Process: 142/2016-T

Date: September 1, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration decision addresses whether Stamp Tax under item 28.1 of the General Table (Verba 28.1 TGIS) applies to building land (terrenos para construção) owned by a real estate investment fund. The claimant, a management company representing a closed real estate investment fund, challenged Stamp Tax assessments totaling €199,381.20 for 2014 on four properties classified as building land with taxable asset values exceeding €1 million each. The dispute centers on Law 55-A/2012 and subsequent amendments by Law 83-C/2013, which extended item 28.1 from residential properties to include building land intended for residential construction. The claimant argued the assessments were illegal due to errors in factual and legal premises, requesting annulment and refund of taxes paid plus compensatory interest. Subsidiarily, the claimant sought disapplication of item 28.1 on constitutional grounds, alleging violation of the equality principle (Article 13 CRP) by treating building land differently from other property types. The Tax Authority defended the assessments, noting the 2014 legislative amendment explicitly included building land with residential destination within the scope of item 28.1. The properties in question had been assessed under CIMI with residential location coefficients, supporting their classification as building land for residential purposes. The arbitral tribunal analyzed whether the legislative expansion to building land was justified and constitutional. Key considerations included the legislative intent behind the 2014 amendment, the economic substance of holding valuable building land, and whether differential treatment violated equality principles. The case exemplifies how real estate investment funds can contest tax assessments through administrative arbitration (CAAD), seeking both annulment of illegal assessments and compensatory interest for undue payments.

Full Decision

ARBITRAL DECISION

The arbitrators Cons. Jorge Manuel Lopes de Sousa (arbitrator-president), Dr. Ricardo Marques Candeias and Dr. Ricardo Farinha Sequeira, appointed by the Ethics Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, constituted on 23-05-2016, agree as follows:

1. Report

A... – ..., S.A., NIF..., in its capacity as managing company and in representation of B... – SPECIAL CLOSED REAL ESTATE INVESTMENT FUND, NIPC..., with registered office at..., n.º..., ..., ...-... ..., hereinafter referred to as "Claimant", came, in accordance with the provisions of articles 2.º, n.º 1 letter a), and 10.º, n.º 1, letter a), of Decree-Law n.º 10/2011, of 20 January, legislation that approved the Legal Regime for Arbitration in Tax Matters ("RJAT"), to file a request for constitution of an arbitral tribunal for examination of the legality of the act dismissing the administrative appeal that it filed against the assessments of Stamp Duty, relating to the year 2014, issued by the Tax and Customs Authority under item 28.1 of the General Table of Stamp Duty ("TGIS") with reference to urban properties (building land) with the property registration numbers..., ..., ..., ..., all in the parish of..., municipality of... and district of Setúbal.

The Claimant requests, in the first instance, the declaration of illegality of the assessments, for errors in the factual and legal premises, and that the Tax and Customs Authority be ordered to refund it for the amount of Stamp Duty paid in relation to the impugned assessments, plus compensatory interest.

Subsidiarily, the Claimant requests that item 28 of the General Table of Stamp Duty be disapplied, in this specific case, on grounds of manifest unconstitutionality, by violation of the constitutional principle of equality (cf. article 204.º of the CRP) and that the illegality of the tax acts of Stamp Duty assessment sub judice be declared, because based on unconstitutional norms, the same being annulled, with all legal consequences.

The respondent is the TAX AND CUSTOMS AUTHORITY.

The request for constitution of the arbitral tribunal was accepted by the President of the CAAD and notified to the Tax and Customs Authority on 18-03-2016.

In accordance with the provisions of letter a) of n.º 2 of article 6.º and letter b) of n.º 1 of article 11.º of the RJAT, the Ethics Council appointed as arbitrators the signatories, who communicated acceptance of the appointment within the applicable period.

On 06-05-2016, the Parties were notified of this appointment, and did not express any will to refuse the appointment of the arbitrators, in accordance with the combined provisions of article 11.º n.º 1 letters a) and b) of the RJAT and articles 6.º and 7.º of the Code of Ethics.

Thus, in accordance with the provision of letter c) of n.º 1 of article 11.º of the RJAT, the collective arbitral tribunal was constituted on 23-05-2016.

The Tax and Customs Authority responded, arguing for the lack of merit of the request for arbitral pronouncement and that, in the event that the application of the norm of item 28.1 of the TGIS is refused, notification of the arbitral award to the Public Prosecutor's Office must be effected.

