Process: 189/2016-T

Date: December 7, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration process 189/2016-T addressed whether Stamp Tax under clause 28.1 of the General Stamp Tax Table (TGIS) applies to buildings in vertical property ownership based on aggregate or individual unit values. The claimant challenged assessments on two residential buildings containing multiple divisions with independent use, arguing that tax authorities incorrectly aggregated the patrimonial tax values (VPT) of all divisions to exceed the €1 million threshold. The company contended that clause 28.1 TGIS requires three cumulative conditions: ownership rights over the property, VPT equal to or greater than €1 million, and residential destination. Critically, the claimant argued that in vertical property with independently usable divisions, each division should be assessed separately for residential destination and VPT purposes, similar to horizontal property regimes. Since no individual division exceeded €1 million VPT, the assessments were allegedly illegal. Additionally, the 2013 assessments were challenged as violating Article 6 of Law 55-A/2012 due to alleged double taxation for the 2012 tax year. The Tax Administration defended that vertical property differs fundamentally from horizontal property—divisions in vertical ownership do not constitute separate urban properties and therefore the building's total VPT should determine tax liability. The case raised important questions about the interpretation of residential property taxation thresholds, the distinction between vertical and horizontal property regimes, and the application of transitional tax provisions under the State Budget Law 55-A/2012.

Full Decision

ARBITRATION DECISION

1. REPORT

1.1. A..., S.A., taxpayer no. ... (hereinafter referred to as the Claimant), with registered office at Avenue ..., no. ..., ..., Lisbon, filed on 28/03/2016 a request for arbitral ruling, in which it requests the annulment of the decisions of tacit dismissal of the applications for official revision that have as their object the Stamp Tax assessments described below, the reimbursement of the amounts unduly paid and the payment of compensatory interest.

1.2. The Honourable President of the Ethics Council of the Centre for Administrative Arbitration (CAAD) appointed on 25/05/2016 as arbitrator, Francisco Nicolau Domingos.

1.3. On 29/06/2016 the arbitral tribunal was constituted.

1.4. In compliance with the provision of Article 17, no. 1 of Decree-Law no. 10/2011, of 20 January (RJAT), the Respondent was notified on 04/07/2016 to, if it so wished, submit a reply, request the production of additional evidence and annex the Administrative Process (PA) to the case file.

1.5. On 15/09/2016 the Respondent submitted its reply in which it maintains that the tax acts in dispute should be maintained in the legal order, since they correctly apply item 28.1 of the General Table of Stamp Tax (TGIS) and, on the other hand, do not violate Article 6 of Law no. 55-A/2012, of 29 October.

1.6. The tribunal on 21/09/2016, given the absence of evidence to be produced or exceptions to be addressed, decided to dispense with the holding of the meeting to which Article 18, no. 1 of the RJAT refers, on the ground of the principle of the autonomy of the arbitral tribunal in the conduct of the proceeding and in the determination of the rules to be observed with a view to obtaining, within a reasonable period, a substantive ruling on the claims made, see Article 16, subparagraph c) of the RJAT, granted a period for the parties, if they so wished, to submit written final submissions and set a time limit for delivering the arbitral decision.

1.7. The parties did not submit written final submissions.

2. POSITION OF THE PARTIES

The Claimant, regarding the factual matters, alleges that the Respondent assessed Stamp Tax in November 2012 at a rate of 0.5% in relation to apartments or divisions susceptible of independent use and with residential destination on an aggregate tax patrimonial value (VPT) of € 2,009,240.00 in relation to the building «...» and of € 1,208,930.00 with respect to the building «...».

With regard to the assessments made by reference to the year 2012, on apartments and divisions susceptible of independent use and at the rate of 1%, these were made using the aggregate VPT of € 2,054,447.93, in relation to the building «...» and of € 1,236,130.98, with respect to the building «...».

In its view, the assessments are illegal by violation of item 28.1 of the TGIS, of Article 23, no. 7 of the Stamp Tax Code (CIS) and of Article 12, no. 3 of the Municipal Property Tax Code (CIMI) and, secondly, with regard to the assessments made in 2013, by violation of the transitional regime contained in Article 6, no. 1 of Law no. 55-A/2012, of 29 October.

Specifically, the Claimant understands that the interpretation adopted by the Tax Administration (AT) regarding the Stamp Tax assessments has no normative support and, therefore, should be annulled.

To support this conclusion, it argues that item 28.1 of the TGIS provides three cumulative requirements for taxation: i) the taxpayer being the owner of the right of ownership, right of usufruct or right of surface over the property; ii) the property having a VPT equal to or greater than € 1,000,000.00, contained in the register and iii) it being a property with residential destination.

It further adds in support of its thesis that the concept of urban property includes divisions susceptible of independent use; that residential destination is assessed division by division, in the case of properties in vertical ownership, with divisions susceptible of independent use; and that the reference value for the incidence of both IMI and Stamp Tax provided for in item 28.1 of the TGIS is the VPT of each division allocated to housing and not the sum of these.

