Process: 143/2015-T

Date: August 18, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration process 143/2015-T examined whether Stamp Tax under Verba 28 of the General Stamp Tax Table (TGIS) applies to building land (terrenos para construção). The claimant contested three 2013 Stamp Tax assessments totaling €15,071.30 on urban property classified as 'land for construction' with taxable patrimonial value exceeding €1,000,000. The central legal question concerned interpretation of 'properties with residential allocation' under Verba 28.1, introduced by Law 55-A/2012. The taxpayer argued that Verba 28.1 applies exclusively to already-built residential properties under IMI Code article 6, not unbuilt construction land. Citing grammatical interpretation and legislative intent, the claimant contended the legislator targeted 'high-value residential urban properties' for housing, not building land lacking physical residential characteristics. The Tax Authority countered that 'residential allocation' encompasses both built properties and construction lands, as the CIMI assessment methodology applies allocation coefficients to building land under article 41. The AT argued the broader concept of 'residential allocation' differs from 'properties intended for housing' and integrates construction lands destined for residential development. The arbitral tribunal was constituted following implicit rejection of administrative complaints after the 4-month statutory deadline. The case illustrates critical interpretive issues regarding Stamp Tax scope on high-value real estate, specifically whether taxation extends to undeveloped land based on intended future use versus current physical characteristics and actual residential occupation.

Full Decision

ARBITRAL DECISION

1. REPORT

1.1. A..., taxpayer no. ..., with tax domicile at Travessa ..., number ..., ..., in Lisbon, filed on 01/03/2015, a request for arbitral decision, in which he petitions for the declaration of illegality of the Stamp Tax assessment acts for the year 2013 (1st, 2nd and 3rd installments), to which correspond the documents with no. 2014 ..., no. 2014 ... and no. 2014 ..., in the amounts of € 5,023.76, € 5,023.78 and € 5,023.76, respectively.

1.2. His Excellency the President of the Deontological Council of the Administrative Arbitration Center (CAAD) appointed, on 23/04/2015, as sole arbitrator the signatory of this decision.

1.3. On 11/05/2015 the arbitral tribunal was constituted.

1.4. In compliance with the provision of no. 1 of article 17 of the Legal Framework for Tax Arbitration (RJAT) the Tax and Customs Authority (AT) was notified, on 12/05/2015, to, if willing, present a response and request the production of additional evidence.

1.5. On 12/06/2015 the AT presented its response, accompanied by a request in which it requested the waiver of the holding of the meeting described in article 18 of the RJAT.

1.6. The arbitral tribunal on 15/06/2015 decided to waive the holding of the meeting to which no. 1 of article 18 of the RJAT refers, on the basis of the principle of the arbitral tribunal's autonomy in the conduct of the proceedings, inviting both parties to, if willing, present optional written submissions and scheduled the date for the rendering of the final decision.

1.7. On 29/06/2015 the Claimant presented a request to the record containing written submissions.

1.8. The AT did not present written submissions.

2. PRELIMINARY ASSESSMENT

The arbitral tribunal was regularly constituted and is materially competent.

The parties have legal standing and capacity and are legitimate, with no defects in representation.

There are no nullities, exceptions or preliminary questions that prevent knowledge of the merits and that must be dealt with ex officio.

The request for constitution of the arbitral tribunal was presented within the time limit provided for in item a) of no. 1 of article 10, no. 1 a) of the RJAT, counted from the date on which the presumption of implicit rejection is presumed, due to non-compliance with the 4-month deadline for conclusion of the procedure provided for in no. 1 of article 57 of the General Tax Law, of the administrative complaints presented by the Claimant, and is therefore timely.

Consequently, the conditions are met for the final decision to be rendered.

3. POSITIONS OF THE PARTIES

There are two positions in confrontation, that of the Claimant, set forth in the request for arbitral decision (and subsequent written submissions) and that of the AT in its response.

In summary, the Claimant understands that:

a) "The (...) Claimant was notified of the Stamp Tax assessment acts nos. 2014 ..., 2014 ... and 2014 ..., made by reference to the year 2013, corresponding to the first, second and third installments of the Stamp Tax relating to the urban property of the kind 'land for construction' registered in the respective property register of the Union of Parishes of ... and ... under article U-... (...)";

b) "(...) the assessments in question (...) were issued pursuant to the provision in item 28.1 of the General Stamp Tax Table (TGIS), amended by Law no. 55-A/2012, of 29 October.";

c) "From the wording in force on the date of the facts, provision was made for taxation under Stamp Tax of properties that, cumulatively, were owned by the passive subject of the tax, presented a taxable patrimonial value equal to or greater than € 1,000,000 and, furthermore, had a 'residential allocation'";

