Process: 170/2015-T

Date: November 23, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 170/2015-T addresses the application of Stamp Tax under Item 28.1 of the General Stamp Tax Table (TGIS) to properties held in sole ownership (propriedade total). This provision imposes Stamp Duty on urban properties with residential use having a taxable property value equal to or exceeding €1 million. The central dispute concerned whether a single property in sole ownership containing multiple independent units should be taxed as one property or as separate units. The Applicant, owner of an urban building in Lisbon valued above €1 million, argued that each independent unit with individualized taxable values should be assessed separately, invoking Municipal Property Tax Code (CIMI) rules and constitutional tax equality principles. The Tax Authority contended that properties in sole ownership constitute a single taxable unit, unlike autonomous fractions under horizontal property regimes. This revision corrected procedural errors: recognizing payment of €7,333.17 across 14 partial assessments, acknowledging bank guarantees established for enforcement proceedings, correcting cost allocation to the unsuccessful party, and including annulment of the administrative complaint dismissal in the operative part. The case illustrates the critical distinction between horizontal property regimes (creating autonomous fractions) and sole ownership for Stamp Tax purposes, the availability of administrative complaints (reclamação graciosa) and arbitration as challenge mechanisms, and CAAD's power to reform decisions when material facts or legal conclusions are omitted.

Full Decision

Proc. 170/2015-T

REVISION OF DECISION

The arbitral decision rendered on 16 November 2015 is affected by the following errors:

1st

It was not taken into account that the Applicant, as of the date of the rendering of the decision, had proven payment of the tax relating to the assessments:

  •    Partial Assessment No. 2014 ..., in the amount of 502.66 euros

  •    Partial Assessment No. 2014 ..., in the amount of 515.92 euros

  •    Partial Assessment No. 2014 ..., in the amount of 511.35 euros

  •    Partial Assessment No. 2014 ..., in the amount of 576.19 euros

  •    Partial Assessment No. 2014 ..., in the amount of 504.27 euros

  •    Partial Assessment No. 2014 ..., in the amount of 513.00 euros

  •    Partial Assessment No. 2014 ..., in the amount of 569.33 euros

  •    Partial Assessment No. 2014 ..., in the amount of 566.39 euros

  •    Partial Assessment No. 2014 ..., in the amount of 564.81 euros

  •    Partial Assessment No. 2014 ..., in the amount of 420.57 euros

  •    Partial Assessment No. 2014 ..., in the amount of 507.15 euros

  •    Partial Assessment No. 2014 ..., in the amount of 574.57 euros

  •    Partial Assessment No. 2014 ..., in the amount of 427.79 euros

  •    Partial Assessment No. 2014 ..., in the amount of 579.17 euros

2nd

It was not taken into account that the Applicant, as of the date of the rendering of the decision, had established a bank guarantee in relation to the tax enforcement proceedings Nos. ... 2014 ..., ... 2014 ..., ... 2014 ..., ... 2014 ..., ... 2014 ..., ... 2014 ... and ... 2014 ....

3rd

By error/oversight, the Applicant was ordered to pay the costs of the proceedings, when such condemnation should have fallen on the unsuccessful party, namely the AT - Tax and Customs Authority.

4th

The request for annulment of the act of dismissal of the administrative complaint filed against the contested assessments was not taken into account in the operative part of the decision.

Accordingly, the decision rendered on 16 November 2015 is hereby reformed in the following terms:

ARBITRAL DECISION

Subject Matter: Stamp Duty – Property in Sole Ownership

Applicant: A..., Lda.