Thus it maintains that, if in the concrete case there are divisions with independent use and if none of the divisions with residential destination has a VPT exceeding € 1,000,000.00, the assessments are illegal and, as such, the decisions of tacit dismissal of the requests for official revision formulated on 31/08/2015 are illegal, by violation of item 28.1 of the TGIS.

With regard to the assessments issued in 2013, it understands that there is violation of the transitional regime contained in Article 6, no. 1 of Law no. 55-A/2012, of 29 October, that is, it is not permissible for the AT to collect the same tax twice by reference to the year 2012.

It further adds that the issuance of two Stamp Tax assessments, one in 2012 and another in 2013, both by reference to the tax year 2012, may equally constitute a duplication of collection.

It concludes by requesting the reimbursement of the amounts of tax unduly paid, plus compensatory interest.

The Respondent, for its part, maintains that the Claimant seeks incorrectly to assimilate vertical ownership to horizontal ownership, to derive fiscal consequences that do not belong to it.

In its judgment, a property in full ownership with apartments or divisions susceptible of independent use is different from a property in horizontal ownership regime, constituted by autonomous fractions and, as such, by diverse properties. A circumstance that makes it possible to conclude that the divisions of properties not subject to horizontal ownership regime do not constitute urban properties.

It argues that the subjection to Stamp Tax of item 28.1 of the TGIS results from the combination of two requirements: i) the tax patrimonial value of the urban property registered in the matrix being equal to or greater than € 1,000,000.00 and ii) residential destination.

It further advocates that the assessments made under Article 6 of Law no. 55-A/2012, of 29 October are not illegal, since they were made in 2013 and the VPT used for the purpose of IMI assessment was considered.

Therefore, it concludes that if no error is recognized in the factual and legal assumptions of the assessments, the right to compensatory interest of the taxpayer cannot be recognized.

Thus, the tribunal must address the following questions:

i) whether the Stamp Tax assessments are illegal due to error in the factual and legal assumptions;

ii) whether the Claimant is entitled to reimbursement of the tax amounts paid;

iii) whether the Claimant is entitled to compensatory interest.

3. PRELIMINARY EXAMINATION

The cumulation of claims underlying the present case is admissible, inasmuch as it has as its object acts of assessment of the same tax, Stamp Tax. As the identity is also verified between the factual matter and the admissibility of the claim depends on the interpretation of the same legal principles and rules, see Article 3, no. 1 of the RJAT.

The process is not affected by nullities, no questions have been raised that impede the examination of the merits of the case, the arbitral tribunal is regularly constituted and is materially competent to know and decide the claim, and consequently the conditions for issuing the final decision are met.

4. FACTUAL MATTERS

4.1. Facts considered proven

4.1.1. The Claimant is the owner of the building – «...» – registered in the property matrix under no. ... (derived from the urban registration article no. ...), urban, parish of ..., Lisbon.

4.1.2. Such building comprises, in particular, 11 divisions with independent use, registered as follows:

a) Left Basement, with a VPT of € 178,260.00, residential;

b) Right Ground Floor, with a VPT of € 179,250.00, residential;

c) Left Ground Floor, with a VPT of € 177,410.00, residential;

d) 1st Right, with a VPT of € 186,560.00, residential;

e) 1st Left, with a VPT of € 180,150.00, residential;

f) 2nd Right, with a VPT of € 186,560.00, residential;

g) 2nd Left, with a VPT of € 180,150.00, residential;

h) 3rd Right, with a VPT of € 188,460.00, residential;

i) 3rd Left, with a VPT of € 181,990.00, residential;

j) 4th Right, with a VPT of € 188,460.00, residential;

l) 4th Left, with a VPT of € 181,990.00, residential.

4.1.3. The Claimant was notified of the Stamp Tax assessments, related to Article 6 of Law no. 55-A/2012, 29 October, in relation to each of such divisions, with residential destination, in the total amount of € 10,046.20 and which break down as follows:

a) Left Basement, in the amount of € 891.30;

b) Right Ground Floor, in the amount of € 896.25;

c) Left Ground Floor, in the amount of € 887.05;

d) 1st Right, in the amount of € 932.80;

e) 1st Left, in the amount of € 900.75;

f) 2nd Right, in the amount of € 932.80;

g) 2nd Left, in the amount of € 900.75;

h) 3rd Right, in the amount of € 942.30;

i) 3rd Left, in the amount of € 909.95;

j) 4th Right, in the amount of € 942.30;

l) 4th Left, in the amount of € 909.95.

4.1.4. Payment of such assessments was made by the Claimant in a single instalment as follows:

a) Left Basement, € 891.30;

b) Right Ground Floor, € 896.25;

c) Left Ground Floor, € 887.05;

d) 1st Right, € 932.80;

e) 1st Left, € 900.75;

f) 2nd Right, € 932.80;

g) 2nd Left, € 900.75;

h) 3rd Right, € 942.30;

i) 3rd Left, € 909.95;

j) 4th Right, € 942.30;

l) 4th Left, € 909.95.

