Process: 185/2015-T

Date: September 3, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 185/2015-T) addresses whether Stamp Tax (Imposto do Selo) under Item 28.1 of the General Stamp Tax Table (TGIS) applies to building land (terrenos para construção) classified for construction purposes. The taxpayer challenged a 2012 Stamp Tax assessment of €5,425.15 on property valued over €1 million, arguing the land was classified as 'land for construction' rather than residential property. The dispute centers on the interpretation of Item 28.1 TGIS in its pre-2014 wording, which taxed 'property with residential use' at 1% when the tax asset value exceeded €1 million. The taxpayer contended this provision could not apply to building land lacking residential use designation. The hierarchical appeal was dismissed, prompting arbitration proceedings under Decree-Law 10/2011 (RJAT framework). The taxpayer's key argument relied on subsequent legislative amendment through Law 83-C/2013 (State Budget 2014), which explicitly added 'land for construction whose building, authorized or foreseen, is for housing' to Item 28.1 effective January 1, 2014. The taxpayer argued this amendment proves the original wording excluded building land, and the change was substantive rather than interpretative, thus non-retroactive. The taxpayer invoked CAAD precedent (Decision 215/2013-T) establishing criteria for interpretative legislation requiring pre-existing doctrinal doubt, selection among disputed interpretations, and express interpretative intent. The case exemplifies the procedural path for challenging Stamp Tax assessments: administrative complaint, hierarchical appeal under Article 76 CPPT, and arbitration request under RJAT Articles 2 and 10(2). The taxpayer also sought compensation for undue guarantee provision per Articles 53 LGT and 171 CPPT. This decision provides critical guidance on TGIS Item 28.1 scope before 2014 reforms and the temporal application of tax law amendments affecting building land taxation.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Process no. 185/2015-T

Subject: Stamp Tax – item 28.1 of TGIS (land for construction)

I. REPORT

  1. "A…, Lda." (hereinafter referred to as "Applicant"), Tax Identification Number …, with registered office at Avenue …, no. … …, in Lisbon, having been notified of the dismissal of the hierarchical appeal (Hierarchical Appeal no. …2014…) filed pursuant to article 76, no. 1, of the Code of Tax Procedure and Process (CPPT), of the decision issued in the administrative complaint process no. …2013…, which had dismissed the request for annulment of the Stamp Tax (IS) assessment for the year 2012, relating to item 28.1 of the General Table of Stamp Tax (TGIS), effected on 07-11-2012, in the amount of €5,425.15 (five thousand, four hundred twenty-five euros and fifteen cents), presented on 17 March 2015, a request for constitution of a single arbitral tribunal and for an arbitral decision, in accordance with the combined provisions of articles 2 and 10, no. 2 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter only referred to as "RJAT") and of articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, in which the Tax and Customs Authority (AT) is required, with a view to the declaration of illegality and consequent annulment of the said assessment act and to the condemnation of the Respondent to pay compensation for the undue provision of guarantee, in accordance with articles 53 of the General Tax Law (LGT) and 171 of the CPPT.

  2. The Applicant chose not to appoint an arbitrator.

  3. The request for constitution of an arbitral tribunal was accepted by the President of CAAD and notified to AT on 24 March 2015.

  4. The Signatory was appointed by the President of the Deontological Council of CAAD as arbitrator of a single arbitral tribunal, in accordance with the provisions of article 6 of the RJAT, and communicated acceptance of the appointment within the applicable period.

  5. On 8 May 2015, the Parties were notified of this appointment and did not object to it, in accordance with the combined provisions of article 11, no. 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code of CAAD.

  6. Thus, in compliance with the provision of paragraph c) of no. 1 of article 11 of the RJAT, the single arbitral tribunal was constituted on 25 May 2015.

  7. The Respondent was notified, by arbitral order of 25 May 2015, to, in accordance with article 17, no. 1, of the RJAT and within 30 days, present its response and, if it so wished, request the production of additional evidence.

  8. On 29 June 2015, the Respondent presented its response, arguing for the dismissal of the claims.

  9. However, it did not submit a copy of the administrative file on which the assessment act was based.

  10. On the same date it requested waiver of the meeting referred to in article 18 of the RJAT.

  11. On 30 June 2015, the Applicant manifested its agreement with the waiver of the said meeting as well as final submissions.

  12. Considering that the Parties did not request the production of any evidence beyond that which the Applicant submitted with the request for arbitral decision, nor was any exception invoked, the Arbitral Tribunal, in light of the principles of autonomy in the conduct of the process, celerity, simplification and procedural informality, inherent in no. 2 of articles 19 and 29 of the RJAT, by order of 2 July 2015, waived the holding of the meeting provided for in article 18 of the same statute as well as the presentation of final submissions.

  13. The date of 3 September 2015 was also set for the pronouncement of the respective final arbitral decision.

  14. The Parties were notified of this order on 3 July 2015.

  15. On 9 July 2015 the Applicant made payment of the subsequent arbitration fee, cf. article 4, no. 3, of the Regulations of Costs in Tax Arbitration Proceedings.

II. PRELIMINARY MATTERS

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

  2. The Arbitral Tribunal is regularly constituted and is substantively competent to know and decide the claim, cf. article 2, no. 1, paragraph a) of the RJAT.