Respondent: AT - Tax and Customs Authority

I - REPORT

1. Request

A..., Lda., a legal entity and taxpayer number ..., with registered office at Rua ... no. ..., ...., in Lisbon, hereinafter referred to as the Applicant, filed, on 13-03-2015, pursuant to the provisions of paragraph a) of section 1 of article 2 and article 10 of Decree-Law No. 10/2011, of 20 January, which approves the Legal Framework for Arbitration in Tax Matters (RJAT), an application for arbitral decision, with the AT - Tax and Customs Authority as respondent, with a view to:

  •      Annulment of the act of dismissal of the administrative complaint filed against the Stamp Duty assessment acts embodied in the documents 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., and 2014 ...;

  •      Annulment of the same assessment acts;

To support its request, the Applicant alleges, in summary:

  •    The Applicant is the owner of the urban property held in sole ownership located at ..., nos .../..., and at Tv. ..., nos .../..., in Lisbon, registered under article ... in the property registry office of Lisbon and registered under property tax article no. ... of the parish of ..., Lisbon.

  •    The Applicant was notified of the said assessments, based on Item 28.1 of the General Stamp Duty Table (GSDT);

  •    This item imposes stamp duty on urban properties with residential use that have a taxable property value equal to or exceeding 1 million euros;

  •    In the case of properties held in sole ownership consisting of parts capable of independent use, where the taxable property value of each part is individualized, the value to be taken as the basis for determining the applicability of item 28.1 of the GSDT should be the taxable property value of each independent part;

  •    Taking into account the cross-reference made by the Stamp Duty Code (SDC) to the rules of the Municipal Property Tax Code (MPTC) and the subjective element or intention of the legislator, it must be concluded that the taxable subject matter serving as the basis for the rule of applicability of item 28.1 of the GSDT is the taxable property value determined in accordance with the MPTC for each "property" in the tax sense of that term, including autonomous fractions as well as floors or parts of property capable of independent use;

  •    Furthermore, the constitutional principle of tax equality also requires that material truth and not formal truth be the determining criterion of tax capacity in the present case.

2. Reply

In its Reply, the Respondent AT – Tax and Customs Authority alleges, in summary:

  •    The situation of the Applicant's property is subsumed, literally, in the scope of the item in question, as it is an urban property with residential use and its taxable property value is greater than one million euros;

  •    Within the scope of the MPTC, only autonomous fractions of property under a horizontal property regime have the status of properties;

  •    The Applicant, for purposes of IMI and also of stamp duty, by virtue of the wording of the said item, is not the owner of seven autonomous fractions, but rather of a single property;

  •    The taking into account, for purposes of SD, of the taxable property value of each unit capable of independent use would be equivalent to the application of the tax regime for horizontal property to a property held in sole ownership, when the tax rules do not establish such equivalence, which is not permitted to the legal interpreter under article 11, section 2 of the General Tax Law.

3. Hearing provided for in article 18 of the RJAT and pleadings

With the agreement of the parties, the Tribunal determined the waiver of the hearing provided for in article 18 of the RJAT as well as of the final pleadings phase.

4. Subsequent Application by the Applicant

In a petition filed in the proceedings on 8 September 2015, the Applicant:

1st: Alleged that it had meanwhile proceeded with payment of the tax relating to the following contested assessments:

  •    Partial Assessment No. 2014 ..., in the amount of 502.66 euros

  •    Partial Assessment No. 2014 ..., in the amount of 515.92 euros

  •    Partial Assessment No. 2014 ..., in the amount of 511.35 euros

  •    Partial Assessment No. 2014 ..., in the amount of 576.19 euros

  •    Partial Assessment No. 2014 ..., in the amount of 504.27 euros

  •    Partial Assessment No. 2014 ..., in the amount of 513.00 euros

  •    Partial Assessment No. 2014 ..., in the amount of 569.33 euros

  •    Partial Assessment No. 2014 ..., in the amount of 566.39 euros

  •    Partial Assessment No. 2014 ..., in the amount of 564.81 euros

  •    Partial Assessment No. 2014 ..., in the amount of 420.57 euros

  •    Partial Assessment No. 2014 ..., in the amount of 507.15 euros

  •    Partial Assessment No. 2014 ..., in the amount of 574.57 euros

  •    Partial Assessment No. 2014 ..., in the amount of 427.79 euros

  •    Partial Assessment No. 2014 ..., in the amount of 579.17 euros

2nd: Alleged that it had established a bank guarantee in relation to the tax enforcement proceedings Nos. ..., and ....

