Process: 195/2016-T

Date: January 16, 2019

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 195/2016-T addresses the application of annual Stamp Tax (Imposto do Selo) under Item 28.1 of the General Stamp Tax Table (TGIS) to construction land with a taxable asset value of €1,522,493.70. The claimant, a construction company, challenged the 2014 tax assessment totaling €15,224.94, arguing unconstitutionality on multiple grounds. The company contended that Item 28.1 violated the principle of tax equality by discriminating against owners of high-value construction land compared to owners of completed buildings divided into units below €1,000,000 each. Additionally, the claimant argued double taxation due to concurrent Municipal Property Tax (IMI) and Stamp Tax obligations, and that the land should not qualify under Item 28.1 since only part was designated for residential use, with the remainder allocated for services. Initially, the CAAD arbitral tribunal issued a decision on October 22, 2016. However, the Tax Authority appealed to the Constitutional Court, which ruled on August 9, 2018, that Item 28.1 TGIS was constitutional regarding annual taxation of construction land for housing valued at €1,000,000 or more. Following this Constitutional Court judgment, the arbitrator reformed the original arbitral decision in accordance with the higher court's ruling. This case demonstrates the reform procedure in Portuguese tax arbitration when the Constitutional Court overturns a CAAD decision, requiring the arbitrator to amend the decision to align with constitutional interpretation, ultimately upholding the validity of Stamp Tax on high-value construction land intended for residential purposes.

Full Decision

ARBITRAL DECISION

— Reviewed Following Constitutional Court Judgment —

Arbitrator Raquel Franco, appointed by the Deontological Council of the Administrative Arbitration Centre (CAAD) to form the single arbitral tribunal constituted on 13 June 2016, hereby, following the decision of the Constitutional Court of 09.08.2018[1], which granted the appeal filed by the Tax and Customs Authority against the decision handed down on 22.10.2016, ruling the norm contained in Item 28.1 of the General Stamp Tax Table, approved by Law No. 55-A/2012, of 29 October and amended by Law No. 83-C/2013, of 31 December, not to be unconstitutional, in the part in which it imposes annual taxation on the ownership of land for construction whose construction, authorized or planned, is for habitation, whose tax asset value is equal to or greater than €1,000,000.00, hereby amends the previously handed down decision, which now reads as follows:

REPORT

Procedural Framework

On 29-03-2016, company A..., S.A., Tax Identification Number..., filed a petition for constitution of a single arbitral tribunal, in accordance with the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as RJAT), in which the Tax and Customs Authority (AT) is the respondent.

The petition for constitution of the Arbitral Tribunal was accepted by the President of CAAD and automatically notified to AT on 11-04-2016.

Pursuant to the provisions of paragraph (a) of Article 6, subsection 2 and paragraph (b) of Article 11, subsection 1 of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as arbitrator of the single arbitral tribunal, who communicated acceptance of the appointment within the applicable time period.

On 25-05-2016 the parties were duly notified of such appointment and manifested no wish to refuse the arbitrator's appointment in accordance with the combined provisions of Article 11, subsection 1, paragraphs (a) and (b) of the RJAT and Articles 6 and 7 of the Deontological Code.

Thus, pursuant to the provisions of paragraph (c) of Article 11, subsection 1 of Decree-Law No. 10/2011, of 20 January, as amended by Law No. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 13-06-2016.

The Tribunal rendered its decision in this matter on 22.10.2016, with the case file being archived on 24.10.2016.

The Tax and Customs Authority filed a request for a copy of the case file on 25.10.2016 and a petition for appeal to the Constitutional Court on 31.10.2016, on which a ruling was handed down on 02.11.2016.

The Constitutional Court's summary decision was received and notified on 20.09.2018.

Summary of the Claimant's Arguments

In the present proceedings, the Claimant seeks to have the Arbitral Tribunal declare the illegality and unconstitutionality of the stamp tax levy assessment for the year 2014, which it identifies through its three installments, with the numbers 2015..., 2015... and 2015..., in the total amount of €15,224.94, with a view to its annulment, as well as of the ruling by the Head of the Administrative Justice Division of the Finance Directorate of Lisbon (in substitution), of 28.12.2015, which denied the administrative complaint filed by the Claimant concerning the additional levy assessment in question, further requesting the consequent restitution of the amounts unduly paid plus compensatory interest.

The requesting company conducts its business in the area of construction of residential and non-residential buildings, and is the owner of a parcel of land for construction described in the Real Estate Register Office of Lisbon with the number... of the parish of..., municipality of Lisbon, registered in the urban real estate matrix of the parish of..., municipality of Lisbon, with the number..., and with a tax asset value of €1,522,493.70.