By order of 22-06-2016, holding of a hearing was dispensed with and it was decided that the proceedings would continue with written submissions.

The Parties made no written submissions.

The arbitral tribunal was duly constituted and is competent.

The parties have legal standing and capacity (arts. 4.º and 10.º, n.º 2, of the same legislation and art. 1.º of Ordinance n.º 112-A/2011, of 22 March) and are properly represented.

The proceedings are free from defects of form.

2. Facts

2.1. Established Facts

The following facts are considered established:

· B... – SPECIAL CLOSED REAL ESTATE INVESTMENT FUND, here represented by the managing company Claimant, in the course of its activities, is the owner of various properties, including residential properties, commercial properties and building land;

· The Claimant was notified of the following Stamp Duty assessment acts relating to the year 2014, sub judice, relating to properties registered in the property matrix as "building land", acts issued under item 28.1 of the General Table of the Stamp Duty Code (property record sheets attached as documents n.º 14 with the request for arbitral pronouncement, the contents of which are reproduced):

– documents n.ºs 2015..., 2015... and 2015..., relating to the 1st, 2nd and 3rd instalments of Stamp Duty, item 28.1 of the TGIS, relating to the property with registration number U-... of the parish of... of the municipality of..., the total amount of tax relating to the year 2014 being € 44,474.00 (documents n.ºs 2 to 4 attached with the request for arbitral pronouncement, the contents of which are reproduced);

– documents n.ºs 2015..., 2015... and 2015..., relating to the 1st, 2nd and 3rd instalments of Stamp Duty, item 28.1 of the TGIS, relating to the property with registration number U-... of the parish of... of the municipality of..., the total amount of tax relating to the year 2014 being € 34,407.10 (documents n.ºs 5 to 7 attached with the request for arbitral pronouncement, the contents of which are reproduced);

– documents n.ºs 2015..., 2015... and 2015..., relating to the 1st, 2nd and 3rd instalments of Stamp Duty, item 28.1 of the TGIS, relating to the property with registration number U-... of the parish of... of the municipality of..., the total amount of tax relating to the year 2014 being € 54,164.70 (documents n.ºs 8 to 10 attached with the request for arbitral pronouncement, the contents of which are reproduced);

– documents n.ºs 2015..., 2015... and 2015..., relating to the 1st, 2nd and 3rd instalments of Stamp Duty, item 28.1 of the TGIS, relating to the property with registration number U-... of the parish of... of the municipality of..., the total amount of tax relating to the year 2014 being € 66,335.40 (documents n.ºs 11 to 13 attached with the request for arbitral pronouncement, the contents of which are reproduced);

· The aforesaid building land were subjected to assessment in accordance with the CIMI, having been assessed at their respective taxable asset value of € 4,447,400.00, € 3,440,710.00, € 5,416,470.00 and € 6,833,540.00, respectively, appearing in the property record sheets, furthermore, the «location coefficient type: Residential»;

· The Claimant made payment of the assessed amounts;

· The Claimant filed an administrative appeal of the aforementioned assessments, which was dismissed (document n.º 1 attached with the request for arbitral pronouncement, the contents of which are reproduced);

· The decision dismissing the administrative appeal was based on information contained in document n.º 1 attached with the request for arbitral pronouncement, the contents of which are reproduced, in which it is stated, among other things, the following:

V - ASSESSMENT

Law n.° 55-A/2012, of 29 October introduced amendments to various tax codes, including the Stamp Duty Code.

That law, through its art.° 4.°, came to add to the General Table of Stamp Duty, attached to the Stamp Duty Code, item n.° 28 with the following wording: "28 — Ownership, usufruct or right of superficies of urban properties whose taxable asset value appearing in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 — on the taxable asset value used for IMI purposes:

28.1— For property with residential use — 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 favourable tax regime, appearing in the list approved by ordinance of the Minister of Finance — 7.5%.

Law n.° 83-C/2013 of 31 December, entering into force on 01/01/2014, amended the wording of item 28.1, which now reads:

"28.1 - For residential property or for building land whose construction, authorised or planned, is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code".

And it was in accordance with this normative framework currently in force that the assessments in question were issued.

