Process: 152/2013-T

Date: November 29, 2013

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration decision (Process 152/2013-T) addresses whether stamp tax under provision 28.1 of the General Stamp Tax Table (TGIS), introduced by Law 55-A/2012, applies to building land (terrenos para construção) valued over €1,000,000. Company A challenged a €21,151.10 stamp duty assessment on building land valued at €2,115,110.00, arguing that provision 28.1 targets properties with residential allocation, not undeveloped land destined for future construction. The taxpayer contended that building land constitutes raw material for productive investment, not a manifestation of residential wealth that the austerity measure intended to tax. The company emphasized that Article 41 of the Real Estate Tax Code (CIMI) defines allocation only for constructed properties, not land for development, and that the IMI Code clearly distinguishes between residential urban properties and building land. The tax authority countered that the concept of allocation derives from CIMI Article 41 and that provision 28 applies to both constructed properties and building land, arguing that urban planning legislation permits determining allocation before construction occurs. The core legal issue involves interpreting 'properties with residential allocation' where neither the Stamp Duty Code nor CIMI explicitly defines this term for building land. This case raises fundamental questions about fiscal equality principles, the distinction between productive investment and residential wealth, and whether taxation of building land respects constitutional legality principles. The tribunal must determine if stamp tax on high-value properties extends beyond completed residences to encompass land designated for residential development, balancing fiscal policy objectives against taxpayer protections and statutory interpretation principles.

Full Decision

ARBITRATION DECISION

Report

  1. A, NIPC ..., with registered office at …, hereinafter referred to as A, filed a petition for arbitral decision with a view to obtaining the annulment of the stamp duty assessment in the amount of € 21,151.10, levied on urban property of which it is the owner, consisting of land for development registered under article ..., of the urban property register of the parish of ..., municipality of ....

  2. As grounds for the petition, the claimant alleges, in summary, that being effectively the owner of said land and destining it for future construction of buildings to be constituted as condominium property and subsequent sale of the units, the provision 28.1 of the General Table of Stamp Duty, amended by article 4 of Law No. 55-A/2012, of 29 October, invoked as the legal basis for the assessment, cannot be applied to it.

According to the claimant, this measure is intended to reinforce the principle of fiscal equity in the context of austerity, affecting manifestations of wealth expressed in the ownership of real estate intended for residential use with tax assessment value exceeding one million euros, whereas, in her view, what is at issue is not a property with residential allocation but merely land for development, on which buildings can be constructed for residential purposes and also other types of buildings.

Furthermore, the claimant also argues that said land constitutes mere raw material for its productive process and that the regulation under which the contested assessment was made does not aim to tax productive investment.

Nor is it defensible, the claimant continues, to sustain the assessment by invoking article 41 of the IMI Code which, in providing for the "type of use of constructed properties," refers only to one of the coefficients to be considered in the valuation of urban properties and never to define the properties covered by the new taxation.

The claimant further invokes the provisions of the IMI Code that define and distinguish between residential urban properties and land for development, concluding that only the former, immediately intended for residential use, are covered by the scope of the tax rule and that only in this way will constitutional principles of equality and legality be respected.

  1. The respondent authority, in turn, argued for the dismissal of the petition, defending the legality of the assessment given that the property in question has residential allocation and should be classified under provision 28 of the General Table of Stamp Duty, amended by Law 55-A/2012, of 29/12, which extended the scope of Stamp Duty, with subsidiary application of the Real Estate Tax Code, to the ownership, usufruct, or right of superficies of urban properties whose tax assessment value is equal to or greater than € 1,000,000.00, including "properties with residential allocation."

According to the respondent, the concept of allocation of a property is found in the part of the IMI Code that governs the valuation of real estate, particularly in article 41, invoking in support of its position Judgment No. 04950/11, of 14/02/2012, and drawing the conclusion that provision 28 of the General Table applies both to constructed properties and to land for development.