  3. The proceeding does not suffer from nullities.

III – MATTER OF FACT

1. Grounds

1.1. In the arbitral petition, the Applicant alleges:

a) "The aforementioned stamp tax assessment acts suffer from a vice of illegality, insofar as they violate the provision of article 99, paragraph a) of the Code of Tax Procedure and Process, with the grounds that shall be demonstrated below" (article 6 of the arbitral petition).

b) "The Applicant does not agree with the assessment of Stamp Tax on the aforementioned property. In fact, in the Applicant's understanding, item 28.1 of TGIS cannot be applied to article 22966 insofar as this is a piece of land for construction and not a property with residential use, as required by the wording of the norm at the date of the assessment now being challenged" (article 10).

c) "Item 28 of TGIS, in the wording in force until 31 December 2013, does not tax land for construction, but only:

'28. Ownership, usufruct or surface right of urban properties whose tax asset value recorded in the matrix, in accordance with the Code of Municipal Tax on Properties (CIMI), is equal to or greater than 1,000,000 – on the tax asset value used for IMI purposes:

28.1 For property with residential use – 1%'" (article 11).

d) "Now, while it is true that the aforementioned article 22966 at the date of the assessment had a tax asset value in excess of one million euros, it is also true that it did not meet the other essential requirement required by item 28.1 of TGIS to be taxed under Stamp Tax, which is residential use. Indeed, the article in question was classified as land for construction in the year in question and not as an urban property dedicated to housing" (article 12).

e) "Since the article in question consists of land for construction and not property with residential use, it cannot be subsumed under Item 28.1 of TGIS, in the wording in force at the date of the facts" (article 14).

f) "Land for construction only begins to be subsumed under Item 28 of TGIS from 1 January 2014, so any assessment prior to this date is illegal" (article 15).

g) "Article 194 of Law no. 83-C/2013, of 31 December, which approved the State Budget for 2014, contemplates an amendment to item 28.1 of TGIS, with the purpose of taxing land for construction, however it only entered into force on 1 January 2014" (article 16).

h) "(…) And the new wording is as follows:

'28.1 For residential property or land for construction whose building, authorized or foreseen, is for housing, in accordance with the provisions of the IMI Code – 1%'" (article 17).

i) "That is, the legislator itself recognizes, thus, that the rule of incidence did not allow, until 31 December 2013, the taxation of land for construction under Item 28.1 of TGIS, and amends the rule in order to tax also, from 1 January 2014, 'land for construction whose building, authorized or foreseen, is for housing, in accordance with the provisions of the IMI Code'" (article 18).

j) "As stated in the arbitral decision no. 215/2013-T, of 21 April 2014, 'and do not say that such legislative amendment assumes the legal nature of an interpretative rule, and, as such, retroactive. Indeed, as Oliveira Ascensão states, for a law to be interpretative it is necessary that (1) there is a doubt in doctrine and/or case law as to the meaning of the previous law; (2) that the later law chooses one of the interpretations in dispute, and (3) that the later law is intended to interpret the old law, and this purpose must result unequivocally from its text (…). None of the requirements are fulfilled in the concrete case. First of all, it is not an interpretative rule that can be integrated in the meaning and scope of the previous wording (at issue here) of item 28.1 of TGIS, because if it were an interpretative law, this would have to result from an express statement in the text or preamble of the statute, saying that it was an interpretative rule. A statement that the legislator did not make. In the absence of an express statement by the law itself, the interpretative character could still result 'from the text, when there is a manifest tacit reference of the new source to a doubtful normative situation that previously existed (…).

We are, therefore, in the understanding of this Court, faced with an innovative amendment to the norm of item 28.1 of TGIS, which implies that such amendment will only produce its effects from 2014 onwards'" (article 20).

k) "We fully share this opinion. From the wording of the law in force at the date of the facts, it could not be inferred that residential use comprised properties other than those dedicated to housing in the property matrix. And if it were not so, the legislator would not feel the need to amend the wording of the law to subsume land for construction under Item 28.1 of TGIS.

As it is a new law, in accordance with article 12 of the Civil Code, it can only be applied to tax periods that begin on or after its entry into force, that is, from 1 January 2014" (article 22).

l) "Thus, in light of such circumstance, the AT is prevented from applying the new wording of item 28.1 of TGIS to the tax assessed in previous years. The same may only be applied to tax facts occurring at an earlier date by virtue of the principle of non-retroactivity of tax law, enshrined in article 103, no. 3 of the Constitution of the Portuguese Republic" (article 23).

m) "Indeed, article 103, no. 3 of the Constitution provides that 'no one can be obliged to pay taxes that have not been created in accordance with the Constitution, that have a retroactive nature or whose assessment and collection are not made in accordance with the law'" (article 24).

n) "As already mentioned, given the principle of specific typicality, only urban properties of the type 'building with construction apt to serve as housing for persons' can be subject to the incidence of the rule, that is, only after submission of Form 1 of IMI to notify completion of works does the property come to be classified as urban property dedicated to housing" (article 47).

o) "Thus, since CIMI does not define what 'property with residential use' is, it seems to the Applicant that the legislator intended to refer to residential properties, in the sense of article 6 of CIMI and not land for construction" (article 48).

p) "Now, the explanatory statement of Law no. 55-A/2012, of 29 October, makes clear the legislative intention not to extend the scope of incidence to land for construction. The Government, when presenting to the Plenary of the Republic's Assembly the Bill 96-XII, would have said, through the voice of the State Secretary for Tax Affairs: 'First, the Government proposes the creation of a special tax to tax high-value urban residential properties. This is the first time in Portugal that a special tax on high-value properties intended for housing has been created. 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. With the creation of this additional tax, the fiscal effort required from these owners will be significantly increased in 2012 and 2013'" (article 50).

q) "The arbitral decision in the scope of Process no. 210/2014-T, of 30 July, concludes, with which it entirely agrees, 'This understanding, according to which the concept of "land for construction", for tax purposes, cannot be considered as "property with residential use", has been, moreover, consistently affirmed in multiple Arbitral Decisions, in addition to those already cited here (AD no. 48/2013-T, of 9/10/2013; AD no. 53/2013-T, of 2/10/2013; AD no. 180/2013-T, of 7/3/2014; AD no. 189/2013-T, of 20/3/2014; AD no. 288/2013-T, of 30/4/2014), as well as in various Judicial Decisions, such as, for example, the following: "Since the legislator did not define the concept of 'urban properties with residential use', and resulting from article 6 of the IMI Code - subsidiarily applicable to the Stamp Tax provided for in the new item no. 28 of the General Table - a clear distinction between 'urban residential properties' and 'land for construction', these cannot be considered, for purposes of the incidence of Stamp Tax (Item 28.1 of TGIS, in the wording of Law no. 55-A/2012, of 29 October), as urban properties with residential use." (Decision of the Supreme Administrative Court of 23/4/2014, proc. 271/14)'" (article 51).

