Process: 165/2014-T

Date: September 18, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Case 165/2014-T addresses a critical dispute regarding Stamp Duty taxation under clause 28.1 of the General Stamp Duty Table (TGIS) on vertical property ownership. A construction company challenged Stamp Duty assessments on a building containing 20 independent residential floors, arguing that the tax threshold of €1,000,000 should apply individually to each autonomous unit rather than the building's total patrimonial value. The Tax Authority maintained that the relevant patrimonial value is the aggregate total of the entire urban property as registered, not each floor separately, even when floors are capable of independent use. The taxpayer raised constitutional concerns, arguing that this interpretation violates Article 13 of the Portuguese Constitution's equality principle, as it creates disparate treatment between properties structured as single units versus those with autonomous fractions. Additionally, the taxpayer challenged the assessments for lack of proper reasoning required under Article 268(3) of the Constitution and Article 124 of the Administrative Procedure Code. The arbitral tribunal found certain collection documents were submitted out of time under Article 10(1)(a) of Decree-Law 10/2011 and Article 102(1)(a) of the Tax Procedure Code, dismissing claims related to first and second installments of 2012 assessments. However, claims regarding third installment documents were deemed timely. This case presents significant implications for property taxation in Portugal, particularly affecting developers and investors holding buildings with multiple independent units, as the interpretation determines whether Stamp Duty applies based on consolidated or fragmented property values.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 165/2014 – T

Claimant/Applicant: A… – CIVIL CONSTRUCTION COMPANY, LDA

Respondent: Tax and Customs Authority (hereinafter AT)

1. Report

On 21-02-2014, A… – CIVIL CONSTRUCTION COMPANY, LDA, legal entity no. …, with registered office on Avenue …, Lisbon, hereinafter referred to as the Applicant, submitted to the Administrative Arbitration Centre (CAAD) a request for the constitution of an arbitral tribunal for the purpose of annulling the stamp duty tax assessment acts concerning item 28.1 of the General Stamp Duty Table, relating to the urban property located on Avenue …, in Lisbon, registered in the urban real estate register of the parish of … under article …, consisting of 20 floors with independent use.

The Applicant requests the annulment of the aforementioned Stamp Duty assessment acts due to the absence of the legal prerequisite for the incidence of Stamp Duty provided in item 28 of the GSDT and consequently, due to the erroneous characterization and quantification of the tax facts.

The Applicant alleges that the property to which all the Stamp Duty assessments relate is a building containing twenty floors with independent use, all designated for residential purposes. The Applicant alleges that since none of the floors has a VPT (Patrimonial Value for Tax Purposes) exceeding €1,000,000, the legal prerequisite for the incidence of Stamp Duty provided in item 28.1 of the General Stamp Duty Table is not met.

The Applicant further alleges that the Stamp Duty assessments at issue directly violate the principle of equality, enshrined in article 13 of the Constitution of the Portuguese Republic.

The Applicant further states that the tax act in question in these proceedings is not properly reasoned, as required by articles 268, no. 3 of the CRP and 124 of the CPA.

The Tax and Customs Authority submitted a reply on 28-05-2014, defending the maintenance of the tax acts in question, requesting the dismissal of the claim, alleging that the patrimonial value relevant for purposes of tax incidence is the total patrimonial value of the urban property and not the patrimonial value of each of the floors that compose it, even if they are capable of independent use.

A sole arbitrator was appointed on 09-04-2014: Suzana Fernandes da Costa. In accordance with article 11, no. 1, paragraph c) of the RJAT (Tax Arbitration Regime), the singular arbitral tribunal was constituted on 29-04-2014.

The arbitral tribunal meeting was scheduled for 02-07-2014 at 14:00 hours. At the meeting, testimonial evidence was dispensed with. A simultaneous period of 10 days was granted to the parties to submit their written arguments, if they so wished. The date for delivery of the decision was set as 18-09-2014. The parties opted not to submit written arguments.

On 03-07-2014 a ruling was issued granting a period of 10 days for the AT to attach the administrative proceedings to the file, which it did on 27-08-2014.

The parties have legal personality and capacity and are legitimate parties (articles 4 and 10, nos. 1 and 2 of the RJAT and article 1 of Ordinance no. 112-A/2011 of 22 March).

