Process: 153/2015-T

Date: September 28, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 153/2015-T addresses whether Stamp Tax under Item 28.1 of the General Stamp Duty Table (TGIS) applies to a vertical property building in Lisbon with a total patrimonial value of €1,184,297.44, owned by three co-owners. The property consists of 9 independent floors/divisions, each individually valued between €128,000 and €132,036.13 for tax purposes. The Tax Authority assessed Stamp Duty totaling €3,520.96 for 2013, applying the tax to the aggregate property value exceeding €1 million. The claimants challenged this, arguing that vertical property should be treated like horizontal property, with each independent unit assessed separately. They contended that since no individual unit exceeded the €1 million threshold, Item 28.1 should not apply. Additionally, claimants alleged the property was demolished with only facade preservation, making it incompatible with 'residential use' required by the statute. The Tax Authority defended its position by distinguishing vertical from horizontal property, noting that only horizontal property units acquire independent property status under Article 2(4) of the Municipal Real Estate Tax Code (CIMI). The Authority argued that the patrimonial value of vertical property necessarily equals the sum of its constituent units under Article 7(2)(b) CIMI, and that the property register confirmed residential use. The claimants invoked favorable CAAD precedents (cases 49/2013-T, 50/2013-T, 180/2013-T, 183/2013-T) and raised constitutional challenges based on equality principles. The case hinges on statutory interpretation of 'property with residential use' and whether vertical property units should be assessed individually or collectively for Stamp Tax purposes when applying the €1 million threshold under Item 28.1 TGIS.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case no. 153/2015-T

Subject: Stamp Duty – Item no. 28.1 of the GTSD, vertical property

I - REPORT

  1. A… and B… requested, on 4 March 2015, under the provisions of articles 2, no. 1, al. a) and 10 of Decree-Law no. 10/2001, of 20 January, which regulates the Legal Regime of Tax Arbitration (LRTA), that a pronouncement be made on the illegality of the Stamp Duty (SD) assessment acts, by application of Item 28.1 of the General Table of Stamp Duty (GTSD) attached to the Stamp Duty Code (SDC), for the year 2013, which gave rise to collection documents with numbers 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, in the total amount of € 3,520.96, in accordance with the 16 documents attached.

  2. In the request for arbitral pronouncement the Claimant opted not to appoint an arbitrator.

  3. Under articles 6, no. 2, al. a) and 11, no. 1, al. b) of the LRTA, the Deontological Council appointed the undersigned as sole arbitrator, who accepted the position within the legally stipulated period.

  4. The Arbitral Tribunal was constituted on 11 May 2015.

  5. The Respondent submitted its reply on 17 June 2015.

  6. In the reply, the Respondent requested that the meeting referred to in art. 18 of the LRTA be waived, for lack of interest and utility in its holding, as well as waiving submissions since the parties' positions were already clearly set out in their pleadings.

  7. Once the Claimant was notified of the request identified in the previous paragraph, it came to state that it would not waive the holding of the meeting referred to in art. 18 of the LRTA, "however waiving the presentation of oral submissions".

  8. No exceptions were raised.

  9. By the Tribunal it was decided to waive the meeting of art. 18 of the LRTA, setting as the deadline for issuing the decision the date of 30 September 2015.

  1. The Claimants allege, in summary, that:

a) The Claimants are co-owners, in the proportion of 1/3 for each, of the urban property situated at Avenue … no. … to …, turning into Courtyard …, in the parish of ..., municipality of Lisbon, registered in the respective property register under article …

b) Property constituted in full ownership with 9 floors or divisions capable of independent use, with total patrimonial value of € 1,184,297.44, being certain, however, that the patrimonial value for tax purposes of each of the floors varies between € 128,000.00 and € 132,036.13.

c) The Claimants were notified of the stamp duty assessments listed in paragraph a) of the request, which were based on the application of Item 28.1 of the GTSD, in the wording given by Law no. 55-A/2012, of 29 October.

d) The Claimants proceeded to pay the aforementioned collection notes.