r) "It is thus demonstrated that land for construction does not have residential use, for purposes of the application of item 28.1 of TGIS, and is therefore not susceptible to taxation under Stamp Tax under item 28.1, in the wording in force until 31 December 2013, so the Stamp Tax assessment now being challenged should be annulled as being illegal and the situation prior to the issuance of the same should be restored" (article 52).

s) "The Applicant did not pay the Stamp Tax assessed ex officio by the AT under the transitional rule provided for in article 6 of Law no. 55-A/2012, of 29 October, so the Finance Office of Lisbon – ...(the office competent at the date of the institution of the tax enforcement process) instituted the competent tax enforcement process, with a view to the forced collection of the tax" (article 54).

t) "In order, and with a view to suspending the tax enforcement process (Tax Enforcement Process no. ...2013...), the now Applicant provided suitable guarantee, as per a copy attached as document no. 3" (article 55).

u) "Article 53 of the LGT states that in case of error attributable to the services, the now Applicant is entitled to be compensated for the damages resulting from the provision of guarantee presented to suspend tax enforcement process, without dependence on the period for which it is to be maintained" (article 56).

v) "Now, article 171 of the CPPT states that 'compensation in the event of a bank guarantee or equivalent undue provided will be requested in the proceeding in which the legality of the enforceable debt is contested'.

No. 2 of the same article provides that 'compensation must be requested in the complaint, challenge or appeal or in the event of its ground being subsequent within 30 days after its occurrence'" (article 57).

w) "Therefore, the Applicant is entitled to compensation corresponding to the total costs incurred with the guarantee provided, plus interest at the legal interest rate calculated on those costs and counted from the dates on which they were incurred until the date when the guarantee is authorized to be released" (article 61).

Concludes, requesting that the illegality of the assessment act be declared, with the consequent annulment, as well as that the attribution of compensation for the undue provision of guarantee be determined.

1.2. In its response, the AT alleges, in summary, as follows:

a) "In the absence of any definition of the concepts of urban property, land for construction and residential use, under IS, one must resort to CIMI, in search of a definition that allows ascertaining the possible subjection to IS, in accordance with the provision of art. 67, no. 2 of the Stamp Tax Code in the wording given by Law no. 55-A/2012, of 29/10" (article 10 of the Response).

b) "In accordance with the said legal provision, to matters not regulated in the Code, relating to item no. 28 of TGIS, the provision of CIMI is subsidiarily applied" (article 11).

c) "The notion of use of urban property is found in the part relating to the valuation of properties, which is well understood since the valuation of the property (purpose) incorporates value to the property, constituting a distinguishing fact that is determining (coefficient) for purposes of valuation" (article 14).

d) "As results from the expression '…value of authorized buildings', contained in art. 45, no. 2 of CIMI, the legislator opted to determine the application of the valuation methodology of properties in general to the valuation of land for construction, being therefore applicable to them the use coefficient provided for in art. 41 of CIMI" (article 15).

e) "In this sense, see Decision no. 04950/11, of 14/02/2012, of the Administrative Court of the South: 'The regime for valuation of the tax asset value of land for construction is provided for in art. 45 of CIMI. The valuation model is the same as that for constructed buildings, although starting from the building to be constructed, taking as a basis its respective project, the value of land for construction corresponds, fundamentally, to a legal expectation, embodied in a right to be able to construct thereon a property with certain characteristics and a certain value. It will be this expectation of production of wealth materialized in a property to be constructed that increases the value of the assets and the wealth of the owner of the land for construction, as soon as the property in question comes to be considered as land for construction. For that reason, the greater the value of the property to be constructed, the greater is the value of the land for construction underlying it (cf. Art. 6, no. 3 of CIMI), (article 16).

f) "In conclusion, in the valuation of land for construction the legislator wanted the methodology of valuation of urban properties in general to be applied, thus all coefficients should be taken into account, above identified, namely the use coefficient provided for in art. 41 of CIMI, further resulting such legal requirement from no. 2 of art. 45 of CIMI, by referring to the value of authorized or foreseen buildings on the same land for construction" (article 17).

g) "Contrary to what is argued by the Applicant, the AT understands that the concept of 'properties with residential use', for purposes of the provision of item 28 of TGIS, comprises both built properties and land for construction, starting with the literal element of the rule" (article 19).

h) "Note that the legislator does not refer to 'properties intended for housing', having opted for the notion of 'residential use' - an expression different and broader, whose meaning must be found in the need to integrate other realities beyond those identified in art. 6, no. 1, paragraph a) of CIMI" (article 20).

i) "The mere constitution of a right of potential construction immediately increases the value of the property in question, hence the rule contained in art. 45 of CIMI which orders the separation of the two parts of the land" (article 21).

j) "The AT understands that the provision of item 28 of TGIS does not constitute a violation of any constitutional command" (article 30).

k) "Item 28 of TGIS applies to the ownership, usufruct or surface right of urban properties with residential use, whose tax asset value recorded in the matrix, in accordance with CIMI, is equal to or greater than €1,000,000.00, that is, it applies to the value of the property" (article 31).

l) "The different aptitude of properties (housing/services/commerce) sustains the different treatment, having constituted an option of the legislator, for political and economic reasons, to exclude from the incidence of IS the properties intended for purposes other than housing" (article 36).

m) "It is also important to note that taxation under stamp tax obeys criteria of adequacy, applying equally to all holders of properties with residential use worth more than €1,000,000.00, applying to the wealth embodied and manifested in the value of the properties" (article 37).

n) "Thus, the option for this mechanism of obtaining revenue is justified, which would only be subject to criticism, in light of the principle of proportionality, if it resulted in manifestly indefensible" (article 39).

o) "Which does not occur since such measure will apply equally to all holders of properties with residential use worth more than €1,000,000.00" (article 40).