4.1.5. The Claimant was notified of the Stamp Tax assessments, related to the year 2012, in relation to each of such divisions, with residential destination, in the total amount of € 20,092.40 and which break down as follows:

a) Left Basement, in the amount of € 1,782.60;

b) Right Ground Floor, in the amount of € 1,792.50;

c) Left Ground Floor, in the amount of € 1,774.10;

d) 1st Right, in the amount of € 1,865.60;

e) 1st Left, in the amount of € 1,801.50;

f) 2nd Right, in the amount of € 1,865.60;

g) 2nd Left, in the amount of € 1,801.50;

h) 3rd Right, in the amount of € 1,884.60;

i) 3rd Left, in the amount of € 1,819.90;

j) 4th Right, in the amount of € 1,884.60;

l) 4th Left, in the amount of € 1,819.90.

4.1.6. Payment of the assessments for the year 2012 was made by the Claimant as follows:

i) 1st instalment:

a) Left Basement, in the amount of € 594.20;

b) Right Ground Floor, in the amount of € 597.50;

c) Left Ground Floor, in the amount of € 591.38;

d) 1st Right, in the amount of € 621.88;

e) 1st Left, in the amount of € 600.50;

f) 2nd Right, in the amount of € 621.88;

g) 2nd Left, in the amount of € 600.50;

h) 3rd Right, in the amount of € 628.20;

i) 3rd Left, in the amount of € 606.64;

j) 4th Right, in the amount of € 628.20;

l) 4th Left, in the amount of € 606.64.

ii) 2nd instalment:

a) Left Basement, in the amount of € 594.20;

b) Right Ground Floor, in the amount of € 597.50;

c) Left Ground Floor, in the amount of € 591.36;

d) 1st Right, in the amount of € 621.86;

e) 1st Left, in the amount of € 600.50;

f) 2nd Right, in the amount of € 621.86;

g) 2nd Left, in the amount of € 600.50;

h) 3rd Right, in the amount of € 628.20;

i) 3rd Left, in the amount of € 606.63;

j) 4th Right, in the amount of € 628.20;

l) 4th Left, in the amount of € 606.63.

iii) 3rd instalment:

a) Left Basement, in the amount of € 594.20;

b) Right Ground Floor, in the amount of € 597.50;

c) Left Ground Floor, in the amount of € 591.36;

d) 1st Right, in the amount of € 621.86;

e) 1st Left, in the amount of € 600.50;

f) 2nd Right, in the amount of € 621.86;

g) 2nd Left, in the amount of € 600.50;

h) 3rd Right, in the amount of € 628.20;

i) 3rd Left, in the amount of € 606.63;

j) 4th Right, in the amount of € 628.20;

l) 4th Left, in the amount of € 606.63.

4.1.7. The building identified in 4.1.1 was not constituted under the horizontal ownership regime on 31 October 2012.

4.1.8. The Claimant is likewise the owner of the building – «...» – registered in the property matrix under no. ... (derived from the urban registration article no. ...), urban, parish of ..., Lisbon.

4.1.9. Such building comprises, in particular, 13 divisions with independent use, registered as follows:

a) Right Basement, with a VPT of € 93,960.00, residential;

b) Left Basement, with a VPT of € 99,320.00, residential;

c) Right Ground Floor, with a VPT of € 93,590.00, residential;

d) Left Ground Floor, with a VPT of € 98,950.00, residential;

e) 1st Right, with a VPT of € 93,590.00, residential;

f) 1st Left, with a VPT of € 98,950.00, residential;

g) 2nd Right, with a VPT of € 93,590.00, residential;

h) 2nd Left, with a VPT of € 98,950.00, residential;

i) 3rd Right, with a VPT of € 93,590.00, residential;

j) 3rd Left, with a VPT of € 98,950.00, residential;

l) 4th Right, with a VPT of € 93,590.00, residential;

m) 4th Left, with a VPT of € 98,950.00, residential;

n) 5th, with a VPT of € 52,950.00, residential.

4.1.10. The Claimant was notified of the Stamp Tax assessments, related to Article 6 of Law no. 55-A/2012, 29 October, in relation to each of such divisions, with residential destination, in the total amount of € 6,044.65 and which break down as follows:

a) Right Basement, in the amount of € 469.80;

b) Left Basement, in the amount of € 496.60;

c) Right Ground Floor, in the amount of € 467.95;

d) Left Ground Floor, in the amount of € 494.75;

e) 1st Right, in the amount of € 467.95;

f) 1st Left, in the amount of € 494.75;

g) 2nd Right, in the amount of € 467.95;

h) 2nd Left, in the amount of € 494.75;

i) 3rd Right, in the amount of € 467.95;

j) 3rd Left, in the amount of € 494.75;

l) 4th Right, in the amount of € 467.95;

m) 4th Left, in the amount of € 494.75;

n) 5th, in the amount of € 264.75.