d) "From the correct legal hermeneutics results, clearly, the non-incidence of this Item 28.1 of the TGIS to construction lands.";

e) "This is because, it is clear the difference between the realities (properties) that have the physical characteristics that allow a residential allocation, and the lands whose purpose is construction.";

f) "Thus, while the 'property with residential allocation' is nothing more than an already built property, to which a residential allocation was given, whereas the 'land for construction' is a property not yet built, allocated to construction, regardless of the allocation that will be given to the building to be constructed therein.";

g) "(...) for all the foregoing (...), the resort to the grammatical element allows us to verify, without room for doubt, that the legislator, by using the expression 'properties with residential allocation', to delimit the objective scope of the Stamp Tax provided for in item 28.1 of the TGIS, in the wording in force on the date of the facts, wished to refer to the 'residential urban properties' identified in article 6, nos. 1, item a), and 2 of the IMI Code.";

h) "And it is also clear that this non-incidence of Stamp Tax on construction lands was intended by the legislator, if we consider the thinking of the legislator, expressed in the discussion of the aforementioned Proposed Law no. 96/XII/2a, in the National Assembly, where it was stated by His Excellency the Secretary of State for Tax Affairs, who stated that '(...) the Government proposes the creation of a special tax on high-value residential urban properties' '(...) a special taxation on high-value properties intended for housing that '(...) will apply to houses with a value equal to or greater than 1 million euros'.";

i) "(...) there is no doubt that what the legislator wished to cover with the concept of 'property with residential allocation' exactly and solely, as already resulted from the interpretation of item 28.1 of the TGIS through the grammatical element, the concept of 'residential urban property', legally defined in article 6, no 1 and 2 of the IMI Code.".

By contrast, the AT sustains that:

a) "Law no. 55-A/2012, of 29/10/2012 came to amend article 1 of the Stamp Tax Code, and add to the General Stamp Tax Table, item 28.";

b) "With this legislative amendment, the stamp tax would now also apply to the ownership, usufruct or surface right of urban properties whose taxable patrimonial value shown in the register, under the terms of the Municipal Property Tax Code (CIMI) is equal to or greater than € 1,000,000.00.";

c) "The notion of allocation of urban property will be found in the part relating to the assessment of real estate, since the allocation of the property (purpose) will incorporate value to the property, constituting a determining factor of distinction (coefficient) for assessment purposes.";

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

e) "The reference to properties with residential allocation contained in item 28 of the CIS should be understood broadly, encompassing both built residential properties and construction lands, not least by the very wording of the rule and the concept used.";

f) "Note that the legislator does not refer to 'properties intended for housing', having opted for the notion '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 of the CIMI.";

g) "(...) the part of the land where the building to be constructed will be implanted is considered, 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% (...) because the construction is not yet carried out.";

h) "(...) well before the actual construction of the property, it is possible to determine and define the allocation of the construction land.";

i) "Item 28 of the TGIS applies to the ownership, usufruct or surface right of urban properties with residential allocation, whose taxable patrimonial value shown in the register, under the terms of 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 factual and legal requirements are met.";

k) "(...) taxation under stamp tax follows criteria of adequacy, applying indiscriminately to all holders of properties with residential allocation of value greater than € 1,000,000.00, applying to the wealth embodied and manifested in the value of properties.";

l) "(...) the contested assessment constitutes a correct interpretation and application of law to the facts, not suffering from a defect of violation of law (...), and consequently, the claim put forward should be judged unfounded and the Defendant Entity should be absolved of the claim.".

4. MATTERS OF FACT

4.1. FACTS FOUND PROVEN

In light of the documents submitted to the proceedings, it is found proven that:

4.1.1. The Claimant is the sole owner of the urban property of the kind 'land for construction' registered in the respective property register of the Union of Parishes of ... and ... under article U-....

4.1.2. The taxable patrimonial value (VPT) of the urban property in question amounts to € 1,507,130.00.

4.1.3. There is no construction or building on the said property.

4.1.4. The voluntary payment deadline for the Stamp Tax assessment of 2013, 1st installment (document no. 2014 ...), in the amount of € 5,023.78, ended on 30 April 2014.

4.1.5. The voluntary payment deadline for the Stamp Tax assessment of 2013, 2nd installment (document no. 2014 ...), in the amount of € 5,023.76, ended on 31 July 2014.

4.1.6. The voluntary payment deadline for the Stamp Tax assessment of 2013, 3rd installment (document no. 2014 ...), in the amount of € 5,023.76, ended on 30 November 2014.

