Process: 156/2015-T

Date: October 5, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 156/2015-T) addresses whether Stamp Tax under Verba 28.1 of the General Table of Stamp Tax (TGIS) applies to building land (terrenos para construção). A Real Estate Investment Fund challenged a Stamp Tax assessment of €9,929.75 levied on October 31, 2012, concerning a building plot valued at €1,985,949.51. The Fund argued that Verba 28.1 TGIS, in its wording prior to December 31, 2013, only applied to 'properties with residential use' and that building land did not qualify under this concept. The claimant contended that building land became subject to this tax only from January 1, 2014, following legislative amendments, and that retroactive application of the new rules was impermissible. Additionally, the Fund maintained that construction licensing alone does not constitute residential use, as licensing provides no guarantee that construction will actually occur. The Tax Authority countered that building land destined for residential construction possesses the legal nature of residential property, relying on definitions from the Municipal Property Tax Code (CIMPT) pursuant to Article 67(2) of the Stamp Tax Code. The Authority argued that the use coefficient applied in determining the property's tax value demonstrates residential purpose, making Verba 28.1 applicable. The Fund also sought compensation for damages incurred from providing a bank guarantee to suspend tax enforcement proceedings initiated after non-payment. The arbitral tribunal accepted jurisdiction under LRATM and permitted joinder of both claims—challenging the assessment's legality and claiming compensation—under principles of procedural economy, as the compensation claim directly flows from the validity determination of the underlying tax assessment.

Full Decision

ARBITRAL DECISION[1]

  1. Report

A - General

1.1. Real Estate Investment Fund Closed A…, with tax identification number …, with registered office in Lisbon, at Largo …, no. …, …., legally represented by company B…, S.A., legal entity number …, with registered office at the same address (hereinafter referred to as "Claimant"), filed, on 04.03.2015, a request for constitution of the tax arbitral tribunal, which was accepted, seeking, on one hand, the declaration of illegality of the Stamp Tax assessment act of 07.11.2012, concerning item 28.1 of the General Table of Stamp Tax (hereinafter "GTST"), relating to a property of which it is owner, as will be better seen below, and which gave rise to billing note no. 2012 …, referring to the taxable event that occurred on 31.10.2012, in the amount of € 9,929.75 (nine thousand nine hundred and twenty-nine euros and seventy-five cents), and, on the other hand, compensation for damages suffered by it due to the provision of an undue bank guarantee intended to suspend the tax execution instituted against it due to its failure to pay the assessed amount.

1.2. Under the terms set forth in subsection a) of item 2 of article 6th and subsection b) of item 1 of article 11th of Decree-Law No. 10/2011, of 20 January, as amended by article 228th of Law No. 66-B/2012, of 31 December, the Deontological Council of the Centre for Administrative Arbitration (CAAD) designated the undersigned as arbitrator, and the Parties, after being duly notified, did not manifest any objection to this designation.

1.3. By order of 19.03.2015, the Tax and Customs Authority (hereinafter referred to as "Respondent") proceeded to designate Ms. Dr. C… to intervene in the present arbitral proceedings, in the name and representation of the Respondent.

1.4. In accordance with what is prescribed in subsection c) of item 1 of article 11th of Decree-Law No. 10/2011, of 20 January, as amended by article 228th of Law No. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 11.05.2015.

1.5. On 20.05.2015 the top official of the Respondent's service was notified to, if it so wished, within 30 days, submit a response and request production of additional evidence.

1.6. On 23.06.2015 the Respondent submitted its response.

B – Position of the Claimant

1.7. The Claimant is the owner of a plot of land for construction that was recorded in the property register under article …, of the parish of …, municipality of Lisbon, with a patrimonial value, at that date, of € 1,985,949.51 (one million nine hundred and eighty-five thousand nine hundred and forty-nine euros and fifty-one cents), to which corresponds the property record that the Claimant attaches to its request as document no. 2, the contents of which are deemed reproduced (hereinafter referred to as "Property").

1.8. The Claimant was notified of the Stamp Tax assessment (hereinafter referred to as "ST") referred to in 1.1., the billing document of which was attached to the request for arbitral ruling as document no. 1, the contents of which are deemed reproduced, which was based on article 1st of the Stamp Tax Code (hereinafter the "STC") and on item 28.1 of the GTST, amended by article 4th of Law No. 55-A/2012, of 29 October, and on sub-section i) of section f) of item 1 of article 6th of the same Law.