4.1.11. Payment of the assessments was made by the Claimant in a single instalment as follows:

a) Right Basement, in the amount of € 469.80;

b) Left Basement, in the amount of € 496.60;

c) Right Ground Floor, in the amount of € 467.95;

d) Left Ground Floor, in the amount of € 494.75;

e) 1st Right, in the amount of € 467.95;

f) 1st Left, in the amount of € 494.75;

g) 2nd Right, in the amount of € 467.95;

h) 2nd Left, in the amount of € 494.75;

i) 3rd Right, in the amount of € 467.95;

j) 3rd Left, in the amount of € 494.75;

l) 4th Right, in the amount of € 467.95;

m) 4th Left, in the amount of € 494.75;

n) 5th, in the amount of € 264.75.

4.1.12. The Claimant was notified of the Stamp Tax assessments, related to the year 2012, in relation to each of such divisions, with residential destination, in the total amount of € 12,089.30 and which break down as follows:

a) Right Basement, in the amount of € 939.60;

b) Left Basement, in the amount of € 993.20;

c) Right Ground Floor, in the amount of € 935.90;

d) Left Ground Floor, in the amount of € 989.50;

e) 1st Right, in the amount of € 935.90;

f) 1st Left, in the amount of € 989.50;

g) 2nd Right, in the amount of € 935.90;

h) 2nd Left, in the amount of € 989.50;

i) 3rd Right, in the amount of € 935.90;

j) 3rd Left, in the amount of € 989.50;

l) 4th Right, in the amount of € 935.90;

m) 4th Left, in the amount of € 989.50;

n) 5th, in the amount of € 529.50.

4.1.13. Such assessments were paid by the Claimant in three instalments as follows:

i) 1st instalment:

a) Right Basement, in the amount of € 313.20;

b) Left Basement, in the amount of € 331.08;

c) Right Ground Floor, in the amount of € 311.98;

d) Left Ground Floor, in the amount of € 329.84;

e) 1st Right, in the amount of € 311.98;

f) 1st Left, in the amount of € 329.84;

g) 2nd Right, in the amount of € 311.98;

h) 2nd Left, in the amount of € 329.84;

i) 3rd Right, in the amount of € 311.98;

j) 3rd Left, in the amount of € 329.84;

l) 4th Right, in the amount of € 311.98;

m) 4th Left, in the amount of € 329.84;

n) 5th, in the amount of € 176.50.

ii) 2nd instalment:

a) Right Basement, in the amount of € 313.20;

b) Left Basement, in the amount of € 331.06;

c) Right Ground Floor, in the amount of € 311.96;

d) Left Ground Floor, in the amount of € 329.83;

e) 1st Right, in the amount of € 311.96;

f) 1st Left, in the amount of € 329.83;

g) 2nd Right, in the amount of € 311.96;

h) 2nd Left, in the amount of € 329.83;

i) 3rd Right, in the amount of € 311.96;

j) 3rd Left, in the amount of € 329.83;

l) 4th Right, in the amount of € 311.96;

m) 4th Left, in the amount of € 329.83;

n) 5th, in the amount of € 176.50.

iii) 3rd instalment:

a) Right Basement, in the amount of € 313.20;

b) Left Basement, in the amount of € 331.06;

c) Right Ground Floor, in the amount of € 311.96;

d) Left Ground Floor, in the amount of € 329.83;

e) 1st Right, in the amount of € 311.96;

f) 1st Left, in the amount of € 329.83;

g) 2nd Right, in the amount of € 311.96;

h) 2nd Left, in the amount of € 329.83;

i) 3rd Right, in the amount of € 311.96;

j) 3rd Left, in the amount of € 329.83;

l) 4th Right, in the amount of € 311.96;

m) 4th Left, in the amount of € 329.83;

n) 5th, in the amount of € 176.50.

4.1.14. On 31/08/2015 two requests for official revision of the above-identified assessment acts were filed with the Tax Service – Lisbon – ... .

4.1.15. The request for arbitral ruling was filed on 28/03/2016.

4.1.16. The Claimant was not notified by 28/03/2016 of any decision regarding the requests for revision of the tax acts submitted on 31/08/2015.

4.2. Facts not considered proven

There are no facts with relevance to the arbitral decision that have not been given as proven.

4.3. Basis for the factual matters considered proven

The factual matters given as proven originate from the documents used for each of the alleged facts whose authenticity was not called into question.

5. LAW

The first question that the tribunal must address consists of determining whether the Respondent should have revised the tax acts.

For this purpose it is necessary to identify, first of all, the applicable rule, that is, Article 78 of the LGT, which provides as follows:

«1. The revision of tax acts by the entity that performed them may be effected at the initiative of the taxpayer, within the administrative objection period and on the basis of any illegality, or at the initiative of the tax administration, within four years after assessment or at any time if the tax has not yet been paid, on the basis of error attributable to the services.