If prior to the entry into force of Law n.° 83-C/2013 of 31 December, it was debatable whether the concept of "property with residential use" used for tax purposes under item 28 of the TGIS included or not building land to which residential use had been attributed in the context of their respective assessments, taking into account the value of buildings authorised or planned at the time of assessment (such use appearing in their respective matrices), there is no doubt that, from its entry into force, by express declaration of the legislator, the norm covers not only "residential properties" (provided for in art.° 6.° n.° 1 al. a) of the CIMI) but also "building land" whose construction, authorised or planned, is for residential purposes.

In fact, the use of the property constitutes a decisive distinguishing factor for the purposes of assessing urban properties, as established in art.° 41.° of the CIMI, influencing the formula for determining the taxable asset value of urban properties, defined in art.° 38.° of the CIMI and the adjustment coefficient for areas provided for in art.° 40.°-A of the CIMI, which in its n.° 5 expressly refers to building land.

Being provided for, in art.° 45.º of the CIMI, that in determining the taxable asset value of building land account shall be taken of the "value of authorised or planned constructions".

On this matter, we cite part of the Decision of the South Regional Administrative Court n.° 4950/11, of 14/02/2012, where the most relevant parts are highlighted:

"First of all, it must be said that it is now established that tax laws are interpreted like any others, and one must determine their true meaning in accordance with the techniques and interpretative elements generally accepted by doctrine (... ).

The scheme for assessing the taxable asset value of building land is provided for in art°.45.º, of the Municipal Property Tax Code. The assessment model is the same as for constructed buildings, although starting from the building to be constructed, taking as a basis the respective project. This is because the value of building land corresponds, fundamentally, to a legal expectation, embodied in a right to build on it a property with certain characteristics and with a certain value. It is that expectation of production of wealth materialised in a property to be constructed that increases the value of the assets and the wealth of the owner of building land, as soon as the property in question comes to be considered as building land. For that reason, the greater the value of the property to be built, the greater is the value of the building land underlying it (cf. art°.6.º, n°.3, of the Municipal Property Tax Code.).

Article .45.º, of the Municipal Property Tax Code, under the heading:

"Taxable asset value of building land"

1 - The taxable asset value of building land is the sum of the value of the footprint area of the building to be constructed, which is that situated within the perimeter of attachment of the building to the ground, measured by the outer part, added to the value of the land adjacent to the footprint.

2 - The value of the footprint area varies between 15% and 45% of the value of authorised or planned constructions.

3 - In fixing the percentage of the value of the footprint land, the characteristics referred to in n°.3, of art°.42.º are taken into account.

4- The value of the area adjacent to the construction is calculated in accordance with n°.4, of art°.40.º."

Making an exegesis of the norm, it must be said that the legislator, in assessing building land, orders the separation of two parts of the land.

First, the part of the land where the building to be constructed will be placed. The footprint area of the building to be constructed is that situated within the envisaged perimeter of attachment of the building to the ground. To determine the value of that part of the land, it is necessary to proceed with an assessment of the building to be constructed, as if it were already constructed. For this purpose, the approved construction project is used and in the area there is naturally not considered the area of free land or the area of excess land. Once that determination is made, the assessed value is reduced to a percentage between 15% and 45%, as provided for in n°. 2 of the norm. This reduction is justified by the fact that the property has not yet been constructed.

Second, the value of the land adjacent to the footprint area. The value of this part of the land is determined in the same way as the value of the area of free land and the area of excess land is determined for any urban property, thereby taking into account the rules provided for in art°.40.º, n°.4, of the Municipal Property Tax Code. This is expressly provided for in n°.4 of the norm.

The determination of the percentage to be applied in assessing building land, which is added for the determination of the value of the footprint area of the building, shall be carried out in accordance with n°.3 of the norm under examination, for which purpose the same methodology provided for in art°.42, n°.3, of the Municipal Property Tax Code shall be used.

Taking into account the methodology referred to above, the tax authority uses the following mathematical formula for assessing building land:

VPT=Vcx[(Aa+Ab)x%+ (Ac +Ad)jxCax Cl. xCq

(...) In conclusion, in assessing building land the legislator intended that the methodology for assessing urban properties in general should be applied, and therefore all the above-identified coefficients must be taken into account, in particular the use coefficient provided for in art°.41.º, of the Municipal Property Tax Code, it furthermore resulting from such legal obligation from n°.2, of art°.45.º, of the Municipal Property Tax Code, when referring to the value of authorised or planned constructions on the same building land."

