Process: 184/2015-T

Date: November 10, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Case 184/2015-T addressed whether Item 28 of the Portuguese General Stamp Tax Table (GSTS) applied to building land (terrenos para construção) before the 2014 legislative amendment. The claimant, A... Lda, challenged a stamp tax assessment of €8,362.77 on land for construction in Faro, arguing that such land only became subject to Item 28 from January 1, 2014, following amendments introduced by Law 83-C/2013 (State Budget 2014). The taxpayer contended that Law 55-A/2012, which introduced stamp tax on high-value urban properties effective October 30, 2012, did not clearly include building land within its scope, as it referenced 'properties with residential use' without defining the term. The claimant emphasized that building land and residential urban properties constitute distinct classifications under the Property Tax Code (CIMI), and that building land has only potential, not effective, residential use. The taxpayer argued that imposing tax based on future, uncertain use would constitute taxation of a non-existent taxable event. Furthermore, the claimant sought compensation for undue payment under Articles 53 of the General Tax Law (LGT) and 171 of the Tax Procedure Code (CPPT), including costs incurred for a bank guarantee (estimated at €1,587.52) provided to suspend enforcement proceedings. The Tax Authority countered that building land qualifies as urban property under CIMI Article 6(1), and that Article 67(2) of the Stamp Tax Code mandates subsidiary application of CIMI definitions. The Authority argued that the use coefficient applied in valuing building land under CIMI Article 45(2) demonstrates that residential use encompasses potential use, not merely effective occupation. This case illustrates the critical interpretive challenge of whether stamp tax on high-value properties applies based on actual or potential use, a question ultimately clarified by the 2014 legislative amendment that explicitly included building land.

Full Decision

ARBITRATION DECISION

Case No. 184/2015-T

Claimant: A..., Lda,
Respondent: Tax and Customs Authority

Subject Matter: Stamp Tax – item 28 of the GSTS – land for construction

I – Report

  1. On 17 March 2015, A..., Lda, legal entity no. ..., with registered office at Avenue..., SF Lisbon 2, invoking Article 10, No. 2, of Decree-Law No. 10/2011, of 20 January (RJAT) and Articles 1 and 2 of Ordinance No. 112-A/2011, of 22 March, filed a request for the constitution of an arbitral tribunal with a view to the declaration of illegality of the stamp tax assessment act (document No. 2012...), issued under Item No. 28 of the General Table of Stamp Tax, in the total amount of € 8,362.77 (eight thousand three hundred sixty-two euros and seventy-seven cents) relating to the property with registration entry ..., from the parish of ..., Faro (currently ... from the parish of ... and ...), and to the award of compensation for undue payment, pursuant to Articles 53 of the LGT and 171 of the CPPT. It submitted, in addition to the legal power of attorney and proof of payment of the initial arbitration fee, five documents.

  2. In the Request for Arbitral Decision, the Claimant chose not to appoint an arbitrator.

  3. In accordance with No. 1 of Article 6 of the RJAT, by decision of the President of the Deontological Council, the undersigned was appointed as sole arbitrator, who accepted the office within the legally stipulated period.

  4. The arbitral tribunal was constituted on 25 May 2015.

  5. Notified in accordance with and for the purposes of Article 17 of the RJAT, the Tax and Customs Administration (TA) presented, on 29 June 2015, a Response and a request in which, taking into account the absence of any objection and the need for additional evidence production, it proposed dispensation with the hearing provided for in Article 18 of the RJAT.

  6. The Claimant adhered to the position of the Respondent as to the dispensation with the hearing of Article 18 of the RJAT as well as the presentation of final submissions, whereby the tribunal decided to dispense with any other formalities and deliver its decision by 15 November 2015.

7. The Request for Decision

In the Request for Arbitral Decision the Claimant states, in summary (our responsibility):

  • The Claimant does not agree with the Stamp Tax assessment effected in relation to the property in question, pursuant to item 28.1 of the GSTS, and the transitional provision set out in Article 6 of Law No. 55-A/2012, of 29/10, which resulted in a collection of € 8,362.77, insofar as it is land for construction and not a property with residential use.

  • Land for construction only began to fall within item 28 of the GSTS from 1 January 2014, following the amendment to item 28.1 introduced by Article 194 of Law No. 83-C/2013, of 31/12, with the legislator acknowledging that the scope rule did not previously cover land for construction.

  • The amendment introduced by the State Budget for 2014 cannot have retroactive application because it is innovative, since from the wording of the law in force at the time of the facts it could not be inferred that residential use encompassed properties other than those dedicated to housing in the property register.