2. Without prejudice to the legal obligations of administrative objection or judicial challenge by the taxpayer, error in self-assessment is considered attributable to the services for the purposes of the preceding paragraph.

3. The revision of tax acts pursuant to no. 1, regardless of whether it is material or substantive error, requires its proper recognition on the basis of no. 1 of the preceding article.

4. The head of the service may exceptionally authorize, in the three years following the year of the tax act, the revision of the taxable matter determined on the basis of serious or notorious injustice, provided that the error is not attributable to negligent conduct of the taxpayer.

5. For the purposes of the preceding paragraph, only manifest and unequivocal injustice is considered notorious and serious that resulting from taxation manifestly excessive and disproportionate to reality or which has resulted in significant loss to the State.

6. The revision of the tax act due to duplication of collection may be effected, regardless of the basis, within four years.

7. The period for official revision of the tax act or taxable matter is interrupted by the taxpayer's request directed to the competent body of the tax administration for its performance.»

The institute of revision constitutes a realization of the duty to revoke illegal acts and, as such, the AT must proceed in this manner in cases where errors occur in assessments that result in the collection of taxes in an amount greater than legally provided. The principles of justice, equality and legality that inform the activity of the AT require this official correction.

Thus, while revision of the act at the initiative of the taxpayer within the administrative objection period is admissible, on the other hand, the AT, at the impulse of the taxpayer, may also promote the so-called «official revision».

In this sense jurisprudence[1] affirms that: «It follows from the law and constitutes settled jurisprudence of this Supreme Tribunal that the official revision of tax acts to which the final part of no. 1 of Article 78 of the LGT refers "at the initiative of the tax administration" may be carried out at the request of the taxpayer (Article 78, no. 7 of the LGT), with the dismissal, express or tacit, of such revision request being susceptible of contentious challenge, pursuant to Article 95, no. 1 and 2, subparagraph d) of the LGT and Article 97, no. 1, subparagraph d) of the CPPT, when the examination of the legality of the assessment act is at issue and this possibility not being prejudiced by the fact that the official revision request was submitted well after the administrative objection periods had expired, but within the 4 years for revision of the assessment act "at the initiative of the tax administration"».

It follows that such revision request must be based on «error attributable to the services» and be submitted within four years. Now, this error encompasses the lapse, material or factual error, as well as substantive error.

To support the latter conclusion jurisprudence[2] also refers that: «...this Supreme Tribunal has long understood in settled form that where there exists a substantive error in an assessment effected by the services of the tax administration, and such incorrect application of the law does not result from any information or statement of the taxpayer, the error in question is attributable to the services, because both no. 2 of Article 266 of the Constitution and Article 55 of the General Tax Law establish the generic obligation for the tax administration to act in full compliance with the law, reason why any illegality not resulting from an act of the subject taxpayer will be attributable to the Administration itself, and this attribution to the services is independent of the demonstration of culpability of any of the officials involved in the issuance of the act affected by the error,...».

Thus, «official revision» requires that, cumulatively, the following requirements are met: i) the request is formulated within four years from the act whose revision is requested or at any time when the tax has not been paid; ii) it has its origin in «error attributable to the services» and iii) it proceeds from the initiative of the taxpayer or is carried out officially by the AT.

On the other hand, no. 4 of Article 78 of the LGT provides for the possibility of exceptional revision of the taxable matter within three years following the year in which the tax act was performed, always provided that its basis is found in serious or notorious injustice and provided that the error is not attributable to negligent conduct of the taxpayer. That is, it requires not only the occurrence of flagrant injustice in the determination of the taxable matter, but also that such error does not originate in conduct of the taxpayer susceptible of legal censure.

The concept of serious or notorious injustice must be interpreted on the basis of the degree of deviation from reality, although always provided that the injustice is unequivocal in nature, since it is in this sense that we must interpret Article 78, no. 4 and 5 of the LGT.

Thus, this exceptional revision depends on the following requirements: i) the formulation of the request within three years from the performance of the act whose revision is sought; ii) the injustice be serious or notorious and iii) the error does not originate from negligent conduct of the taxpayer.

In the concrete case, the Claimant argues, in its request for arbitral ruling, that the revision requests are based on Article 78, no. 1 of the LGT, since there is error attributable to the AT and, secondly, the request was timely submitted. As well as, it argues that the understanding according to which a building composed of divisions susceptible of independent use allocated to housing, whose separately determined VPTs are below € 1,000,000.00, but which in total reach or exceed this amount, are subject to Stamp Tax, pursuant to item 28.1 of the TGIS, should be considered illegal.

Let us see if this is the case, by which, we must, first of all, determine whether the subjection to the norm of incidence of item 28.1 of the TGIS must be implemented by the VPT corresponding to each of the divisions susceptible of independent use, or if, conversely, by the sum of the VPT of each of such divisions.

To accomplish this task it is necessary to seek the rule whose interpretation the parties dispute.