1.9. The Claimant did not proceed to payment of the assessed amount, and consequently, tax execution proceedings (no. … 2013 …) were instituted against it.

1.10. The Claimant, aiming to suspend the said tax execution, provided a guarantee of payment of the tax that was required by the assessment referred to above, as is evidenced by the document attached to the request for arbitral ruling with no. 3, the contents of which are deemed reproduced, petitioning for compensation for damages suffered by it due to the issuance of an undue bank guarantee.

1.11. The Claimant alleges, first, that item 28 of the GTST, in the wording in force until 31.12.2013 did not apply to plots of land for construction, as these were not subsumable under the concept of "properties with residential use", reason for which the assessment in question suffers from the defect of error regarding the factual assumptions, and is therefore illegal.

1.12. Plots of land for construction only began to fall under item 28 of the GTST from 01.01.2014, and therefore the impugned assessment is illegal, as it is prior to that date, and retroactive effects cannot be attributed to the mentioned normative change nor can it be given an interpretative nature.

1.13. The Claimant further understands that even the licensing of the work cannot be an indicator of the residential use of a plot of land for construction, insofar as licensing is not in itself a guarantee of the realization of the construction from which results an effective residential use.

C – Position of the Respondent

1.14. On the other hand, the Respondent maintains the understanding that the identified plot of land for construction has "the legal nature of a property with residential use", consequently advocating for the maintenance of the assessment act subject of the request for arbitral ruling.

1.15. The Respondent's understanding results from the fact that there is no definition, in the context of Stamp Tax, of the concepts of "urban property", "plot of land for construction" and "residential use" which requires recourse to the Code of Municipal Property Tax (the "CMPT"), in compliance with what is provided in item 2 of article 67th of the STC, as amended by Law No. 55-A/2012, of 29 October, resulting in the necessary conclusion that the notion of use of an urban property "is found in the part relating to the assessment of properties" and if "for purposes of determining the tax patrimonial value of plots of land for construction the application of the use coefficient in the context of assessment is clear", then "its consideration for purposes of applying item 28 of the GTST cannot be ignored".

D – Conclusion of the Report and Clarification

1.16. By order of 01.10.2015 the arbitral tribunal dispensed with the meeting provided for in article 18th of the Legal Regime of Arbitration in Tax Matters (LRATM), as it understood that the Parties had already brought to the proceedings the factual elements necessary and sufficient for the delivery of the decision.

1.17. The arbitral tribunal is materially competent, under the terms set forth in articles 2nd, item 1, subsection a) of the LRATM.

1.18. The Parties have legal capacity and standing under the terms of article 4th and item 2 of article 10th of the LRATM, and article 1st of Ordinance No. 112-A/2011, of 22 March.

1.19. The joinder of claims made in the present request for arbitral ruling, in honor of the principle of procedural economy, is justified since article 3rd of the LRATM, by expressly admitting the possibility of "joinder of claims even if relating to different acts", accommodates, without hermeneutical abuse, the appreciation of a claim that flows, in necessary terms, from the judgment that the arbitral tribunal makes regarding the validity of the assessment in question.

1.20. The proceedings do not suffer from any nullity nor were any exceptions raised by the Parties that prevent the appreciation of the merits of the case, so the conditions are met for the delivery of the arbitral decision.

  1. Facts

2.1. Proven Facts

2.1.1. The Claimant is the sole owner of the Property (doc. no. 2, attached with the request for arbitral ruling).

2.1.2. The Property was described as a plot of land for construction (doc. no. 2, attached with the request for arbitral ruling).

2.1.3. To the Property, at the date of the facts, the tax patrimonial value of € 1,985,949.51 (one million nine hundred and eighty-five thousand nine hundred and forty-nine euros and fifty-one cents) was assigned (doc. no. 1, attached with the request for arbitral ruling).

2.1.4. For purposes of determining its respective tax patrimonial value, the Property was assigned residential use (agreement of the Parties).

2.1.5. The Claimant was notified of the ST assessment referred to in the billing note attached to the request for arbitral ruling as document no. 1.

2.1.6. The Claimant did not proceed to payment of the amount officially assessed by the Respondent (article 54th of the request for arbitral ruling).

2.1.7. The Respondent, following the voluntary non-payment of the tax required by the assessment now in question, instituted tax execution proceedings against the Claimant numbered … 2013 … (agreement of the Parties).