The levy assessment was made pursuant to Item 28.1 of the TGIS, which the Claimant considers to be, in the wording introduced by Law No. 83-C/2013, of 31 December, unconstitutional by violation of the principle of tax equality insofar as "there is no plausible justification, within the spirit of the legislator, for the negative discrimination made by Item 28.1 of the TGIS regarding land with residential allocation whose tax asset value is equal to or greater than €1,000,000.00 relative to the taxation of constructed residential properties constituted in horizontal or vertical property ownership, whose autonomous units or individual allocation units do not exceed, in their respective tax asset value, the value of €1,000,000.00, but whose total tax asset value is equal to or greater than that same value, given that as a result the holder of the right of property of land for construction, intended for habitation, with a value greater than €1,000,000.00 suffers increased taxation relative to that to which it will be subject from the moment it has proceeded to construct a residential building on the land for construction."

It considers that the principle of tax equality is violated insofar as taxpayers with the same contributory capacity are taxed not according to their wealth, but according to the destination of their properties and, further, because the value of unbuilt property is not the same as that of built property, and therefore the two realities cannot be taxed identically.

The Claimant further states that, if the Superior Administrative Court understands that, when buildings are constituted by units susceptible to independent use, it is the value of each of them that is relevant for assessing taxation pursuant to Item 28.1 of the TGIS, then, regarding land for construction, the criterion should be that of the value of each of the authorized or planned units.

Finally, it contends that regard must be had to the purpose for which construction is intended, differentiating situations in which construction is for use from those in which construction, taking into account the economic activity conducted by the taxpayer, is intended for subsequent sale, with land being a factor of production and not an element indicative of wealth (this being the case of the Claimant, which pursues real estate investment activity, acquiring land for subsequent sale of the constructed building). It further adds that stamp tax does not take into account company income, applying even where companies record tax losses, which also generates unequal treatment of companies engaged in the sale of land for construction.

In addition to unconstitutionality by violation of the principle of equality, the Claimant also understands there to be unconstitutionality of the norm in Item 28.1 of the TGIS by violation of the principle of prohibition of double taxation in light of taxation under both municipal property tax (IMI) and stamp tax (IS) of the situation at hand, which, in its view, would justify the annulment of the tax levy assessment in question.

The final ground invoked by the Claimant for annulment of the levy assessment at issue is violation of Item 28.1 of the TGIS itself, on the ground that the land in question is not land whose construction, authorized or planned, is for habitation insofar as it is not licensed exclusively for residential purposes and only part of the building to be constructed will be intended for habitation, with the other part intended for services. Consequently, it contends, the part of the land that will be allocated to services and not to habitation cannot be taxed pursuant to Item 28.1 of the TGIS.

Summary of AT's Counter-Arguments

What is at issue is a levy assessment that results from direct application of the legal norm, and which translates into objective elements, without any subjective or discretionary assessment. Thus, upon consultation of the certified particulars of the urban property that underlies the present levy, it appears that the land for construction is allocated to habitation.

The fact that, in the norm of incidence – Item 28.1 of the TGIS – property with residential allocation was affirmed in preference to residential property, appeals to the allocation coefficient, cf. Article 41 of the CIMI, which applies, indiscriminately, to all urban properties.

In the absence of a definition in stamp tax of what is understood by 'urban property', 'land for construction' and 'residential allocation', it is necessary to resort subsidiarily to the CIMI to obtain a definition that permits determining any subjection to stamp tax, in accordance with Article 67, subsection 2 of the IS Code as amended by Law No. 55-A/2012, of 29/10.

The classification of residential, commercial, industrial or service properties is dependent on their respective licensing, or in its absence, on the normal destination for such purposes and not on its allocation (cf. subsection 2 of Article 6 of the CIMI).

As emerges from the expression "...value of authorized constructions", contained in subsection 2 of Article 45 of the CIMI, the legislator opted to determine the application of the methodology for evaluation of properties in general, to the evaluation of land for construction, being therefore applicable to them the allocation coefficient provided for in Article 41 of the CIMI.

Hence, for the purposes of determining the tax asset value of land for construction, the application of the allocation coefficient in evaluation is clear, from which it follows that consideration for the purposes of applying Item 28 of the TGIS cannot be disregarded, the following order of considerations being pertinent in this regard:

a) in the application of law to concrete cases it is important to determine the exact meaning and scope of the norm, so as to reveal the rule contained therein, an indispensable condition for it to be applicable, in accordance with Article 9 of the Civil Code, by force of Article 11 of the General Tax Law (LGT);

b) Article 67, subsection 2, of the IS Code, mandates the subsidiary application of the provisions of the CIMI;

c) the allocation of the property (aptitude or purpose) is a coefficient that contributes to the evaluation of the property, in the determination of tax asset value, applicable to land for construction;

d) Item 28 of the TGIS itself refers to the expression 'property with residential allocation', appealing to a classification that overlaps the categories provided for in subsection 1 of Article 6 of the CIMI.