4.1.7. The Claimant presented, on 30 July 2014, two administrative complaints against the Stamp Tax assessment acts no. 2014 ... and no. 2014 ..., requesting their annulment, which did not receive any decision from the AT.

4.1.8. On 30 November 2014, the AT's silence led to the presumption of implicit rejection for purposes of hierarchical review, contentious review, judicial challenge or request for arbitral decision.

4.2. FACTS NOT FOUND PROVEN

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

5. THE LAW

5.1. ILLEGALITY OF THE STAMP TAX ASSESSMENT ACT FOR 2013

In the case at hand, the fundamental question under consideration by the arbitral tribunal consists in determining the scope of application of Item no. 28.1 of the General Stamp Tax Table (General Table) in its wording on the date of the tax facts. That is, did the initial provision of Item no. 28 of the General Stamp Tax Table allow, from the outset – as the AT argues – the taxation of construction lands whose taxable patrimonial value reached or exceeded 1 million euros?

On this matter there is already abundant case law of the Supreme Administrative Court (STA) and arbitral case law to the contrary. [1] [2]

This is case law that is also adopted here, as we continue to agree with it entirely, and we will therefore limit ourselves to reproduce what was said on the question in the aforementioned STA Judgment of 9 April 2014, rendered in Case no. 1870/13, as follows: [3]

"The concept of 'property (urban) with residential allocation' was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the IMI Code, to which no. 2 of article 67 of the Stamp Tax Code (also introduced by that Law) refers as a subsidiary matter. And it is a concept that, probably due to its imprecision – a fact all the more serious as it is in light of it that the objective scope of the new taxation is determined – had a short life, as it was abandoned upon the entry into force of the State Budget Law for 2014 (Law no. 83-C/2013, of 31 December), which gave new wording to that item no. 28 of the General Table, and which now determines its objective scope of application through the use of concepts that are legally defined in article 6 of the IMI Code." [underlining ours].

"This amendment – to which the legislator did not attribute an interpretative character, nor does it seem to us that it did – only makes it unambiguous for the future that construction lands whose building, authorized or foreseen, is for housing are covered within the scope of item 28.1 of the General Stamp Tax Table (provided that their respective taxable patrimonial value is of a value equal to or greater than 1 million euros), but clarifies nothing, however, in relation to past situations (assessments of (...) 2013), such as that which is at issue in the present proceedings." [underlined].

"Now, as for these, it does not seem possible to adopt the interpretation of (...) the AT "(...), as it does not clearly result either from the letter or from the spirit of the law that the intention of the latter was, ab initio, to cover in its objective scope of application construction lands for which the construction of residential buildings was authorized or foreseen, as now clearly results from item 28.1 of the General Stamp Tax Table.

In fact, 'From the letter of the law nothing unambiguous follows, indeed, for it itself by using a concept that it did not define and which also was not defined in the statute to which it referred as a subsidiary matter lent itself, unnecessarily, to ambiguities, in a matter – of tax incidence – in which certainty and legal security should also be paramount concerns of the legislator.' [underlined].

"And from its 'spirit', discernible in the statement of reasons of the bill that is at the origin of Law no. 55-A/2012 (Proposed Law no. 96/XII – 2nd, Journal of the National Assembly, series A, no. 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing more follows than the concern of garnering new tax revenue, from sources of wealth 'more spared' in the past from the voracity of the Tax Authority than work income, in particular income from capital, securities gains and property, reasons which bring no relevant contribution to the clarification of the concept of 'properties (urban) with residential allocation', as they give it as settled, without any concern to clarify it. Such clarification would, however, have emerged - as reported in the Arbitral Decision rendered on 12 December 2013, in case no. 144/2013-T, available in the CAAD database –, at the time of the presentation and discussion in the National Assembly of that bill, in the words of the Secretary of State for Tax Affairs, who would have stated expressly, as gathered from the Journal of the National Assembly (DAR I Series no. 9/XII – 2, of 11 October, p. 32) that: «The Government proposes the creation of a special tax on high-value residential urban properties. It is the first time in Portugal that a special taxation on high-value properties intended for housing is created. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses with a value equal to or greater than 1 million euros" (underlined), from which it follows that the reality to be taxed that was envisaged is, after all, and notwithstanding the imprecision of the terminology of the law, "the residential properties (urban)", in common parlance "houses", and not other realities.". [4]

"The fact that one can consider that in the determination of the taxable patrimonial value of urban properties classified as construction lands one must take into account the allocation that the building authorized or foreseen for it will have for the determination of the respective value of the implantation area (cf. nos. 1 and 2 of article 45 of the CIMI), does not determine that construction lands can be classified as 'properties with residential allocation', since 'residential allocation' always appears in the IMI Code referred to 'buildings' or 'constructions', existing, authorized or foreseen, for the reason that only these can be inhabited, which is not the case with construction lands, which do not, in themselves, have conditions for such use, and are not susceptible of being used for housing except if and when the construction authorized and foreseen for them is built thereon (but in that case they will no longer be 'construction lands' but another kind of urban property – 'residential', 'commercial, industrial or for services' or 'others' – article 6 of the CIMI).".

