Process: 172/2015-T

Date: July 22, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 172/2015-T addressed a critical Stamp Tax dispute concerning whether construction land (terreno para construção) falls within the scope of Item 28.1 of the General Stamp Tax Table (TGIS) under Law 55-A/2012. The taxpayer A... S.A. challenged a 2012 Stamp Tax assessment of €53,296.70, arguing that Law 55-A/2012 explicitly taxes 'property with residential use' (prédios com afetação habitacional), not undeveloped construction land. The claimant contended the assessment violated fundamental tax principles of legality and typicality, as the urban property registry classified the property as 'land for construction' without any residential designation. The Tax and Customs Authority countered that the concept of 'properties with residential use' must be interpreted broadly using definitions from the Urban Property Code (CIMI), arguing that construction land with residential building potential falls within the tax scope because the mere right to build immediately increases property value. The Authority emphasized that 'residential use' differs from 'intended for housing' and encompasses a wider range of properties, including land destined for residential construction. This case exemplifies the interpretive challenges surrounding Law 55-A/2012's application and highlights the importance of precise statutory language in tax law. The arbitral tribunal under CAAD jurisdiction would need to determine whether the legislator intended to tax potential residential use or only existing residential properties, balancing literal interpretation against systematic and teleological methods, with significant implications for real estate taxation in Portugal.

Full Decision

Case Number 172/2015-T

I – Report

1.1. A…., S.A., NIPC …, with registered office in …, …, …-… Leiria (hereinafter referred to only as "claimant"), having been notified of the assessment of stamp tax No. 2013 …, for the year 2012, in the amount of €53,296.70, and not accepting same, filed on 13/3/2015 a petition for the constitution of an arbitral tribunal and arbitral award, in accordance with the provisions of Articles 1, 2, paragraph 1, paragraph a), and 10, paragraph 2, paragraph c), all of Decree-Law No. 10/2011, of 20/1 (Legal Regime of Arbitration in Tax Matters, hereinafter referred to as "LRATM"), in which the Tax and Customs Authority (TCA) is requested, with a view to [having] annulled or declared null the stamp tax assessment in this case, with the legal consequences".

1.2. On 21/5/2015 the present Single Arbitral Tribunal was constituted.

1.3. In accordance with Article 17, paragraph 1, of the LRATM, the TCA was cited as respondent party to present its answer on 22/5/2015. The TCA presented its answer on 29/5/2015, having argued towards the complete dismissal of the claimant's petition.

1.4. By order of 17/7/2015, the Tribunal considered, in accordance with Articles 16, paragraphs c) and e), and 19 of the LRATM, to be dispensable the production of expert evidence requested by the claimant (given that the elements contained in the present case file were sufficient for a decision on the merits of the claims formulated), as well as the meeting provided in Article 18 of the LRATM, and that the case was ready for decision. The date of 22/7/2015 was further set for the delivery of the arbitral award.

1.5. The Arbitral Tribunal was duly constituted, is materially competent, the case does not suffer from defects that would invalidate it and the Parties have legal personality and capacity, being legitimately constituted.

II – Grounds: The Matter of Fact

2.1. The claimant alleges in its initial petition that: a) "the assessment in question ensues allegedly from the application of the provisions of Law No. 55-A/2012, of 29 October"; b) "as evidenced in the urban property record for the land in question, already annexed as Doc. 2, it is a 'land for construction' and not a property with residential use"; c) "the subdivision that gave rise to the property in question does not provide for any residential use for the property in question"; d) "the stamp tax assessment in question can only be understood as a mere lapse by the Tax Authority, being the same affected by illegality"; e) "the stamp tax assessment in question was carried out under the invocation of the 'Item 28.1 of the General Stamp Tax Table', when it is certain that the aforementioned Law No. 55-A/2012, of 29 October, does not provide for the taxation of land for construction, but rather 'property with residential use'"; f) "the stamp tax assessment in question, under the principle of legality and typicality of taxes, could only have been made on the basis of the provisions of the General Table of Stamp Tax and in accordance with the facts provided therein by the legislator"; g) "the assessment act under analysis is thus null and void, as the amount charged has no legal or factual basis whatsoever (Article 77 of the LGT and Article 98/c of the CPPT; cf. Article 133 of the CPA)".