Concludes, arguing for the dismissal of the request for declaration of illegality and consequent annulment of the assessment, absolving the AT of the claim.

2. Proven facts

The following facts are deemed proven:

a) The Applicant has registered in its name the urban property recorded in the urban property matrix of the parish of Albufeira and Olhos de Água, municipality of Albufeira, under article … (previously recorded in the parish of Albufeira under article …), cf. doc. no. 2.

b) The property is recorded in the matrix with the following description: "Type of Property: Land for Construction".

c) The property, at the time, had a tax asset value of €1,085,030.00.

d) Based on the provision of item 28.1 of the General Table of Stamp Tax (TGIS), the AT assessed the stamp tax for 2012, which is the origin of the assessment in question, in the amount of €5,425.15, cf. doc. no. 1.

e) To suspend the tax enforcement process no. ...2013..., in accordance with article 169 of the CPPT, the Applicant provided a bank guarantee through Banco Espírito Santo (Bank Guarantee N…), cf. doc. no. 3.

3. Unproven facts

There are no facts relevant to the decision of the case that have not been proven.

4. Grounds for determining the matter of fact

The facts were deemed proven on the basis of documents submitted with the request for arbitral decision, as the Tax and Customs Authority did not submit the administrative file.

There is no controversy over the matter of fact.

IV – MATTER OF LAW

Questions to be decided

Regarding the illegality of the assessment impugned

Regarding the non-retroactivity of the amendment to item 28 of TGIS

Regarding compensation for undue guarantee

Regarding the illegality of the assessment impugned

To determine whether "the concept of land for construction, for tax purposes, [can or cannot] be considered property dedicated to housing, under the provision of article 1, no. 1, of the Stamp Tax Code and the same Item 28".

Although the AT states, in article 3 of its response, that "[the now applicant] further alleges that the interpretation underlying the assessments impugned, according to which land for construction are properties with residential use, suffers from unconstitutionality due to violation of the principles of legality and equality enshrined in the Constitution of the Portuguese Republic." However, reading the Applicant's petition, it is verified that it does not invoke, at any moment, such a vice of unconstitutionality, so the (alleged) question will not be dealt with here.

Let us see, then.

At the origin of the disputed question (above identified) is item no. 28 of TGIS, added by article 4 of Law no. 55-A/2012, of 29/10, which provided the following (note that, in the meantime, the wording of no. 1 of this item was amended by Law no. 83-C/2013, of 31/12):

"28 – Ownership, usufruct or surface right of urban properties whose tax asset value recorded in the matrix, in accordance with the Code of Municipal Tax on Properties (CIMI), is equal to or greater than €1,000,000.00 – on the tax asset 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, listed in the Ordinance approved by the Minister of Finance – 7.5%."

Law no. 55-A/2012, which entered into force on 30/10/2012, did not proceed to qualify the concepts contained in the said item no. 28, in particular, the concept of 'property with residential use'. However, observing what is provided in article 67, no. 2, of the Stamp Tax Code (CIS), also added by the cited Law no. 55-A/2012, it is verified that 'to matters not regulated in this Code relating to item 28 of the General Table, the provisions of CIMI are subsidiarily applied.' In case of doubt as to the scope of the said item, it is therefore justified to observe what CIMI says.

From reading CIMI, it is apparent that the concept of 'property with residential use' seems to refer to the concept of 'urban property' (see article 2 and, particularly, article 4).

Now, among the species of 'urban properties' (article 6), there are expressly mentioned 'urban residential properties' [see no. 1, para. a)] and 'land for construction' [see no. 1, para. c)]. Nos. 2 and 3 of the said article of CIMI specify that the former "are buildings or constructions licensed for such purpose or, in the absence of a license, which have such purpose as their normal destination" and that the latter are "plots of land located within or outside an urban agglomeration for which a license or authorization has been granted, prior notice admitted or favorable prior information issued for subdivision or construction operations, and also those that have been declared as such in the acquisition title, except for land where the competent entities prohibit any of such operations, namely those located in green areas, protected areas or that, in accordance with municipal spatial planning plans, are assigned to spaces, infrastructure or public facilities."

However, from reading the provisions of CIMI (see articles 2, 4 and 6), the (specific) concept of 'property with residential use' is not apparent in the classification of 'properties'. Thus, in the absence of exact terminological correspondence of the concept of 'property with residential use' with another used in this and other statutes, only interpretive hypotheses can be ventured, in light of the provision of article 9, no. 1, of the Civil Code.

This was done, for example, in Arbitral Decision no. 231/2013-T, of 3/2/2014: "The starting point for the interpretation of that expression 'properties with residential use' is, naturally, the text of the law, and it is on the basis of it that the 'legislative thought' must be reconstructed, as required by no. 1 of article 9 of the Civil Code, applicable by virtue of the provision of article 11, no. 1, of the LGT".

In this context, the two possible interpretations were tested: 1) that the concept in question ('properties with residential use') refers to 'residential properties'; 2) that such concept refers to a concept different from that of 'residential properties'.