  • Law No. 55-A/2012, of 29/10, which amended item 28 with effect from 30 October 2012, did not clarify anywhere what properties with residential use are, adding a No. 2 to Article 67 of the Stamp Tax Code, mandating the subsidiary application of the Property Tax Code.

  • Verifying the classification of properties in the CIMI, it is concluded that residential urban properties and land for construction are two different classes of properties, with the Code not defining what properties with residential use are.

  • Taking into account Article 6 of the CIMI, one cannot say that land for construction has residential use insofar as such use must be effective and not merely potential and future, otherwise one would be taxing future and uncertain realities or even taxing a non-existent tax fact.

  • Neither can building licensing be an indicator of residential use, be it because in most cases the authorized construction also provides for use for commercial or service purposes, be it because licensing is not in itself a guarantee of the realization of construction or of an effective residential use.

  • Nor with the obtaining of a building permit – when there is already a firm commitment to build something – can one say that a property has residential use because it is not possible to live in it, it does not have the characteristics necessary for human habitation.

  • As for the fact that in calculating the taxable property value of land for construction reference is made to the use coefficient (residential, services, etc.) as merely potential and future uses, this constitutes only a mere indicator that the legislator intended to use to calculate the value of land for construction, not authorizing subsumption within the factual scope of item 28.1 of the GSTS as a property with residential use, this can only happen with the submission of IMI form 1 communicating the completion of the works.

  • The statement of reasons for Law No. 55-A/2012 confirms the legislative intent not to extend the scope of the law to land for construction, as do the statements of the State Secretary for Tax Affairs in the presentation to parliament of the bill.

  • The same interpretation was followed in arbitral and judicial decisions.

  • With a view to suspending the tax execution proceedings initiated for non-payment of the assessed tax, the Claimant provided a bank guarantee, the cost of which will only be determined with accuracy at the moment when it is possible to release the guarantee, but which is estimated to date to have amounted to €1,587.52.

  • Accordingly, the claimant is entitled to compensation corresponding to the totality of costs incurred with the bank guarantee plus interest at the legal rate of interest calculated on those costs counted from the date they were borne until the date the bank guarantee is authorized to be released.

8. The Response

The Respondent responds, in summary (our responsibility):

  • With the legislative amendment introduced by Law No. 55-A/2012, of 29/10/2012, in Article 1 of the CIS, and the amendment of item 28 to the GSTS, Stamp Tax began to apply also to the ownership, usufruct or right of superficies of urban properties whose taxable property value contained in the register, pursuant to the Property Tax Code, is equal to or greater than €1,000,000.00.

  • In the absence of any definition of the concepts of urban property, land for construction and residential use in Stamp Tax law, one must resort to the CIMI, mandatorily applied by Article 67, No. 2 of the Stamp Tax Code.

  • One must take into account the concept of property in No. 1 of Article 2 of the CIMI, as well as Article 6, No. 1 of the CIMI, on the types of existing urban properties (integrating into this concept land for construction).

  • The mere constitution of a right of potential construction increases the value of the property in question, therefore the notion of use of the urban property is based on the valuation of properties, and Article 45, No. 2, of the CIMI which requires taking into account "...the value of authorized buildings" must be taken into account, with the use coefficient provided for in Article 41 of the CIMI therefore being applicable.

  • Thus, if for the purposes of determining the taxable property value of land for construction the application of the use coefficient is clear in the context of valuation, its consideration cannot be ignored for the purposes of applying item 28 of the GSTS.

  • The legislator does not refer to "properties intended for housing," but to "residential use," the meaning of which must be found not in Article 6, No. 1, paragraph a) of the CIMI but in Article 45 of the CIMI, which distinguishes the part of the land where the building to be constructed will be located and the area of free land; determining the amount of the first part, the determined value is reduced to a percentage between 15% and 45% as provided for in No. 2 of that rule, by virtue of the construction not yet being effectuated.

  • The value of the land adjacent to the construction area is determined in the same manner as the value of the free land area and the excess land area is determined for any urban property.

  • It is possible, before the actual construction of the property, to determine and establish the use of land for construction taking into account the regime of urbanization and building, RJUE and Municipal Master Plans.

  • The Constitution of the Republic does not prevent differentiated treatment, but only arbitrary, unreasonable discriminations without justification and sufficient material basis, but item 28 of the GSTS does not violate the CRP because it supports the different treatment of properties (residential/services/commerce) as a choice of the legislator, for political and economic reasons.