2.1.8. The Claimant, with a view to suspending the tax execution proceedings referred to in 2.1.7, presented a bank guarantee dated 29.04.2014 (doc. no. 3, attached with the request for arbitral ruling).

2.1.9. The issuance of the bank guarantee referred to in 2.1.8 has costs for the Claimant, the final quantification of which depends on the determination of the period during which it will remain in force (docs. nos. 4 and 5, attached with the request for arbitral ruling).

2.2. Unproven Facts

There are no facts relevant to the appreciation of the merits of the case that have been determined as unproven.

  1. Matters of Law

3.1. Questions to be Decided

It follows from what has been stated above that the questions to be appreciated are, fundamentally, two:

a) To know whether, at the date to which the facts relate, a plot of land for construction is a property "with residential use" for purposes of applying article 1st of the STC and item 28.1 of the GTST, amended by article 4th of Law No. 55-A/2012, of 29 October; and

b) To clarify whether, in case the claim for declaration of illegality and consequent annulment of the contested assessment is found to be well-founded, the Claimant, within the scope of the present arbitral proceedings, may obtain the condemnation of the Respondent regarding compensation for damages suffered by it due to the provision of an undue bank guarantee.

3.2. Item 28.1 of the GTST

Law No. 55-A/2012, of 29 October, among various amendments it made to the STC, added, by its article 4th, item 28 to the GTST, which has the following wording:

"28 - Ownership, usufruct or surface right of urban properties whose tax patrimonial value recorded in the register, under the terms of the Code of Municipal Property Tax (CMPT), is equal to or greater than € 1,000,000 - on the tax patrimonial value used for purposes of Municipal Property Tax:

28.1 - For a property with residential use - 1%;

28.2 - For a 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 the notice approved by order of the Minister of Finance - 7.5%."

With the heading "transitory provisions", article 6th of Law No. 55-A/2012, of 29 October, and with relevance to what must be decided, established the following:

"1 — In 2012, the following rules must be observed by reference to the assessment of stamp tax provided for in item no. 28 of the respective General Table:

a) The taxable event occurs on 31 October 2012;

b) The taxpayer of the tax is the one mentioned in item 4 of article 2nd of the Stamp Tax Code on the date referred to in the preceding subsection;

c) The tax patrimonial value to be used in the assessment of the tax corresponds to that resulting from the rules provided for in the Code of Municipal Property Tax by reference to the year 2011;

d) The assessment of the tax by the Tax and Customs Authority must be made by the end of November 2012;

e) The tax must be paid, in a single installment, by taxpayers by 20 December 2012;

f) The applicable rates are the following:

i) Properties with residential use assessed under the terms of the Municipal Property Tax Code: 0.5%;

ii) Properties with residential use not yet assessed under the terms of the Municipal Property Tax Code: 0.8%;

iii) Urban properties 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 the notice approved by order of the Minister of Finance: 7.5%."

As can be seen, item 28.1 refers to "properties with residential use". Now, not only does this concept not appear defined in any provision of the STC, but it is also not used in the CMPT, the law to which item 2 of article 67th of the STC expressly refers when matters not regulated in the STC are at issue regarding item 28.

3.3. The Meaning and Scope of the Concept of "Property with Residential Use"

The meaning and scope of the concept of "property with residential use" cannot be determined without keeping in mind the meaning of the word "use" itself. And this must be found in dictionaries, drawing from them the benefit of the careful study of lexicographers. Thus, "use", according to the Dictionary of Contemporary Portuguese Language, of the Academy of Sciences of Lisbon, is the action of destining something to a particular purpose and "to use", consequently, is synonymous with destining to a specific use or function.

a) The rules of interpretation of tax norms

The question to be appreciated does not dispense with, but rather implies, capturing the meaning and scope of the concept of "property with residential use" to which item 28.1 of the GTST appeals. In the absence of a legal definition, either in the STC or in any other law, the interpreter-applicator of this provision has the duty to invoke the norms that govern the necessary hermeneutical exercise.

There is not truly a special regime of interpretation of tax norms. Item 1 of article 11th of the General Tax Law orders that, "in determining the meaning of tax norms and in qualifying the facts to which they apply", "the general rules and principles of interpretation and application of laws" be observed.