Article 1, no. 1 of the Stamp Tax Code (CIS) and item 28 of the TGIS provide that the following are subject to taxation: «Ownership, usufruct or right of surface of urban properties whose tax patrimonial value contained in the matrix, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the tax patrimonial value used for the purpose of IMI:

28.1 - For residential property (...) – 1%...».

It is also important to add that there are assessments that are the object of the revision requests of the tax acts made under Article 6 of Law no. 55-A/2012, of 29 October. More specifically, such rule provides that: «1 – In 2012, the following rules must be observed by reference to the assessment of the stamp tax provided for in item 28 of the respective General Table: a) The taxable event occurs on 31 October 2012; b) The taxpayer of the tax is the one mentioned in no. 4 of Article 2 of the Stamp Tax Code on the date referred to in subparagraph a); (...) f) The applicable rates are as follows: i) Properties with residential destination assessed under the Municipal Property Tax Code: 0.5%;...».

Thus, it is necessary to scrutinize the concept of «residential property» to which the rule under interpretation refers and that of «tax patrimonial value used for the purpose of IMI». Now, since it is not possible to resolve the question by recourse to the CIS, it is by force of the provision of Article 67, no. 2 of such statute necessary to apply the rules of the CIMI.

Consequently, Article 2 of the CIMI provides on the concept of property:

«1 - For the purposes of this Code, property is any portion of territory, comprising waters, plantations, buildings and constructions of any nature incorporated or located therein, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the preceding circumstances, endowed with economic autonomy in relation to the land where they are located, although situated in a portion of territory that is an integral part of diverse assets or does not have patrimonial nature.

2 - Buildings or constructions, although movable by nature, are deemed to have a character of permanence when allocated to non-transitory purposes.

3 - The character of permanence is presumed when buildings or constructions are located on the same site for a period exceeding one year.

4 - For the purposes of this tax, each autonomous fraction, in the horizontal ownership regime, is deemed to constitute a property.»

The concept of property in the context of IMI is, as we know, endowed with greater breadth in relation to that contained in Article 204, no. 2 of the Civil Code (CC) and encompasses three elements, more specifically, one of a physical nature, the second of a legal character and the last of an economic nature, J. SILVÉRIO MATEUS/L. CORVELO DE FREITAS, Os impostos sobre o património imobiliário. O Imposto do Selo, Engisco, 2005, pages 101 to 103 and JOSÉ MARTINS ALFARO, Código do Imposto Municipal sobre Imóveis – Comentado e Anotado, Áreas Editora, 2004, pages 118 to 123. The first requires reference to a portion of territory, comprising, in particular, buildings and constructions located therein with a character of permanence. The legal element requires that the thing, movable or immovable, belong to the assets of a natural or legal person. Third, the economic element requires that the thing have economic value.

With regard to the concept of urban property, Article 6 of the CIMI describes its various categories, being fundamental for subsumption in each of them the nature of its use, that is, the purpose to which it is allocated. And, nothing in the structure of Article 6, no. 1, subparagraph a) of the CIMI prevents the classification of parts of a property in vertical ownership, with apartments or divisions susceptible of independent use, with residential use, as «residential property».

Relevant is, it is repeated, its use. And a different conclusion cannot be reached by interpretation of Article 2, no. 4 of the CIMI which raises each autonomous fraction, in the horizontal ownership regime, to the category of property. In truth, in this latter rule no basis can be seen to discriminate between properties in vertical ownership and properties in horizontal ownership regime, with apartments or divisions susceptible of independent use, with regard to their subsumption as urban and residential properties, in accordance with the entire structure of item 28 of the TGIS. In other words, if the legislator did not treat vertically-owned properties differently from those constituted in horizontal ownership, the interpreter should not do so, see in this sense the arbitration decision rendered in case no. 50/2013 – T, of 29/10/2013, in which the functions of arbitrator were assumed by Dr. MARIA DO ROSÁRIO ANJOS.

Quite the contrary, the registration entry and the determination of the VPT demonstrate the similarity of legislative treatment. Indeed, the parts endowed with economic independence should each be subject to separate registration entry and, consequently, the respective VPT should likewise be recorded separately, see Article 2, no. 4, Article 7, no. 2, subparagraph b) and Article 12, no. 3, all of the CIMI. Which has refraction in the context of assessment, in that there will be one for each apartment or division subject to separate use.

Reverting such interpretation to the present case, there are 11 and 13 divisions of the buildings «...» and «...», respectively, with independent residential use which, at the date of the taxable events, were not constituted under the horizontal ownership regime and, consequently, from the outset, there is no doubt that the same should be classified as residential properties of an urban nature.

It is also important to clarify the other textual segment of the CIS item under interpretation, namely the «tax patrimonial value used for the purpose of IMI».