2.2. The claimant concludes that the "arbitral award petition must be held to be well-founded, as proven, based on the factual and legal grounds presented above, and consequently the stamp tax assessment in this case must be annulled or declared null, with the legal consequences". The claimant further requests "the reimbursement of the amount unduly paid with respect to that assessment, plus the indemnificatory interest due."

2.3. For its part, the TCA alleges, in summary, in its answer that: a) "in the absence of any definition of the concepts of urban property, land for construction and residential use under Stamp Tax, one must resort to the Urban Property Code (CIMI), in search of a definition that permits assessing the possible subjection to Stamp Tax in accordance with the provision of Article 67, paragraph 2 of the Stamp Tax Code, as amended by Law No. 55-A/2012, of 29/10"; b) "for the purposes of determining the taxable property value of land for construction, the application of the use coefficient in the context of assessment is clear, so that its consideration for purposes of applying item 28 of the General Stamp Tax Table cannot be ignored, being worth noting in this order of considerations: a) in the application of law to concrete cases it is important to determine the exact meaning and scope of the rule, so as to reveal the rule contained therein, an indispensable condition for it to be applied, in accordance with Article 9 of the Civil Code, under Article 11 of the LGT. b) Article 67, paragraph 2 of the Stamp Tax Code mandates the subsidiary application of the provisions of the CIMI. c) the use of the property (aptness or purpose) is a coefficient that contributes to the assessment of the property in the determination of taxable property value, applicable to land for construction. d) the very item 28 of the General Stamp Tax Table refers to the expression 'properties with residential use', calling for a classification that overlaps the categories provided in paragraph 1 of Article 6 of the CIMI."; c) "contrary to what is argued by the Claimant, the TCA understands that the concept of 'properties with residential use', for purposes of the provision of item 28 of the General Stamp Tax Table, includes both constructed properties and land for construction, considering the literal element of the rule"; d) "the legislator does not refer to 'properties intended for housing', having opted for the notion of 'residential use' – a different and broader expression, the meaning of which must be found in the need to integrate other realities beyond those identified in Article 6, paragraph 1, paragraph a) of the CIMI"; e) "the mere constitution of a right of potential construction immediately increases the value of the property in question, hence the rule contained in Article 45 of the CIMI requiring the separation of the two parts of the land"; f) "the provision of item 28 of the General Stamp Tax Table does not constitute a violation of any constitutional provision"; g) "the assessment in dispute constitutes a correct interpretation and application of law to the facts, suffering no violation of law, whether of the Constitution or of the Stamp Tax Code, and should therefore be held to be unfounded and the Requested Entity absolved of the petition"; h) "there is no perceived need for the production of expert evidence."

2.4. The TCA concludes, in light of the aforementioned, that "the petition for a declaration of illegality and consequent annulment of the contested assessment should be held to be unfounded, and the TCA should be absolved of the petition".

2.5. The following facts are considered proven:

i) The claimant is the owner of urban property ("Land for Construction"), described in the Land Register Office of … under No. … and registered in the urban property register under Article … of the parish designated as Joint Parishes of … and … and municipality of … (see Docs. 1 and 2 attached to the initial petition).

ii) The claimant was notified of the assessment of Stamp Tax No. 2013 …, for the year 2012, in the amount of €53,296.70 (see Doc. 3 attached to the initial petition), in which item 28.1 of the General Stamp Tax Table appears as the basis for the application of the rate of 1% to the taxable property value of the property in the value of €5,329,670.00.

iii) The amount of the assessment in question was paid by the claimant (see Doc. 4 attached to the initial petition).

iv) On 14/4/2014, the claimant hereby submitted a petition for administrative review (see Doc. 5 attached to the initial petition). The rejection of said petition was notified to the claimant on 23/12/2014 (see Doc. 8 attached to the initial petition).