e) The Claimants allege that the urban property in question does not fit within the concept of "property with residential use" provided for in item no. 28.1 of the GTSD.

f) They further add that the interpretation given by the Tax Administration in the sense of considering, for purposes of application of Stamp Duty, the total patrimonial value of the property instead of the patrimonial value of each floor or division, violates the provisions of the law, specifically the provisions of the Code of Municipal Tax on Real Property (CMTRP), applicable by virtue of art. 67 of the SDC.

g) The Claimants further allege that the property register description of the property does not correspond to the current and cadastral reality since it was demolished through works no. …, which makes the property incompatible with its use for the purposes of commerce and residence described in the register.

h) In the view of the Claimants, an interpretation of the law in accordance with the criteria of art. 9 of the Civil Code, the tax administration could not apply item no. 28.1 of the GTSD to a demolished property with facade preservation, which never had use for habitation, concluding that stamp duty cannot be demanded from a property in ruins.

i) They concluded by alleging unconstitutionality, by violation of the principle of equality, of item no. 28.1 of the GTSD when interpreted in the sense of encompassing in the concept of residential property properties in ruins, or even demolished properties, with only facade preservation, for treating unequal situations equally.

j) On the other hand, the Claimants invoke that when there are units of the same property with independent use, the patrimonial value relevant for purposes of application of item 28.1 of the GTSD can only be that of each unit considered autonomously, and reference should be made to the provisions of art. 12 of the Code of Municipal Real Estate Tax, applicable by force of art. 67, no. 2 of the SDC.

k) In support of their thesis they invoke the decisions issued in cases 49/2013-T, 50/2013-T, 180/2013-T and 183/2013-T, all of the CAAD.

l) The Claimants finally request that the Respondent be condemned to proceed with reimbursement of the amount of tax paid, plus compensatory interest.

  1. Notified to respond, the Respondent alleges, in summary, the following:

a) That it proceeded with the assessments which are the subject of the present request for arbitral pronouncement in compliance with the provision of article 6, no. 2 of Law no. 55-A/2012, of 29/10, which added item no. 28 to the GTSD and whose respective scope provision refers to urban properties, valued in accordance with the Code of Municipal Tax on Real Property (CMTRP), with patrimonial value for tax purposes (PVTP) equal to or greater than € 1,000,000.00, with residential use.

b) That the Claimants wrongly seek to assimilate vertical property to horizontal property, which constitute different realities, as it was the legislature itself that understood that only the units subject to the regime of horizontal property could acquire the status of property, as follows from art. 2, no. 4 of the Code of Municipal Real Estate Tax.

c) It further alleges that the property register registration of the floors capable of independent use and the attribution of an individual patrimonial value for tax purposes does not exclude the patrimonial value of the respective property, which necessarily results from the sum of the patrimonial values for tax purposes of the floors capable of independent use, under art. 7, no. 2, al. b) of the CMTRP.

d) Consequently, it understands that the interpretation given by the Claimants to item no. 28.1 of the GTSD should be deemed unconstitutional, by offense to the principles of tax legality and equality.

e) It further alleges that, according to art. 113 of the CMTRP, the assessment is carried out on the basis of the patrimonial values for tax purposes of the properties and in relation to the taxpayers that appear in the register on 31 December of the year to which they relate.

f) It emphasizes that the Claimants did not provide any proof that the property register description does not correspond to the current and material reality of the property, being in a state of ruin.

g) And, in view of the property register certificate, the urban property in question is indeed dedicated to habitation, being a property with residential use as provided for in item no. 28.1 of the GTSD.

h) It concludes that the tax acts in question do not suffer from defects, do not violate any legal or constitutional principle, and should therefore be maintained, and in support of its thesis invokes the decision issued in case no. 640/2014-T.