The legislator does not refer to 'properties intended for habitation', having opted for the concept 'residential allocation', an expression different and broader, whose meaning is to be found in the need to integrate other realities beyond those identified in Article 6, subsection 1, paragraph (a) of the CIMI. A property licensed for or intended for habitation is not the same as property with residential allocation.

The Claimant alleges that the property at issue has residential allocation together with services, and therefore the taxation carried out in the manner in which it was is illegal. However, it appears that this property corresponds only to residential allocation (the principal and predominant one). Indeed, in accordance with the evaluation data contained in the property record card, the property was assigned only a single allocation – habitation. Although the Claimant filed a property register complaint on 31-12-2015, the levy assessment under discussion relates to 2014 and does not appear to have been resolved.

AT further considers there to be no unconstitutionality by violation of the principle of equality insofar as the legislator of Item 28.1 of the TGIS defined an economically valid constitutional presupposition, as a manifestation of contributory capacity (whose addressees have effectively special contributory capacity in light of the criterion adopted) required for payment of this tax. The reduction of inequalities presided over the presentation of Bill No. 96/XII (2.a), in which the legislator sought to distribute the burdens imposed by austerity to all, permitting discrimination of assets, without, as the Claimant seeks, violating constitutional provisions, notably the principle of equality, either per se or in its aspect of contributory capacity, as no unjustified differences in treatment between taxpayers result therefrom, as different situations are treated differently, in keeping with that constitutional principle.

That is, the fact that the legislator establishes a value (€1,000,000.00) as the delimiting criterion of the incidence of the tax, below which the provision of the tax norm is not fulfilled, constitutes a legitimate choice by the legislator as to fixing the material scope of "luxury residential properties" intended to be taxed more heavily, especially as any other value of analogous magnitude would likewise assume an artificial character that is inherent to any quantitative fixing of a level or limit.

Indeed, the different valuation and taxation of property with residential allocation as opposed to property intended for commerce, industry or services, or even rural property, results from the different aptitude of the properties in question (habitation/services/commerce/industry/agricultural activity), which supports the different treatment given by the legislator who, for economic and social reasons, decided, within its legislative discretion, to exclude from the incidence of the tax properties intended for purposes other than residential.

With Item 28.1 TGIS the legislator assumed as a measure of a measure of equality, which was intended to "strengthen the principle of social equity in austerity, guaranteeing an effective distribution of the burdens necessary for compliance with the adjustment program", with equality in the distribution of burdens aimed at with Item 28.1 of the TGIS through the "fiscal effort required" of owners of "urban residential properties of higher value" compared with "those who live on their labor income".

The tax legislator considered that ownership, usufruct or right of superficies of residential property or land for construction whose construction, authorized or planned, was for habitation, with tax asset value equal to or greater than €1,000,000.00 represented a manifestation of wealth and was susceptible, in itself, to reveal significant contributory capacity, and therefore made Item 28.1 of the TGIS apply to the ownership of a certain type of property, by contrast with labor and pension income, already affected by other tax measures (and more).

Specifically regarding the request for compensatory interest, AT contends that, given that the levy assessment was made on the basis of applicable law, to which the Administration is bound, with the tax administration, pursuant to Article 55 of the LGT and following the principle set out in Article 266, subsections 1 and 2 of the Constitution, "...pursuing the public interest, respecting the rights and legally protected interests of citizens" and with its "...organs and administrative agents... subordinated to the Constitution and law..." and obliged to "...act, in the exercise of their functions, with respect for the principles of equality, proportionality, justice, impartiality and good faith", the tax administration is thus bound by the principle of legality, it cannot fail to give full compliance with the normative provisions created by the ordinary legislator and in force in the legal order and also by force of Article 55 of the LGT.

The error supporting the right to compensatory interest is not any defect or illegality but that which is concretized in defective assessment of relevant factuality or in misapplication of legal norms. Since, at the time of the facts, the tax administration made application of the law in the manner in which as an executive organ it is constitutionally bound, one cannot speak of error on the part of the services pursuant to Article 43 of the LGT.

II. CASE MANAGEMENT

  1. The Tribunal is competent and properly constituted, pursuant to Articles 2, subsection 1, paragraph (a), 5 and 6, all of the RJAT.

  2. The parties have legal personality and capacity, are legitimate and are legally represented, pursuant to Articles 4 and 10 of the RJAT and Article 1 of Order No. 112-A/2011, of 22 March.