  • Taxation in Stamp Tax is subject to adequacy criteria, applying in an indiscriminate manner to all owners of properties with residential use of value exceeding €1,000,000.00, focusing on the wealth embodied and manifested in the value of properties, being legitimate as a mechanism for obtaining revenue, and not violating the principle of proportionality by applying indiscriminately to all owners of properties with residential use of value exceeding €1,000,000.00.

  • The assessments do not suffer from the vice of violation of law, whether of the CRP or of the CIS, and should, accordingly, the claim be judged unfounded and the Respondent be absolved of the claim.

9. Object of the Request

The legal question raised in this request for review of the legality of the Stamp Tax assessment effected pursuant to paragraphs a) to f) of No. 1 of Article 6 of Law No. 55-A/2012, of 29 October, consists in determining whether land for construction should be considered a "property with residential use" for the purposes of applying item 28.1 of the General Table of Stamp Tax, amended by the aforementioned law and in the wording then in force.

10. Sanitation

The arbitral tribunal is materially competent in accordance with the provisions of Articles 2, No. 1, paragraph a) of the Legal Regime of Arbitration in Tax Matters.

The parties have legal personality and capacity and have standing in accordance with Article 4 and No. 2 of Article 10 of the Legal Regime of Arbitration in Tax Matters (RJAT), and Article 1 of Ordinance No. 112-A/2011, of 22 March.

The proceedings do not suffer from any nullity nor were any objections raised by the parties that would prevent the examination of the merits of the case, therefore the conditions are met for the delivery of the arbitral decision.

II – Grounds

11. Proven Facts

Based on the procedural documents – facts invoked and not contested – and documents submitted by the Claimant (the TA submitted no Administrative File), the following factual basis is established:

11.1. The Claimant, A..., Lda, is the owner of the property with registration entry ..., from the parish of ..., Faro (currently ... from the parish of ... and ...) (Article 7 of the Request and Doc. No. 2 attached to the Request).

11.2. In the respective urban property register, the aforementioned property is designated as "land for construction," with the respective areas: total land area 1,344.0000 m²; building footprint, 1,344.0000 m²; gross construction area, 4,700.0000 m²; dependent gross area, 0.0000 m² (Doc. No. 2 attached to the Request for Decision).

11.3. In 2012 the taxable property value was fixed at the amount of € 1,672,553.75.

11.4. In December 2012 the Claimant was notified of a stamp tax assessment issued on 07 November 2012, through a document numbered 2012 ..., for payment by 20 December 2012, corresponding to the application of the rate of 0.5% to the TPV of € 1,672,553.75 (Document No. 1 attached to the Request).

11.5. The Claimant submitted, successively, an administrative appeal (No. ...) and a hierarchical appeal (No. ...), which were dismissed (Article 3 of the Request).

11.6. The Claimant did not pay the assessed tax and tax execution proceedings (No. ...) were initiated by the Finance Service of Lisbon 3 (Articles 54 and 55 of the Request).

11.7. The Claimant subscribed a bank guarantee up to the limit of € 70,500.00 to provide security and guarantee possible payments in six tax execution proceedings relating to Stamp Tax year 2012, including proceedings No. ... (Article 55 of the Request).

12. Facts Not Proven

There are no proven facts with relevance to the decision of the case.

13. Grounds for Proven and Unproven Facts

The proven facts are based on the documents indicated for each point, whose authenticity and correspondence to reality were not questioned by the Parties.

14. Legal Appreciation

14.1. Application of item 28 of the General Table of Stamp Tax (GSTS) to land for construction

Item 28 of the General Table of Stamp Tax attached to the Stamp Tax Code (CIS) was amended by Article 4 of Law No. 55-A/2012, of 29 October, with the following content:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable property value contained in the register, pursuant to the Property Tax Code (CIMI), is equal to or greater than €1,000,000 – on the taxable property value for IMI purposes:

28.1 – For property with residential use – 1%;

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

The provisions of Law No. 55-A/2012, of 29 October, regarding the new item 28 of the General Table of Stamp Tax, entered into force on the day following publication of the law, that is, 30 October 2012. Article 6 of Law No. 55-A/2012 provides for transitional provisions by virtue of which, in that first year of validity, that is, 2012: the tax event occurs on 31 October (when, in accordance with Article 8 of the CIMI, applicable by referral from No. 4 of Article 2 of the CIS, it would be on 31 December); the taxpayer of the tax is the owner of the property (No. 4 of Article 2 of the CIS) also on that 31 October; the taxable property value to be used in the assessment of the tax corresponds to what results from the rules provided for in the CIMI by reference to the year 2011; the assessment of the tax by the TA is effected by the end of November 2012; the tax shall be paid in a single installment by the taxpayers by 20 December of that year 2012.

