Process: 144/2017-T

Date: September 7, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Arbitration Case 144/2017-T examined whether Stamp Duty under Item 28.1 of the General Stamp Duty Table (Verba 28 TGIS) should apply to the aggregate patrimonial tax value of a property with multiple independent residential divisions or to each division separately. The taxpayer owned a property with 12 independent units, 10 allocated to residential use with total VPT of €2,284,750. The Tax Authority assessed Stamp Duty on the total residential VPT at 1%, while the taxpayer argued each independent division should be taxed separately. The case raised procedural issues including non-impugnability of challenging only the third installment separately and lis pendens with related proceedings. The substantive dispute centered on interpreting whether Verba 28.1 TGIS, which taxes urban properties with residential allocation based on IMI patrimonial values, requires aggregation of all residential divisions within a single property or separate taxation. The Tax Authority maintained that the determining factor is the total patrimonial value of the property, not individual parcels, regardless of independent economic use for IMI purposes. This case illustrates critical issues in applying the Stamp Duty regime introduced by Law 55-A/2012 to properties with multiple autonomous units and the proper tax base calculation methodology.

Full Decision

ARBITRAL DECISION

I - REPORT

A - IDENTIFICATION OF THE PARTIES

Applicant: A…, Ltd., with registered office located at Avenue …, No. …, …, …-… Lisbon, holder of tax identification number for legal persons NIPC: …, hereinafter referred to as Applicant or taxpayer.

Respondent: Tax and Customs Authority, hereinafter referred to as Respondent or TA.

The Applicant filed a request for the constitution of an Arbitral Tribunal in tax matters and made a request for arbitral pronouncement, pursuant to the provisions of paragraph a) of article 2, section 1 and paragraph a) of article 10, section 1, both of Decree-Law No. 10/2011, of January 20 (Legal Framework for Arbitration in Tax Matters, hereinafter abbreviated as RJAT).

The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD, and in accordance with the provision of paragraph c) of article 11, section 1 of Decree-Law No. 10/2011, of January 20, in the wording introduced by article 228 of Law No. 66-B/2012, of December 31, the Tax Authority was notified on 2017-05-23.

The Applicant did not proceed with the appointment of an arbitrator, and therefore, pursuant to the provisions of section 1 of article 6 and paragraph b) of article 11, section 1 of Decree-Law No. 10/2011, of January 20, in the wording introduced by article 228 of Law No. 66-B/2012, of December 31, the Deontological Council designated Rita Guerra Alves as Arbitrator, with the appointment having been accepted by her according to legal provisions.

On 2017-04-11, the parties were duly notified of this designation, and did not manifest their intention to refuse the designation of the arbitrator, pursuant to article 11, section 1, paragraphs a) and b), of RJAT and Articles 6 and 7 of the Deontological Code.

The Singular Arbitral Tribunal was regularly constituted on 2017-05-23, to examine and decide on the subject matter of the present dispute, and the Tax and Customs Authority was automatically notified on 2017-05-23 as set forth in the respective minutes.

B – REQUEST

1. The Applicant herein filed a request for arbitral pronouncement declaring the illegality of the following tax assessment acts, in the context of Stamp Duty, No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…, relating to the year 2015, which established a tax payable of €7,615.82 (seven thousand six hundred and fifteen euros and eighty-two cents).

C – GROUNDS FOR THE CLAIM

2. To support its request for arbitral pronouncement, the Applicant alleged, with a view to declaring the illegality and consequent annulment of the tax assessment acts in the context of Stamp Duty, the following:

The Applicant is the full owner of the property located at Avenue …, No. …, registered in the urban property register with No. …, parish … .

The property comprises a total of 12 (twelve) divisions with independent use, whose Patrimonial Tax Value (PTV) determined pursuant to the Municipal Property Tax Code (hereinafter referred to as MPTC), is valued at €2,923,710.00.

Of the twelve divisions with independent use, only two are allocated to commerce/services, whereas the remaining divisions are allocated to housing, whose total PTV is €2,284,750.00.

The TA issued tax assessment notices for the tax claimed herein, because ten of the twelve divisions with independent use have residential allocation and their respective PTV amounts to the sum of €2,284,750.00.

The assessment notices challenged herein are limited to the 3rd installment of Stamp Duty, whereas the 1st and 2nd were challenged jointly in this Arbitral Tribunal, with proceedings ongoing under Case No. 269/2016-T.