The general principles of interpretation and application of laws are those established in article 9th of the Civil Code:

ARTICLE 9

(Interpretation of Law)

  1. Interpretation should not be confined to the letter of the law, but should reconstruct from the texts the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

  2. However, the interpreter cannot consider the legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  3. In fixing the meaning and scope of the law, the interpreter will presume that the legislator established the most correct solutions and knew how to express its thought in adequate terms.

Note, however, that the interpretation of norms, including tax norms, is not exhausted in a lexical exercise. It does not involve only, nor even principally, vocabulary dissection. What is at issue is not knowing exactly what "property with residential use" means, but rather capturing the meaning and scope of that concept within the scope of item 28.1 of the GTST. In other words, let it be emphasized, there will only be procedural utility to the hermeneutical effort, within the scope of this specific request for arbitral ruling, if it is directed at discerning whether the legislator, with the wording chosen for item 28.1 of the GTST, wished to encompass therein urban properties qualified as plots of land for construction.

b) "Residential use" – residential properties and properties with residential use

The Respondent argues that the use of the property is a coefficient that contributes to its assessment, which we believe is indisputable. However, what is now at issue is whether item 28 of the GTST, in the wording that we must consider, comprises both built properties and plots of land for construction.

Item 1 of article 6th of the STC, with taxonomic concern, distinguishes "residential properties" from "plots of land for construction". The former will be, under the terms set forth in item 2 of the same article, buildings or constructions licensed for such purpose or, in the absence of such license, those which have as their normal destination that purpose. As for plots of land for construction, item 3 of the provision to which we have been referring clarifies, are those for which a license or authorization has been granted, admitted prior communication or favorable prior information issued for a subdivision or construction operation, and also those that have been declared thus in the acquisition title, with some exceptions.

It is therefore clear that a plot of land for construction is not, according to this classification, a residential property. The question is now whether "property with residential use", the concept used by item 28.1 of the GTST, corresponds, notwithstanding the literal diversity, to "residential property", the notion employed in the classification just visited.

Use, by what we have learned from the lexicographers, invokes the destination given to a certain asset. Already "residential" is relative to housing, which this is, in turn, and according to the Dictionary we have been using, the place or house in which one lives or dwells. Now, residential use cannot suggest any meaning other than the action of giving to a certain asset – in this case the Property, which is, recall, a plot of land for construction – the destination of a house or place where one lives.

It is known that the CMPT makes, in various provisions, use of the expression "use". It does so, for example:

· In article 3rd, when it refers, regarding rural properties, to a use generating agricultural income;

· In article 9th, when it imposes on taxpayers the duty to communicate to the finance services that a plot of land for construction has come to be listed in the inventory of a company whose object is the construction of buildings for sale or that a property has come to be listed in the inventory of a company whose object is its sale;

· In article 27th, when it relates certain buildings and constructions to the production of agricultural income.

In all the situations presented, as can be seen, use is not referred to in potential terms, of vocation or expectation. It is quite the opposite. It suggests an effective or direct destination, to use an expression to which the legislator appeals in article 27th.

However, the CMPT also makes abundant use of the expression "use" when it sets forth the rules that must apply to the determination of the tax patrimonial value of urban properties (articles 38th and following of the CMPT). It is important to see, then, whether we can extract from the rules of determination of tax patrimonial value some useful element that permits us to capture the meaning and scope of the concept of "property with residential use".

c) The Relevance of the Rules for Determining Tax Patrimonial Value

The Respondent argues that the "notion of use of an urban property is found in the part relating to the assessment of properties" and, furthermore, that "for purposes of determining the tax patrimonial value of plots of land for construction the application of the use coefficient in the context of assessment is clear, so its consideration for purposes of applying item 28 of the GTST cannot be ignored".

It is true that for the determination of the tax patrimonial value of plots of land for construction attention has been paid to the "use" of what may be built thereon.

However, as the Respondent rightly points out, "the mere creation of a right of potential construction immediately increases the value of the property in question", in function, precisely, of what may be built thereon. For this reason, as the Respondent very well explains, article 45th of the CMPT "requires the separation of the two parts of the land": on one hand, we will have to consider "the part of the land where the building to be constructed is to be located [more precisely, where it may come to be located], 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% (…), by virtue of the construction not yet being realized". It is clear that the application of that percentage allows precisely for attention to the fact that there is not yet construction, but does not authorize the legislator to ignore that the economic value, or market value, of a plot of land for construction is related to its constructive capacity.