According to the amendments to the Stamp Tax Code (CIS) introduced by Article 3 of Law No. 55-A/2012, of 29/10, the stamp tax provided for in item 28 of the General Table of Stamp Tax (GSTS) applies to a legal situation (No. 1 of Article 1 and No. 4 of Article 2 of the CIS), of which the respective taxpayers are those referred to in Article 8 of the CIMI (No. 4 of Article 2 of the CIS), to whom the tax liability falls (paragraph u) of No. 3 of Article 3 of the CIS).

Item 28.1 covers "properties with residential use," but this concept is not defined in any provision of the CIS, nor is it used in the Property Tax Code, the diploma to which No. 2 of Article 67 of the CIS expressly refers when matters not regulated in the CIS regarding item 28 are in question.

This matter has been the subject of examination in a very high number of proceedings, both in arbitral tribunals[1], and in administrative and tax courts, with there already being a considerable number of decisions rendered at the highest level[2] (Tax Contentious Section of the STA), with a great unanimity of positions being verified.

We cannot but agree with the assessment that has been made in those multiple decisions, which is why we will cite some excerpts from them, largely repeating argument also already used in previous cases we have decided.

Recall that, in summary, the Claimant argues that item 28 of the GSTS in referring to properties with residential use covers "built properties," properties that have already been given the purpose of housing, and not "land for construction," which may someday, if it arrives, be dedicated to that specific purpose.

In opposition, the TA considers that the meaning of the legislator not using the expression "properties intended for housing," but "residential use," must be found not in Article 6, No. 1, paragraph a) of the CIMI but in Article 45 of the CIMI, in the interpretation of the expression "residential use," a notion that is based on the valuation of properties. Article 45, No. 2, of the CIMI in requiring "...the value of authorized buildings" to be taken into account, refers to the use coefficient provided for in Article 41 of the CIMI, which would have to be taken into account for the purposes of applying item 28 of the GSTS.

Analyzing precisely this type of argument, it was said in the arbitral decision rendered in case 53/2013-T: "With regard to Article 45 of the CIMI, it has no relation to the classification of properties, only indicating the factors to be considered in the valuation of land for construction. What is weighed there, in making reference to the 'building to be constructed' is the consideration of the destination of the land, which, as was seen, is something that, in the context of the CIMI, does not imply dedication and occurs before it."[3]

Also arbitral decisions Nos. 158/2013-T and 288/2013-T rejected the TA's thesis on the application of the valuation methodology of properties in general to land for construction which makes the use coefficient provided for in Article 41 of the CIMI applicable to such property, as follows: "It is true that the CIMI determines the application, to the valuation of land for construction, of the valuation methodology applicable to constructed buildings, incorporating into the land value the estimated value of the building to be constructed; and that this value is determined, in turn, by the type of use provided for the properties to be built. Put in simpler terms, the law (CIMI) says that to determine the taxable property value of land for construction, the estimated value of the buildings to be constructed is incorporated into it; and to estimate the value of the buildings to be constructed, the use provided for them is taken into account. Contrary to what the TA maintains, it follows precisely from the wording of these provisions the inapplicability of the concept of 'dedication' to land for construction. The dedication that is taken into account, for valuation purposes, even of land for construction, is always and only the dedication of the buildings to be constructed. The dedication provided for the buildings to be constructed influences the taxable property value of the land for construction, but nothing more. From the rule concerning the determination of the value of properties which determines that, in the value of land for construction, the estimated value of the buildings to be built is incorporated, which, in turn, is influenced by the future dedication of those buildings, it cannot be inferred that the dedication in question is a dedication of the land itself, and this for two reasons: First, because this interpretation would be contrary to the very wording of the provisions which require that the dedication of the properties to be built be taken into account in the valuation of land for construction; And second, because the way in which the law requires a particular patrimonial reality to be valued cannot be determinative of the nature or legal qualification of that reality, with a view, above all, to the principle of typicity of tax scope rules. The fact that the law requires the same valuation methodology that is applied to one patrimonial reality to be applied to another different reality does not mean that the first reality becomes part of the nature of the second. Thus, if it is true that the value of authorized or planned buildings influences the actual value of construction land, and that value should therefore be reflected in the taxable property value of such land, it does not follow from this that land becomes residential use when it is planned that residential buildings be constructed on it, drawing this distinction clearly from the very valuation rules of the CIMI."