D - RESPONSE OF THE RESPONDENT

3. The Respondent, duly notified for such purpose, presented its response in a timely manner, in which, in abbreviated summary, it alleged the following:

By way of exception, it invoked:

A) Of the non-impugnability of the subject matter of the present request for arbitral pronouncement. The Respondent argued in summary that the law does not comprehend the independent challenge of an installment of item 28 of Stamp Duty contained in tax bills, as is the case in the present proceedings, and ends by requesting the dilatory exception provided for in paragraph c) of section 1 of article 89 of the CPTA, subsidiarily applicable by article 29, section 1, paragraph c) of RJAT, which prevents the tribunal from hearing the merits, with the consequent acquittal of the TA;

B) Of the exception of lis pendens with case No. 469/2016-T, because the challenge of the assessment act of item 28.1 of the General Stamp Duty Table of the year 2015 is pending, via the first and second installments, relating to the Applicant herein. It ends by requesting the exception of lis pendens provided for in article 581 of the CPC applicable ex vi article 29, section 1, paragraph e) of RJAT with the consequent acquittal of the tribunal under article 576, section 2 of the CPC.

By way of substantive defense, it invoked in summary:

All floors with independent use are property of the Applicant in the present request for arbitral pronouncement.

The patrimonial value of all such floors with independent use and residential allocation that compose the said urban property was determined separately, pursuant to article 7, section 2, paragraph b), of the Municipal Property Tax Code (MPTC).

The sum of the patrimonial value of such floors and divisions subject to item 28 of the General Stamp Duty Table amounts to €2,284,750.00.

It would be on this value that the TA would assess, pursuant to articles 6, section 1, paragraph f), sub-paragraph i), the mentioned Stamp Duty of item 28.1 of the General Table, in the wording given by article 4 of Law No. 55-A/2012, of October 29, at the rate of 1 percent.

The interpretation underlying the contested assessment acts is that the patrimonial tax value upon which the incidence of Stamp Duty of item 28.1 of the General Stamp Duty Table depends must be, as it was in the case at hand, the total patrimonial value of the property and not the value of each of its independent parts.

According to item 28.1 of the General Stamp Duty Table, in the case of urban properties with residential allocation, the tax falls on the patrimonial tax value used for the purposes of municipal property tax (IMI).

The Respondent argues that the patrimonial value relevant for the purposes of the incidence of the tax will be the total patrimonial value of the urban property and not the patrimonial value of each of the parts that compose it, even if they are capable of independent use.

In summary, the patrimonial tax value upon which the incidence of the stamp duty of item 28.1 of the General Table depended had to be, as it was, the total patrimonial value of the property and not that of each of its independent parts.

The fact that the IMI was calculated based on the patrimonial tax value of each part of property with independent economic use does not equally affect the application of article 28, section 1, of the General Table.

This is what results from the fact that the determining factor for the application of that item of the General Table is the total patrimonial value of the property and not separately that of each of its parcels.

It will be concluded, thus, by the legality of the contested assessments, and the Applicant's claim should be considered unfounded and the Respondent acquitted of all claims.

E - FACTUAL FINDINGS

4. For the examination of the issues submitted to this Tribunal's consideration, it is necessary to set out the factual matters relevant, based on the documentary evidence brought by the parties to the record and the facts not disputed by the parties.

5. Thus, this Tribunal finds proven the following facts:

6. The Applicant is the full owner of the property located at Avenue …, No. …, registered in the urban property register with No. …, parish … .

7. The property comprises a total of 12 (twelve) divisions with independent use whose PTV, determined pursuant to the Municipal Property Tax Code, hereinafter referred to as MPTC, is €2,923,710.00.

8. Of the twelve divisions with independent use, only two are allocated to commerce/services, whereas the remaining divisions are allocated to housing, whose total PTV is €2,284,750.00.

9. The Applicant was notified by the TA of the following assessment acts of Stamp Duty: No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…

10. The assessment notices challenged herein are limited to the 3rd installment of Stamp Duty.

F - UNPROVEN FACTS

11. Of the facts with interest for the decision of the case, contained in the request for pronouncement, all subject to concrete analysis, those not contained in the factuality described above were not proven.

G - ISSUES TO BE DECIDED

12. Having regard to the positions of the parties, adopted in the arguments presented by each, the following constitute central issues, which must therefore be examined and decided:

REGARDING THE EXCEPTIONS RAISED BY THE RESPONDENT:

A) Of the non-impugnability of the subject matter of the present request for arbitral pronouncement.