As to the first of the hypotheses, it is concluded here, as in the said Decision, with which it agrees, that, "if it is understood that the expression 'property with residential use' coincides with the [concept] of 'residential properties', it is manifest that the assessments will suffer from error as to the factual and legal presuppositions, as all properties for which Stamp Tax was assessed under the said item no. 28.1 are land for construction, without any building or construction required by that no. 2 of article 6 to fulfill that concept of 'residential properties'. Therefore, adopting the interpretation that 'property with residential use' means 'residential property', the assessments whose declaration of illegality is sought will be illegal, because there is no building or construction in any of the plots."

In summary, from this it follows that: either the terms of the expression used in item no. 28.1 of TGIS coincide with that extracted from no. 2 of article 6 of CIMI - and then the assessments made with that justification are illegal for the reasons already mentioned above -, or the said terms are not coincident. In the latter case, it must be concluded that a concept other than that of 'residential properties' was intended to be used.

But what concept would that be?

This is, therefore, the investigation underlying the second hypothesis dealt with in the said Decision, which concluded that, there being no coherent sense in item no. 28.1, only the route of interpretation of the legal text remained, framed by article 9, no. 3, of the Civil Code: "The recognized lack of coherence of Stamp Tax is particularly exuberant in the case of this item no. 28.1, hastily included at the margin of the General State Budget by a tax legislator without perceptible overall tax guidance, which successively implements successive norms of fiscal aggravation in accordance with the vicissitudes of budget execution, the impositions of international institutional creditors (represented by the 'troika') and the supervision of the Constitutional Court. [...]. In this context, there being no safe interpretive elements that allow detecting legislative coherence in the solution adopted in the said item no. 28.1 or the rightness or wrongness of the solution adopted (relevant for interpretive purposes in the face of no. 3 of article 9 of the Civil Code), the content of the legal text must be the primary element of interpretation, in conformity with the presumption, imposed by the same no. 3 of article 9, that the legislator knew how to express its thought in adequate terms."

Now, as the cited Decision well continues, "in the face of those meanings of the words 'use' and 'use', which are 'give destination' or 'apply', the formula used in that item no. 28.1 of TGIS manifestly encompasses properties to which a destination for housing has already been given, properties that are already applied to housing purposes, so it is important to inquire whether it will also encompass properties which, although not yet applied to housing purposes, are intended for these, in particular in a subdivision license. To do so, it will be necessary to clarify when it can be understood that a property is used for housing purposes, in particular whether it is when this destination is fixed for it in a subdivision license or act of licensing or similar, or only when the actual assignment of this destination is concretized. [...]. The text of the law, by adopting the formula 'property with residential use', instead of 'urban properties with residential use', which appears in the [...] 'Explanatory Statement', points strongly to the fact that the residential use already needs to be realized, as only then will the property have this use."

The fact is that, in the present case - as was the case in the case underlying the Decision that has been frequently cited -, "we are faced with a reality even more distant in relation to residential use than that of not even having any building or construction and, therefore, not being able to consider existing a use that presupposes its existence. On the other hand, as the Claimant well refers [and the now applicant, in the very same terms], the legislative intention not to extend the scope of incidence to land for construction was expressly stated by the Government when presenting to the Plenary of the Assembly of the Republic the Bill 96-XII by saying, through the voice of the State Secretary for Tax Affairs: 'First, the Government proposes the creation of a special tax to tax high-value urban residential properties. This is the first time in Portugal that a special tax on high-value properties intended for housing has been created. 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. With the creation of this additional tax, the fiscal effort required from these owners will be significantly increased in 2012 and 2013'. The express reference to 'houses' as the target of the incidence of the new tax leaves no room for doubt about the legislative intention. On the other hand, there is no reference in the discussion of the said Bill to 'land for construction'."

Indeed, as the applicant also argues, rightly, it follows "from the presentation of bill no. 96-XII [that] what was proposed to the deputies and they approved was the creation of a taxation of luxury real estate, in which land for construction is not included, or, in the clearer words of the SEAF, a special taxation of high-value properties intended for housing and a special taxation that will apply to properties worth equal to or greater than 1 million euros, that is, a taxation of residential properties referred to in no. 2 of art. 6 of CIMI."

Note, finally, what refers, with clarity and correctness, Arbitral Decision no. 49/2013-T, of 18/9/2013: "Land for construction - whatever the type and purpose of the building that will be, or may be, erected on it - does not, by itself, satisfy any condition to be licensed as such or to be able to be defined as having housing as its normal destination. Since, then, the rule of incidence of stamp tax refers to urban properties with 'residential use', without any specific concept being established for this purpose, cannot it be extracted from it that it contains a future potentiality, inherent to a distinct property that may possibly be built on the land."

This interpretation has been defended by the case law of this Arbitral Tribunal, peacefully and consistently, in accordance with decisions rendered in numerous cases[1], in addition to those referred to in article 53 of the arbitral petition, as well as in many others.

As well as by the Supreme Administrative Court[2].

In the name of the principles of economy and procedural celerity and for a matter of procedural authenticity and reliability, the arguments contained in the ruling of the Supreme Administrative Court, of 23/04/2014, rendered in case no. 272/14, available at www.dgsi.pt are transcribed here:

"4.3 The question that is the subject of this appeal consists of knowing the scope of incidence of item 28.1 of the General Table of Stamp Tax in the wording given to it by Law no. 55-A/2012 of 29.10, namely knowing whether in that rule land for construction should be included and, specifically, whether land for construction with tax asset value equal to or greater than €1,000,000 are subsumed, or not, under the species of urban properties 'with residential use.'

The convicted sentence considered that in the face of the literal content of item no. 28.1, it is to exclude from the scope of the incidence of Stamp Tax provided therein land for construction that does not yet have any type of use defined, since it is not yet applied nor intended for housing purposes.

Moreover, it considered that land for construction that does not have defined use cannot be considered properties with residential use, as they do not yet have any use or any other destination than the construction of unknown type.