Now, it is by taking into account the expectation of wealth, materialised in the right to build a property with its own characteristics and values, that increases the value and wealth of an owner of building land, that it has always been the understanding of the Tax Authority that urban properties that are building land and to which residential use has been attributed in the context of their respective assessments, taking into account the value of buildings authorised or planned at the time of assessment (such use appearing in their respective matrices), are subject to stamp duty, under item 28.1 of the table attached to the Stamp Duty Code.

An understanding to which the legislator came to give express form with the new wording of item 28.1.

For which reason, being the properties..., ..., ..., and..., of the parish of..., municipality of..., registered in the respective matrix as "building land" with residential use, with a taxable asset value exceeding € 1,000,000.00, they fall within the concept provided for in item 28.1 of the TGIS and, as such, are subject to tax.

And being the action of the Tax Authority, subject to the principle of legality, as results from art.° 266.° n.º 2 of the Constitution of the Portuguese Republic, art.° 50.º n.° 2 of the General Tax Law and art.° 55.º of the Tax Procedure and Process Code, cannot fail to apply the law, assessing and collecting tax in the manner in which it is provided for.

It should also be noted that the claimant does not dispute the fact that the subjective and objective requirements of the tax base for Stamp Duty are met, but bases its argument on the (alleged) unconstitutionality of the legal provision.

Now, the Tax Authority cannot fail to apply the law on the grounds of its (alleged) unconstitutionality since the control of the constitutionality of laws is the responsibility of the courts and, ultimately, of the Constitutional Court.

This means that the Tax Authority, except in cases where the Constitutional Court has already declared the unconstitutionality of a given norm (art.° 281.° of the CRP) or is faced with disrespect for constitutional norms that are directly applicable and binding, such as those that refer to rights, liberties and guarantees (art.° 18.º n.° 1 of the CRP), bound as it is to the principle of legality, cannot review the constitutionality of legal norms nor, in any case, refrain from applying legal provisions in force in our legal system.

In this regard, Vieira de Andrade states "This conflict (between constitutionality and the principle of legality) cannot be resolved through the automatic prevalence of constitutional law over legal law. That is not what is at issue, because what is in question is not the constitutionality of the law, but the judgment that administrative bodies can make on that constitutionality. On the one hand, the Administration is not an organ for oversight of constitutionality; on the other hand, the subjection of the Administration to the law is not intended only to protect the rights of individuals, but also the defence and pursuit of public interests (...). The granting to administrative power of unlimited powers to control the constitutionality of the laws to be applied would lead to administrative anarchy, would invert the law-administration relationship and would strike at the heart of the separation of powers, as is enshrined in our Constitution." (Constitutional Law — 1977 — p. 270).

In identical sense João Caupers states that: "The Administration does not have, in principle, competence to decide on the non-application of norms whose unconstitutionality offers it doubts, contrary to the courts, to whom falls the responsibility for diffuse and concrete oversight of constitutional compliance, as is demonstrated by the differences between articles 207.° (now 204.°) and 266.° n.° 2 of the Constitution. While the former prevents courts from applying unconstitutional norms, the latter stipulates the subjection of administrative bodies and agents to the Constitution and the law. It appears clear that the essential difference between the two provisions stems precisely from the fact that it was not intended to entrust the Administration with the task of overseeing the constitutionality of laws. The performance of such a function by the latter must be seen as exceptional." (The Rights of Workers and the Constitution, Almedina, 1985, p.157).

As regards the request for compensatory interest, as the claim is without merit, the right to the same is prejudiced.

VI - CONCLUSION

In light of the above, we believe that the administrative appeal process should be DISMISSED.

· On 08-03-2016, the Claimant filed the request for arbitral pronouncement that gave rise to the present proceedings.

2.2. Reasoning of the Factual Determination

The facts were established as proven on the basis of the documents attached to the request for arbitral pronouncement, which are the only ones that were submitted.

As to the payment of the first two instalments of the impugned assessments, the evidential assessment is based on the acknowledgment by the Tax Authority that those payments were made (page 6 of document n.º 1 attached to the request for arbitral pronouncement).