Preliminary Question: Timeliness of the Application

As regards the timeliness of the application, it is found that:

The present request for arbitral decision was submitted out of time, pursuant to article 10, no. 1, paragraph a) of Decree-Law no. 10/2011 of 20 January and article 102, no. 1, paragraph a) of the CPPT (Tax Procedure Code), regarding the collection documents relating to the first and second instalments, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €373.82, no. 2013 … in the amount of €373.82, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €373.82, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €373.82, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, with a payment deadline of 30-04-2013, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, with a payment deadline of 30-04-2013, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €179.30, no. 2013 … in the amount of €179.30, whose payment deadline ended on 30-04-2014, and no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €179.29, relating to the Stamp Duty assessment of the year 2012, whose payment deadline ended on 31-07-2013. Therefore, regarding these documents, the present request for arbitral decision must be dismissed.

And it was submitted in a timely manner, pursuant to article 10, no. 1, paragraph a) of Decree-Law no. 10/2011 of 20 January and article 102, no. 1, paragraph a) of the CPPT, regarding the collection documents relating to the third instalment, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €179.29, and no. 2013 … in the amount of €179.29, relating to the Stamp Duty assessment of the year 2012, taking into account that the payment deadline for these collection documents ended on 30-11-2013.

The proceedings are free from nullities and no preliminary questions were raised.

2. Factual Matters

2.1 Proven Facts:

Following analysis of the documentary evidence produced, the following facts are considered proven and relevant to the resolution of the case:

  • The Applicant A… – CIVIL CONSTRUCTION COMPANY, LDA is the owner of the urban property located on Avenue …, in Lisbon, registered in the urban real estate register of the parish of … under article …, a building consisting of 20 floors with independent use, as set out in the property record attached to the arbitral application as document 1.

  • The Applicant was notified of the following collection documents relating to the Stamp Duty assessment of the year 2012, as per copies of documents attached to the arbitral application:

  • Collection document no. 2013 … in the amount of €376.54, with payment deadline of 30-04-2013, relating to the 1st floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.54, with payment deadline of 30-04-2013, relating to the 1st floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €373.82, with payment deadline of 30-04-2013, relating to the 2nd floor right of the property referred to above, whose VPT is €112,141.51;

  • Collection document no. 2013 … in the amount of €373.82, with payment deadline of 30-04-2013, relating to the 2nd floor left of the property referred to above, whose VPT is €112,141.51;

  • Collection document no. 2013 … in the amount of €376.54, with payment deadline of 30-04-2013, relating to the 3rd floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.54, with payment deadline of 30-04-2013, relating to the 3rd floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €373.82, with payment deadline of 30-04-2013, relating to the 4th floor right of the property referred to above, whose VPT is €112,141.51;

  • Collection document no. 2013 … in the amount of €376.54, with payment deadline of 30-04-2013, relating to the 4th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.54, with payment deadline of 30-04-2013, relating to the 5th floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.54, with payment deadline of 30-04-2013, relating to the 5th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €373.82, with payment deadline of 30-04-2013, relating to the 6th floor right of the property referred to above, whose VPT is €112,141.51;

  • Collection document no. 2013 … in the amount of €376.54, with payment deadline of 30-04-2013, relating to the 6th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.54, with payment deadline of 30-04-2013, relating to the 7th floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.54, with payment deadline of 30-04-2013, relating to the 7th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.54, with payment deadline of 30-04-2013, relating to the 8th floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.54, with payment deadline of 30-04-2013, relating to the 8th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.54, with payment deadline of 30-04-2013, relating to the 9th floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.54, with payment deadline of 30-04-2013, relating to the 9th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €179.30, with payment deadline of 30-04-2013, relating to the 10th floor right of the property referred to above, whose VPT is €53,788.03;

  • Collection document no. 2013 … in the amount of €179.30, with payment deadline of 30-04-2013, relating to the 10th floor left of the property referred to above, whose VPT is €53,788.03;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 31-07-2013, relating to the 1st floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 31-07-2013, relating to the 1st floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €373.80, with payment deadline of 31-07-2013, relating to the 2nd floor right of the property referred to above, whose VPT is €112,141.51;