The TA's argument has also been rejected by the Supreme Administrative Court, with grounds that we reproduce here with an excerpt from the Judgment of 14 May 2014, rendered in case No. 0317/14 (being Reporter Councilor Isabel Marques da Silva): "From the wording of the law nothing unequivocal follows, indeed, since it itself in using a concept that it did not define and that was also not found defined in the diploma to which it referred subsidiarily, unnecessarily lent itself to equivocations, in a matter – of tax scope – in which certainty and legal security should also be paramount concerns of the legislator. And from its 'spirit,' discernible from the statement of reasons of the bill that is the origin of Law No. 55-A/2012 (Bill No. 96/XII – 2nd, Journal of the Republic Assembly, series A, No. 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing more follows than the concern to raise new tax revenues, from sources of wealth 'spared' in the past from the fiscal burden that labor income, in particular capital income, securities gains and property, reasons which make 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, however, arose – as reported in the Arbitral Decision rendered on 12 December 2013, in case No. 144/2013-T, available in the CAAD database – upon presentation and discussion in the Assembly of the Republic of that bill, in the words of the State Secretary for Tax Affairs, who expressly referred, as appears from the Journal of the Republic Assembly (DAR I Series No. 9/XII – 2, of 11 October, p. 32): 'The Government proposes the creation of a special tax on high-value residential urban properties. It is the first time that Portugal has created a special tax on high-value properties intended for housing. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses of value equal to or greater than 1 million euros' (underlined in original), from which it is apparent that the reality to be taxed with a view is, after all, and notwithstanding the terminological imprecision of the law, 'properties (urban) with residential use,' in common language 'houses,' and not other realities. The fact that in determining the taxable property value of urban properties classified as land for construction account should be taken of the dedication that the authorized or planned construction will have for determining its respective value of the construction area (cf. Nos. 1 and 2 of Article 45 of the CIMI), does not determine that land for construction can be classified as 'properties with residential use,' since 'residential dedication' always appears in the Property Tax Code referred to 'buildings' or 'constructions,' existing, authorized or planned, since only these can be inhabited, which does not occur in the case of land for construction, which do not have, in themselves, conditions for this, not being capable of being used for housing except if and when the construction authorized and planned for them is erected on them (but in that case they will no longer be 'land for construction' but another type of urban property – 'residential,' 'commercial, industrial or service' or 'other' – Article 6 of the CIMI). It would be strange, indeed, if the scope of the objective tax scope rule of item No. 28 of the General Table of Stamp Tax were to be found, ultimately, in the rules for determining the taxable property value of the Property Tax Code, and that the terminological imprecision of the legislator in the drafting of that rule were, after all, clarified and finally explained through an indirect and equivocal referral to the use coefficient established by the legislator in relation to built properties (Article 41 of the Property Tax Code). Thus, taking into account that land for construction – whatever the type and purpose of the building that will, or may be, erected on it – does not satisfy, by itself, any condition to be licensed as such or for housing to be defined as its normal destination, and the tax scope rule referring to Stamp Tax to urban properties with 'residential use,' without any specific concept being established for this purpose, cannot extract from it that it contains a future potentiality, inherent to a distinct property that might perhaps be built on the land. It is therefore concluded, in conformity with what was decided in the sentence under appeal that, resulting from Article 6 of the Property Tax Code a clear distinction between urban properties 'residential' and 'land for construction,' these cannot be considered as 'properties with residential use' for the purposes of the provisions of item No. 28.1 of the General Table of Stamp Tax, in its original wording, which was given to it by Law No. 55-A/2012, of 29 October."

This tribunal endorses the analyses contained in the reproduced excerpts.

And it is also considered that this interpretation is confirmed by the amendment, by the State Budget Law for 2014 (Law No. 83-C/2013, of 31 December), of the wording of item 28.1, which now reads: "For residential property or for land for construction whose building, authorized or planned, is for residential purposes, in accordance with the provisions of the Property Tax Code."

Indeed, this change in wording means that it was intended to change the text to encompass what previously was not included in it.

And if anyone had previously wanted to encompass the reality defended by the TA, such intent not only found no expression in the wording of the law but was contradicted by the historical element, through the account of parliamentary proceedings.