In this respect, as already described, the CIMI provides for the autonomization of parts of urban property susceptible of independent use with regard to the registration entry and the specification of the respective VPT. Such observation is equally valid regarding the resulting assessment, as provided for in Article 113, no. 1 and Article 119, no. 1, both of the latter statute cited. Indeed, if the tax is assessed «...on the basis of the tax patrimonial values of the properties (our emphasis) and in relation to the taxpayers contained in the matrices on 31 December (our emphasis)...» and the collection document must contain the «...breakdown of the properties, their parts susceptible of independent use, respective tax patrimonial value and collection...», this means that, not only is the VPT for the purpose of application of item 28.1 of the TGIS to be considered that subject to separate registration entry, but also nothing prevents the qualification as «residential property» of apartments or divisions with independent use.

Now, if none of the divisions with residential destination exceeded the VPT of € 1,000,000.00, the rule of incidence in dispute cannot be applicable to the case sub judice, under penalty of illegality. It is repeated, relevant is, to define the scope of such rule, that the parties dispute its interpretation: i) that the apartment or division susceptible of independent use has a VPT exceeding € 1,000,000.00 and ii) that it has residential destination.

This is also the conclusion of the state jurisprudence regarding the delimitation of the incidence of item 28.1 of the TGIS when it observes that: «Where a property is constituted in vertical ownership, the incidence of IS should be determined, not by the VPT resulting from the sum of the VPT of all divisions or apartments susceptible of independent use (individualized in the registration article), but by the VPT attributed to each of those apartments or divisions intended for housing», as per Judgment of the Supreme Administrative Tribunal of 09/09/2015, rendered in case no. 047/15 and in which the Reporter was Counsellor FRANCISCO ROTHES.

Such interpretation is also found in the following: «Item 28 of the General Table of Stamp Tax (TGIS) added by Article 4 of Law no. 55–A/2012, of 29/10, does not apply to urban properties, with one registration article but constituted by parts with independent destination and use to which independent VPTs were attributed, each of these of value less than one million euros...», Judgment of the Supreme Administrative Tribunal of 04/05/2016, rendered in case no. 0172/16 and in which the Reporter was Counsellor ANA PAULA LOBO.

Thus, the claim for a declaration of illegality of the decisions of tacit dismissal of the requests for official revision of the tax acts is well-founded, and the assessments which are the object of these are accordingly void and, consequently, the Claimant is entitled to reimbursement of the amounts of Stamp Tax unduly paid.

The Claimant further makes a request for compensatory interest, therefore it must be determined whether it is entitled to the same.

Article 43, no. 1 of the LGT provides that: «Compensatory interest is due when it is determined, in administrative objection or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than legally due». In other words, there are three requirements for the right to such interest: i) the existence of an error in a tax assessment act attributable to the services; ii) the determination of such error in a process of administrative objection or judicial challenge and iii) payment of a tax debt in an amount greater than legally due.

Thus, it is immediately possible to raise a question: is it admissible to determine compensatory interest in a tax arbitration process? The answer to the question is in the affirmative. Indeed, Article 24, no. 5 of the RJAT provides that: «Payment of interest, regardless of its nature, is due, pursuant to the terms provided for in the General Tax Law and the Tax Procedure and Process Code.»

It follows that, in the present case, the tribunal's cognitive activity concerns the decisions dismissing the requests for revision of the tax acts and Article 43, no. 1 of the LGT determines that compensatory interest is only due for unduly collected taxes when the taxpayer challenges or objects. However, «official revision» constitutes a distinct institute from administrative objection and judicial challenge.

In this respect Article 43, no. 3 of the LGT provides that: «Compensatory interest is also due in the following circumstances: (...) c) When the revision of the tax act at the initiative of the taxpayer takes place more than one year after his request, except if the delay is not attributable to the tax administration.»

Thus, when «official revision» of the tax act is requested by the taxpayer, if the AT exceeds the period of one year to carry out such revision and if it decides it favorably, compensatory interest is only due after the expiration of one year. And if the taxpayer finds himself obliged to resort to judicial means? The jurisprudence answers the question by stating that: «...if the taxpayer finds himself obliged to resort to the court to obtain a decision, because the Administration, within or outside that period, did not revise the act, such taxpayer is not treated differently from one who obtained the same favorable decision by the administrative route after one year has elapsed. Similarly to the interested party whose request for revision had a favorable outcome dictated by the Administration after one year has passed, also he to whom justice was given in court after that time is due the same interest»[3]. That is, Article 43, no. 3, subparagraph c) of the LGT applies to a reality distinct from reimbursement to the taxpayer as a result of «error attributable to the services», namely the delay of the AT in the conclusion of the «official revision» procedure.

Reverting such interpretation to the concrete case, if the requests for revision of the tax acts were formulated on 31/08/2015, compensatory interest is only due from 01/09/2016, which is determined.

6. DECISION

In these terms and with the basis described above, it is decided that the request for arbitral ruling is fully upheld, condemning the Respondent to remove from the legal order the Stamp Tax assessments above identified, to reimburse the Claimant of the amounts of tax unduly paid and to pay it compensatory interest pursuant to the terms set out above.