Furthermore, the respondent invokes urban planning legislation to conclude, regarding land for development, that even before the construction of any property, it is possible to determine and establish the allocation of such land.

The respondent authority also contests that the contested assessment violates any constitutional principle or rule.

  1. The arbitral tribunal was duly constituted on 02-09-2013 and is materially competent; the parties enjoy legal personality and capacity and have standing.

The first and only hearing of the tribunal took place on 07-11-2013, at which the representative of the claimant declared that she dispensed with hearing the witnesses she had listed, and both the representative of the claimant and the representative of the respondent declared that they dispensed with oral arguments.

Since the case does not suffer from nullities and no issues have been raised that would prevent consideration of the merits of the case, the conditions are met for the arbitration decision to be rendered.

  1. Factual Findings

In terms of factual findings brought to the proceedings by the parties, the following is evident:

5.1. In light of the "Statement of Assessment of Provision 28," submitted by the respondent authority, it is established that the contested assessment, in the amount of € 21,151.10, is for the year 2012, has the number …, document no. 2013 …, and was levied on an urban property registered in the respective register under article ...;

5.2. It is not indicated in the case whether the tax assessed and now contested has been or has not been paid in full;

5.3. In light of the copy of the property registry, the property registered under matriculation article ... consists of land for development located on Rua Tenente Valadim, s/n, in the place and parish of ..., municipality of ..., and had a tax assessment value of € 2,115,110.00;

5.4. No subdivision license or any other type of license relating to said land was submitted, nor was it demonstrated that any buildings or constructions existed thereon in the year to which the tax relates;

5.5. The claimant submitted a copy of the permanent certificate relating to data deposited with the Commercial Registration Office of ..., which states that its corporate purpose is "the promotion and management of real estate and purchase for resale or leasing of real estate."

  1. Legal Findings

The issue to be decided by this arbitral tribunal is a strictly legal question, as is expressly recognized and accepted by the claimant in her petition for decision and in the respondent authority's response.

The position of each of the parties is already summarized in paragraphs 2 and 3 above, reducing to the question of whether land for development can or cannot be considered "urban properties with residential allocation" and whether, accordingly, they can or cannot fall within the scope of the stamp duty tax referred to in provision 28 of the General Table.

Question of the Classification of Land for Development within the Scope of Provision No. 28 of the General Table of Stamp Duty

6.1. Law No. 55-A/2012, of 29 October, amended the General Table of Stamp Duty by adding provision 28, with the following wording:

28 – Ownership, usufruct, or right of superficies of urban properties whose tax assessment value appearing in the register, in accordance with the Real Estate Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the tax assessment value used for IMI purposes:

28.1 – For properties with residential allocation – 1%;

In the transitional provisions contained in article 6 of Law No. 55-A/2012, it was established that in 2013 the assessment of stamp duty provided for in provision No. 28 of the respective General Table should be levied on the same tax assessment value used for assessment of real estate tax in that year.

Since the matter of the prerequisites for the scope of this provision and particularly the meaning of the expression "property with residential allocation" are not expressly provided for in the Stamp Duty Code, which in turn refers to the Real Estate Tax Code, where this concept is also not defined, interpretation of the legal provisions that, in this second Code, govern the concept of property and its various allocations must be undertaken in order to conclude whether land for development can or cannot be considered as falling within the scope of said provision.

Let us examine, then, which provisions of the IMI Code should be invoked and analyzed with a view to that purpose.

The fiscal concept of property and the various types of properties are provided for in articles 2 to 6 of the IMI Code, as follows:

Article 2 – Concept of Property

1 – For the purposes of this Code, property is any portion of land, including waters, plantations, buildings, and constructions of any nature incorporated therein or situated thereon, with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings, or constructions, in the circumstances mentioned above, endowed with economic autonomy in relation to the land where they are located, although situated in a portion of land that constitutes an integral part of a different patrimony or does not have a patrimonial nature.