B) Of the exception of lis pendens with case No. 469/2016-T.

REGARDING WHAT WAS PETITIONED BY THE APPLICANT:

(i) Of the declaration of illegality of the tax assessment acts in the context of Stamp Duty, No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…; No. 2016…, relating to the year 2015, which established a tax payable of €7,615.82 (seven thousand six hundred and fifteen euros and eighty-two cents).

H. REGARDING THE EXCEPTION OF NON-IMPUGNABILITY OF THE SUBJECT MATTER OF THE PRESENT REQUEST FOR ARBITRAL PRONOUNCEMENT AND CONSEQUENT LACK OF JURISDICTION OF THE ARBITRAL TRIBUNAL

1. The Respondent argues that, given the manifest non-impugnability of the independent installments of the assessment acts, contained in the tax bills, which constitute the subject matter of the present request for arbitral pronouncement, the dilatory exception of lack of jurisdiction of the Arbitral Tribunal occurs, provided for in section 1 and paragraph c) of section 4 of article 89 of the CPTA, subsidiarily applicable under article 29, section 1, paragraph c), of RJAT, which prevents the tribunal from hearing the merits of the case and consequently prevents the acquittal of the TA.

2. To this end it bases its arguments, alleging that the assessment act of item 28 of Stamp Duty is unique, by which the amount of tax to be paid will be determined. The fact that it may be paid in several installments does not imply that several assessments have occurred. The nature of the installments of an assessment of this tax is one of division of the overall assessment, made annually, and each installment cannot be challenged independently on its own, since the object of judicial challenge or tax arbitral proceedings is the tax assessment act and not the collection act.

3. Furthermore, it argues that the annulment of the tax assessment act necessarily has implications for all installments, terminating the obligation to pay them or imposing on the tax administration the obligation to refund amounts possibly paid by the taxpayer.

4. The Applicant was granted a deadline to respond regarding the exception raised, which it did not present a response.

5. In light of the positions assumed by the parties, faced with the exception raised, it falls to this Tribunal to decide.

6. It results from the Urban Property Record relating to the property, the existence of fractions with independent use and residential allocation, and the applicant attached the assessment notices relating to each of the fractions with independent use and residential allocation of the property, relating to the 2nd and 3rd installments of Stamp Duty.

7. The value attributed by the Applicant to the arbitral petition corresponds to the sum of the tax assessed on the Stamp Duty assessment act challenged herein by the Applicant, corresponding to the 2nd and 3rd annual installments relating to the year 2015, in the total amount of €6,244.52.

8. However, the value of the tax collection of the acts challenged herein corresponds to the amount of €16,319.40.

9. The challenge of the Stamp Duty assessment acts, although issued for payment in installments, remains indivisible, pursuant to the combined provisions of articles 120 and 113, section 1, both of the IMI Code, applicable by reference of section 7 of article 23 of the Stamp Duty Code, in the wording given to it by Law No. 55-A/2012, of October 29.

10. It results from these provisions that, in the situations referred to in item 28 of the General Stamp Duty Table, an annual assessment is made, and as such the payment in installments is merely a tax collection technique.

11. As it is not a divisible tax act, in the sense that "if partial annulment of a tax act is requested, the tribunal cannot, in principle, annul it entirely"[1], the request for annulment of the Stamp Duty assessment act of any of the three installments, should be challengeable exclusively as to the tax amount determination act and not as to the tax payable in that installment.

12. Although the request for annulment of the act may be made at any time counting from the date of notification of one of the installments or from the rejection of the administrative remedy,

13. The Stamp Duty assessment act being annullable and challengeable, it is the tax amount determination act that permits this challenge, because the same cannot be divisible and challengeable independently on its own. In that way, its annulment implies the annulment of the payment acts, of collection, respectively the three or all installments paid or to be paid.

14. On the issue of the indivisibility of a Stamp Duty assessment (item 28 of the General Stamp Duty Table), the CAAD has already pronounced itself in cases No. 408/2014-T, 138/2015-T, 387/2014, 726/2014-T, 736/2014-T and 90/2015-T, 205/2013-T (available at https://caad.org.pt/tributario/decisoes/).