To say what precedes does not mean, however, that the legislator feels the need to impose automatic and necessary taxation, in the context of Municipal Property Tax, on all plots of land for construction. It suffices to read what is provided in subsection d) of the already mentioned article 9th of the CMPT:

ARTICLE 9

(Beginning of Taxation)

  1. The tax is due from:

(…)

d) The 4th year following, inclusive, the year in which a plot of land for construction has come to be listed in the inventory of a company whose object is the construction of buildings for sale;

(…)

That is, even though the legislator understands it to be reasonable, as it appears to be, to determine the tax patrimonial value of a plot of land for construction taking into account its constructive capacity and, granting for argument's sake, the nature or vocation of what may be built thereon, it is nonetheless symptomatic that it opted, at the same time, to suspend that taxation in cases where those plots of land for construction are listed in the inventory of a company whose object is the construction of buildings for sale. In cases in which, one could also say, those urban properties are part of a productive process that tends to continue and to produce, downstream, fruits also subject to taxation.

If the primary meaning of "use", as we have said, suggests an effective, direct destination given to a certain asset, we do not see how this understanding can be refuted by the observation that the legislator, in the context of the assessment of plots of land for construction, authorizes the use of the use coefficient, with a view to what may come to be built thereon. In truth, it does not seem reasonable to admit in this scenario the recourse to norms of determination of the taxable matter to broaden the prediction of the norms of incidence.

d) Position Adopted

In light of the foregoing, the arbitral tribunal judges that it is necessary, in the interpretation of item 28.1 of the GTST with the wording applicable to the case we have before us, the understanding that residential use of an urban property suggests that one gives it that effective destination, or that one can directly give it that destination. Being as it appears to us, a plot of land for construction is not included in that item, in terms of objective incidence. It seems to us then that a plot of land for construction, by its very nature, cannot be associated with residential use such as that suggested by item 28.1 of the GTST.

Let it not be said that this judgment collides with the possibility of seeing the use coefficient applied to a plot of land for construction to which reference is made in section II of Chapter VI of the STC. In truth, one thing is the rules that the legislator imposes for determining the tax patrimonial value of plots of land for construction, it being not strange that attention be paid to their constructive capacity and to the nature and vocation of what may be built thereon, another, quite different, is claiming that those rules be invoked to cut down the field of prediction of the normative rules of incidence.

Furthermore, the interpretation here adopted is in harmony with what appears to have been the intention of the Government, author of the proposal that resulted in this rather imprecise legislative intervention.

When presenting and discussing, in Parliament, proposal for law No. 96/XII (2nd), the Secretary of State for Tax Affairs expressly referred[2]:

"The Government proposes the creation of a special tax on high-value urban residential properties. It is the first time in Portugal that a special taxation has been created on high-value properties intended for housing. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses valued at equal to or greater than 1 million euros."

Now, the Secretary of State for Tax Affairs presents this bill referring to the expressions "urban residential properties", which are those in subsection a) of item 1 of article 6th of the STC and "houses", it being manifest that, in one case and the other, in those concepts there do not fit, without more, plots of land for construction, referred to as they are in subsection c) of the cited provision.

Thus, notwithstanding the infelicity of the legislative technique and without prejudice to the wording now in force, it results with meridian clarity that item 28.1 of the GTST, at the date of the facts, cannot be interpreted in the sense that it encompasses plots of land for construction, for the reasons adduced above. Rather it seems that the meaning and scope of the concept of "properties with residential use" is the equivalent of "residential properties" mentioned in subsection a) of item 1 of article 6th of the STC.

3.4. Compensation for Undue Provision of Guarantee

The Claimant also presents a claim for compensation for undue provision of guarantee.

Claims of this nature are not a novelty in the CAAD, there being several decisions to the effect of admitting their cognoscibility by arbitral tribunals[3]. As has already been stated in summary terms, this arbitral tribunal also understands that it may take cognizance of this claim.

Subsection b) of item 1 of the LRATM provides that "the arbitral decision on the merits of the claim for which there is no appeal or challenge binds the tax administration from the end of the period provided for appeal or challenge, and this must, in the exact terms of the merits of the arbitral decision in favor of the taxpayer and until the end of the period provided for voluntary execution of sentences of tax courts, restore the situation that would exist if the tax act subject to the arbitral decision had not been carried out, adopting the acts and operations necessary for that purpose".