2 – Buildings or constructions, even though movable in nature, are considered to have a character of permanence when intended for non-temporary purposes.

3 – The character of permanence is presumed when buildings or constructions are situated in the same location for a period exceeding one year.

4 – For the purposes of this tax, each autonomous unit, under the condominium property regime, is considered to constitute a property.

Article 3 – Rural Properties

1 – Rural properties are lands situated outside an urban settlement that cannot be classified as land for development, under the terms of paragraph 3 of article 6, provided that:

a) They are intended for or, in the absence of specific allocation, are normally destined for a use generating agricultural income, as considered for purposes of personal income tax;

b) Not having the allocation indicated in the preceding subparagraph, they are not constructed or have only buildings or constructions of an accessory nature, without economic autonomy and of reduced value;

2 – Rural properties also include lands situated within an urban settlement, provided that, by virtue of a legally approved provision, they cannot have a use generating any income or can only have a use generating agricultural income, and are in fact being used for this allocation.

3 – The following are also rural properties:

a) Buildings and constructions directly intended for the production of agricultural income, when situated on the lands referred to in the preceding paragraphs;

b) Waters and plantations in the situations referred to in paragraph 1 of article 2;

4 – For the purposes of this Code, urban settlements are considered, in addition to those situated within legally fixed perimeters, nuclei with a minimum of 10 dwelling units served by streets of public use, with their perimeter delimited by points at a distance of 50 m from the centerline of the streets, in the transversal direction, and 20 m from the last building, in the direction of the streets.

Article 4 – Urban Properties

Urban properties are all those that should not be classified as rural, without prejudice to the provisions of the following article.

Article 5 – Mixed Properties

1 – Whenever a property has rural and urban parts, it is classified, in its entirety, according to the principal part.

2 – If neither part can be classified as principal, the property is considered mixed.

Article 6 – Types of Urban Properties

1 – Urban properties are divided into:

a) Residential;

b) Commercial, industrial, or for services;

c) Land for development;

d) Others.

2 – Residential, commercial, industrial, or for services are buildings or constructions licensed for such purposes or, in the absence of a license, which are normally intended for each of these uses.

3 – Land for development is considered to be lands situated within or outside an urban settlement, for which a license or authorization has been granted, preliminary communication admitted, or favorable prior information issued for a subdivision or construction operation, and also those that have been declared as such in the title of acquisition, with the exception of lands in which the competent entities prohibit any of those operations, namely those located in green areas, protected areas, or that, in accordance with municipal land-use planning plans, are intended for spaces, infrastructure, or public facilities (As amended by Law No. 64-A/08, of 31-12).

4 – Paragraph d) of paragraph 1 includes lands situated within an urban settlement that are not land for development nor are covered by the provisions of paragraph 2 of article 3, and also buildings and constructions licensed or, in the absence of a license, that are normally intended for other purposes than those referred to in paragraph 2, and also those of the exception of paragraph 3.

In the matter of interpretation of tax laws, it is settled that these are interpreted as any other rules.

Now, invoking from the outset the specific rules for interpretation of tax laws, particularly article 11 of the General Tax Law, it does not seem difficult to conclude that even for those who admit doubts as to the meaning and scope of provision 28 of the General Table of Stamp Duty, in terms of its economic substance, land for development, as such, can never be considered as properties intended for residential use or intended for "residential allocation," which is the expression used in the cited rule.

This conclusion is further reinforced when recourse is had to article 9 of the Civil Code, according to which interpretation should not be limited solely to the letter of the law but "cannot be considered by the interpreter as legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed."

Thus, what flows from the reading of the transcribed provisions of the IMI Code, particularly article 6, paragraphs 1 and 2, is that the decisive criterion for distinguishing the various types of urban properties is first and foremost between those that are already built and therefore susceptible of being used in economic or human activities such as industry, commerce, services, or residential use, and those that, although they may come to include buildings intended for these same functions, are still in a prior phase, being only endowed with a constructive potential that may or may not be realized.