3rd: Requested that the Respondent AT – Tax and Customs Authority be ordered:

  •    to reimburse the sum of 7,333.17 Euros, relating to the tax paid

  •    to pay compensation for the damages suffered by the Applicant with the establishment of the said bank guarantee

II. Preliminary Proceedings

The Sole Arbitral Tribunal was regularly constituted on 21-05-2015, with the Arbitrator appointed by the Ethics Council of the CAAD, in compliance with the respective legal and regulatory formalities (articles 11, section 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Code of Ethics of the CAAD), and is competent ratione materiae in accordance with article 2 of the RJAT.

The parties have legal standing and capacity and are regularly represented.

No procedural defects were identified in the proceedings.

III. Reasoning

Questions to be decided

The following are the questions to be decided by the Tribunal:

  •    The applicability of item 28.1 of the GSDT to urban properties held in vertical ownership consisting of parts capable of independent use considered as a whole, with the consequence that the taxable property value to be taken into account for purposes of tax applicability shall be, in the event of an affirmative answer, the taxable property value of the property;

  •    In the event of an affirmative answer to the previous question, the constitutionality of the rule of applicability contained in item 28.1 of the GSDT, if interpreted as covering building land, in light of the constitutional principle of equality.

Factual Matters

The following are the facts considered proven and relevant for the decision:

  •    The Applicant was, at the date of the alleged tax event, the owner of the urban property held in sole ownership located at ..., nos .../..., and at ..., nos .../..., in Lisbon, registered under article ... in the property registry office of Lisbon and registered under property tax article no. ... in the property tax register of the parish of ..., Lisbon;

  •    It is a property described as urban, held in sole ownership, consisting of parts capable of independent use;

  •    The taxable property value of the whole of the parts of the property with residential use is 1,011,030.00 euros;

  •    The Applicant was notified of the following stamp duty assessments, pursuant to item 28.1 of the GSDT, on the independent parts of the said property with residential use:

¾ Assessment No. 2014 ..., relating to the 1st floor right, in the amount of 1,584.20 euros

¾ Assessment No. 2014 ..., relating to the 1st floor left, in the amount of 1,412.80 euros

¾ Assessment No. 2014 ..., relating to the 2nd floor right, in the amount of 1,399.80 euros

¾ Assessment No. 2014 ..., relating to the 2nd floor left, in the amount of 1,571.10 euros

¾ Assessment No. 2014 ..., relating to the 3rd floor right, in the amount of 1,404.40 euros

¾ Assessment No. 2014 ..., relating to the 3rd floor left, in the amount of 1,575.80 euros

¾ Assessment No. 2014 ..., relating to the 3rd floor left, in the amount of 1,162.20 euros

  •    The total amount of tax assessed in the said assessments is 10,110.30 euros;

  •    The Applicant filed an administrative complaint against the above-mentioned assessment acts;

  •    The administrative complaint was totally dismissed on 19-12-2014;

  •    The Applicant proceeded with payment of the tax relating to the following contested assessments:

¾ Partial Assessment No. 2014 ..., in the amount of 502.66 euros

¾ Partial Assessment No. 2014 ..., in the amount of 515.92 euros

¾ Partial Assessment No. 2014 ..., in the amount of 511.35 euros

¾ Partial Assessment No. 2014 ..., in the amount of 576.19 euros

¾ Partial Assessment No. 2014 ..., in the amount of 504.27 euros

¾ Partial Assessment No. 2014 ..., in the amount of 513.00 euros

¾ Partial Assessment No. 2014 ..., in the amount of 569.33 euros

¾ Partial Assessment No. 2014 ..., in the amount of 566.39 euros

¾ Partial Assessment No. 2014 ..., in the amount of 564.81 euros

¾ Partial Assessment No. 2014 ..., in the amount of 420.57 euros

¾ Partial Assessment No. 2014 ..., in the amount of 507.15 euros

¾ Partial Assessment No. 2014 ..., in the amount of 574.57 euros

¾ Partial Assessment No. 2014 ..., in the amount of 427.79 euros

¾ Partial Assessment No. 2014 ..., in the amount of 579.17 euros

  •    The total amount of tax and accruals paid is 7,333.17 Euros;

Not considered proven:

  •    That the tax enforcement proceedings in relation to which a bank guarantee was provided relate to the contested assessments.

On the Law

The question to be decided in the present proceedings has already been the subject of numerous arbitral decisions, and it can be said that the case law emanating from them is firmly established (see, for example, cases 50/2013-T, 132/2013-T, 144/2013-T, 181/2013-T, 182/2013-T, 183/2013-T).

More recently, the Supreme Administrative Court ruled on this same issue in the judgment of 09-09-2015, rendered in case no. 47/15, confirming the approach that had been followed by the arbitral tribunals.

In this judgment, which we take as the basis for our decision in the present proceedings, the STA rules:

"Taking into account that the registration in the property tax register of properties held in vertical ownership, for purposes of the Municipal Property Tax Code, follows the same rules of registration of properties constituted under horizontal property, with the respective IMI, as well as the new SD, being assessed individually in relation to each of the parts, it does not seem, (...), that there is any doubt that the legal criterion for defining the applicability of the new tax must be the same.

In this context, if the law requires, with respect to IMI, the issuance of individualized assessment notes for the autonomous parts of properties held in vertical ownership in the same manner as it establishes for properties held under horizontal property, it will require, in the same terms, with respect to the rule of applicability of Item no. 28 of the GSDT.

Therefore, the SD, within the scope of Item no. 28 of the GSDT, could only apply to a particular fraction if this, potentially, had a taxable property value exceeding € 1,000,000.00.

And, moreover, this was also the understanding adopted by the ATA.

Indeed, the (ATA) also issued individualized assessment notes relating to each of the fractions capable of autonomous use, demonstrating that, in its view, the said fractions, although not legally constituted under horizontal property, would be, for all purposes, independent of each other.

However, the ATA overlooked that it could not, by virtue of the framework previously stated, proceed with the sum total of the taxable property values of the individual fractions previously mentioned, seeking a value that would fall within the incidence basis of Item no. 28 of the GSDT.

This when the legislator himself established a different rule within the scope of the Municipal Property Tax Code which, as previously mentioned, is the Code applicable to matters not regulated in the Stamp Duty Code, with regard to Item no. 28 of the GSDT.

Summarizing, the criterion established by the ATA of considering the value of the sum total of individual taxable property values attributed to the parts, floors or units with independent use, taking advantage of the fact that the property is not constituted under a horizontal property regime, does not find, in the opinion of this tribunal, legal support, being, namely, contrary to the criterion applicable under the IMI and, by cross-reference (in the terms mentioned above), under the SD.

In this context, this tribunal considers that the criterion advocated by the ATA violates the principles of legality and tax equality, and as well that of the prevalence of material truth over legal-formal reality.

In parallel, note that article 12, section 3 of the Municipal Property Tax Code makes no distinction as to the regime of properties held under horizontal or vertical ownership.

As such, and since if the property were held under a horizontal property regime, none of its residential fractions would be subject to the new tax, the ATA cannot treat materially equal situations differently."

In summary, the STA's doctrine on this matter is that to treat unequally, within the scope of SD, the fractions under horizontal property and the parts of property held in sole ownership would correspond to treating unequally materially identical situations, which is not permitted under the principle of tax equality. Furthermore, the Tax and Customs Authority itself recognizes implicitly that the two situations are identical when it assesses SD on the parts individually and not on the property as a whole.