15. See in particular case No. 205/2013-T, as partially transcribed:

"11. The Respondent further disputes the value of the case, considering that the same is €8,940.94 and not €28,822.80, as indicated by the applicant. The applicant argues that 'the act challenged in these proceedings is the assessment act numbered ... of 22/02/2013, relating to the first installment of stamp duty for the year 2012, in the amount of €8,940.94, attached by the applicant to the request for arbitral pronouncement as Document 1'. However, the value of the assessment numbered ... of 22/02/2013, as stated in said document, is actually €26,822.00 and not €8,940.94.'

It should be noted that there is no assessment of €8,940.94. This value is merely the first installment of an assessment that was made from the outset and in the value indicated by the Applicant. From the fact that the value of the assessment may be paid in several installments, it does not follow that there are three assessments. It is, differently, an assessment that may be paid in several installments (underlined in the original), and the taxpayer is not prevented from challenging the same due to the fact that only the payment deadline for one of them has elapsed."

16. Indeed, the installments for payment of a Stamp Duty assessment under item 28 of the General Stamp Duty Table are not independently reviewable, because they originate from a single annual obligation. Let us note what Braz Teixeira teaches us: "It is necessary not to confuse periodic installments, which, although carried out by successive acts at different moments, originate from the same obligation and constitute the various parcels of the same installment that was divided, with installments that must be made periodically, not due to a division of the overall installment, but rather to the birth, also periodic, of new obligations, through the permanence of the factual requirements of taxation."

17. Now, in cases where the tax must be paid in installments, the assessment is notified to the taxpayer together with the notification for payment of each of the installments, being able only to be challenged in its entirety and not installment by installment.

18. Regarding the lack of jurisdiction of the Arbitral Tribunal to annul an installment of a Stamp Duty assessment, a Collective Arbitral Tribunal pronounced itself recently, constituted in case No. 442/2014-T, as per the excerpt transcribed (decision available at https://caad.org.pt/):

"(...) the Applicant is correct in arguing that the value of the case should be that of the assessments for which it requests a declaration of illegality and not the value of the 1st installment of each of the properties referred to, because it is the illegality of the annual assessments that the Applicant intends. Besides, the jurisdiction of the arbitral tribunals operating at CAAD covers requests for declaration of illegality of assessment acts and not of the installments through which the collection of the assessed amounts is made."

19. Given that the present tax is indivisible, its challenge implies the annulment of the three installments, and not the other way around. The decision concerns the act as a whole, and as such, annulment implies total annulment.

20. As the three installments are not issued simultaneously, and as the act to be annulled is not divisible, one cannot consider that the non-challenge by administrative means of one of the installments means that the taxpayer has lost their right to defend themselves against the same.

21. For the foregoing reasons, in the absence of independent challenge of each of the installments of the Stamp Duty assessment identified in the proceedings, for the reasons set out above, we are faced with lack of jurisdiction of the Arbitral Tribunal for examination and declaration of the illegality of the assessment notices and consequent annulment.

22. Based on the foregoing, this Tribunal considers that the Stamp Duty assessment of item 28 of the General Stamp Duty Table is indivisible, and as such each of its installments cannot be independently challenged, which is why it is decided that the exception of lack of jurisdiction of the Arbitral Tribunal is upheld pursuant to the provisions of article 16, section 1 of the CPTA applied ex vi article 29 of RJAT, associated with the autonomous non-impugnability of the acts subject to the petition by the Applicant, which prevents the continuation of the proceedings and examination of the merits of the case, with the consequent acquittal of the Respondent.

23. The Arbitral Tribunal, under the terms of articles 608, section 2, 663, section 2 and 679 of the Code of Civil Procedure by application of article 29 of RJAT, is not obliged to examine all arguments raised by the Applicant nor in the response made by the Respondent, when the decision is prejudiced by the solution already given, as is the case in the present proceedings, which is why the remaining issues submitted to the request for pronouncement are prejudiced for examination.

J - DECISION

In these terms and in accordance with the law, having regard to the analysis carried out, this Arbitral Tribunal has decided:

To uphold the dilatory exception of absolute lack of jurisdiction of the Arbitral Tribunal, having regard to the autonomous non-impugnability of the collection acts, and consequently acquit the Respondent of the claim;

To order the Applicant to pay the costs of the present proceedings.