  3. The proceedings do not suffer from defects that would invalidate them.

III. FACTUAL MATTERS

Before proceeding to consider the legal questions, it is necessary to set out the factual matters relevant to their understanding and decision, which, upon examination of documentary evidence and the administrative file (PA) attached to the proceedings and taking into account the alleged facts, are established as follows:

III.1. Proven Facts

a) The Claimant is the owner of land for construction registered in the urban real estate matrix of the parish of..., municipality of Lisbon, with the number..., described in the Real Estate Register Office of Lisbon with the number... of the parish of..., municipality of Lisbon, with a tax asset value of €1,522,493.70.

b) Pursuant to the respective property record card, the land in question has as its location coefficient type "habitation".

c) The requesting company conducts its business in the area of construction of residential and non-residential buildings.

d) AT issued a stamp tax levy assessment for the year 2014, which affected the land identified in a., which was collected in three installments, with the numbers 2015..., 2015... and 2015..., in the total amount of €15,224.94.

e) The Claimant filed an administrative complaint regarding the aforementioned levy assessment on 27.08.2015.

f) By ruling of the Head of the Administrative Justice Division of the Finance Directorate of Lisbon (in substitution), of 28.12.2015, the administrative complaint was denied.

g) The Claimant proceeded with payment of the tax in question.

h) On 30.12.2015, the Claimant filed a property register complaint, requesting the revision of the allocation and the breakdown of the tax asset value by autonomous use division.

III.2. Unproven Facts

There are no facts relevant to the decision that have been determined as unproven.

IV. THEMA DECIDENDUM

The questions requiring consideration in the present proceedings are, essentially, the following:

  1. Whether the norm contained in Item 28.1 of the TGIS, insofar as it concerns the taxation of land for construction, should be considered unconstitutional by violation of the principle of tax equality;

  2. Whether double taxation should be found to exist under stamp tax and municipal property tax in cases where Item 28.1 of the TGIS is applicable and what repercussions such a finding would have, if established;

  3. Whether, in the present case, the levy assessment was based on an unlawful application of the norm contained in Item 28.1 of the TGIS by not being a matter of "land for construction whose construction, authorized or planned, is for habitation".

V. LEGAL GROUNDS

The first question raised by the Claimant concerns the alleged violation of the principle of equality, provided for in Article 13 of the Constitution, in the aspect of tax equality, by the interpretation of the norm provided in Item 28.1 of the TGIS, and this tribunal shall now address this first question.

The second arbitral decision, rendered on 22 October 2016, upon which the Constitutional Court subsequently ruled through its judgment of 09.08.2018, shall now be addressed, since the Constitutional Court by referral to the grounds contained in Judgment No. 378/2018, of 04 July, ruled that the norm contained in Item 28.1 of the General Stamp Tax Table, approved by Law No. 55-A/2012, of 29 October and amended by Law No. 83-C/2013, of 31 December, in the part in which it imposes annual taxation on the ownership of land for construction whose construction, authorized or planned, is for habitation, whose tax asset value is equal to or greater than €1,000,000.00, was not unconstitutional.

Accordingly, the question of constitutionality raised by the Claimant must be decided against its position, that is, by not granting the argument raised.

Regarding the question of whether double taxation should be found to exist under stamp tax and municipal property tax in cases where Item 28.1 of the TGIS is applicable, it does not appear to this tribunal that any illegality occurs by such means. Indeed, municipal property tax being a municipal tax that applies to the tax asset value of rural and urban properties situated in Portuguese territory, and with Item 28.1 of the TGIS applying, at the time, to ownership of land for construction whose construction, authorized or planned, was for habitation and whose tax asset value was equal to or greater than €1,000,000, it was verified that the same owner could be subject to both taxes. However, this does not constitute any illegality, insofar as these were two distinct taxes that taxed, at the time, distinct circumstances in a differentiated manner. The mere fact that the same owner is subject to both does not result in illegality.

Regarding the question, also raised by the Claimant, of whether, in the present case, the levy assessment was based on an unlawful application of the norm contained in Item 28.1 of the TGIS by not being a matter of "land for construction whose construction, authorized or planned, is for habitation", insofar as the land is not licensed exclusively for residential purposes because part of the future building is allocated to services, let us consider this.

The norm on which taxation is based is the norm resulting from the amendment introduced by Law No. 83-C/2013, of 31 December, to Item 28 of the TGIS. The legislative text makes taxation apply to "land for construction, whose construction, authorized or planned, is for habitation" and whose tax asset value is equal to or greater than €1,000,000. In the present case, it is not disputed that the tax asset value of the land triggers taxation. What is at issue is whether the coexistence of two allocations provided for the buildings to be constructed – habitation and services – is capable, in itself, of excluding the norm of incidence.