In the case of constructed urban properties, the criterion for distinction is their destination or allocation to one or more of said functions, whether this allocation results from their licensing, whether it is conferred by the physical characteristics that make them apt for that purpose, or already by the fact that they are subject to actual use in one of said functions.

Tax law does not define what should be understood by residential allocation. Thus, in light of the aforementioned article 11, paragraph 2, of the General Tax Law, it should be noted that whenever terms proper to other branches of law are employed in tax rules, they must be interpreted in the same sense as they have therein, unless otherwise directly provided for by law.

Now, whether these are properties licensed to be used/allocated for residential purposes, whose requirements and procedures are provided for in specific urban planning legislation (see in particular articles 62 and following of the Legal Regime for Urban Development and Building approved by Decree-Law 555/99, of 16 December), or whether only buildings apt for that function or others already actually used for that purpose are at issue, it must always be considered that only construction that meets the legal requirements for licensing as such or, when this does not occur, that gathers the minimum physical conditions that make it apt for that function in order to allow privacy and intimacy of persons using it for such purpose is residential.

In the specific case of land for development, for whose qualification, given the provisions of article 3, paragraph 1, and article 6, paragraph 3, the formal component connected with recognition of its suitability plays a decisive role, it is evident that it is never provided for and, let us admit it, by the nature of things, it could never be conceived that a license would be granted to land of this type allowing the owner or a third party to allocate it, without further ado, to residential occupation.

The same may be said for cases in which the classification of land for development depends only, provided the legal limits of buildability are respected, on the condition of someone having it entered as such in the title of acquisition.

In any case, land for development is a property with a very specific function, delimited and conditioned by legal provisions outside the tax system but which the latter must accept.

In tax terms, land for development is an autonomous fiscal reality, as such evaluated and registered in the property register, ceasing to have that qualification only when it fulfills its function, that is, when, causing it to disappear, any construction is erected thereon, which will then be apt for another function, whether residential, commercial, industrial, or any other nature.

It is true that in the economy of the IMI Code, the expression "allocation" does not necessarily mean actual occupation but is used in the broader sense of destination or suitability for its use.

Indeed, in article 10 of said Code, which fixes the moment when an urban building assumes the status of urban property in fiscal terms and the beginning of its taxation, it is determined that buildings and constructions are considered completed, in addition to other dates now not relevant, on the date "on which normal use becomes possible for the purposes to which it is intended."

However, this rule should not be extrapolated to consider that, because a "land for development" may have as a possible destination the construction of buildings for residential purposes, only for that reason can it be granted "residential allocation."

For, in the case of buildings and constructions of any nature, it is possible to fix the moment from which they are physically apt to be used for the function for which they were erected.

By contrast, in the case of land for development, and as already mentioned, the only possible destination or suitability is its use as one of the factors of production of buildings or constructions, with its function or allocation being exhausted therein.

It is finally noted that the argument of the respondent according to which provision 28 covers land for development given that for purposes of determining the tax assessment value of land for development the coefficient of allocation relating to the type of building to be constructed is applied is not accepted.

For one thing is the rules for valuation of urban properties in general and of land for development in particular, in which the type and characteristics of the buildings to be constructed are relevant to determining the tax assessment value; another matter entirely are the rules for classification of properties referred to in article 6 of the IMI Code.

In fact, if any argument were to be drawn from the consideration of the type and allocation of the "building to be constructed" as one of the factors in the formula to determine the value of land for development, it would be confirmation that, given that the expression "building to be constructed" is at issue, as something that will only be realized in the future, the requirement cannot be considered satisfied, this requirement yes as a present reality, of the residential allocation required in said provision 28.

Nor is the support that the respondent seeks to derive for its position from Judgment No. 04950/11 of 14/02/2012 of the Administrative Court of Appeals (TCA) South accepted.