As regards the third instalments, the Claimant states that it made payment (articles 20.º and 113.º of the request for arbitral pronouncement) and the Tax and Customs Authority does not dispute those assertions, for which reason it is justified that it be established as proven that payment was made.

The Tax and Customs Authority did not attach to the case file the administrative file.

2.3. Unproven Facts

It was not established that there exists any act defining the characteristics of the buildings that could be constructed on the land, in particular the purpose they are to serve.

3. Matters of Law

3.1. Defect of Error Regarding the Factual Premises

The Stamp Duty assessments impugned are relating to the year 2014 and are based on item 28.1 of the TGIS.

Item 28.1 of the TGIS, in the wording given by Law n.º 83-C/2013, of 31 December, in force in the year 2014, establishes the following:

28 - Ownership, usufruct or right of superficies of urban properties whose taxable asset value appearing in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 - on the taxable asset value used for IMI purposes:

28.1 – For residential property or for building land whose construction, authorised or planned, is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code - 1%

The first question raised by the Claimant is whether these norms are inapplicable to the properties referred to in the proceedings, as the taxation in question is only applicable in situations where construction has been authorised or planned for the "building land" and such construction is intended for "residential purposes".

The Claimant states, in sum, that

– the mere existence of the legal expectation that, on a "building land", an urban property with residential use will be constructed could never configure a tax fact subsumable under the norm in question, because, without such provision or expectation of "construction for residential purposes" being realised, it cannot be considered as verified in this case the demonstration of wealth or fortune that the law intended to reach;

– the properties in question in these proceedings, on the date of the tax event in question (year 2014), did not have an effective potential for construction for residential purposes, not having the same "construction, authorised or planned" for "residential purposes", despite being registered in the property matrix as "building land", such situation cannot, by itself, justify the application of item 28.1. of the TGIS.

The Tax and Customs Authority said nothing on this point in its Response and in the decision on the administrative appeal only refers, as regards the construction approved or planned, that «to determine the value of that part of the land, it is necessary to proceed with an assessment of the building to be constructed, as if it were already constructed. For this purpose, the approved construction project is used and in the area there is naturally not considered the area of free land or the area of excess land».

The references made in item 28.1 and in article 45.º, n.º 2, of the CIMI to planned constructions, in addition to authorised ones, allow it to be concluded that, contrary to what the Tax and Customs Authority may have understood in the decision on the administrative appeal, it will not be essential that there already exists an administrative act approving a construction project (which would constitute "authorisation"), it being sufficient that construction with determined characteristics is planned, at least as regards the footprint area of the building to be constructed.

There is no indication in these norms of the TGIS and CIMI of what is to be understood by «planned construction», but, taking into account the documents required to carry out the assessment of building land, indicated in article 37.º, n.º 2, of the CIMI, it can be concluded that one can only speak of authorised or planned construction when the «building to be constructed», to which n.º 1 of article 45.º refers, is defined in a subdivision permit or building licence permit, or approved project, or prior notification, or prior information notice or document certifying constructive viability. In fact, it is only in these situations that there will be legal consistency in envisaging the future realisation of construction with determined characteristics.

In the case in question, before the assertion by the Claimant that the properties in question «did not have an effective potential for construction for residential purposes, not having the same "construction, authorised or planned" for "residential purposes"», the Tax and Customs Authority did not present any document of one of the types referred to on which it had based its conclusion that the properties had authorised or planned constructions for residential purposes.

Since the possibility of construction of buildings for residential purposes invoked by the Tax and Customs Authority as a basis for the assessment acts and the decision on the administrative appeal is that on which the burden of proof of that fact falls, as can be concluded from article 74.º, n.º 1, of the General Tax Law, which establishes that «the burden of proof of the facts constitutive of the rights of the tax administration or of taxpayers falls on whoever invokes them».

Thus, the doubt regarding the existence or not of the possibility of construction of residential buildings on the land in question must be assessed procedurally in favour of the Claimant, leading to the annulment of the acts practised, as is imposed by n.º 1 of article 100.º of the Tax Procedure and Process Code, subsidiarily applicable, by force of the provision of article 29.º, n.º 1, letter c), of the RJAT.

By the foregoing, the request for arbitral pronouncement is upheld as to this first defect attributed by the Claimant to the assessments in question and to the decision on the administrative appeal.