  • Collection document no. 2013 … in the amount of €373.80, with payment deadline of 31-07-2013, relating to the 2nd floor left of the property referred to above, whose VPT is €112,141.51;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 31-07-2013, relating to the 3rd floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 31-07-2013, relating to the 3rd floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €373.80, with payment deadline of 31-07-2013, relating to the 4th floor right of the property referred to above, whose VPT is €112,141.51;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 31-07-2013, relating to the 4th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 31-07-2013, relating to the 5th floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 31-07-2013, relating to the 5th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €373.80, with payment deadline of 31-07-2013, relating to the 6th floor right of the property referred to above, whose VPT is €112,141.51;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 31-07-2013, relating to the 6th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 31-07-2013, relating to the 7th floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 31-07-2013, relating to the 7th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 31-07-2013, relating to the 8th floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 31-07-2013, relating to the 8th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 31-07-2013, relating to the 9th floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 31-07-2013, relating to the 9th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €179.29, with payment deadline of 31-07-2013, relating to the 10th floor right of the property referred to above, whose VPT is €53,788.03;

  • Collection document no. 2013 … in the amount of €179.29, with payment deadline of 31-07-2013, relating to the 10th floor left of the property referred to above, whose VPT is €53,788.03;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 30-11-2013, relating to the 1st floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 30-11-2013, relating to the 1st floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €373.80, with payment deadline of 30-11-2013, relating to the 2nd floor right of the property referred to above, whose VPT is €112,141.51;

  • Collection document no. 2013 … in the amount of €373.80, with payment deadline of 30-11-2013, relating to the 2nd floor left of the property referred to above, whose VPT is €112,141.51;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 30-11-2013, relating to the 3rd floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 30-11-2013, relating to the 3rd floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €373.80, with payment deadline of 30-11-2013, relating to the 4th floor right of the property referred to above, whose VPT is €112,141.51;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 30-11-2013, relating to the 4th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 30-11-2013, relating to the 5th floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 30-11-2013, relating to the 5th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €373.80, with payment deadline of 30-11-2013, relating to the 6th floor right of the property referred to above, whose VPT is €112,141.51;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 30-11-2013, relating to the 6th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 30-11-2013, relating to the 7th floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 30-11-2013, relating to the 7th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 30-11-2013, relating to the 8th floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 30-11-2013, relating to the 8th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 30-11-2013, relating to the 9th floor right of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €376.52, with payment deadline of 30-11-2013, relating to the 9th floor left of the property referred to above, whose VPT is €112,958.07;

  • Collection document no. 2013 … in the amount of €179.29, with payment deadline of 30-11-2013, relating to the 10th floor right of the property referred to above, whose VPT is €53,788.03;

  • Collection document no. 2013 … in the amount of €179.29, with payment deadline of 30-11-2013, relating to the 10th floor left of the property referred to above, whose VPT is €53,788.03.

  • The Applicant proceeded to pay all of the above-referenced collection documents.

  • The aforementioned collection documents show that the total patrimonial value of the property is €2,137,555.08.

No other facts with relevance to the resolution of the case were proven.

2.2 Reasoning for Proven Factual Matters:

Regarding the proven facts, the arbitrator's conviction was based on the documentary evidence attached to the proceedings and on the agreement of the parties regarding the facts taken as established.

3. Legal Matters:

3.1 Object and Scope of the Present Proceedings

The questions to be decided in these proceedings are:

  • whether item 28.1 of the General Stamp Duty Table (GSDT), in the case of properties not constituted as horizontal property, applies to the sum of the patrimonial value for tax purposes attributed to the different parts or floors (global VPT), or rather to the patrimonial value for tax purposes of each part of the property with independent economic use;

  • whether there has been a violation of the principle of equality enshrined in article 13 of the Constitution of the Portuguese Republic;

  • whether there has been a lack of reasoning for the tax act in question in these proceedings.

On the first question, among others, the rulings of the CAAD in cases no. 50/2013-T, 132/2013-T, 181/2013-T, 183/2013-T, 272/2013-T, 280/2013-T, 88/2014-T and 206/2014-T have already pronounced themselves.

3.2 Question of the Patrimonial Value for Tax Purposes Relevant for the Application of Item 28.1 of the GSDT

According to the Tax and Customs Authority, in a property in vertical ownership (or not constituted in horizontal property regime) the criterion for determining the incidence of stamp duty is the global VPT of the floors and divisions designated for residential use.

For the Applicant, on the other hand, liability to stamp duty under item no. 28.1 of the GSDT should be assessed not by the total value of the property but by the value attributed to each of the parts with independent use, depending on their respective VPT, and should follow the same criterion as the determination of IMI (Municipal Property Tax).