However, while we do not contest that this could, in theory, be considered as one of the possible interpretations of the normative language in question, we understand that it should not be, for a number of reasons, the interpretation to be adopted in light of the interpretative criteria established in Article 9 of the Civil Code, namely: (i) the letter of the law; and (ii) reconstruction, from the texts, of the legislative intent, taking above all into account (ii1) the unity of the legal system, (ii2) the circumstances in which the law was drafted and (ii3) the specific conditions of the time in which it is applied.

Indeed, regarding the literal element, the norm does not refer only to land whose construction, present or future, is exclusively residential. The norm only requires that construction allocated to habitation come to exist. That is, the element "construction for habitation" does not appear in the normative text in exclusive terms, which does not permit us to safely exclude from the norm of incidence cases such as the present one, in which, alongside residential construction, others may come to exist.

Regarding the reconstruction of the legislative intent taking into account the unity of the legal system, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied, this leads us to the same conclusion. Recall the context of financial difficulties of the Portuguese State in which the norm was drafted, the need to increase tax revenues and the resort to this form of "extraordinary" taxation as a means of financial assistance to the State by those taxpayers understood to be in more privileged conditions to do so[2]. It is true that, in the amendment that occurred via the State Budget for 2014, there was a desire to adjust taxation under Item 28.1, notably in light of problems raised by the previous wording. But its grounds did not change, nor did the perspective change that, whoever was, broadly speaking, the owner of residential properties or that could come to be residential properties of value greater than €1,000,000 should be called upon to help the State through this form of taxation. The introduction of explicit reference to land for construction aimed to respond to the interpretative doubts that had arisen regarding their inclusion, or not, in the original norm of incidence. That is, it aimed to eliminate doubts that land for construction of value equal to or greater than €1,000,000 that could come to give rise to residences should be taxed in the same manner as already-constructed buildings. It does not appear to us, therefore, in light of this element as well, that the legislator intended to exclude land for construction that would permit the coexistence of construction for habitation and for services.

Accordingly, there are no grounds for considering the taxation occurring in the present case to be unconstitutional or illegal, and therefore the challenged acts should remain in the legal order. Thus, consideration of the request for compensatory interest is rendered moot.

VI. DECISION

In accordance with the foregoing, it is decided:

  1. To find the petition for arbitral pronouncement meritorious and, in consequence, to maintain in the legal order the stamp tax levy assessment challenged;

  2. To find the request for payment of compensatory interest meritorious pursuant to Article 43 of the LGT;

  3. To condemn the Claimant in the costs of the proceedings.

Value: In accordance with the provisions of subsection 2 of Article 315 of the Code of Civil Procedure, combined with paragraph (a) of subsection 1 of Article 97-A of the Tax Procedure Code and subsection 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €15,224.94.

Costs: Pursuant to the provisions of Article 22, subsection 4, of the RJAT and in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €918.00, to be borne by the Respondent pursuant to Articles 12, subsection 2, and 22, subsection 4, both of the RJAT, and Article 4, subsection 4, of the aforementioned Regulation.

Let it be recorded and notified.

Lisbon, 16 January 2019

The Arbitrator,

Raquel Franco

ARBITRAL DECISION

The Arbitrator Raquel Franco, appointed by the Deontological Council of the Administrative Arbitration Centre (CAAD) to form the single arbitral tribunal constituted on 13 June 2016, hereby decides as follows:

REPORT

Procedural Framework

On 29-03-2016, company A..., S.A., Tax Identification Number..., filed a petition for constitution of a single arbitral tribunal, in accordance with the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as RJAT), in which the Tax and Customs Authority (AT) is the respondent.

The petition for constitution of the Arbitral Tribunal was accepted by the President of CAAD and automatically notified to AT on 11-04-2016.

Pursuant to the provisions of paragraph (a) of Article 6, subsection 2 and paragraph (b) of Article 11, subsection 1 of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as arbitrator of the single arbitral tribunal, who communicated acceptance of the appointment within the applicable time period.

On 25-05-2016 the parties were duly notified of such appointment and manifested no wish to refuse the arbitrator's appointment in accordance with the combined provisions of Article 11, subsection 1, paragraphs (a) and (b) of the RJAT and Articles 6 and 7 of the Deontological Code.

Thus, pursuant to the provisions of paragraph (c) of Article 11, subsection 1 of Decree-Law No. 10/2011, of 20 January, as amended by Law No. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 13-06-2016.

Summary of the Claimant's Arguments

In the present proceedings, the Claimant seeks to have the Arbitral Tribunal declare the illegality and unconstitutionality of the stamp tax levy assessment for the year 2014, which it identifies through its three installments, with the numbers 2015..., 2015... and 2015..., in the total amount of €15,224.94, with a view to its annulment, as well as of the ruling by the Head of the Administrative Justice Division of the Finance Directorate of Lisbon (in substitution), of 28.12.2015, which denied the administrative complaint filed by the Claimant concerning the additional levy assessment in question, further requesting the consequent restitution of the amounts unduly paid plus compensatory interest.