2.6. There are no material unproven facts relevant to the decision of the case.

III – Grounds: The Matter of Law

In the present case, there are three disputed questions of law: whether in item 28.1 of the General Table of Stamp Tax, as amended by Law No. 55-A/2012 of 29/10, land for construction should be included and, in particular, whether land for construction with taxable property value equal to or greater than €1,000,000 are subsumed, or not, in the category of urban properties "with residential use" [1)]; whether item 28.1 of the General Stamp Tax Table violates the principles of legality and typicality of taxes [2)]; whether indemnificatory interest is owed to the claimant [3)].

  1. This is a question that, independently of the constitutional issues it raises, namely at the level of the principle of equality and the possibility of the existence of taxation in Stamp Tax on properties in a purely patrimonial taxation perspective without any connection with the principle of equivalence or benefit (the fundamental principle of IMI), has been extensively dealt with, both in the case law of CAAD and in the case law of the Supreme Administrative Court.

Indeed, it is today a unanimous interpretation of the judging entities that it is to be excluded from the scope of application of Stamp Tax land for construction that does not yet have any defined type of use, as it is neither applied nor intended for residential purposes.

In fact, land for construction, whether from the perspective of urban development law or from the perspective of tax law, has a distinct nature from properties with residential purposes, since, at the moment prior to the realization of the improvement (the construction itself) it does not have defined use constituting itself as a simple land asset, and therefore cannot be considered property with residential use.

It should be noted that the legislator's intention was clearly restrictive. When it uses the expression "residential purposes" it clearly expresses a will to include only residential properties within the scope of application of the rule, clearly excluding those with commercial and industrial purposes (even if integrated in urban areas which, in a limiting situation of implementation that is manifested in the existence of an approved Urbanization Plan or Detailed Plan), given that their actual use depends on their definitive construction.

In this context, diverse case law concluded that the contested assessments suffer from error regarding the assumptions of fact and law, since the properties for which Stamp Tax was assessed under the said item No. 28.1 constitute themselves as land for construction, without any building or construction, required to fill that concept of "residential properties".

The Treasury comes arguing that, for purposes of the provision of item No. 28.1 of the General Stamp Tax Table, the concept of "properties with residential use" comprises not only constructed properties but also land for construction, given that the legislator does not refer to "properties intended for housing", having instead opted for the notion of "residential use", an expression that it considers different and broader, integrating other realities beyond those identified in Article 6, paragraph 1, paragraph a) of the CIMI.

Concluding that residential use, for purposes of the application of item 28, does not necessarily imply the existence of buildings or constructions – applying therefore to land for construction with that use.

This does not appear to be correct for the reasons already advanced.

Indeed, the question under examination is, even in its factual assumptions, entirely identical to the question that was examined and decided in the Supreme Administrative Court in recent judgments of 9/4/2014, rendered in case numbers 1870/13 and 48/14, and in judgments of 23/4/2014, rendered in case numbers 270/14, 271/14 and 272/14, in which it was decided that "land for construction" cannot be considered, for purposes of the scope of application of Stamp Tax, provided for in Item 28.1 of the respective General Table (as amended by Law No. 55-A/2012, of 29 October), as "urban properties with residential use".

This is case law that is also adopted here, as it is entirely agreed with the respective grounds, and we shall limit ourselves to reproducing what was said on the question in the aforementioned Judgment rendered in case No. 1870/13:

"The concept of 'property (urban) with residential use' was not defined by the legislator. Neither in Law No. 55-A/2012, which introduced it, nor in the Urban Property Code, to which paragraph 2 of Article 67 of the Stamp Tax Code (also introduced by that Law) refers on a subsidiary basis. And it is a concept that, probably due to its imprecision – a fact all the more serious given that it is on the basis of it that the objective scope of application of the new taxation is determined –, had a short life, in that it was abandoned upon the entry into force of the State Budget Law for 2014 (Law No. 83-C/2013, of 31 December), which gave new wording to said item 28 of the General Table, and which now determines its objective scope of application through the use of concepts that are legally defined in Article 6 of the Urban Property Code.