C – Established Facts

  1. On the basis of the facts alleged by the parties, and not contested by the Respondent, as well as in the documentation attached to the case file, the following relevant factuality is established for the proper decision of the case:

a) The Claimants are co-owners, in the proportion of 1/3 for each of them, of the urban property situated at Ave. … no. … to …, turning into Courtyard …, parish of ..., municipality of Lisbon, registered in the urban property register of that parish under the property register article ….

b) From the property register certificate it appears that the property is a "five-floor urban property, 4 bays per floor. Average construction, in regular state of conservation. Intended for commerce and habitation. Shop on … to …, with two divisions, 1st floor right, habitation, with 13 divisions. 1st floor left, habitation, with 13 divisions. 2nd floor right, habitation, with 13 divisions. 2nd floor left, habitation, with 13 divisions. 3rd floor right, habitation, with 13 divisions. 4th floor right, habitation, with 12 divisions. 4th floor left, habitation, with 12 divisions" (cf. doc. 17 attached with the request for arbitral pronouncement, whose content is given as fully reproduced).

c) It also appears from the property register certificate that the property is composed of 9 floors or divisions capable of independent use, with area of 581.8000 m², building footprint area: 465.1000 m², Total gross private area: 2,092.9500 m², Land area constituting part of the units: 116.7000 m², has the total patrimonial value of € 1,184,297.44 (cf. doc. 17).

d) To each of the independent units, valued on 23 April 2010, was assigned a patrimonial value for tax purposes with the following values: (i) ground floor shop with patrimonial value for tax purposes of € 124,280.00; (ii) first right with patrimonial value for tax purposes of € 125,450.00; (iii) first left with patrimonial value of € 125,400.00; (iv) second right with patrimonial value of € 125,450.00; (v) second left with patrimonial value of € 125,450.00; (vi) third right with patrimonial value of € 125,450.00; (vii) third left with patrimonial value of € 125,450.00; (viii) fourth right with patrimonial value of € 125,450.00; (ix) fourth left with patrimonial value for tax purposes of € 125,450.00 (cf. doc. 17).

e) The aforementioned patrimonial values were updated in 2014 for the shop and in 2013 for the residential units, appearing in the urban property register that the current patrimonial value (CMTRP), determined in 2013, of each of the 8 residential units, is € 132,036.13 (cf. doc. 17).

f) With reference to the property of the Claimants, the Respondent proceeded with the assessment of Stamp Duty (SD), by application of item no. 28.1 of the General Table of Stamp Duty (GTSD) attached to the Stamp Duty Code (SDC), referring to the year 2013, which gave rise to documents with numbers 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, in the total amount of € 3,520.96, with the following mention appearing in those documents "Patrimonial Value of property – total subject to tax: € 1,056,289.04";

g) The Claimants proceeded to pay the amount of € 3,520.96.

h) By fax from the Lisbon Municipal Council, dated 27 June 2006, with the Subject: cost of coercive works, Location: Ave … …/…, states that "the demolition works of the private property located at that site, carried out through Works no. … have been completed. (...)" (cf. Doc. 18).

i) On 30 June 2014 (proc. …/2014), the LMC certified that the property in question was demolished with facade preservation/containment (cf. Doc. 27).

II – SANITATION

  1. The Tribunal is competent and is regularly constituted, under articles 2, no. 1, letter a), 5, no. 2, and 6, no. 1, all of the LRTA.

The parties have legal personality and capacity, are legitimate and are legally represented, under articles 4 and 10, no. 2, of the LRTA and article 1 of Ordinance no. 112-A/2011, of 22 March.

The case does not suffer from defects that would invalidate it, nor have the parties raised any exceptions that would prevent the consideration of the merits of the case, so the conditions are met for the issuance of the final decision.

III. – REASONING

The issue to be considered concerns the application of item no. 28 of the table attached to the SDC, in the wording given by Law no. 55-A/2012, of 29 October, to the property of which the Claimants are co-owners, more specifically, it consists of determining whether in the case of properties in full ownership, with floors or divisions capable of independent use, the patrimonial value for tax purposes to be considered for purposes of the scope of item no. 28.1 of the GTSD is the patrimonial value for tax purposes of each floor or division capable of independent use, with residential use, as argued by the Claimant; or whether it is the total value of the property resulting from the sum of the patrimonial values for tax purposes corresponding to the floors or divisions capable of independent use with residential use, as argued by the Respondent.