The statements of the State Secretary for Tax Affairs transcribed above are proof of this: the legislator in introducing this legislative innovation considered the expression of determining capacity to contribute to be urban properties with residential use, of high value (luxury), more rigorously, of value equal to or greater than €1,000,000.00 on which a special stamp tax rate began to apply, intending to introduce a principle of taxation on wealth manifested in ownership, usufruct or right of superficies of high-value urban properties with residential use.

For this reason, the criterion was the application of the new rate to urban properties "with residential use, whose TPV is equal to or greater than €1,000,000.00." (...)[4] "The justification for the measure designated as 'special tax on high-value residential urban properties' is based on the invocation of the principles of social equity and fiscal justice, calling to contribute in a more intense manner the holders of high-value properties intended for housing, making the new special tax apply to 'houses of value equal to or greater than 1 million euros. Clearly the legislator understood that this value, when attributed to a residential property (house, autonomous fraction or floor with independent use) translates a capacity to contribute above the average and, as such, capable of determining a special contribution to ensure just apportionment of the tax burden."

Now, if the legislator clearly revealed an intention to tax luxury houses dedicated to residential use, it is not possible to draw from the wording of the law, with the wording approved in 2012, the interpretation that maintains that the taxation covers land for construction of buildings, even if these are to be dedicated to housing.

Citing again the Judgment of the STA rendered in case No. 317/14: "'residential dedication' always appears in the Property Tax Code referred to 'buildings' or 'constructions,' existing, authorized or planned, since only these can be inhabited, which does not occur in the case of land for construction, which do not have, in themselves, conditions for this, not being capable of being used for housing except if and when the construction authorized and planned for them is erected on them (but in that case they will no longer be 'land for construction' but another type of urban property – 'residential,' 'commercial, industrial or service' or 'other' – Article 6 of the CIMI)."

Therefore, the wording given to item 28.1 with the State Budget for 2014 is clearly innovative, and the question of its application to earlier years does not arise, an effect which, moreover, the legislator did not attempt through the assignment to the new wording of an interpretive character.

14.2. Conclusion

Taking into account that the Claimant's property is classified as land for construction, it does not constitute a property with current residential use, and therefore the Stamp Tax provided for in item 28.1 of the GSTS does not apply to that property, in the wording in force at the time of the facts.

For this reason, the assessment whose declaration of illegality is requested in these proceedings suffers from the vice of violation of item No. 28.1, due to error as to the legal presuppositions, which justifies the declaration of its illegality and annulment (Article 135 of the CPA).

15. Bank Guarantee Unduly Provided

The Claimant requests recognition of compensation for undue provision of a bank guarantee provided with a view to suspending the tax execution proceedings initiated for non-payment of the assessed tax, acknowledging that the cost is not easy to determine at this time.

In the facts it was proven that a bank guarantee exists for a set of six proceedings, including proceedings ... initiated for collection of the tax that is the subject of these proceedings (11.7 and 11.6).

It follows from Nos. 1 to 3 of Article 53 of the LGT (with heading "guarantee in case of undue payment") that in the event of verification, in administrative appeal or appeal, that there was error attributable to the services in the assessment of the tax, the debtor who offered a bank guarantee or equivalent to suspend execution will be indemnified fully or partially for the prejudice resulting from its provision in proportion to the success in judicial appeal which has as its object the guaranteed debt, having as its maximum limit the amount resulting from the application to the guaranteed value of the indemnity rate of interest provided for in the LGT.

On this matter, Article 171 of the CPPT provides: "Compensation in case of bank guarantee or equivalent unduly provided shall be requested in the proceedings in which the legality of the debt to be executed is challenged."

In the case of these proceedings, it was concluded that the Respondent's services' interpretation was not correct when taxing the situation pursuant to item 28.1 of the GSTS, and it is also common ground that arbitral tribunals are competent to apply Article 53 of the LGT [5], and therefore the Claimant's right to be compensated for the cost of providing the guarantee is recognized[6].

But in the absence of elements that allow the determination of the amount of compensation, the condemnation must be effected with reference to what is to be liquidated in execution of this decision (Article 609 of the Code of Civil Procedure of 2013 and Article 565 of the Civil Code).

16. Decision

In accordance with and with the grounds set out above, the arbitral tribunal decides to judge the claim as founded:

  • Declaring the illegality, with the consequent annulment, of the stamp tax assessment effected pursuant to item No. 28 of the General Table of Stamp Tax and Article 6 of Law No. 55-A/2012, relating to the property with registration entry ..., from the parish of ..., Faro (document No. 2012 ...);

  • Recognizing the right to compensation for costs incurred with unduly provided guarantee to obtain the suspension of tax execution concerning the tax now annulled, in terms to be determined through liquidation in execution of judgment.