7. PROCESS VALUE

The process value is fixed at € 48,272.55 (corresponding to the sum of the assessments that are the object of the ruling), pursuant to Article 97-A of the CPPT, made applicable by force of the provision of Article 29, no. 1, subparagraph a) of the RJAT and Article 3, no. 2 of the Regulation of Costs in Tax Arbitration Processes (RCPAT).

8. COSTS

Costs charged to the Respondent, in the amount of € 2,142, see Article 22, no. 4 of the RJAT and Table I attached to the RCPAT, in that the claim fully succeeded.

Notify.

Lisbon, 7 December 2016

The Arbitrator,

Francisco Nicolau Domingos

[1] Judgment of the Supreme Administrative Tribunal rendered in case no. 0886/14, of 19/11/2014, reported by Counsellor ISABEL MARQUES DA SILVA.

[2] Judgment of the Supreme Administrative Tribunal rendered in case no. 0886/14, of 19/11/2014, reported by Counsellor ISABEL MARQUES DA SILVA.

[3] Judgment of the Supreme Administrative Tribunal rendered in case no. 0918/06, of 12/12/2006, reported by Counsellor BAETA DE QUEIROZ.

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) under clause 28.1 of the TGIS and how does it apply to residential properties valued over €1 million?
Stamp Tax under clause 28.1 of the TGIS applies to urban properties with residential destination when the patrimonial tax value (VPT) registered in the property matrix equals or exceeds €1,000,000. The tax was introduced with rates of 0.5% (later increased to 1%) and requires three cumulative conditions: the taxpayer holds ownership, usufruct, or surface rights over the property; the property has a VPT of at least €1 million; and the property has residential destination. The central interpretative question concerns whether the €1 million threshold applies to the aggregate VPT of an entire building or to individual divisions within buildings not constituted under horizontal property regimes.
How does vertical property (propriedade vertical) affect the calculation of Stamp Tax on aggregated property values?
Vertical property (propriedade vertical) significantly impacts Stamp Tax calculation methodology. In vertical ownership, a building contains multiple divisions with independent use but is not legally constituted as horizontal property (condominium) with autonomous fractions. The Tax Administration argues that divisions in vertical property do not constitute separate urban properties and therefore the aggregate VPT of the entire building determines tax liability. Conversely, taxpayers contend that each division with independent use and residential destination should be assessed individually, similar to horizontal property treatment, meaning only divisions individually exceeding €1 million VPT should be taxed. This distinction is crucial because aggregating values can trigger taxation even when no single unit exceeds the threshold.
Can individual units in a vertical property building be taxed using the combined patrimonial value (VPT) under clause 28.1 TGIS?
The legality of taxing individual units using combined VPT values is the core dispute in process 189/2016-T. The Tax Administration's position is that clause 28.1 TGIS permits aggregation of VPT values for buildings in vertical ownership, as these divisions do not constitute separate urban properties under property tax law (CIMI). The claimant argued this interpretation lacks normative support and violates Article 23(7) of the Stamp Tax Code and Article 12(3) of CIMI, which recognize divisions susceptible of independent use. The claimant maintained that residential destination must be assessed division by division, and the reference value for both IMI and Stamp Tax should be each division's individual VPT, not their sum. If no individual division exceeds €1 million, taxation would be improper.
What was the outcome of CAAD arbitration process 189/2016-T regarding the annulment of Stamp Tax assessments on vertical property?
While the complete decision text is not provided, the arbitral tribunal in process 189/2016-T was constituted to determine whether Stamp Tax assessments using aggregate VPT values were illegal due to errors in factual and legal assumptions. The tribunal examined whether the claimant was entitled to annulment of tacit dismissal decisions regarding official revision requests, reimbursement of amounts paid, and compensatory interest. The case required interpreting whether vertical property divisions should be taxed individually or collectively under clause 28.1 TGIS, and whether 2013 assessments for the 2012 tax year violated the transitional regime in Article 6 of Law 55-A/2012, potentially constituting double taxation. The arbitral decision would establish important precedent for taxation of high-value residential properties not constituted as horizontal ownership.
What is the procedure for requesting an official review (revisão oficiosa) of Stamp Tax assessments and claiming compensatory interest?
Taxpayers may request official review (revisão oficiosa) of Stamp Tax assessments under general tax procedural law by submitting applications to the Tax Administration challenging the legality of assessments. If the Tax Administration does not respond within the legal timeframe, a tacit dismissal (indeferimento tácito) occurs, which can be challenged through administrative arbitration at CAAD. The request must identify the contested assessments, specify legal grounds for annulment (such as violations of TGIS provisions, CIS, or CIMI), and may seek reimbursement of amounts unduly paid plus compensatory interest. Compensatory interest compensates taxpayers for the financial cost of taxes paid beyond legal deadlines when tax authorities are found to have acted unlawfully. In this case, applications were filed on 31/08/2015 for assessments made in 2012-2013, and arbitration was requested on 28/03/2016 following tacit dismissal.