This amendment - to which the legislator did not attribute an interpretative character, nor does it seem to us that it did – only makes it unequivocal for the future that land for construction whose construction, authorized or anticipated, is for residential purposes is covered within the scope of item 28.1 of the General Table of Stamp Tax (provided that its taxable property value is equal to or greater than 1 million euros), clarifying nothing, however, with respect to past situations (assessments for 2012 and 2013), such as the one in question in the present case.

Now, as to these, it does not seem possible to adopt the interpretation of the appellant, since it does not result unequivocally either from the letter or from the spirit of the law that the intention of the latter was, ab initio, to encompass within its objective scope of application land for construction for which construction of residential buildings was authorized or anticipated, as is made unequivocally clear today by item 28.1 of the General Table of Stamp Tax.

From the letter of the law nothing unequivocal results, indeed, since it itself, by using a concept that it did not define and that was also not defined in the statute to which it referred on a subsidiary basis, lent itself, unnecessarily, to ambiguities, in a matter – of tax scope – in which certainty and legal security should also be paramount concerns of the legislator.

And from its "spirit", ascertainable in the statement of reasons of the bill that is at the origin of Law No. 55-A/2012 (Bill No. 96/XII – 2nd, Parliamentary Record, Series A, No. 3, 21/09/2012, p. 44, available at www.parliament.pt) nothing more results than the concern of raising new tax revenue, from sources of wealth "more spared" in the past from the voracity of the Tax Authority than labor income, in particular income from capital, securities gains and property, reasons which bring no relevant contribution to the clarification of the concept of "properties (urban) with residential use", since they take it as established, without any concern to clarify it. Such clarification must have emerged - as informed in the Arbitral Award rendered on 12 December 2013, in case No. 144/2013-T, available in the CAAD database -, upon the presentation and discussion in Parliament of said bill, in the words of the Secretary of State for Tax Affairs, who is reported to have stated expressly, as gathered from the Parliamentary Record (Series A No. 9/XII – 2, of 11 October, p. 32) that: 'The Government proposes the creation of a special tax on high-value urban residential properties. This is the first time that Portugal has created a special taxation on high-value properties intended for housing. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to properties with a value equal to or greater than 1 million euros' (emphasis ours), from which it follows that the reality to be taxed in view was, in fact, and notwithstanding the terminological imprecision of the law, 'properties (urban) for residential purposes', in current language 'homes', and not other realities.

The fact that one can consider that in determining the taxable property value of urban properties classified as land for construction one should take into account the use that the construction authorized or anticipated for it will have in determining the value of the respective implantation area (cf. paragraphs 1 and 2 of Article 45 of the CIMI), does not determine that land for construction can be classified as 'property with residential use', since 'residential use' is always in the Urban Property Code referred to 'buildings' or 'constructions', existing, authorized or anticipated, since only these can be inhabited, which is not the case with land for construction, which does not have, in itself, conditions for such, being not susceptible of being used for housing unless and until the construction authorized and anticipated for it is erected thereon (but in that case they will no longer be 'land for construction' but another category of urban property – 'residential', 'commercial, industrial or service' or 'other' – Article 6 of the CIMI).

It would indeed be strange if the determination of the scope of the tax rule of application of item 28 of the General Table of Stamp Tax were ultimately found in the rules for determining the taxable property value of the Urban Property Code, and that the terminological imprecision of the legislator in drafting that rule were, in fact, elucidated and finally clarified through an indirect and ambiguous reference to the use coefficient established by the legislator with respect to constructed properties (Article 41 of the Urban Property Code).