In this context, it concluded that the syndicated assessment suffers from error as to the factual and legal presuppositions, as the property for which Stamp Tax was assessed under the said item no. 28.1 is land for construction, without any building or construction required to fulfill that concept of 'residential properties'.

Against this decision, the Public Treasury objects, claiming that the concept of 'properties with residential use' for purposes of the provision of item no. 28 of TGIS comprises both built properties and land for construction, since the legislator does not refer to 'properties intended for housing' but has opted for the notion of 'residential use', an expression that it considers different and broader, integrating other realities beyond those identified in art. 6 no. 1 para. a) of CIMI.

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

From the outset it will be stated that the appeal does not merit approval and that the sentence that decided thus should be confirmed.

Indeed, the question raised in these terms is, in all presuppositions of fact, identical to the question that was examined and decided in this Supreme Administrative Court in date recent, by rulings of 09.04.2014, rendered in the cases 1870/13 and 48/14, in which the present relator had intervention as deputy, in which it was decided that 'land for construction' cannot be considered, for purposes of the incidence of Stamp Tax provided for in Item 28.1 of the respective General Table (in the wording of Law no. 55-A/2012, of 29 October), as urban properties with residential use.

This is case law that is also received here, by the fact that we fully agree with its respective grounds, whereby we will simply limit ourselves to reproducing what was said on the question in the said Ruling 1870/13:

'The concept of 'urban property with residential use' was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the IMI Code, to which no. 2 of article 67 of the Stamp Tax Code (also introduced by that Law), refers subsidiarily. And it is a concept that, probably due to its imprecision – a fact all the more serious since it is a function of it that the scope of the objective incidence of the new taxation is defined -, had a short life, as it was abandoned when Law no. 83-C/2013, of 31 December, on the State Budget for 2014, entered into force, which gave new wording to that item no. 28 of the General Table, and which now defines its objective scope of incidence through the use of concepts that are legally defined in article 6 of the IMI Code.

This amendment - to which the legislator did not attribute an interpretative character, nor do we think it did -, only makes unequivocal for the future that land for construction whose building, authorized or foreseen, is for housing is encompassed in the scope of item 28.1 of the General Table of Stamp Tax (provided that its respective tax asset value is equal to or greater than 1 million euros), nothing clarifying, however, with respect to past situations (assessments of 2012 and 2013), such as the one that is in question in these proceedings.

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 its intention has been, ab initio, to encompass in its objective scope of incidence land for construction for which construction of residential buildings has been authorized or foreseen, as now results unequivocally from item 28.1 of the General Table of Stamp Tax.

From the letter of the law, nothing unequivocal results, moreover, as it itself, by using a concept that it did not define and that was also not defined in the statute to which it referred subsidiarily, lent itself, unnecessarily, to equivocations, in a matter – of tax incidence - in which certainty and legal security should also be paramount concerns of the legislator.

And from its 'spirit', apprehensible in the explanatory statement of the bill that is at the origin of Law no. 55-A/2012 (Bill no. 96/XII – 2nd, Journal of the Republic's Assembly, series A, no. 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing more results than the concern to obtain new tax revenue, from sources of wealth 'less spared' in the past from the voracity of the Tax Authority than labor income, in particular capital income, securities gains and property, reasons which provide no relevant contribution to the clarification of the concept of 'urban properties with residential use', as they take it as established, without any concern to clarify it. Such clarification would, however, have arisen - as informed in the Arbitral Decision rendered on 12 December 2013, in case no. 144/2013-T, available in the CAAD database -, when the said bill was presented and discussed in the Assembly of the Republic, in the words of the State Secretary for Tax Affairs, who is said to have stated expressly, as collected from the Journal of the Republic's Assembly (DAR I Series 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 in Portugal that a special tax on high-value properties intended for housing has been created. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to properties worth equal to or greater than 1 million euros" (underlines ours), from which it is gathered that the reality to be taxed that was in mind is, ultimately, and despite the terminological imprecision of the law, 'urban residential properties', in common language 'houses', and not other realities.

The fact that it can be considered that in determining the tax asset value of urban properties classified as land for construction, account should be taken of the use that the building authorized or foreseen for it will have for determining the respective value of the implantation area (cf. nos. 1 and 2 of article 45 of CIMI), does not determine that land for construction can be classified as 'properties with residential use', as the 'residential use' always appears in the IMI Code referred to 'buildings' or 'constructions', existing, authorized or foreseen, as only these can be inhabited, which does not occur in the case of land for construction, which do not have, in themselves, conditions for such, not being susceptible of being used for housing unless and when the construction authorized and foreseen for them is built thereon (but in that case they will no longer be 'land for construction' but another species of urban properties – 'residential', 'commercial, industrial or for services' or 'others' – article 6 of CIMI).

It would be strange, moreover, if the determination of the scope of the rule of tax incidence of item no. 28 of the General Table of Stamp Tax was to be found, after all, in the rules for determining the tax asset value of the IMI Code, and that the terminological imprecision of the legislator in the wording of that rule was, after all, elucidated and finally clarified by means of a referral, indirect and equivocal, to the use coefficient established by the legislator in relation to constructed properties (article 41 of the IMI Code).

Thus, given that land for construction – whatever the type and purpose of the building that will be, or may be, erected on it – does not, by itself, satisfy any condition to be licensed as such or to be able to be defined as having housing as its normal destination, and the rule of tax incidence of stamp tax refers to urban properties with 'residential use', without any specific concept being established for this purpose, cannot it be extracted from it that it contains a future potentiality, inherent to a distinct property that may possibly be built on the land.

It is concluded therefore, in accordance with what was decided in the sentence under appeal that, resulting from article 6 of the IMI Code a clear distinction between 'residential' urban properties and 'land for construction', these cannot be considered as 'properties with residential use' for purposes of the provision of item no. 28.1 of the General Table of Stamp Tax, in its original wording, which was given by Law no. 55-A/2012, of 29 October'. (end of quotation).