The requesting company conducts its business in the area of construction of residential and non-residential buildings, and is the owner of a parcel of land for construction described in the Real Estate Register Office of Lisbon with the number... of the parish of..., municipality of Lisbon, registered in the urban real estate matrix of the parish of..., municipality of Lisbon, with the number..., and with a tax asset value of €1,522,493.70.

The levy assessment was made pursuant to Item 28.1 of the TGIS, which the Claimant considers to be, in the wording introduced by Law No. 83-C/2013, of 31 December, unconstitutional by violation of the principle of tax equality insofar as "there is no plausible justification, within the spirit of the legislator, for the negative discrimination made by Item 28.1 of the TGIS regarding land with residential allocation whose tax asset value is equal to or greater than €1,000,000.00 relative to the taxation of constructed residential properties constituted in horizontal or vertical property ownership, whose autonomous units or individual allocation units do not exceed, in their respective tax asset value, the value of €1,000,000.00, but whose total tax asset value is equal to or greater than that same value, given that as a result the holder of the right of property of land for construction, intended for habitation, with a value greater than €1,000,000.00 suffers increased taxation relative to that to which it will be subject from the moment it has proceeded to construct a residential building on the land for construction."

It considers that the principle of tax equality is violated insofar as taxpayers with the same contributory capacity are taxed not according to their wealth, but according to the destination of their properties and, further, because the value of unbuilt property is not the same as that of built property, and therefore the two realities cannot be taxed identically.

The Claimant further states that, if the Superior Administrative Court understands that, when buildings are constituted by units susceptible to independent use, it is the value of each of them that is relevant for assessing taxation pursuant to Item 28.1 of the TGIS, then, regarding land for construction, the criterion should be that of the value of each of the authorized or planned units.

Finally, it contends that regard must be had to the purpose for which construction is intended, differentiating situations in which construction is for use from those in which construction, taking into account the economic activity conducted by the taxpayer, is intended for subsequent sale, with land being a factor of production and not an element indicative of wealth (this being the case of the Claimant, which pursues real estate investment activity, acquiring land for subsequent sale of the constructed building). It further adds that stamp tax does not take into account company income, applying even where companies record tax losses, which also generates unequal treatment of companies engaged in the sale of land for construction.

In addition to unconstitutionality by violation of the principle of equality, the Claimant also understands there to be unconstitutionality of the norm in Item 28.1 of the TGIS by violation of the principle of prohibition of double taxation in light of taxation under both municipal property tax (IMI) and stamp tax (IS) of the situation at hand, which, in its view, would justify the annulment of the tax levy assessment in question.

The final ground invoked by the Claimant for annulment of the levy assessment at issue is violation of Item 28.1 of the TGIS itself, on the ground that the land in question is not land whose construction, authorized or planned, is for habitation insofar as it is not licensed exclusively for residential purposes and only part of the building to be constructed will be intended for habitation, with the other part intended for services. Consequently, it contends, the part of the land that will be allocated to services and not to habitation cannot be taxed pursuant to Item 28.1 of the TGIS.

Summary of AT's Counter-Arguments

What is at issue is a levy assessment that results from direct application of the legal norm, and which translates into objective elements, without any subjective or discretionary assessment. Thus, upon consultation of the certified particulars of the urban property that underlies the present levy, it appears that the land for construction is allocated to habitation.

The fact that, in the norm of incidence – Item 28.1 of the TGIS – property with residential allocation was affirmed in preference to residential property, appeals to the allocation coefficient, cf. Article 41 of the CIMI, which applies, indiscriminately, to all urban properties.

In the absence of a definition in stamp tax of what is understood by 'urban property', 'land for construction' and 'residential allocation', it is necessary to resort subsidiarily to the CIMI to obtain a definition that permits determining any subjection to stamp tax, in accordance with Article 67, subsection 2 of the IS Code as amended by Law No. 55-A/2012, of 29/10.

The classification of residential, commercial, industrial or service properties is dependent on their respective licensing, or in its absence, on the normal destination for such purposes and not on its allocation (cf. subsection 2 of Article 6 of the CIMI).

As emerges from the expression "...value of authorized constructions", contained in subsection 2 of Article 45 of the CIMI, the legislator opted to determine the application of the methodology for evaluation of properties in general, to the evaluation of land for construction, being therefore applicable to them the allocation coefficient provided for in Article 41 of the CIMI.