The value of the case is fixed at €7,615.82 (seven thousand six hundred and fifteen euros and eighty-two cents), corresponding to the value of the assessment having regard to the economic value of the case assessed by the value of the tax assessments challenged, and accordingly the costs are fixed at €612.00 (six hundred and twelve euros), to be borne by the Applicant, pursuant to article 12, section 2 of the Tax Arbitration Regime, article 4 of the Rules of Procedure of the CAAD Tax Chamber and Annex Table I to the latter - section 10 of article 35, and sections 1, 4 and 5 of article 43 of the General Tax Law, articles 5, section 1, paragraph a) of the Rules of Procedure of the CAAD Tax Chamber, 97-A, section 1, paragraph a) of the CPTA and 559 of the CPC.

Notify.

Lisbon, 7 September 2017.

The Arbitrator

Rita Guerra Alves

[1] SOUSA, Jorge Lopes de, "Code of Tax and Administrative Procedure – annotated and commented" Volume II, 6th Edition, Áreas Publisher, 2011, page 319.

Frequently Asked Questions

Automatically Created

Does Verba 28 of the Tabela Geral do Imposto do Selo apply to building land (terrenos para construção)?
Verba 28 of the TGIS applies to urban properties with residential allocation (prédios urbanos com afetação habitacional), not specifically to building land (terrenos para construção). Building land typically falls outside the scope of Verba 28.1, which targets completed residential properties based on their patrimonial tax value (VPT) determined for Municipal Property Tax (IMI) purposes. The title reference to 'terrenos para construção' suggests this case examined whether certain properties could be excluded from Verba 28 taxation by qualifying as building land rather than completed residential properties, representing a potential exception to the tax's application.
What exceptions exist under Verba 28 TGIS for Stamp Tax on high-value urban properties?
The main exceptions under Verba 28 TGIS for high-value urban properties include: (1) properties below the minimum taxable threshold (originally €600,000 for properties located in Portugal); (2) properties classified as building land rather than completed residential units; (3) properties allocated to non-residential use (commerce/services); and (4) properties owned by entities exempt from Stamp Duty under special regimes. In this case, 2 of 12 divisions were allocated to commerce/services and thus excluded from the residential property tax base, demonstrating how allocation determines tax liability under Verba 28.1 of the General Stamp Duty Table.
How is the taxable value (VPT) determined for properties with independent divisions under Imposto do Selo?
For properties with independent divisions under Imposto do Selo Verba 28, the critical determination is whether the taxable VPT should be calculated as: (1) the aggregate total patrimonial value of all residential divisions within a single property, or (2) the individual VPT of each autonomous division. The Tax Authority's position in Case 144/2017-T was that the total patrimonial value of the property determines Stamp Duty liability, not separate values of independent parts. While IMI may assess each division with independent economic use separately under Article 7(2)(b) of the Municipal Property Tax Code (CIMF), the Tax Authority argued this separate IMI valuation does not automatically require separate Stamp Duty treatment under Verba 28.1 TGIS.
What is the procedure for challenging Stamp Tax assessments through CAAD tax arbitration?
The procedure for challenging Stamp Tax assessments through CAAD (Centro de Arbitragem Administrativa) involves: (1) filing a request for arbitration within the statutory deadline after receiving the tax assessment; (2) the CAAD President accepting the request and notifying the Tax Authority; (3) constitution of the Arbitral Tribunal (singular or collective); (4) the respondent Tax Authority filing a response raising procedural exceptions and substantive defenses; (5) evidence presentation and factual findings; and (6) issuance of the arbitral decision. In this case, procedural issues arose regarding whether taxpayers can challenge individual installments separately and whether lis pendens applies when related proceedings are pending, illustrating the technical requirements under RJAT (Regime Jurídico da Arbitragem Tributária).
Can a property owner obtain annulment of Imposto do Selo assessments when the Verba 28 exception applies?
A property owner can obtain annulment of Imposto do Selo assessments under Verba 28 when valid exceptions apply, such as: (1) the property qualifies as building land (terrenos para construção) rather than completed residential property; (2) the VPT falls below statutory thresholds; (3) the Tax Authority incorrectly aggregated values or applied the wrong tax base; or (4) procedural irregularities vitiated the assessment. The success of annulment depends on proving the legal exception applies. In Case 144/2017-T, the taxpayer sought annulment of €7,615.82 in Stamp Duty by challenging how the Tax Authority calculated the tax base for a property with multiple independent divisions, arguing the exception methodology should apply to each autonomous unit rather than the aggregate property value.