Let us examine:

Law no. 55-A/2012, of 29 October, added item 28 to the General Stamp Duty Table (GSDT) with the following wording:

28 – Ownership, usufruct or right of superficies of urban properties whose patrimonial value for tax purposes shown in the registry, in accordance with the Municipal Property Tax Code (CIMI), is equal to or exceeding €1,000,000 – on the patrimonial value for tax purposes used for IMI purposes:

28.1 – For a property with residential designation – 1% (…);

In the transitional provisions contained in article 6 of that Law no. 55-A/2012, the following rules were established:

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

f) The applicable rates are as follows:

i) Properties with residential designation assessed in accordance with the Municipal Property Tax Code: 0.5%;

ii) Properties with residential designation not yet assessed in accordance with the Municipal Property Tax Code: 0.8%;."

Item 28.1 GSDT and subitems i) and ii) of paragraph f) of no. 1 of article 6 of Law no. 55-A/2012 contains a concept that is not used in any other tax legislation, which is that of "property with residential designation".

In turn, article 67, no. 2 of the Stamp Duty Code, added by the aforementioned Law, provides that "to matters not regulated in the present code concerning item 28 of the General Table, the CIMI shall apply subsidiarily."

The rule of incidence refers to urban properties, the concept of which results from the provisions of article 2 of the CIMI, with the determination of VPT in accordance with the provisions of article 38 and following of the same code.

In turn, article 6 of the CIMI indicates the different types of urban properties and determines that "residential, commercial, industrial or service properties are buildings or constructions licensed for such use or, in the absence of a licence, that have as their normal purpose each of these uses." See paragraph a) of no. 1) of article 6 CIMI.

It must therefore be concluded that for the legislator it is irrelevant whether the property is in vertical ownership or horizontal property; what matters is only the material truth underlying its existence as an urban property and its use.

Since the Stamp Duty Code remits to the CIMI, we must consider that the registration in the real estate registry of properties in vertical ownership, consisting of different parts, floors or divisions with independent use, follows the same registration rules as properties constituted in horizontal property.

It follows therefrom that the respective IMI, as well as Stamp Duty, are assessed individually in relation to each of the parts. For this reason, the legal criterion for defining the incidence of the new tax must be the same.

Thus it is concluded, as in the CAAD ruling 50/2013-T, according to which "if the legal criterion requires the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal property, it clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of item 28.1 of the GSDT".

It results from the law that stamp duty would only be incurred under item 28.1 of the GSDT if one of the parts, floors or divisions with independent use had a VPT exceeding €1,000,000.00, which is not the case in these proceedings.

The criterion defended by the AT, which takes into account the sum of the parts, on the argument that the property is not constituted in horizontal property regime, finds no legal support and is contrary to the criterion that results from the CIMI and that applies by remission in Stamp Duty matters.

Furthermore, the law itself expressly establishes, in the final part of item 28 of the GSDT, that Stamp Duty to be incurred on urban properties of value equal to or exceeding €1,000,000.00 – "on the patrimonial value for tax purposes used for IMI purposes."

In conclusion, the patrimonial value relevant for purposes of application of item 28.1 of the GSDT is the VPT of the part, floor or division with independent use.

3.3 Violation of the Principle of Equality

Although the analysis of a possible violation of the principle of equality may be prejudiced, we shall not refrain from taking a position on the principle invoked in line with the jurisprudence of the CAAD.

The Applicant alleges that the application of item 28.1 of the GSDT directly violates the principle of equality enshrined in article 13 of the Constitution of the Portuguese Republic.

In accordance with the interpretation supported above, the taxation of parts with independent use of value below one million euros is not covered by the rule of incidence; therefore, their taxation does indeed violate the principle of equality, more specifically in its corollaries of contributive capacity and fiscal proportionality.

With regard to the principle of equality, see the CAAD rulings no. 50/2012-T and 218/2013-T, and the Constitutional Court rulings no. 142/04 and 187/2013.

We conclude as in the CAAD ruling no. 218/2013-T, "the Stamp Duty assessment now under consideration manifestly violates the principle of fiscal equality provided for in article 13 of the RCP, because: i) it is based on a rule that treats taxpayers in identical situations in very different ways, with the measure of the difference not being assessed by their real contributive capacity; ii) it is based on an arbitrary legal solution devoid of any rational foundation."

In the case of these proceedings, the property in question is in vertical ownership and contains several floors and divisions with independent use designated for residential purposes, as proven above. Since none of the floors designated for residential purposes has patrimonial value equal to or exceeding €1,000,000.00, as results from the documents attached to the proceedings, it is concluded that the legal prerequisite for the incidence of Stamp Duty provided for in Item 28 of the GSDT is not met.