The issue has already been considered in various cases, within the scope of Tax Arbitration, in which it was decided that when it is verified that each of the floors that comprise a property in vertical ownership has a patrimonial value for tax purposes less than one million euros, the legal presupposition for the scope of stamp duty provided for in item no. 28.1 of the GTSD is not met, and consequently, a pronouncement was made on the illegality of the respective assessment acts (cf. decisions issued within cases numbers 51/2015-T, 391/2014-T, 451/2014-T, among others).

Item no. 28 of the GTSD, attached to the SDC, added by art. 4 of Law no. 55-A/2012, of 29 October, initially had the following wording:

"28 – Ownership, usufruct or surface right of urban properties whose patrimonial value for tax purposes appearing in the property register, under the Code of Municipal Tax on Real Property, is equal to or greater than € 1,000,000 – on the patrimonial value for tax purposes for purposes of Municipal Real Estate Tax:

28.1 – Per property with residential use – 1%;

28.2 – Per property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in a list approved by ordinance of the Ministry of Justice – 7.5%."

The wording of item no. 28.1 was subsequently amended by Law no. 83-C/2013, of 31 December, which approved the State Budget for 2014, with point 28.1 now using the concept of residential property, now providing as follows: "28.1 Per residential property or for land for construction whose building, authorized or intended, is for habitation, as provided for in the Code of Municipal Real Estate Tax – 1%". However, the legislative amendment made does not apply to the present case, which has reference to the year 2013. In fact, as already noted by the Decision of the STA of 29/04/2015, this amendment does not apply to past situations (assessments from 2012 and 2013), such as the one at issue in the case.

The issue that arises in the present case is to determine the scope of item no. 28.1 of the GTSD in the wording given by Law no. 55-A/2012, of 29 October, i.e., to determine whether item no. 28.1 of the GTSD applies to urban properties in full ownership, but with floors capable of independent use, with residential use, when the patrimonial value for tax purposes attributed to each of those floors is less than € 1,000,000.00, although the sum of the floors, with independent use, dedicated to habitation has a total value equal to or greater than that amount.

With respect to the rule in question – item no. 28.1 of the GTSD – the legislative thought that underlay it can be scrutinized in the presentation and discussion, in Parliament, of bill no. 96/XII (2nd), in which the State Secretary for Tax Affairs expressly stated:

"The Government proposes the creation of a special rate on high-value residential urban properties. This is the first time that Portugal has created special taxation on high-value properties intended for habitation. This rate 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."

From the semantic variety of the discussion, there immediately emerges the undifferentiated use of expressions such as "residential urban properties", "high-value properties intended for habitation" and "houses with a value equal to or greater than 1 million euros", everything seeming to point to the intention to tax single-family units of greater economic value, parameterized through their respective patrimonial value for tax purposes equal to or greater than one million euros.

However, from the preparatory works it is not possible to gather, with the necessary rigor, as already emphasized in previous decisions, what the concept of property underlying that rule is (cf. decisions issued in cases no. 21/2015-T and 451/2014-T), namely, whether a residential urban property is, in the sense of item no. 28 of the GTSD, an autonomous unit (self-sufficient for the purpose to which it is intended), distinct and isolated in which the life of each individual or family unit residing is processed, in single-family or multi-family buildings; or, whether it encompasses multi-family properties with autonomous units, but without legal autonomy, a characteristic of the autonomous units that make up properties constituted in horizontal ownership.

In the case at hand, the property in full ownership is composed, similarly to what happens with identical properties constituted in horizontal ownership, of nine floors capable of independent use, eight of which are dedicated to habitation.

The patrimonial values for tax purposes of the eight floors capable of independent use were € 132,035.13 for each of them, the units dedicated to habitation totaling a total value of € 1,056,289.04.

From the wording of item no. 28.1 it provides that "Ownership, usufruct or surface right of urban properties whose patrimonial value for tax purposes appearing in the property register, under the Code of Municipal Tax on Real Property, is equal to or greater than € 1,000,000 – on the patrimonial value for tax purposes for purposes of Municipal Real Estate Tax.