"It would be strange, moreover, if the determination of the scope of the rule of tax incidence of item no. 28 of the General Stamp Tax Table were to be found, after all, in the rules for determination of the taxable patrimonial value of the IMI Code, and that the imprecision of the legislator's terminology in the drafting of that rule would, in fact, be clarified and finally explained by way of an indirect and ambiguous reference to the allocation coefficient established by the legislator in relation to built properties (article 41 of the IMI Code).".

In this measure, "(...) considering that a construction land – whatever the type and purpose of the building that will, or may be, erected on it – does not by itself satisfy any condition to be licensed as such or to be defined as having housing as its normal purpose, and referring the rule of incidence of stamp tax to urban properties with 'residential allocation', without any specific concept being established for such purpose, cannot from it be extracted that it contains a future potentiality, inherent to a distinct property that may perhaps be built on the land." [underlined].

"It is concluded therefore, in conformity with what was decided in the judgment under appeal, that, resulting from article 6 of the IMI Code a clear distinction between urban properties 'residential' and 'construction lands', these cannot be considered as 'properties with residential allocation' for purposes of the provision in item no. 28.1 of the General Stamp Tax Table, in its original wording, which was conferred on it by Law no. 55-A/2012, of 29 October.".

This case law is reiterated, once more, as no new grounds were presented that would contradict the jurisprudential orientation advocated.

For all the foregoing, if the Claimant's property was registered in the property register as 'construction land' on the date of the tax fact relating to the year 2013, the rule of incidence in question cannot be applicable to the case sub judice, under penalty of illegality. Reason for which, the Stamp Tax assessments of 2013 should be annulled, with all legal consequences.

6. DECISION

In these terms and with the foundation described above, it is decided to judge the claim founded, with the consequent annulment of the acts subject to arbitral decision – Stamp Tax assessment acts no. 2014 ..., no. 2014 ... and no. 2014 ....

7. CASE VALUE

The case value is fixed at € 15,071.30 (fifteen thousand and seventy-one euros and thirty cents), under the terms of article 97-A of the Code of Tax Procedure and Process (CPPT), applicable by force of items a) and b) of no. 1 of article 29 of the RJAT and of no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

8. COSTS

Costs to be borne by the AT, in the amount of € 918 (nine hundred and eighteen euros), under the terms of Table I of the Regulation of Costs of Tax Arbitration Proceedings, under the terms of no. 2 of article 22 of the RJAT.

Notify.

Lisbon, 18 August 2015

The Arbitrator,

(Hélder Filipe Faustino)

Document prepared by computer, in accordance with the provision of no. 5 of article 131 of the CPC, applicable by remission of item e) of no. 1 of article 29 of the RJAT.

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

[1] Cf. Andreia Gabriel Pereira, "The 'Luxury Houses' and Stamp Tax. Commentary on the Judgment of the Supreme Administrative Court (2nd Section), of 5 February 2015, rendered in case no. 0993/14, Rapporteur Cons. Francisco Rothes", Journal of Public Finance and Tax Law, Year VII, No. 4, July 2015, pp. 235 et seq.

[2] See, by way of example, the arbitral decisions rendered within case numbers 218/2013-T, 247/2013-T, 66/2014-T and 202/2014-T, available at https://caad.org.pt/.

[3] By virtue of the STA Judgment, of 29 April 2015, rendered in Case no. 021/15, both available at www.dgsi.pt.

[4] As pointed out by Andreia Gabriel Pereira, "(...) it was intended to create a specific taxation for the holders of the so-called 'luxury houses', which, indeed, is possible to infer from the fact that Item no. 28 of the General Stamp Tax Table applies only to properties intended for housing (and marginally, to properties held by residents in tax havens). It was thus that that Item was presented to public opinion and perceived by it.". Op. Cit. p. 237.