What is at issue in this learned Judgment are the rules for valuation of land for development and the fact that buildings to be constructed influence their fiscal value, with which full agreement exists, but which has nothing to do with the disputed question of whether these lands can or cannot be covered by the taxation provided for in provision 28 of the General Table of Stamp Duty.

Decision

In these terms, the arbitral tribunal decides to declare the petition for arbitral decision to be well-founded, determining the annulment of the contested assessment.

The value of € 21,151.10 is fixed to the case and, in accordance with the provisions of article 3 and article 4, paragraph 4, of the Regulation of Costs in Tax Arbitration Proceedings, costs are fixed at € 1,224.00, to be borne by the respondent authority.

Lisbon, 29 November 2013

The Arbitrator,

(Joaquim Silvério Dias Mateus)

Frequently Asked Questions

Automatically Created

Is stamp tax under Verba 28.1 of the TGIS applicable to building land (terrenos para construção) valued over €1,000,000?
The applicability of stamp tax under Verba 28.1 to building land valued over €1,000,000 depends on whether such land qualifies as property with 'residential allocation.' The taxpayer argued that building land is merely raw material for future construction and does not constitute a residential property manifestation of wealth that Law 55-A/2012 intended to tax. The tax authority contended that allocation can be determined from urban planning designations even before construction. The key interpretive issue is whether 'afetação habitacional' requires actual residential use or merely potential residential designation.
Does a building plot qualify as a property with housing allocation (afetação habitacional) for purposes of Imposto de Selo?
A building plot's qualification as property with housing allocation for Imposto de Selo purposes is contested. The claimant argued that only properties immediately intended for residential use—not undeveloped land—should be classified as having residential allocation. The tax authority maintained that building land can have residential allocation based on its designated use under urban planning regulations, even absent constructed buildings. Neither the Stamp Duty Code nor CIMI explicitly defines 'afetação habitacional' for terrenos para construção, creating interpretive ambiguity that the tribunal must resolve.
Can Article 41 of the CIMI be used to determine whether building land is subject to Verba 28.1 of the Stamp Tax Table?
Article 41 of CIMI's applicability to determine whether building land is subject to Verba 28.1 is disputed. The taxpayer argued that Article 41 addresses the 'type of use of constructed properties' as a valuation coefficient and cannot define which properties fall under the new taxation, particularly since it refers only to constructed properties. The tax authority invoked Article 41 as the source for the concept of property allocation, arguing it applies to building land. The central debate is whether allocation concepts in CIMI's valuation provisions extend beyond constructed properties to encompass land for development.
What is the distinction between urban residential properties and building land under Portuguese tax law for Stamp Tax purposes?
Portuguese tax law distinguishes between urban residential properties (prédios urbanos habitacionais) and building land (terrenos para construção) under the IMI Code framework. Articles 2-6 of CIMI define property concepts and types. The taxpayer emphasized that this distinction is fundamental, with only residential properties intended for immediate housing use qualifying under provision 28.1. Building land, classified separately in the property registry and IMI system, serves as raw material for development rather than constituting residential wealth. This distinction is crucial for determining stamp tax liability under the constitutional principles of equality and legality.
How does the principle of fiscal equality apply to the taxation of building plots under Lei n.º 55-A/2012?
The principle of fiscal equality applies to building plot taxation under Law 55-A/2012 by requiring that similarly situated taxpayers receive similar treatment and that tax burdens reflect actual wealth manifestations. The taxpayer argued that taxing building land—productive investment capital—alongside completed residential properties violates fiscal equity because the austerity measure targeted residential wealth manifestations, not business assets. The law's purpose was to tax luxury residential property ownership exceeding €1,000,000, not to burden real estate development activities. Applying provision 28.1 to building land would treat productive capital like consumption assets, contradicting the equality principle that requires taxation to correspond to actual economic capacity and wealth demonstration.