It is this case law that is here adopted and reiterated, taking into account the rule contained in no. 3 of art. 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 the law, and the appellant does not put forward new grounds that undermine such jurisprudential orientation".

Regarding the non-retroactivity of the amendment to item 28 of TGIS

As stated before, article 194 of Law no. 83-C/2013, of 31 December, which approved the State Budget for 2014, with the purpose of taxing land for construction under stamp tax, amended the wording of item 28.1 of TGIS as follows:

"28.1 — For residential property or land for construction whose building, authorized or foreseen, is for housing, in accordance with the provisions of the IMI Code — 1 %".

Such amendment entered into force on 1 January 2014, cf. article 260 of the said law.

Thus, in light of the principle "tempus regit actus" inherent in article 12, no. 1, of the General Tax Law, according to which "tax rules apply to facts subsequent to their entry into force, and no retroactive taxes can be created" as well as the provision of article 103, no. 3, of the Constitution of the Portuguese Republic, which prohibits retroactivity in the application of taxes, the new wording of the said rule applies to tax periods that begin on or after its entry into force, that is, from 1 January 2014.

On this matter, accompanying the arbitral decision rendered in Case no. 215/2013-T, of 21 April 2014, we proceed to transcribe it:

"and do not say that such legislative amendment assumes the legal nature of an interpretative rule, and, as such, retroactive. Indeed, as Oliveira Ascensão states, for a law to be interpretative it is necessary that (1) there is a doubt in doctrine and/or case law as to the meaning of the previous law; (2) that the later law chooses one of the interpretations in dispute, and (3) that the later law is intended to interpret the old law, and this purpose must result unequivocally from its text (…). None of the requirements are fulfilled in the concrete case. First of all, it is not an interpretative rule that can be integrated in the meaning and scope of the previous wording (at issue here) of item 28.1 of TGIS, because if it were an interpretative law, this would have to result from an express statement in the text or preamble of the statute, saying that it was an interpretative rule. A statement that the legislator did not make. In the absence of an express statement by the law itself, the interpretative character could still result 'from the text, when there is a manifest tacit reference of the new source to a doubtful normative situation that previously existed (…).

We are, therefore, in the understanding of this Court, faced with an innovative amendment to the norm of item 28.1 of TGIS, which implies that such amendment will only produce its effects from 2014 onwards".

Regarding compensation for undue guarantee

The Applicant also petitions for compensation for the costs incurred with the provision of a bank guarantee in order to obtain, in accordance with article 169 of the CPPT, the suspension of the tax enforcement process identified by the number ...2013..., relating to the forced collection of the tax debt to which the present arbitral decision refers.

In accordance with the provision of no. 1 of article 53 of the General Tax Law, the debtor who, to suspend enforcement, offers a bank guarantee or equivalent will be compensated totally or partially for the damage resulting from its provision, if it has maintained it for a period exceeding three years in proportion to the success in administrative appeal, challenge or opposition to enforcement which have as object the debt guaranteed.

As results from no. 2 of the cited article, all damages incurred with the provision of guarantees provided to suspend enforcement are compensated, without dependence on the said period, in the event of total success in proceedings in which there has been an error attributable to the services in the assessment of the tax[3].

However, in accordance with no. 3 of the same article, the amount of compensation for undue guarantee is subject to a maximum limit equivalent to the amount resulting from the application to the guaranteed value of the indemnificatory interest rate provided for in article 43, no. 4, of that law.

On the other hand, article 171 of the CPPT establishes that "compensation in the event of a bank guarantee or equivalent undue provided will be requested in the proceeding in which the legality of the enforceable debt is contested" and that "compensation must be requested in the complaint, challenge or appeal or in the event of its ground being subsequent within 30 days after its occurrence"

The judicial challenge proceeding, in which the legality of the tax act is decided, constitutes, therefore, the appropriate procedural means to submit a request for compensation for undue guarantee.

In accordance with reiterated arbitral case law, "The request for constitution of the arbitral tribunal has as a corollary that it will be in the arbitral proceeding that the 'legality of the enforceable debt' will be discussed, so that, as results from the express content of that no. 1 of the said article 171 of the CPPT, the arbitral proceeding is also the appropriate one to examine the request for compensation for undue guarantee."[4]

In the case at hand, the error underlying the stamp tax assessment acts is exclusively attributable to the Tax Administration, and the Applicant is entitled to the petitioned compensation.

Notwithstanding the fact that the Applicant indicates, in the initial petition, that the costs incurred with the provision of the guarantees in question amounted, then, to €1,029.87, this Tribunal does not have elements that allow it to fix the exact value of the petitioned compensation.

Indeed, the value of the compensation due under the cited rules must be calculated on the basis of the costs actually incurred with the guarantees provided from the date on which they were constituted until the day on which they are released, with the maximum limit provided for in article 53, no. 3, of the LGT.

Under these circumstances, this Tribunal being unable to quantify the exact costs of the guarantees provided, as well as to ascertain that maximum limit, the condemnation must be effected with reference to what comes to be assessed in execution of the present decision (articles 609 of the Code of Civil Procedure and 565 of the Civil Code).

V – DECISION

In light of the foregoing, it is decided:

· To judge the request for declaration of illegality of the Stamp Tax (IS) assessment for the year 2012, relating to item 28.1 of the General Table of IS (TGIS), effected on 07-11-2012, in the amount of €5,425.15 as meritorious and, in consequence, to annul the impugned assessment;

· To judge the Applicant's request as to the right to payment of compensation for provision of guarantee to suspend the tax enforcement process no. ...2013... as meritorious, and to condemn the Tax and Customs Authority to pay to the Applicants the compensation that comes to be assessed in execution of the present ruling.