But the Tribunal adds further:

"(...) The present subject matter is, from the outset by virtue of article 67, section 2 of the Stamp Duty Code, subject to the rules of the Municipal Property Tax Code – 'to matters not regulated in this Code relating to item 28 of the General Table, the MPTC shall apply subsidiarily.'

As such, and as has been mentioned so many times, in the understanding of this tribunal, the mechanism for determining the relevant taxable property value for purposes of the said item is what is established in the Municipal Property Tax Code.

Now, article 12, section 3 of the Municipal Property Tax Code provides that 'each floor or part of property capable of independent use is considered separately in the property tax registration, which also distinguishes the respective taxable property value.'

The legislator devaluing, in the terms previously mentioned, any prior constitution of horizontal or vertical property.

Indeed, for the legislator, what matters is material truth underlying its existence as an urban property and its use.

It should be noted that the ATA itself seems to agree with the criterion set forth, the reason being that the assessments that it itself issues are very clear in their essential elements, from which it follows that the incidence value is that corresponding to the taxable property value of each of the floors and the individualized assessments.

Therefore, if the legal criterion requires the issuance of individualized assessments for the autonomous parts of properties held in vertical ownership in the same manner as it establishes for properties held under horizontal property, it has clearly established the criterion which must be unique and unequivocal for the definition of the rule of applicability of the new tax.

Thus, there would be place for the application of SD (within the scope of Item no. 28 of the GSDT) if any of the parts, floors or units with independent use had a taxable property value exceeding € 1,000,000.00.

The ATA cannot consider as the reference value for the applicability of the new tax the total value of the property when the legislator himself established a different rule under the IMI (and, as previously mentioned, this is the Code applicable to matters not regulated with respect to Item no. 28 of the GSDT).

In conclusion, the current legal regime does not impose an obligation to constitute horizontal property, so the conduct of the ATA amounts to arbitrary and unlawful discrimination.

Indeed, the ATA cannot distinguish where the legislator himself decided not to do so, under penalty of violating the coherence of the tax system, as well as the principle of tax legality provided for in article 103 of the Constitution of the Portuguese Republic, and also the principles of tax justice, equality and proportionality.

In the case at hand, the property/properties in question were found, at the relevant date of the facts, constituted in sole ownership and had [...] fractions with independent use, as results from the documents [...].

Given that none of these fractions has a property value equal to or exceeding € 1,000,000.00, as results from the documents appended to the proceedings, it is concluded that the legal prerequisite for applicability is not met."

This is the doctrine that we also adopt here, in consonance with all the vast and unanimous prior arbitral case law, wherefore it is incumbent to conclude that the contested stamp duty assessments are illegal for violation of the tax law by applying to independent parts of properties held in sole ownership but taking as a basis the taxable property value of the sum of the same parts.

Consequently, the decision dismissing the administrative complaints filed against the contested assessments is also illegal.

IV. DECISION

For the reasons stated:

1st: It is held to be completely well-founded the request for annulment of the act of dismissal of the administrative complaint filed against the contested assessment acts;

2nd: It is held to be completely well-founded the request for annulment of the contested assessment acts;

3rd: The Respondent is ordered, pursuant to article 24, section 1, paragraph b), to reimburse the sum of 7,333.17 Euros (seven thousand, three hundred and thirty-three Euros and seventeen cents).

The economic benefit of the proceedings is fixed at 10,110.30 euros.

Costs: Pursuant to article 22, section 4, of the RJAT, the amount of costs is fixed at 918.00 euros in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

This arbitral decision shall be recorded and notified to the parties.