It is not ignored that the legislative authorization granted to the Government by article 124th of Law No. 3-B/2010, of 28 April, on the basis of which the LRATM was approved, determines that the tax arbitral process constitutes an alternative procedural means to the judicial challenge process and to the action for recognition of a right or legitimate interest in tax matters. Even though subsections a) and b) of item 1 of article 2nd of the LRATM base the competence of arbitral tribunals in "declarations of illegality", it seems reasonable the understanding that the competences thereof include the powers that in judicial challenge proceedings are attributed to tax courts, it being certain that in judicial challenge proceedings, in addition to the annulment of tax acts, claims for compensation may be appreciated, whether they relate to indemnity interest or to undue provision of guarantees.

Indeed, the principle of cognoscibility of compensation claims, in gracious reclamation or in judicial proceedings, is justified whenever the damage that is intended to be compensated results from fact attributable to the tax and customs administration. Manifestations of this principle can be found in item 1 of article 43rd of the General Tax Law (GTL) and in item 4 of article 61st of the Code of Procedure and Tax Proceedings (CPTP).

Specifically regarding compensation in case of undue guarantee is referred article 171st of the CPTP, making it clear from that provision that the claim for compensation may be known in the proceedings in which the legality of the debt to be executed is disputed, which is imposed by reasons of procedural economy, since the right to compensation for guarantee unduly provided depends on what is decided regarding the legality or illegality of the assessment act. Thus, it is necessary to conclude that the arbitral process must also be considered adequate for appreciating the claim for compensation for guarantee unduly provided.

The regime of the right to compensation for guarantee unduly provided is contained, as the Claimant rightly points out, in article 53rd of the GTL, which establishes the following:

Article 53

Guarantee in Case of Undue Provision

  1. The debtor who, to suspend execution, offers a bank guarantee or equivalent will be compensated in whole or in part for the damages resulting from its provision, if he has maintained it for a period exceeding three years in proportion to the success in administrative appeal, challenge or opposition to execution that have as their object the guaranteed debt.

  2. The period referred to in the preceding item does not apply when it is verified, in gracious reclamation or judicial challenge, that there was error attributable to the services in the assessment of the tax.

  3. The compensation referred to in item 1 has as its maximum limit the amount resulting from the application to the guaranteed value of the rate of indemnity interest provided for in the present law and may be requested in the very process of reclamation or judicial challenge, or autonomously.

(…)

In the case sub judice, as has been said, the contested assessment act is illegal, since the norms on which it is based do not prove applicable to the factuality of the case, an error that cannot fail to be attributable to the Respondent as the said assessment is of its exclusive initiative and responsibility.

Consequently, the arbitral tribunal understands that the Claimant has the right to be compensated for the damages suffered by it due to the issuance of the guarantee unduly provided, being these equivalent to the costs it had to bear with this issuance, costs the fixing of which depends on the knowledge of the period during which said guarantee will be in force, it being certain that until 31.01.2015, these costs amounted to € 574.27 (five hundred and seventy-four euros and twenty-seven cents).

It will always be necessary to determine whether the costs borne by the Claimant with the issuance of the bank guarantee unduly provided exceed the limit set in item 3 of article 53rd of the GTL, in function of the application to the guaranteed value (in its respective proportion) of the rate of indemnity interest. Since the guarantee still remains valid, it is not possible to determine the effective costs nor, consequently, to carry out the necessary arithmetic operation, so it will have to be carried out at a later time.

Thus, the amount of compensation to which the Claimant has the right will have to be determined in execution of this decision, under the terms set forth in article 609th of the Code of Civil Procedure, applicable by force of subsection e) of item 1 of article 29th of the LRATM.

  1. Decision

Under the terms and with the grounds exposed, the arbitral tribunal decides:

a) To find the claim for arbitral ruling well-founded with the consequent annulment of the contested assessment, with all legal consequences;

b) To find the claim for compensation for guarantee unduly provided well-founded, condemning the Respondent to pay to the Claimant the compensation that may be determined in execution of what is hereby decided.

  1. Value of the Case

In accordance with what is provided in item 2 of article 306th of the Code of Civil Procedure, in article 97-A of the Code of Procedure and Tax Proceedings and also in item 2 of article 3rd of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 10,504.02 (ten thousand five hundred and four euros and two cents).