Looking now at the ratio legis of the provision in question in item 28.1 GSDT and quoting the CAAD ruling 50/2013-T "the legislator, in introducing this legislative innovation, considered as the determining element of contributive capacity urban properties, with residential designation, of high value (luxury), more precisely, of value equal to or exceeding €1,000,000.00, on which it proceeded to impose a special rate of stamp duty, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of superficies of luxury urban properties with residential designation. For this reason, the criterion was for application of the new rate to urban properties with residential designation, whose VPT is equal to or exceeding €1,000,000.00.

Clearly the legislator understood that this value, when attributed to a residential property (house, autonomous unit or floor with independent use) translates a contributive capacity above the average and, as such, capable of determining a special contribution to ensure the fair distribution of the fiscal effort." Already when applied to a part or fraction that does not exceed the aforementioned value of one million euros, the rule of incidence will not be met.

The principle of fiscal equality determines that what is equal must be treated fiscally in an equal manner and what is different must be treated differently. Now, there is no justification for differential treatment of units or parts of a property simply because it is already in horizontal property, provided that the units or parts have independent use.

As stated in the CAAD ruling of case no. 218/2013-T, "The principle of fiscal equality is based on the general principle of equality provided for in article 13 of the RCP, from which results the principle of contributive capacity which, by constitutional imperative, is the prerequisite and criterion of taxation.

As Casalta Nabais states, the principle of fiscal equality has inherent above all 'the idea of generality or universality, in accordance with which all citizens are bound by the duty to pay taxes, and of uniformity, which requires that such duty be assessed by the same criterion — the criterion of contributive capacity. This thus implies equal tax for those with equal contributive capacity (horizontal equality) and different tax (in qualitative or quantitative terms) for those with different contributive capacity in proportion to this difference (vertical equality) (Casalta Nabais, Tax Law, 5th edition, Coimbra, 2009, pp. 151-152)."

The CAAD ruling of case no. 50/2013-T argues that "The tax legislator cannot treat equal situations differently. Now, if the property were constituted in horizontal property regime, none of its residential units would suffer incidence of the new tax."

Thus, and in line with the jurisprudence of the Constitutional Court and the CAAD, we conclude that there has been a violation of the principle of fiscal equality and contributive capacity.

3.4 Lack of Reasoning

The Applicant alleges that the AT did not reason the act that is the subject of the present arbitral request.

A tax act is considered properly reasoned when it allows one to understand the evaluative path followed by the administration in issuing the decision in question.

However, in so-called mass acts, the ruling of the Supreme Administrative Court of 22-11-2000, in case no. 25389, understands that "everything advises that such acts not be required to have the same formal rigor that must be required of other administrative acts intended for specific individualized situations".

Now, in this case of Stamp Duty assessments under item 28.1 of the GSDT, we are dealing with a mass act.

From the analysis of the assessments at issue in these proceedings, it appears clear that the AT considered that the urban property owned by the Applicant was classifiable under item 28.1 of the GSDT, and for this reason it assessed the Applicant at the rate of 1% on the VPT of each of the twenty floors, in stamp duty for the year 2012.

Thus, we understand that the assessments in question are properly reasoned.

As concluded in the CAAD ruling no. 42/2013-T, "this reasoning appears elucidative as to the cognitive and evaluative path followed by the AT in deciding as it decided, especially if we take into account that it is a mass act".

In sum, the assessments in question do not lack legal reasoning, therefore the obligation to provide reasoning was fulfilled.

3.5 Compensatory Interest

As the collection documents relating to the third instalment no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 ... in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €179.29, and no. 2013 … in the amount of €179.29, are affected by illegality, compensatory interest is due from the date of payment until complete reimbursement by the AT, pursuant to articles 43 of the LGT (General Tax Law) and 61, no. 2 of the CPPT.

4. Decision

In view of the foregoing, it is determined:

  • to dismiss, as untimely, the request filed by the Applicant in the present tax arbitral proceedings regarding the illegality of the Stamp Duty assessments of the year 2012, contained in the collection documents no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €373.82, no. 2013 … in the amount of €373.82, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €373.82, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €373.82, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €376.54, no. 2013 … in the amount of €179.30, no. 2013 … in the amount of €179.30, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €179.29, no. 2013 … in the amount of €179.29;

  • to grant the request filed by the Applicant in the present tax arbitral proceedings regarding the illegality of the Stamp Duty assessments of the year 2012, contained in the collection documents no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €373.80, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €376.52, no. 2013 … in the amount of €179.29, no. 2013 … in the amount of €179.29;

  • to grant the request for condemnation of the Tax and Customs Authority to reimburse to the Applicant the amount of tax incorrectly paid relating to the collection documents for the third instalment of Stamp Duty, in the total amount of €7,125.06, plus compensatory interest in accordance with the law, from the date such payment was made until the date of complete reimbursement thereof.