It is therefore necessary to determine what patrimonial value for tax purposes is considered for purposes of Municipal Real Estate Tax, since from item no. 28.1 it follows that stamp duty applies to the "Ownership, usufruct or surface right of property whose patrimonial value for tax purposes appearing in the property register, under the Code of Municipal Tax on Real Property (CMTRP), is equal to or greater than € 1,000,000 (...)".

Reference is thus made to the Code of Municipal Real Estate Tax for all regulatory content regarding the scope "urban properties with patrimonial value for tax purposes appearing in the property register", under the Code of Municipal Real Estate Tax, and regarding the taxable matter "patrimonial value for tax purposes for purposes of Municipal Real Estate Tax". A reference which, moreover, appears, as a subsidiary matter, in art. 67, no. 2 of the SDC which refers to the Code of Municipal Real Estate Tax the "matters not regulated in the present Code relating to item no. 28 of the General Table".

We highlight from the Code of Municipal Real Estate Tax, with respect to floors or divisions capable of independent use, the following rules:

a) each property corresponds to a single property register article (cf. art. 82, no. 2 of the Code of Municipal Real Estate Tax);

b) each floor capable of independent use is considered separately in the property register registration, which also discriminates its respective patrimonial value for tax purposes (cf. art. 12, no. 3 of the Code of Municipal Real Estate Tax);

c) the determination of patrimonial value for tax purposes is established for each floor or division capable of independent use, according to the use of each unit, being evaluated separately depending on its use and areas (cf. art. 38 of the Code of Municipal Real Estate Tax);

d) the collection document contains, necessarily, the discrimination of properties, their parts capable of independent use, respective patrimonial value for tax purposes (cf. art. 119, no. 1 of the Code of Municipal Real Estate Tax);

e) The failure to discriminate the patrimonial value for tax purposes of urban properties by floors or divisions capable of autonomous use constitutes grounds for claiming incorrect property register registration (cf. art. 130, no. 3, al. h) of the Code of Municipal Real Estate Tax).

In doctrine, SILVÉRIO MATEUS and FREITAS CORVELO emphasize that one of the aspects that should be evident in the property register concerns the need to make relevant the autonomy that, within each property, can be attributed to each of its parts, functionally and economically independent.

The Code of Municipal Real Estate Tax establishes tax relevance – at the level of property register registration, determination of patrimonial value for tax purposes, discrimination of patrimonial value for tax purposes, assessment, grounds for claiming – to the autonomization in the property register of each part of a property capable of independent use.

It follows from the Code of Municipal Real Estate Tax that the parts of a property in full ownership endowed with autonomy, that is, self-sufficient for the purpose to which they are intended, are the object of individual and separate evaluation, are individualized in the respective property register registration, have their own patrimonial value appearing in the property register and are the object of individualized assessments (all as follows from articles 7, no. 2 al. b), 13, no. 2 and 119, no. 1 of the Code of Municipal Real Estate Tax), this autonomy should be respected and is relevant for purposes of application of item no. 28 of the GTSD.

Item no. 28 of the GTSD makes reference to "urban properties with patrimonial value for tax purposes appearing in the property register, under the Code of Municipal Tax on Real Property" and to "patrimonial value for tax purposes used for purposes of Municipal Real Estate Tax".

In turn, art. 12, no. 3 of the CMTRP provides that "each floor or part of property capable of independent use is considered separately in the property register registration, which also discriminates its respective patrimonial value for tax purposes".

Hence to the floors capable of independent use – as is the case in the present matter – a specific and own patrimonial value for tax purposes is assigned which is the object of autonomous registration in the respective property register.

There is thus an autonomization for purposes of Municipal Real Estate Tax of the floors capable of independent use which are the object of a specific evaluation, under art. 7, no. 2, al. b) of the CMTRP, of individual property register registration and with patrimonial value for tax purposes for Municipal Real Estate Tax that is autonomous.

