of the meeting provided for in Article 18 of the Legal Framework for Tax Arbitration and determined that the proceedings continue with optional written submissions.

  2. The Parties presented no final submissions.

  3. The Arbitral Tribunal was duly constituted.

II. SCREENING

a. Deciding on the joinder of applicants and cumulation of claims

  1. The assessments now being challenged were issued in relation to the same property, located at …, Lot …, parish of …, municipality of Lisbon, in relation to the same year, 2013 and in relation to the two co-owners of the property, it is concluded that there is a complete identity of the factual circumstances that gave rise to the said assessments.

  2. The said assessments were issued by the Tax Authority under item 28.1 of the General Stamp Duty Table, the applicants strongly disagreeing with its application in the present case, such that the merits of the claims of both Applicants depend essentially on the assessment of the same factual circumstances and on the interpretation and application of the same legal principles or rules.

  3. Thus, pursuant to the provisions of Article 3, section 1, of the Legal Framework for Tax Arbitration, the Tribunal considers that the joinder of applicants and the cumulation of claims are justified and admissible in the present proceedings.

b. Deciding the exception of non-challengeability of the subject matter of the claim

  1. The Respondent alleges "the non-challengeability autonomous to the installments of the assessment acts contained in the collection notes which constitute the subject matter of the present request for arbitral decision" (Article 20 of the Response);

  2. Indeed, the Applicants request that the "assessment notices for stamp duty now being challenged be declared illegal and annulled, with all legal consequences";

  3. Now, pursuant to Article 2, section 1, paragraph a) of the Legal Framework for Tax Arbitration, arbitral tribunals are competent to examine the legality of tax assessment acts.

  4. Article 23, section 7, of the Stamp Duty Code provides that "where stamp duty is due for the situations provided for in item 28 of the General Table, the duty is assessed annually, in relation to each urban property (…), applying, with the necessary adaptations, the rules contained in the Municipal Real Estate Tax Code", and Article 44, section 5, establishes that "[w]here there is stamp duty assessment referred to in item 28 of the general table, the tax is paid in accordance with the deadlines, terms and conditions defined in Article 120 of the Municipal Real Estate Tax Code".

  5. From this it follows that the assessment act for item 28 of Stamp Duty is single, and the fact that it may be paid in several installments does not imply that multiple assessments have occurred.

  6. This means that the law does not admit the autonomous challenge of collection notes, but rather of the assessment act, which precedes them and which is at their origin.

  7. Thus, the annulment of the assessment act for item 28 of Stamp Duty terminates the obligation to pay all installments.

  8. It is concluded, in this manner, that the installments contained in the collection notes are non-challengeable autonomously, and which constitute the subject matter of the present request for arbitral decision, and the dilatory exception provided for in paragraph c) of section 1 of Article 89 of the Code of Administrative Tax Procedure, subsidiarily applicable by Article 29, section 1, paragraph c), of the Legal Framework for Tax Arbitration is verified, which prevents knowledge of the merits and results in the discharge of the Respondent from the instance.

  9. Given the procedural exception in question is well-founded, knowledge of the remaining issues raised in the proceedings is barred.

III. DECISION

Accordingly, and on the grounds set out above, the Arbitral Tribunal decides to uphold the exception of non-challengeability of the subject matter of the claim and, consequently, to discharge the Respondent from the instance.

IV. CASE VALUE

The case value is fixed at € 5,327.44, as provided for in Article 97-A, section 1, paragraph a), of the Code of Administrative Tax Procedure and Proceedings and in Article 3, section 2, of the Regulation of Costs in Tax Arbitration Proceedings.

V. COSTS

Pursuant to Article 22, section 4, of the Legal Framework for Tax Arbitration, the amount of costs is fixed at € 612.00, pursuant to Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Applicant.