3.2. Issues of Prejudiced Cognisance

Being the impugned assessments to be annulled on the basis of the first defect attributed to them by the Claimant, the cognisance of the defects argued subsidiarily is prejudiced, since, in accordance with the provision of article 554.º, n.º 1, of the Civil Procedure Code, the subsidiary claim is only taken into consideration in the event that a previous claim does not succeed.

4. Request for Payment of Amounts Paid and Compensatory Interest

The Claimant requests the refund of the amounts assessed, which it paid, with compensatory interest.

4.1. Possibility of Examination in Tax Arbitral Proceedings of Claims for Refund of Tax Paid and Compensatory Interest

In accordance with the provision of letter b) of art. 24.º of the RJAT, the arbitral decision on the merits of the claim with respect to which no appeal or challenge may be made binds the Tax Authority from the end of the period provided for appeal or challenge, this Authority having to, in the exact terms of the success of the arbitral decision in favour of the taxpayer and until the end of the period provided for spontaneous execution of judgments of tax courts, restore the situation that would exist if the tax act subject to the arbitral decision had not been carried out, adopting the acts and operations necessary for the effect», which is in keeping with the provision of art. 100.º of the General Tax Law [applicable by force of the provision of letter a) of n.º 1 of art. 29.º of the RJAT] which establishes that «the tax administration is obliged, in the event of total or partial success of an administrative appeal, judicial challenge or appeal in favour of the taxpayer, to the immediate and full restoration of the legality of the act or situation subject to the dispute, including the payment of compensatory interest, if applicable, from the end of the period for execution of the decision».

Although art. 2.º, n.º 1, letters a) and b), of the RJAT uses the expression «declaration of illegality» to define the jurisdiction of the arbitral tribunals operating in the CAAD, making no reference to judgment decisions, it should be understood that the powers that in judicial challenge proceedings are attributed to tax courts are comprised in its jurisdiction, this being the interpretation that is in harmony with the sense of the legislative authorisation on which the Government based itself in approving the RJAT, in which it proclaims, as a first directive, that «the tax arbitral process should constitute an alternative procedural means to the judicial challenge process and to the action for recognition of a right or legitimate interest in tax matters».

The judicial challenge process, although it is essentially a process for annulment of tax acts, admits the conviction of the Tax Authority in the payment of compensatory interest, as can be inferred from art. 43.º, n.º 1, of the General Tax Law, in which it is established that «compensatory interest is due when it is determined, in an administrative appeal or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount exceeding the legally due» and from art. 61.º, n.º 4 of the Tax Procedure and Process Code (in the wording given by Law n.º 55-A/2010, of 31 December, to which corresponds n.º 2 in the original wording), that «if the decision that recognised the right to compensatory interest is judicial, the period of payment is counted from the beginning of the period of its spontaneous execution».

Thus, n.º 5 of art. 24.º of the RJAT, when it states that «interest is due for payment, regardless of its nature, in the terms provided for in general tax law and in the Tax Procedure and Process Code», should be understood as allowing the recognition of the right to compensatory interest in the arbitral process.

On the other hand, the right to compensatory interest being dependent on the right to refund of amounts paid indebted, which are its calculation basis, it is inherent in the possibility of recognition of the right to compensatory interest the possibility of examination of the right to refund of those amounts.

It is necessary, therefore, to examine the claim for refund of the amounts unduly paid and for payment of compensatory interest.

4.2. Right to Refund and Compensatory Interest

In the case in question, it is manifest that, following the illegality of the assessment acts, there is a basis for refund of the tax paid, by force of the aforementioned arts. 24.º, n.º 1, letter b), of the RJAT and 100.º of the General Tax Law, since this is essential to «restore the situation that would exist if the tax act subject to the arbitral decision had not been carried out».

As regards compensatory interest, article 43.º, n.ºs 1 and 2, of the General Tax Law establishes that «compensatory interest is due when it is determined, in an administrative appeal or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount exceeding the legally due».

In the case of the proceedings, it was the Tax and Customs Authority that carried out the impugned assessments, on its own initiative, for which reason the defects that affect them are imputable to it.

Thus, the Claimant has the right to compensatory interest at the legal default rate, counted, in relation to each payment it made, on the basis of the respective amount and the period that elapses between the date on which each payment was made and the refund of the amount paid, in accordance with articles 43.º, n.ºs 1 and 4, and 35.º, n.º 10, of the General Tax Law, 61.º, n.ºs 2, 3, 4 and 5, of the Tax Procedure and Process Code, and art. 559.º of the Civil Code and Ordinance n.º 291/2003, of 8 April.