In the case of properties in vertical or full ownership with floors or divisions capable of independent use, but without being constituted in horizontal ownership, there is a clear tax autonomy that is evident from the different units (evaluated with different parameters according to the specific use of each unit), indication of the floor/story, including with specification of the gross private area and dependent gross area, everything as if they were true autonomous units, as occurs in the case at hand – cf. doc. 17.

There being thus no reason to – in the scope of the Stamp Duty provided for in item no. 28.1 of the Table – give to the floors/divisions capable of independent use (integrated in properties in vertical ownership) a treatment different from that granted to properties in horizontal ownership.

Thus, for purposes of the scope of stamp duty provided for in item no. 28.1 of the GTSD, "the patrimonial value for tax purposes appearing in the property register" and the "patrimonial value for tax purposes used for purposes of Municipal Real Estate Tax" corresponds to the patrimonial value for tax purposes that appears in the property register in relation to each floor or part of property capable of independent use, as follows from the provision of art. 12, no. 3 of the Code of Municipal Real Estate Tax.

In view of the foregoing, it is reiterated, in the wake of the decisions already issued, that the application in this case of item no. 28.1 of the GTSD with respect to the property of which the Claimants are co-owners is illegal because the aforementioned item cannot be interpreted in the sense of encompassing each of the floors capable of independent use when only from the sum of the patrimonial values for tax purposes results a PVTP equal to or greater than € 1,000,000.00. As none of the independent units that make up the property has a patrimonial value for tax purposes greater than one million euros, item no. 28.1 of the GTSD does not apply.

The Claimant further raised the issue regarding the residential use of the property given its state of ruin, as well as the issue of unconstitutionality of item no. 28.1 of the GTSD. Since the tribunal considered that item no. 28.1 of the GTSD does not apply to the sum of the patrimonial values of the divisions capable of independent use, the consideration of the relevance of the state of the property, as well as the unconstitutionality invoked by the Claimant are therefore made prejudicial and unnecessary.

Regarding Compensatory Interest

The Claimants petition for the condemnation of the Tax Administration to reimburse the amount of tax paid unduly in the amount of € 3,520.96, as well as the respective compensatory interest.

Article 43, no. 1 of the General Tax Law prescribes that "compensatory interest is due when it is determined, in gracious objection or judicial challenge, that there was error attributable to the services from which resulted the payment of tax debt in an amount greater than legally due."

In turn, article 24, no. 1, al. b) of the LRTA provides that the "arbitral decision on the merits of the claim for which no appeal or challenge applies binds the tax administration from the end of the period provided for appeal or challenge, and the latter must, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the period provided for the spontaneous execution of the sentences of the tax courts, restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been performed.

Given that, in the case sub iudice, there is illegality of the assessments challenged, due to error in the legal presuppositions, attributable to the tax administration that proceeded with the assessments challenged, due to incorrect application and interpretation of the provision of item no. 28.1 of the GTSD, the Claimants have the right to reimbursement of the amounts paid in the sum of € 3,520.96 and to compensatory interest calculated from the date of payment until full payment, at the rate of interest resulting from art. 43, no. 4 of the LGT.

Decision:

For the reasons stated, the arbitral tribunal decides:

a) To find the request for arbitral pronouncement well-founded and, consequently, to declare illegal the assessment of Stamp Duty, for 2013, contained in the documents with numbers 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, in the total amount of € 3,520.96, with the legal consequences;

b) To find the request for condemnation of the Tax and Customs Authority to reimburse to the Claimants the value of the tax paid (€ 3,520.96), plus compensatory interest in accordance with law, from the date of payment until full reimbursement.

c) To condemn the Respondent in the costs of the present proceedings.

Value of the Case:

Under article 315, no. 2 of the Code of Civil Procedure, combined with al. a) of no. 1 of art. 97-A of the Code of Tax Procedure and no. 2 of art. 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 3,520.96.

Costs:

For the purposes of article 12, no. 2 and article 22, no. 4 of the Rules of Procedure in Tax Arbitration Cases and no. 4 of art. 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 612.00, in accordance with Table I attached to the regulation, to be borne by the Respondent.