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto do Selo) under Verba 28 of the TGIS apply to building land (terrenos para construção)?
The application of Stamp Tax under Verba 28 of the TGIS to building land (terrenos para construção) is disputed. The taxpayer's position argues that Verba 28.1 applies only to properties with actual residential allocation - meaning already-built residential properties under IMI Code article 6 - not unbuilt construction land. The claimant contends that 'properties with residential allocation' refers to properties with physical characteristics allowing residential use, distinct from land destined for construction. Conversely, the Tax Authority maintains that 'residential allocation' is a broader concept encompassing both built residential properties and construction lands, as the CIMI assessment methodology applies allocation coefficients to building land under article 41. The AT argues that even before construction, building land can be assigned a residential allocation for valuation purposes, making it subject to Stamp Tax under Verba 28.1 when the taxable patrimonial value exceeds €1,000,000.
What was the outcome of CAAD arbitration process 143/2015-T regarding Stamp Tax on property?
The outcome of CAAD arbitration process 143/2015-T regarding Stamp Tax on property involved a dispute over three 2013 Stamp Tax assessments (documents 2014...) totaling €15,071.30 on land for construction. The arbitral tribunal was regularly constituted on May 11, 2015, with the sole arbitrator appointed by the CAAD President. The procedural timeline included: request filed March 1, 2015; Tax Authority response June 12, 2015; waiver of oral hearing June 15, 2015; claimant's written submissions June 29, 2015. The tribunal found no procedural defects, nullities, or exceptions preventing merit examination. The request was timely filed following implicit rejection of administrative complaints after the 4-month statutory deadline under General Tax Law article 57. The case centered on whether Verba 28.1 of the TGIS applies to building land versus only built residential properties, with fundamental disagreement on interpreting 'properties with residential allocation.'
Can taxpayers challenge Stamp Tax assessments on building land through tax arbitration in Portugal?
Yes, taxpayers can challenge Stamp Tax assessments on building land through tax arbitration in Portugal. The CAAD (Administrative Arbitration Center) provides an alternative dispute resolution mechanism under the RJAT (Legal Framework for Tax Arbitration). To access arbitration, taxpayers must first exhaust administrative remedies by filing a gracious complaint (reclamação graciosa) with the Tax Authority. After the 4-month statutory deadline for decision elapses without response (implicit rejection under General Tax Law article 57), taxpayers may file an arbitration request within the time limit specified in RJAT article 10, no. 1, item a). The arbitration process includes: appointment of arbitrator(s) by the CAAD President; tribunal constitution; notification to the Tax Authority to present response; optional oral hearing (which can be waived); written submissions; and final decision. In process 143/2015-T, the claimant successfully accessed arbitration to contest Stamp Tax assessments on construction land, demonstrating the availability of this judicial avenue for real estate tax disputes.
How are Stamp Tax liquidation acts for 2013 contested under the Portuguese RJAT regime?
Stamp Tax liquidation acts for 2013 are contested under the Portuguese RJAT regime through a sequential process. First, taxpayers must file a gracious complaint (reclamação graciosa) with the Tax Authority challenging the assessment acts. Under General Tax Law article 57, no. 1, the Tax Authority has 4 months to decide on the complaint. If this deadline expires without decision, implicit rejection is presumed. Following implicit rejection, taxpayers may file a request for constitution of an arbitral tribunal with CAAD within the time limit prescribed by RJAT article 10, no. 1, item a). In process 143/2015-T, the claimant filed the arbitration request on March 1, 2015, after implicit rejection of administrative complaints. The request must identify the contested acts, specify the legal grounds for illegality, and present supporting arguments. Once the tribunal is constituted, the Tax Authority is notified to respond under RJAT article 17, no. 1. The tribunal may waive the oral hearing based on procedural autonomy, and parties may present written submissions. The process culminates in a final arbitral decision declaring the legality or illegality of the contested assessments.
What is the legal basis for filing a gracious complaint (reclamação graciosa) against Stamp Tax on real estate?
The legal basis for filing a gracious complaint (reclamação graciosa) against Stamp Tax on real estate is established in the General Tax Law (Lei Geral Tributária) and the Stamp Tax Code (Código do Imposto do Selo). Article 68 of the General Tax Law provides the general right to file gracious complaints against tax acts. Taxpayers may contest Stamp Tax assessment acts by submitting a written complaint to the Tax Authority within the statutory deadline, typically within 120 days of notification of the contested act. The complaint must specify the grounds for illegality, such as incorrect application of Verba 28 of the TGIS, errors in property classification, incorrect taxable patrimonial value, or misinterpretation of legal concepts like 'properties with residential allocation.' Article 57 of the General Tax Law establishes the 4-month deadline for the Tax Authority to decide. Failure to decide within this period creates implicit rejection, opening the path to judicial or arbitral review. In process 143/2015-T, the claimant utilized this administrative complaint mechanism before accessing tax arbitration under the RJAT, demonstrating the mandatory administrative prerequisite for subsequent arbitral or judicial challenge.