Value of the case

In accordance with the provision of article 306, no. 2, of the Code of Civil Procedure, 97-A, no. 1, paragraph a), of the Code of Tax Procedure and Process and 3, no. 2, of the Regulations of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €6,455.02.

Costs

In accordance with article 22, no. 4, of the Legal Framework for Arbitration in Tax Matters, the amount of costs is fixed at €612.00, in accordance with Table I attached to the Regulations of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Notify.

Lisbon, 03-09-2015

The Arbitrator,

(Rui Ferreira Rodrigues)

Text prepared by computer, in accordance with the provision of article 131, no. 5, of the Code of Civil Procedure, applicable by referral from article 29, no. 1, paragraph e), of the Legal Framework for Arbitration in Tax Matters.

[1] Proc.s no.s 42/2013-T, 48/2013-T, 49/2013-T, 53/2013-T, 180/2013-T, 189/2013-T, 202/2014-T, 210/2014-T, 516/2014-T, 523/2014-T, 586/2014-T, 599/2014-T, 757/2014-T.

[2] Rulings of 09-04-2014 (P. 1870/13); 09-04-2014 (P. 48/14); 23-04-2014 (P. 270/14, 271/14 and 272/14); 14-05-2014 (P. 1871/13, 55/14 and 0317/14); 28-05-2014 (P. 395/14); 09-07-2014 (P. 0676/14); 10-09-2014 (P. 0707/14, 0708/14 and 0740/14); 24-09-2014 (P. 01533/13, 0739/14 and 0825/14); 08-10-2014 (P. 0805/14 and 0806/14); 05-11-2014 (P. 0530/14); 14-01-2015 (P. 0541/14); 22-04-2015 (P. 0279/15 and 0347/15) and 29-04-2015 (P. 021/15).

[3] The concept of error attributable to the services is clarified in no. 2 of art. 43 of the LGT, concerning indemnificatory interest.

[4] See, among others, Arbitral Decisions of 14.5.2013, Proc. 1/2013 and of 02.04.2014, Proc. 224/2013-T

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS apply to building land (terrenos para construção)?
Under the pre-2014 wording of Item 28.1 TGIS, Stamp Tax did not apply to building land (terrenos para construção). The provision taxed only 'property with residential use' valued over €1 million at 1%. Building land classified for construction purposes without completed residential use did not meet this requirement. The 2014 amendment through Law 83-C/2013 (State Budget 2014) explicitly added 'land for construction whose building, authorized or foreseen, is for housing' to Item 28.1, effective January 1, 2014. This legislative change demonstrates that the original provision excluded building land, and the amendment was substantive rather than interpretative, meaning it applies prospectively only from 2014 forward.
What are the legal grounds for challenging a Stamp Tax assessment on building land in Portugal?
Legal grounds for challenging a Stamp Tax assessment on building land include: (1) violation of Article 99(a) CPPT regarding assessment legality; (2) misapplication of Item 28.1 TGIS to property lacking 'residential use' classification; (3) improper extension of tax incidence beyond statutory wording; (4) non-retroactive application of 2014 legislative amendments that first included building land. The challenge procedure involves filing an administrative complaint, followed by hierarchical appeal under Article 76 CPPT, and if unsuccessful, arbitration request under RJAT Articles 2 and 10(2). Taxpayers can invoke precedent establishing that legislative amendments expanding tax scope are substantive, not interpretative, and therefore apply only prospectively.
How does CAAD tax arbitration work for disputes involving Imposto do Selo liquidation?
CAAD tax arbitration for Stamp Tax disputes follows the Legal Framework for Arbitration in Tax Matters (RJAT - Decree-Law 10/2011). The taxpayer files an arbitration request after hierarchical appeal dismissal, pursuant to RJAT Articles 2 and 10(2) and Ordinance 112-A/2011. The process includes: appointment of arbitrator(s) by CAAD's President or Deontological Council; tribunal constitution within specified timeframes; notification to the Tax Authority (AT) to respond within 30 days under Article 17 RJAT; optional hearing under Article 18; and final decision issuance. Parties may waive hearings and final submissions by mutual agreement. The arbitration fee is payable per Article 4(3) of the Costs Regulations. The tribunal examines assessment legality, administrative file documentation, and applicable law interpretation.
Can a taxpayer claim compensation for undue guarantee provision under Article 53 LGT in Stamp Tax cases?
Yes, taxpayers can claim compensation for undue guarantee provision under Article 53 LGT (General Tax Law) and Article 171 CPPT in Stamp Tax cases. When a tax assessment is annulled and the taxpayer provided a guarantee (bank guarantee, pledge, or other security) to suspend collection during appeal, they are entitled to compensation for costs incurred. Article 53 LGT establishes the State's obligation to indemnify taxpayers for damages from illegal acts, including undue guarantee provision costs. The claim is typically included in the arbitration request alongside the annulment petition. Compensation covers guarantee commission fees, banking costs, and related financial charges for the guarantee period. The taxpayer must demonstrate the guarantee was provided, the assessment was illegal, and specific costs were incurred.
What is the procedure for filing a hierarchical appeal and subsequent arbitration request against a Stamp Tax assessment?
The procedure involves three stages: (1) Administrative complaint - file a reclamação graciosa against the Stamp Tax assessment under CPPT provisions; (2) Hierarchical appeal - if the complaint is dismissed, file a recurso hierárquico under Article 76(1) CPPT within the legal deadline; (3) Tax arbitration - upon hierarchical appeal dismissal, file an arbitration request with CAAD within the statutory period under RJAT Articles 2 and 10(2) and Ordinance 112-A/2011. The arbitration request must specify the contested act, legal grounds for annulment, evidence, and relief sought (assessment annulment and potential guarantee compensation). The taxpayer may choose to appoint an arbitrator or accept CAAD appointment. Deadlines are strict and jurisdictional; failure to observe them results in preclusion.