Thus, given that land for construction – regardless of the type and purpose of the construction that will be, or may be, erected thereon – does not satisfy, by itself, any condition to be licensed as such or to be defined as having housing as its normal destination, and the Stamp Tax rule of application refers to urban properties with 'residential use', without any specific concept being established for that purpose, one cannot extract therefrom that it contains a future potentiality inherent in a distinct property that may eventually be erected on the land.

It is thus concluded, in accordance with what was decided in the judgment under appeal, that, as results from Article 6 of the Urban Property Code a clear distinction between urban properties 'residential' and 'land for construction', the latter cannot be considered as 'property with residential use' for purposes of the provision of item 28.1 of the General Table of Stamp Tax, in its original wording, as given to it by Law No. 55-A/2012, of 29 October." (end of quotation).

As stated, it is this case law that is adopted and reiterated here, given the rule contained in paragraph 3 of Article 8 of the Civil Code – which imposes on the judge the duty to consider all cases that merit analogous treatment, in order to obtain a uniform interpretation and application of law, and the respondent has not adduced new grounds that would invalidate such jurisprudential orientation.

Also in the arbitral forum, see, in the same sense as the Supreme Administrative Court judgments already mentioned, for example, the Arbitral Awards rendered in case numbers 301/2013-T, of 31/7/2014, No. 308/2013-T, of 28/4/2014, No. 384/2014-T, of 8/2/2015, and No. 516/2014-T, of 12/1/2015.

  1. Given that the understanding of the claimant with respect to the preceding question is well-founded, it becomes unnecessary, in light of Article 124 of the Tax Procedure Code (CPPT), under Article 29, paragraph 1 of the LRATM, to specifically investigate the allegation regarding the principles of legality and typicality of taxes.

  2. Indemnificatory interest is owed when it is determined, in an administrative review petition or judicial challenge, that there has been error attributable to the tax authorities from which results payment of the tax debt in an amount greater than legally due (see Article 43, paragraph 1 of the LGT).

It is therefore a necessary condition for the attribution of said interest the demonstration of the existence of error attributable to the tax authorities. In that sense, see, for example, the following judgments: "The right to indemnificatory interest provided for in paragraph 1 of Article 43 of the LGT [...] depends on it being demonstrated in the case that such act is affected by error regarding the assumptions of fact or law attributable to the TCA." (Supreme Administrative Court judgment of 30/5/2012, case 410/12); "The right to indemnificatory interest provided for in paragraph 1 of Article 43 of the General Tax Law presupposes that in the case it is determined that in the assessment 'there was error attributable to the tax authorities', understood as the 'error regarding the assumptions of fact or law attributable to the Tax Administration'" (Supreme Administrative Court judgment of 10/4/2013, case 1215/12).

Now, given that there has been, as follows from what is observed in 1), error attributable to the tax authorities, it is concluded that the petition for payment of indemnificatory interest to the claimant is well-founded.

IV – Decision

In light of the foregoing, it is decided:

  • To hold the arbitral award petition to be well-founded, with the consequent annulment, with all legal effects, of the contested assessment act, and the reimbursement of the amount unduly paid.
  • To hold the petition also to be well-founded in the part relating to the recognition of the right to indemnificatory interest in favor of the claimant.

The value of the case is fixed at €53,296.70 (fifty-three thousand two hundred and ninety-six euros and seventy cents), in accordance with the provisions of Article 32 of the Code of Administrative Procedure (CPTA) and Article 97-A of the Tax Procedure Code (CPPT), applicable by virtue of the provisions of Article 29, paragraph 1, paragraphs a) and b) of the LRATM, and Article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

Costs to be borne by the respondent, in the amount of €2,142.00 (two thousand one hundred and forty-two euros), in accordance with Table I of the RCPAT, and in compliance with the provisions of Articles 12, paragraph 2, and 22, paragraph 4, both of the LRATM, and the provision of Article 4, paragraph 4 of the said Regulation.

Notify.

Lisbon, 22 July 2015.