5. Decision

In these terms, the Arbitral Tribunal agrees to:

a) Find the claim for arbitral pronouncement to have merit;

b) Declare the illegality of the decision on the administrative appeal and of the assessment acts referred to in documents n.ºs 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015... and 2015...;

c) Annul the said Stamp Duty assessments;

d) Find the claim for restitution of amounts paid to have merit, in the total amount of € 201,381.20 and order the Tax and Customs Authority to effect the respective payment to the Claimant;

e) Find the claim for payment of compensatory interest to have merit and order the Tax and Customs Authority to pay it to the Claimant calculated on each of the amounts paid and from the date on which the respective payment occurred until its refund.

6. Case Value

In accordance with the provision of article 306.º, n.º 2, of the Civil Procedure Code, 97.º-A, n.º 1, letter a), of the Tax Procedure and Process Code and 3.º, n.º 2, of the Regulations on Costs in Tax Arbitration Proceedings, the case value is fixed at € 201,381.20.

7. Costs

In accordance with articles 12.º, n.º 2, and 22.º, n.º 4, of the RJAT, the amount of costs is fixed at € 4,284.00, in accordance with Table I attached to the Regulations on Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Lisbon, 01-09-2016

The Arbitrators

(Jorge Manuel Lopes de Sousa)

(Ricardo Marques Candeias)

(Ricardo Farinha Sequeira)

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28.1 applicable to land classified as building plots (terrenos para construção)?
Yes, since the 2014 amendment by Law 83-C/2013, Stamp Tax under item 28.1 applies to building land (terrenos para construção) intended for residential construction with taxable asset values equal to or exceeding €1 million. The legislative amendment explicitly extended the scope beyond completed residential properties to include building plots with residential destination, as evidenced by the property's classification and location coefficient in the property matrix under CIMI regulations.
Can taxpayers claim compensatory interest (juros indemnizatórios) when Stamp Tax liquidations are annulled by CAAD?
Yes, taxpayers can claim compensatory interest (juros indemnizatórios) when Stamp Tax liquidations are annulled by CAAD. Under Article 43 of the Tax Benefits Statute (EBF) and Article 100 of the General Tax Law (LGT), taxpayers are entitled to compensatory interest on amounts paid in excess when tax assessments are declared illegal and annulled, calculated from the payment date until the refund date at the legally established rate.
What are the grounds for challenging Stamp Tax assessments on urban properties through tax arbitration in Portugal?
Grounds for challenging Stamp Tax assessments through tax arbitration include: (1) errors in factual premises, such as incorrect property classification or valuation; (2) errors in legal application, including misinterpretation of item 28.1 scope; (3) unconstitutionality claims, particularly violations of equality principles under Article 13 CRP; (4) procedural irregularities in the assessment process; and (5) challenges to the dismissal of administrative appeals. Real estate investment funds can initiate arbitration under Articles 2 and 10 of the RJAT within the statutory deadlines.
Does applying Verba 28 of the Stamp Tax General Table to building land violate the constitutional principle of equality (Article 13 CRP)?
The constitutional challenge argues that applying item 28 to building land violates the equality principle (Article 13 CRP) by creating disparate treatment between different property categories without sufficient justification. However, Portuguese arbitral tribunals typically recognize that the legislature has broad discretion in tax policy, and differential treatment based on property type and value may be justified by legitimate fiscal objectives, including addressing wealth concentration and ensuring tax system progressivity, provided the distinction is rational and proportionate.
How can real estate investment funds (fundos de investimento imobiliário) contest Stamp Tax liquidations issued by the Portuguese Tax Authority?
Real estate investment funds contest Stamp Tax liquidations by: (1) filing administrative appeals (reclamação graciosa) within the statutory 120-day deadline after notification; (2) if dismissed, initiating tax arbitration proceedings before CAAD under the RJAT regime within 90 days; (3) submitting detailed legal and factual arguments challenging the assessment's legality; (4) providing supporting documentation including property records, valuations, and legal opinions; and (5) the management company acts on behalf of the fund, demonstrating proper legal standing and representation throughout the proceedings.