17. Value of the Case

In accordance with the provisions of No. 2 of Article 315 of the CPC, paragraph a) of No. 1 of Article 97-A of the CPPT and also No. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the case is assigned the value of € 8,362.77 (eight thousand three hundred sixty-two euros and seventy-seven cents).

18. Costs

For the purposes of the provisions of No. 2 of Article 12 and No. 4 of Article 22 of the RJAT and No. 4 of Article 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 918.00 (nine hundred eighteen euros), in accordance with Table I attached to said Regulation, to be borne entirely by the Respondent.

Lisbon, 10 November 2015

The Arbitrator

Maria Manuela Roseiro

[1] Within the scope of CAAD many decisions have been rendered, with over one hundred already published (CAAD website, tax case law).

[2] Cf. published at www.dgsi.pt, STA judgments (Tax Contentious Section), in 2014: 9 April (case nos. 1870/13 and 48/14); 23 April (case nos. 270/14; 271/14; 272/14); 14 May (case nos. 1871/13, 46/14; 55/14; 274/14; 317/14); 28 May (case nos. 395/14; 396/14 and 425/14); 2 July (case 467/14); 9 July (case 674/14); 29 October (529/14) and 2015: 14 January (541/14); 15 April (1481/14, 699/14 and 764/14); 2 May (1312/14 and 1387/14); 22 April (279/15 and 347/15); 29 April (21/15); 27 May (387/15); 17 June (1479/14); 8 July (573/15).

[3] The same decision also concluded that "it must be presumed that the use of a different expression is intended to express a different reality, and therefore, in sound interpretation, 'property with residential use,' cannot be a property merely licensed for housing or intended for that purpose (that is, it will not be sufficient that it be a 'residential property'), and must be a property that already has effective dedication to that purpose." And "That this is the meaning of the expression 'dedication,' in the same context of property classification that the CIMI makes, is confirmed by Article 3, in which, with regard to rustic properties, reference is made to those that 'are dedicated or, in the absence of concrete dedication, have as their normal purpose a use generating agricultural income,' which makes clear that dedication is concrete, effective. In fact, as seen from the final part of this text, a property may have as its purpose a particular use and be or not be dedicated to it, which makes clear that dedication, at the level of the link of a property to a particular use, is something more intense than mere purpose and which may or may not occur, downstream of this and not upstream of it.

[4] Arbitral Decision in case 219/2013-T and decisions cited there (cases 48/2013-T and 50/2013-T).

[5] Citing other CAAD decisions (e.g., cases 1/2013-T and 420/2015-T): "The request for constitution of the arbitral tribunal and for arbitral decision has as a corollary that it is in the arbitral proceedings that the legality of the debt to be executed will be discussed, and therefore, as results from the express wording of that No. 1 of the aforementioned Article 171 of the CPPT, it is also the arbitral proceedings that is appropriate to examine the claim for compensation for unduly provided guarantee. Moreover, the cumulation of claims relating to the same tax act is implicitly presupposed in Article 3 of the RJAT, when it speaks of 'cumulation of claims even if relating to different acts,' which makes it appear that the cumulation of claims is also possible regarding the same tax act and claims for compensation for indemnity interest and condemnation for unduly provided guarantee are capable of being covered by that formula, and therefore an interpretation in this sense has, at least, the minimum verbal correspondence required by No. 2 of Article 9 of the Civil Code."

[6] Taking into account, however, that: "The right to compensation for undue provision of guarantee does not, in any situation, entail the right to indemnity interest and/or interest on arrears, in accordance with Articles 43 and 102 of the LGT, being limited, solely, to the value corresponding to the costs actually incurred with the provision of the same, albeit still with the limit provided for in No. 3 of the aforementioned Article 53 of the LGT. (cf. Judgment of the STA of 30 March 2012, in case 013/11).