Lisbon, 8 October 2015

The Arbitrator,

Paulo Nogueira da Costa

Frequently Asked Questions

Automatically Created

How does Verba 28.1 of the TGIS apply to properties with independent divisions under Portuguese Stamp Tax law?
Verba 28.1 of the TGIS applies to properties with independent divisions based on the principle that each fraction or part capable of independent use must be considered separately for property registration purposes under Article 31 of the Property Instruction. When a property contains divisions with autonomous use capacity, Portuguese tax law requires that stamp duty be determined based on the individual VPT of each division rather than the aggregate VPT of the entire property. This interpretation ensures that the charging provision of Verba 28.1 is applied in conformity with constitutional principles of tax legality and proportionality. CAAD jurisprudence has consistently recognized that independently usable fractions constitute separate taxable units, meaning that if none of the individual fractions reaches the threshold value established in Verba 28.1, no stamp duty is due even if the combined property value exceeds the limit.
Can the tax authority assess Stamp Tax based on the global VPT of a property instead of each independent division's VPT?
No, the Tax Authority cannot lawfully assess Stamp Tax based on the global VPT of a property when it contains independent divisions capable of autonomous use. Article 34 of the Property Instruction mandates that subjection to stamp duty must be determined by the VPT of individual divisions with independent use, not by the overall property value. CAAD decisions, including Process 205/2014-T and Process 203/2014-T, have ruled that assessments based on aggregate property values violate the charging provision of Verba 28.1 of the General Stamp Duty Table and are therefore illegal. The proper methodology requires evaluating each independently registered fraction separately against the taxable threshold. Assessing based on global VPT constitutes an arbitrary interpretation that conflicts with property registration principles and may result in unconstitutional taxation of fractions that individually fall below the statutory threshold.
What constitutional principles apply to Stamp Tax assessments on high-value properties in Portugal?
Constitutional principles governing Stamp Tax assessments on high-value properties in Portugal include the principle of tax legality under Article 103(2) of the Portuguese Constitution, which requires strict adherence to statutory provisions without arbitrary administrative interpretation. The principle of fairness demands that taxation accurately reflects the legal nature and registration status of property interests. The principle of equality requires that similarly situated taxpayers (those owning independent fractions) receive equivalent treatment regardless of whether their property shares common ownership structures. The principle of proportionality prevents excessive taxation that goes beyond what is necessary to achieve legitimate fiscal objectives. CAAD jurisprudence emphasizes that stamp duty assessments under Verba 28.1 must respect these constitutional principles by correctly identifying the taxable unit—when property comprises independent divisions, taxation must align with the autonomous legal and registration status of each fraction rather than imposing collective liability based on aggregated values.
How does CAAD Process 140/2015-T address the separate valuation of independently usable property parts?
CAAD Process 140/2015-T addresses separate valuation of independently usable property parts by examining whether divisions capable of autonomous use should be taxed individually or collectively under Verba 28.1. The tribunal considered the applicants' argument that Articles 31 and 34 of the Property Instruction require separate treatment of fractions with independent use capacity for property registration and taxation purposes. The case built upon prior CAAD precedents (205/2014-T and 203/2014-T) that annulled stamp duty assessments for the same property's 2012 tax year, recognizing that independent fractions constitute separate taxable units. The arbitral tribunal evaluated whether the Tax Authority's methodology of applying the 1% rate to the overall property VPT violated the legal framework governing property registration and stamp duty. The decision reinforces the principle that when property comprises divisions with independent registry capacity, each fraction must be valued and assessed separately, and taxation only occurs if individual fractions exceed the Verba 28.1 threshold.
What are the grounds for annulling Stamp Tax liquidations under Verba 28.1 when property divisions are assessed collectively?
Grounds for annulling Stamp Tax liquidations under Verba 28.1 when property divisions are assessed collectively include: (1) violation of the charging provision of Verba 28.1 itself, which must be interpreted in accordance with property registration principles that treat independent fractions separately; (2) breach of Article 103(2) of the Portuguese Constitution requiring strict tax legality, as collective assessment constitutes arbitrary administrative interpretation beyond statutory authorization; (3) violation of constitutional principles of fairness, equality, and proportionality when taxation ignores the autonomous legal status of independently registered fractions; (4) non-conformity with Articles 31 and 34 of the Property Instruction, which mandate separate consideration of divisions capable of independent use; and (5) improper application of the taxable threshold when individual fractions that do not independently exceed the limit are taxed based on aggregate values. CAAD consistently rules that these violations render stamp duty assessments illegal and subject to annulment with corresponding refund obligations and legal consequences.