  1. Costs

For the purposes of what is provided in item 2 of article 12 and in item 4 of article 22nd of the LRATM and item 4 of article 4th of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 918.00 (nine hundred and eighteen euros), under the terms of Table I attached to the said Regulation, to be borne entirely by the Respondent.

Lisbon, 5 October 2015

The Arbitrator

(Nuno Pombo)

[1] Text prepared on computer, under the terms of item 5 of article 131st of the Code of Civil Procedure, applicable by referral of subsection e) of item 1 of Decree-Law No. 10/2011, of 20 January.

[2] See Daily Parliamentary Record I Series no. 9/XII -2, of 11 October, page 32.

[3] See, by way of example, the decisions rendered within the scope of proceedings numbered 233/2013-T, 112/2013-T and 36/2013-T.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS applicable to building land (terrenos para construção)?
Prior to January 1, 2014, Verba 28.1 of the TGIS was interpreted differently by taxpayers and tax authorities regarding building land. Taxpayers argued that the provision only applied to 'properties with residential use' and that building land (terrenos para construção) did not fall within this concept, as it lacked actual residential use. The Tax Authority contended that building land intended for residential construction should be included, referencing valuation coefficients from the Municipal Property Tax Code. Legislative amendments effective January 1, 2014, clarified that building land would be subject to the tax, but retroactive application of interpretative changes to prior periods remains legally contentious.
Can a taxpayer claim compensation for costs of a bank guarantee provided to suspend tax enforcement proceedings?
Yes, a taxpayer can claim compensation for costs incurred from providing a bank guarantee to suspend tax enforcement proceedings if the underlying tax assessment is later declared illegal. In this case, the Real Estate Investment Fund sought compensation for damages suffered due to issuing a bank guarantee intended to suspend tax execution proceedings initiated after non-payment of the contested Stamp Tax. The CAAD arbitral tribunal accepted jurisdiction over this compensation claim under principles of procedural economy, as it flows necessarily from the determination of the tax assessment's validity. If the assessment is annulled, the guarantee was provided without legal basis, giving rise to a claim for damages.
How does the CAAD arbitral tribunal assess the legality of Stamp Tax assessments on high-value properties?
CAAD arbitral tribunals assess the legality of Stamp Tax assessments on high-value properties by examining whether the legal requirements for taxation are met, including proper classification of the property, correct application of tax rates, and compliance with temporal application rules. Tribunals analyze whether properties qualify under the relevant TGIS provisions (such as Verba 28.1 for high-value real estate), review property classifications in tax records, consider definitions from related tax codes (like CIMPT), evaluate whether retroactive application of legislative changes is permissible, and assess whether factual assumptions underlying the assessment are correct. The tribunal also considers constitutional principles, including prohibition of retroactive taxation and legal certainty.
What procedural steps must a real estate investment fund follow to challenge an Imposto do Selo liquidation at CAAD?
A real estate investment fund challenging an Imposto do Selo liquidation at CAAD must: (1) file a request for constitution of the arbitral tribunal within the legal deadline; (2) clearly identify the contested assessment act with supporting documentation (billing note, property records); (3) state the legal grounds for illegality; (4) pay required fees; (5) demonstrate legal standing and capacity; (6) if seeking suspension of tax enforcement, provide a bank guarantee; (7) await designation of arbitrator(s) by CAAD's Deontological Council; (8) allow the Tax Authority 30 days to respond after notification; (9) participate in procedural acts as ordered by the tribunal; and (10) comply with requirements of the LRATM (Legal Regime of Arbitration in Tax Matters) and applicable procedural rules.
What is the legal basis for declaring a Stamp Tax assessment under Verba 28.1 TGIS illegal for building land?
The legal basis for declaring a Stamp Tax assessment under Verba 28.1 TGIS illegal for building land includes: (1) error in factual assumptions (erro sobre os pressupostos de facto) if the property does not qualify as having 'residential use' as required by Verba 28.1 in its applicable wording; (2) improper retroactive application of legislative amendments—building land arguably became subject to this tax only from January 1, 2014, and assessments for prior periods applying this interpretation violate legal certainty principles; (3) misclassification of property type, as building land without actual residential use may not meet the statutory requirement; and (4) violation of legality principles if the tax authority extends the provision beyond its literal scope without clear legislative authorization, which occurred before the 2014 clarification.