6. Value of the Case:

In accordance with the provisions of article 315, no. 2, of the CPC (Code of Civil Procedure) and 97-A, no. 1, paragraph a) of the CPPT and 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the action is fixed at €22,408.71.

7. Costs:

Pursuant to article 22, no. 4, of the RJAT (Tax Arbitration Regime), and Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €1,224.00, to be borne by the Applicant and the Tax and Customs Authority, in the proportion of two-thirds for the Applicant and one-third for the AT.

Notify.

Lisbon, 18 September 2014.

Computer-generated document, in accordance with article 138, no. 5 of the Code of Civil Procedure (CPC), applicable by remission of article 29, no. 1, paragraph e) of the Tax Arbitration Regime, with blank lines and reviewed by me.

The Sole Arbitrator

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Does Stamp Tax under clause 28.1 of the TGIS apply to the total property value or individual unit values in vertical property?
Under clause 28.1 of the TGIS, the Tax Authority contends that Stamp Duty applies to the total patrimonial value of the urban property as registered, regardless of internal divisions into independent units. The taxpayer argues conversely that when a building contains autonomous floors capable of independent use, each unit should be evaluated separately against the €1,000,000 threshold. The Tax Authority's position relies on the property's unified registration status, treating the entire building as a single taxable unit for Stamp Duty purposes, even when comprised of twenty separate residential floors with individual patrimonial values.
Can a building with independently used floors be taxed as a single unit for Stamp Tax purposes when no individual floor exceeds €1,000,000?
Yes, according to the Tax Authority's position in this case, a building with independently used floors can be taxed as a single unit for Stamp Duty purposes under clause 28.1 TGIS, even when no individual floor exceeds €1,000,000. The Tax Authority argues that the relevant patrimonial value for tax incidence is the aggregate total of the urban property, not the separate values of constituent parts. This interpretation means that a building registered as one urban property is assessed based on its cumulative patrimonial value, triggering Stamp Duty liability when the total exceeds the statutory threshold, irrespective of individual unit values.
Does taxing vertical property as a whole under Stamp Tax violate the constitutional principle of equality (Article 13 CRP)?
The taxpayer argues that taxing vertical property based on total building value violates the constitutional principle of equality enshrined in Article 13 of the Portuguese Constitution (CRP). The claim suggests this interpretation creates discriminatory treatment between property owners who hold buildings as unified structures versus those who own individual autonomous fractions, despite functional equivalence. When individual floors are capable of independent use but taxed collectively, owners face different tax burdens than those holding equivalent individual units, potentially constituting unconstitutional disparate treatment based solely on registration structure rather than substantive economic differences.
What are the grounds for challenging Stamp Tax assessments on vertical property before CAAD arbitration?
Grounds for challenging Stamp Tax assessments on vertical property before CAAD include: (1) absence of the legal prerequisite for tax incidence under clause 28.1 TGIS when individual units fail to exceed the €1,000,000 threshold; (2) erroneous characterization and quantification of taxable facts by applying aggregate rather than individual patrimonial values; (3) violation of constitutional equality principles under Article 13 CRP through discriminatory treatment of structurally similar properties; and (4) lack of proper reasoning in the tax assessment act as required by Article 268(3) of the Constitution and Article 124 of the Administrative Procedure Code. Challenges must be filed within statutory deadlines under Article 10(1)(a) of Decree-Law 10/2011 and Article 102(1)(a) of the Tax Procedure Code.
How does the Tax Authority justify using the total patrimonial value of a building for Stamp Tax incidence under clause 28.1 TGIS?
The Tax Authority justifies using the total patrimonial value by emphasizing that the property is registered as a single urban property in the real estate registry. According to this interpretation, clause 28.1 TGIS targets the property as a unified taxable object, and the relevant patrimonial value for determining tax incidence is the aggregate VPT (Patrimonial Value for Tax Purposes) of the entire registered property, not its component parts. The Tax Authority maintains this approach applies even when the building contains floors with independent use capability, arguing that internal functional divisions do not alter the property's character as a single registered urban asset subject to unified taxation.