Hence, for the purposes of determining the tax asset value of land for construction, the application of the allocation coefficient in evaluation is clear, from which it follows that consideration for the purposes of applying Item 28 of the TGIS cannot be disregarded, the following order of considerations being pertinent in this regard:

a) in the application of law to concrete cases it is important to determine the exact meaning and scope of the norm, so as to reveal the rule contained therein, an indispensable condition for it to be applicable, in accordance with Article 9 of the Civil Code, by force of Article 11 of the General Tax Law (LGT);

b) Article 67, subsection 2, of the IS Code, mandates the subsidiary application of the provisions of the CIMI;

c) the allocation of the property (aptitude or purpose) is a coefficient that contributes to the evaluation of the property, in the determination of tax asset value, applicable to land for construction;

d) Item 28 of the TGIS itself refers to the expression 'property with residential allocation', appealing to a classification that overlaps the categories provided for in subsection 1 of Article 6 of the CIMI.

The legislator does not refer to 'properties intended for habitation', having opted for the concept 'residential allocation', an expression different and broader, whose meaning is to be found in the need to integrate other realities beyond those identified in Article 6, subsection 1, paragraph (a) of the CIMI. A property licensed for or intended for habitation is not the same as property with residential allocation.

The Claimant alleges that the property at issue has residential allocation together with services, and therefore the taxation carried out in the manner in which it was is illegal. However, it appears that this property corresponds only to residential allocation (the principal and predominant one). Indeed, in accordance with the evaluation data contained in the property record card, the property was assigned only a single allocation – habitation. Although the Claimant filed a property register complaint on 31-12-2015, the levy assessment under discussion relates to 2014 and does not appear to have been resolved.

AT further considers there to be no unconstitutionality by violation of the principle of equality insofar as the legislator of Item 28.1 of the TGIS defined an economically valid constitutional presupposition, as a manifestation of contributory capacity (whose addressees have effectively special contributory capacity in light of the criterion adopted) required for payment of this tax. The reduction of inequalities presided over the presentation of Bill No. 96/XII (2.a), in which the legislator sought to distribute the burdens imposed by austerity to all, permitting discrimination of assets, without, as the Claimant seeks, violating constitutional provisions, notably the principle of equality, either per se or in its aspect of contributory capacity, as no unjustified differences in treatment between taxpayers result therefrom, as different situations are treated differently, in keeping with that constitutional principle.

That is, the fact that the legislator establishes a value (€1,000,000.00) as the delimiting criterion of the incidence of the tax, below which the provision of the tax norm is not fulfilled, constitutes a legitimate choice by the legislator as to fixing the material scope of "luxury residential properties" intended to be taxed more heavily, especially as any other value of analogous magnitude would likewise assume an artificial character that is inherent to any quantitative fixing of a level or limit.

Indeed, the different valuation and taxation of property with residential allocation as opposed to property intended for commerce, industry or services, or even rural property, results from the different aptitude of the properties in question (habitation/services/commerce/industry/agricultural activity), which supports the different treatment given by the legislator who, for economic and social reasons, decided, within its legislative discretion, to exclude from the incidence of the tax properties intended for purposes other than residential.

With Item 28.1 TGIS the legislator assumed as a measure of equality, which was intended to "strengthen the principle of social equity in austerity, guaranteeing an effective distribution of the burdens necessary for compliance with the adjustment program", with equality in the distribution of burdens aimed at with Item 28.1 of the TGIS through the "fiscal effort required" of owners of "urban residential properties of higher value" compared with "those who live on their labor income".

The tax legislator considered that ownership, usufruct or right of superficies of residential property or land for construction whose construction, authorized or planned, was for habitation, with tax asset value equal to or greater than €1,000,000.00 represented a manifestation of wealth and was susceptible, in itself, to reveal significant contributory capacity, and therefore made Item 28.1 of the TGIS apply to the ownership of a certain type of property, by contrast with labor and pension income, already affected by other tax measures (and more).

Specifically regarding the request for compensatory interest, AT contends that, given that the levy assessment was made on the basis of applicable law, to which the Administration is bound, with the tax administration, pursuant to Article 55 of the LGT and following the principle set out in Article 266, subsections 1 and 2 of the Constitution, "...pursuing the public interest, respecting the rights and legally protected interests of citizens" and with its "...organs and administrative agents... subordinated to the Constitution and law..." and obliged to "...act, in the exercise of their functions, with respect for the principles of equality, proportionality, justice, impartiality and good faith", the tax administration is thus bound by the principle of legality, it cannot fail to give full compliance with the normative provisions created by the ordinary legislator and in force in the legal order and also by force of Article 55 of the LGT.