Lisbon, Administrative Arbitration Center, 23 November 2015

The Arbitrator

(Nina Aguiar)

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto de Selo) under Verba 28.1 of the General Stamp Tax Table (TGIS) in Portugal?
The Stamp Tax under Verba 28.1 of the TGIS (General Stamp Tax Table) is a tax levied on urban properties with residential use that have a taxable property value (valor patrimonial tributário) equal to or exceeding €1 million. This provision was introduced to tax high-value residential real estate. The tax base is the taxable property value determined under the Municipal Property Tax Code (CIMI). The critical interpretative question in Process 170/2015-T was whether properties in sole ownership (propriedade total) with multiple independent units should be assessed as a single property or whether each independent unit should be considered separately for the €1 million threshold.
How does the concept of 'prédio em propriedade total' (property in total ownership) affect Stamp Tax liability?
A 'prédio em propriedade total' (property in total/sole ownership) significantly affects Stamp Tax liability under Verba 28.1 TGIS because Portuguese tax law distinguishes between properties held in sole ownership and autonomous fractions under horizontal property regimes. According to the Tax Authority's position in Process 170/2015-T, a property in sole ownership constitutes a single taxable unit for Stamp Tax purposes, even if it contains multiple independent units capable of separate use. Only autonomous fractions legally constituted under horizontal property regimes are treated as separate 'properties' under CIMI. This means the entire taxable property value is considered for the €1 million threshold, not individual unit values. The Applicant argued this interpretation violated tax equality principles, but the formal legal status of the property determines tax treatment.
What are the grounds for reforming an arbitral decision at CAAD in Portuguese tax disputes?
The grounds for reforming an arbitral decision at CAAD (Centro de Arbitragem Administrativa) include: (1) failure to consider material facts proven by the date of the decision, such as tax payments or guarantees provided; (2) errors or oversights in cost allocation to parties; (3) omission of requested relief from the operative part of the decision; and (4) incorrect legal conclusions. In Process 170/2015-T, the decision was reformed because it failed to account for payment of €7,333.17 across 14 partial assessments, did not recognize bank guarantees established for seven enforcement proceedings, erroneously ordered the Applicant to pay costs instead of the unsuccessful Tax Authority, and omitted annulment of the administrative complaint dismissal from the operative part. Reformation corrects these deficiencies while preserving the substantive decision.
Can a taxpayer challenge Stamp Tax assessments through a gracious complaint (reclamação graciosa) and arbitration?
Yes, taxpayers can challenge Stamp Tax assessments through both gracious complaint (reclamação graciosa) and arbitration in Portugal. Process 170/2015-T demonstrates this dual-track procedure. The Applicant first filed an administrative complaint (reclamação graciosa) against the Stamp Tax assessments under Verba 28.1 TGIS, which was dismissed by the Tax Authority. Following this dismissal, the Applicant invoked arbitration under Article 2(1)(a) and Article 10 of the RJAT (Legal Framework for Tax Arbitration), seeking both annulment of the dismissal decision and annulment of the underlying assessments. This shows taxpayers have administrative remedies before resorting to arbitration, though arbitration provides an alternative to judicial courts. The request must be filed within statutory deadlines and may suspend enforcement if payment is made or guarantees are provided.
What was the outcome of CAAD Process 170/2015-T regarding the annulment of Stamp Tax assessments?
The outcome of CAAD Process 170/2015-T involved reformation of the original arbitral decision rendered on November 16, 2015. The reformed decision corrected four key errors: (1) recognized that the Applicant had paid tax totaling €7,333.17 on 14 partial assessments by the decision date; (2) acknowledged establishment of bank guarantees for seven tax enforcement proceedings; (3) corrected cost allocation, ordering the unsuccessful Tax Authority to pay costs rather than the Applicant; and (4) included annulment of the administrative complaint dismissal in the operative part. While the document presents the revision/reformation rather than the full substantive merits decision, it indicates the Tribunal addressed both procedural and substantive issues, ordering reimbursement of €7,333.17 in taxes paid and potentially compensation for damages from guarantee establishment, suggesting at least partial success for the Applicant's challenge to the Stamp Tax assessments.