The Arbitrator,

Miguel Patrício

Text prepared by computer, in accordance with the provisions of Article 131, paragraph 5, of the Code of Civil Procedure (CPC), applicable by reference from Article 29, paragraph 1, paragraph e) of the LRATM.

The drafting of this decision is governed by the orthography prior to the 1990 Orthographic Agreement.

Frequently Asked Questions

Automatically Created

Is construction land subject to Stamp Tax under Verba 28.1 of the Tabela Geral do Imposto de Selo?
The subjection of construction land to Stamp Tax under Item 28.1 TGIS is disputed. While Law 55-A/2012 introduced a 1% annual Stamp Tax on 'property with residential use' (prédios com afetação habitacional), the Tax Authority argues this includes construction land designated for residential building, based on CIMI definitions and the use coefficient applied in property valuation. However, taxpayers contend that construction land without built residential structures does not constitute 'property with residential use' under a strict literal interpretation, as the land registry classifies it distinctly as 'land for construction' (terreno para construção) rather than residential property.
Does Law 55-A/2012 allow Stamp Tax on terrenos para construção without housing designation?
Law 55-A/2012 does not explicitly reference 'terrenos para construção' in its text, referring instead to 'property with residential use.' The interpretive dispute centers on whether this phrase encompasses undeveloped construction land. The Tax Authority interprets 'residential use' broadly to include land with residential building potential, arguing the legislator deliberately chose 'residential use' over 'intended for housing' to capture a wider category. Taxpayers argue the law's literal wording excludes construction land without actual housing designation, invoking the principle of strict interpretation of tax laws (tipicidade fiscal). The absence of explicit legislative reference to construction land strengthens the taxpayer position under legality principles.
Can a taxpayer challenge an unlawful Imposto de Selo assessment through CAAD tax arbitration?
Yes, taxpayers can challenge unlawful Stamp Tax assessments through CAAD (Centro de Arbitragem Administrativa) arbitration under the Legal Regime of Arbitration in Tax Matters (LRATM - Decree-Law 10/2011). Process 172/2015-T demonstrates this mechanism, where the taxpayer filed a petition for constitution of an arbitral tribunal seeking annulment of the assessment. CAAD arbitration provides an alternative to judicial courts for resolving tax disputes, offering specialized tax law expertise. Taxpayers must file within the statutory deadline after exhausting administrative remedies (such as hierarchical review), requesting annulment or declaration of nullity based on illegality, procedural defects, or constitutional violations.
What is the distinction between terreno para construção and prédio com afectação habitacional for Stamp Tax purposes?
The distinction is fundamental for Stamp Tax purposes. 'Terreno para construção' (construction land) refers to undeveloped urban land classified in the urban property registry as suitable for building, lacking any constructed structures. It represents potential rather than actual use. 'Prédio com afetação habitacional' (property with residential designation/use) refers to buildings or properties actually used or specifically designated for housing purposes under CIMI Article 6(1)(a). The Tax Authority argues these categories overlap when construction land has residential building potential, while taxpayers maintain they are distinct legal categories. The classification in the urban property registry and cadastral records is evidential but the ultimate tax treatment depends on interpreting 'afetação habitacional' in Law 55-A/2012.
What are the legal grounds to annul a Stamp Tax liquidation on construction land under Portuguese tax law?
Legal grounds to annul a Stamp Tax liquidation on construction land include: (1) violation of the principle of legality (Article 103 CRP, Article 8 LGT) - tax can only be levied with express legal basis; (2) violation of typicality principle (tipicidade) - tax facts must be clearly defined by law; (3) nullity under Article 77 LGT and Article 98(c) CPPT for lack of legal or factual basis; (4) incorrect legal interpretation of Law 55-A/2012 and Item 28.1 TGIS; (5) misapplication of CIMI provisions regarding property classification; (6) violation of Article 133 CPA (Administrative Procedure Code) for legal invalidity. Taxpayers must demonstrate the assessment lacks statutory foundation because construction land does not constitute 'property with residential use' under proper legal interpretation, invoking strict construction of tax statutes.