Frequently Asked Questions

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Does Verba 28 of the Portuguese Stamp Tax General Table apply to building land (terrenos para construção) before 2014?
The application of Verba 28 (Item 28) of the Portuguese Stamp Tax General Table to building land before 2014 was disputed. Law 55-A/2012, effective October 30, 2012, introduced stamp tax on urban properties with taxable values of €1,000,000 or more, referring to 'properties with residential use' without explicitly defining the term. Taxpayers argued that building land (terrenos para construção) did not qualify as property with residential use because it had only potential, not effective, residential use. The Tax Authority contended that building land constituted urban property under the Property Tax Code (CIMI) and that the use coefficient applied in valuation demonstrated residential use. This ambiguity was resolved by Law 83-C/2013 (State Budget 2014), which explicitly amended Item 28.1 effective January 1, 2014, to include building land, thereby acknowledging that the previous legislation's scope was unclear regarding such properties.
What was the legal basis for challenging the Stamp Tax assessment in CAAD Case 184/2015-T?
The legal basis for challenging the Stamp Tax assessment in CAAD Case 184/2015-T included: (1) Article 10(2) of Decree-Law 10/2011 (RJAT - Legal Framework for Tax Arbitration) establishing jurisdiction for arbitral tribunals to review tax acts; (2) substantive challenge to the legality of applying Item 28 of the General Stamp Tax Table to building land under Law 55-A/2012; (3) argument that the property constituted building land rather than property with residential use, referencing CIMI classifications; (4) claim that retroactive application of unclear legislation violated legal certainty principles; (5) request for compensation for undue payment under Article 53 of the General Tax Law (LGT) and Article 171 of the Tax Procedure Code (CPPT); and (6) claim for reimbursement of costs including bank guarantee expenses incurred to suspend tax enforcement proceedings. The challenge fundamentally rested on interpretive grounds regarding whether 'residential use' encompassed potential versus effective use.
How did the 2014 State Budget Law (Lei 83-C/2013) change Stamp Tax incidence on building land in Portugal?
Law 83-C/2013 (State Budget Law for 2014), through Article 194, explicitly amended Item 28.1 of the General Stamp Tax Table effective January 1, 2014, to expressly include building land (terrenos para construção) within the scope of stamp tax on high-value properties. This amendment clarified that stamp tax would apply to ownership, usufruct, or surface rights over urban properties for residential use or building land with taxable property values equal to or exceeding €1,000,000. The legislative change resolved the ambiguity that existed under Law 55-A/2012, which referred only to 'properties with residential use' without defining whether this encompassed building land. By explicitly mentioning building land alongside residential properties, the 2014 amendment demonstrated legislative acknowledgment that the previous wording did not clearly cover such properties, supporting taxpayer arguments that the pre-2014 legislation should not be interpreted to include building land with only potential, rather than effective, residential use.
Can a taxpayer claim compensation for undue tax payments under Article 53 of the LGT in arbitration proceedings?
Yes, taxpayers can claim compensation for undue tax payments under Article 53 of the General Tax Law (LGT) in arbitration proceedings before the Administrative Arbitration Centre (CAAD). Article 53 LGT establishes the right to compensatory interest on amounts paid in excess or unduly, calculated at the legal interest rate from the date of payment until reimbursement. Article 171 of the Tax Procedure Code (CPPT) further regulates compensation for damages resulting from unlawful tax acts. In CAAD Case 184/2015-T, the claimant sought not only declaration of illegality of the stamp tax assessment but also compensation including: (1) reimbursement of the tax amount paid (€8,362.77); (2) legal interest on that amount; and (3) costs incurred for the bank guarantee (estimated €1,587.52) provided to suspend enforcement proceedings, plus interest on those costs from the date incurred until the guarantee's release. Tax arbitration tribunals have jurisdiction under the RJAT to award such compensation when tax assessments are found unlawful.
What is the difference between building land and residential property for Portuguese Stamp Tax (Imposto de Selo) purposes?
For Portuguese Stamp Tax (Imposto de Selo) purposes, the distinction between building land (terrenos para construção) and residential property is critical, particularly regarding Item 28 of the General Stamp Tax Table. Building land, defined under Article 6(1)(e) of the Property Tax Code (CIMI), consists of urban land plots located within urbanized areas or designated for construction under territorial management instruments, without existing buildings. Residential property refers to urban buildings actually used or intended for housing (Article 6(1)(a) CIMI). The key difference for stamp tax purposes before 2014 centered on 'use': residential properties have effective or actual residential use, while building land has only potential or future use dependent on construction completion. Building land is valued using a use coefficient (residential, commercial, services) under CIMI Article 45(2), but this coefficient reflects potential, not actual, use. Prior to the 2014 amendment by Law 83-C/2013, which explicitly included building land in Item 28.1, taxpayers successfully argued that 'properties with residential use' under Law 55-A/2012 did not encompass building land because effective residential use requires actual habitability, not mere construction authorization or potential future use.