Lisbon, 28 September 2015

The Arbitrator,

(Alexandra Gonçalves Marques)

Frequently Asked Questions

Automatically Created

Does Verba 28.1 of the TGIS apply to vertical property buildings where individual units are each valued below €1,000,000?
Yes, according to the Tax Authority's interpretation in Process 153/2015-T, Verba 28.1 of the TGIS applies to vertical property buildings based on the aggregate patrimonial value of the entire property, not individual unit values. Even when each independent unit is valued below €1,000,000, if the total property value exceeds this threshold and has residential use, Stamp Tax applies. The Tax Authority distinguishes vertical property from horizontal property, arguing that only horizontal property units acquire independent property status under Article 2(4) CIMI. However, claimants challenged this interpretation, citing CAAD precedents suggesting individual units should be assessed separately for properties with independent divisions capable of autonomous use.
How is the taxable value determined for Stamp Tax purposes on a property in total ownership with independent units?
For Stamp Tax purposes under Verba 28.1, the taxable value of a property in total ownership with independent units is determined by aggregating the patrimonial values of all constituent units, as established under Article 7(2)(b) of the Municipal Real Estate Tax Code (CIMI). The Tax Authority in Process 153/2015-T maintained that the property register inscription and individual patrimonial value attribution to each floor does not exclude calculating the total property's patrimonial value by summing all units. This interpretation applies Article 67 SDC, which makes CIMI provisions applicable to Stamp Duty assessments. The assessment is based on patrimonial values appearing in the register on December 31st of the relevant year, pursuant to Article 113 CIMI.
Can co-owners of a multi-unit building challenge Stamp Tax assessments through CAAD tax arbitration?
Yes, co-owners of multi-unit buildings can challenge Stamp Tax assessments through CAAD (Centro de Arbitragem Administrativa) tax arbitration under Article 2(1)(a) of Decree-Law 10/2001. In Process 153/2015-T, three co-owners (each holding 1/3 ownership) jointly requested arbitration to challenge Stamp Duty assessments totaling €3,520.96 issued under Verba 28.1 TGIS. The arbitral tribunal was properly constituted, with jurisdiction to pronounce on the legality of the tax assessments. Co-owners may collectively contest assessments affecting their shared property, arguing both procedural irregularities and substantive legal interpretations, including constitutional challenges based on equality and legality principles.
What is the distinction between vertical property and horizontal property for Imposto de Selo under Verba 28.1?
The critical distinction between vertical and horizontal property for Imposto de Selo under Verba 28.1 concerns their legal status as independent properties. The Tax Authority in Process 153/2015-T emphasized that only horizontal property units (condominium regime under Articles 1414-1438 Civil Code) acquire autonomous property status per Article 2(4) CIMI. Vertical property, despite having independent floors or divisions with separate patrimonial valuations and potential independent use, remains a single property in total ownership. Consequently, for Stamp Tax purposes, vertical property's taxable value equals the aggregate of all units, while horizontal property units would be assessed individually. Claimants contested this distinction, arguing that functionally independent units in vertical property should receive equivalent treatment to horizontal property units when applying the €1 million threshold.
How does CAAD Process 153/2015-T address the application of Stamp Tax to properties with aggregate values exceeding €1,000,000?
CAAD Process 153/2015-T addresses the application of Stamp Tax to properties with aggregate values exceeding €1,000,000 by examining the statutory interpretation of Verba 28.1 TGIS, introduced by Law 55-A/2012. The central issue is whether the €1 million threshold applies to the total property value or individual units in vertical property. The Tax Authority applied Stamp Tax to a property with total patrimonial value of €1,184,297.44, despite individual units ranging from €128,000 to €132,036.13. The case references conflicting CAAD precedents: claimants cited decisions 49/2013-T, 50/2013-T, 180/2013-T, and 183/2013-T favoring unit-by-unit assessment, while the Tax Authority invoked decision 640/2014-T supporting aggregate valuation. The arbitration examined whether treating vertical property differently from horizontal property violates constitutional equality principles and whether demolished properties with facade preservation qualify as 'residential use' property subject to the tax.