The error supporting the right to compensatory interest is not any defect or illegality but that which is concretized in defective assessment of relevant factuality or in misapplication of legal norms. Since, at the time of the facts, the tax administration made application of the law in the manner in which as an executive organ it is constitutionally bound, one cannot speak of error on the part of the services pursuant to Article 43 of the LGT.

II. CASE MANAGEMENT

  1. The Tribunal is competent and properly constituted, pursuant to Articles 2, subsection 1, paragraph (a), 5 and 6, all of the RJAT.

  2. The parties have legal personality and capacity, are legitimate and are legally represented, pursuant to Articles 4 and 10 of the RJAT and Article 1 of Order No. 112-A/2011, of 22 March.

  3. The proceedings do not suffer from defects that would invalidate them.

III. FACTUAL MATTERS

Before proceeding to consider the legal questions, it is necessary to set out the factual matters relevant to their understanding and decision, which, upon examination of documentary evidence and the administrative file (PA) attached to the proceedings and taking into account the alleged facts, are established as follows:

III.1. Proven Facts

a) The Claimant is the owner of land for construction registered in the urban real estate matrix of the parish of..., municipality of Lisbon, with the number..., described in the Real Estate Register Office of Lisbon with the number... of the parish of..., municipality of Lisbon, with a tax asset value of €1,522,493.70.

b) Pursuant to the respective property record card, the land in question has as its location coefficient type "habitation".

c) The requesting company conducts its business in the area of construction of residential and non-residential buildings.

d) AT issued a stamp tax levy assessment for the year 2014, which affected the land identified in a., which was collected in three installments, with the numbers 2015..., 2015... and 2015..., in the total amount of €15,224.94.

e) The Claimant filed an administrative complaint regarding the aforementioned levy assessment on 27.08.2015.

f) By ruling of the Head of the Administrative Justice Division of the Finance Directorate of Lisbon (in substitution), of 28.12.2015, the administrative complaint was denied.

g) The Claimant proceeded with payment of the tax in question.

h) On 30.12.2015, the Claimant filed a property register complaint, requesting the revision of the allocation and the breakdown of the tax asset value by autonomous use division.

III.2. Unproven Facts

There are no facts relevant to the decision that have been determined as unproven.

IV. THEMA DECIDENDUM

The questions requiring consideration in the present proceedings are, essentially, the following:

  1. Whether the norm contained in Item 28.1 of the TGIS, insofar as it concerns the taxation of land for construction, should be considered unconstitutional by violation of the principle of tax equality;

  2. Whether double taxation should be found to exist under stamp tax and municipal property tax in cases where Item 28.1 of the TGIS is applicable and what repercussions such a finding would have, if established;

  3. Whether, in the present case, the levy assessment was based on an unlawful application of the norm contained in Item 28.1 of the TGIS by not being a matter of "land for construction whose construction, authorized or planned, is for habitation".

V. LEGAL GROUNDS

The first question raised by the Claimant concerns the alleged violation of the principle of equality, provided for in Article 13 of the Constitution, in the aspect of tax equality, by the interpretation of the norm provided in Item 28.1 of the TGIS, and this tribunal shall now address this first question.

Article 4 of Law No. 55-A/2012, of 29 October, which entered into force on 30 October following, added an item to the then-applicable TGIS, with the following wording:

"28 - Ownership, usufruct or right of superficies of urban properties whose tax asset value shown in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000 - on the tax asset value used for the purpose of municipal property tax:

• 28.1 - For property with residential allocation - 1%;

• 28.2 - For property, when the passive subjects who are not natural persons are residents in a country, territory or region subject to a clearly more favourable tax regime, shown in the list approved by order of the Minister of Finance - 7.5%."

Later, Article 194 of Law No. 83-C/2013, of 31 December, introduced a new wording to Item 28 of the TGIS, which came to include land for construction and established the following:

"28.1 - For residential property or for land for construction whose construction, authorized or planned, is for habitation, in accordance with the provisions of the Municipal Property Tax Code - 1%".

The amendment introduced by Law No. 83-C/2013, of 31 December, entered into force on 01.01.2014, being therefore applicable to the tax period to which the levy assessment that is the subject of the present proceedings relates.

In accordance with Item 28.1 of the TGIS, in 2013, ownership, usufruct and right of superficies over urban properties with residential allocation whose tax asset value shown in the register, in accordance with the Municipal Property Tax Code, was equal to or greater than €1,000,000 were subject to that tax. Later, with the amendment that occurred in 2013 and which had repercussions on the tax years 2014 and following, land for construction whose construction, authorized or planned, is for habitation, in accordance with the provisions of the Municipal Property Tax Code, also came to be subject to taxation at the rate of 1%.

Within the scope of application of that earlier wording of Item 28.1 of the TGIS, it was concluded in various tax arbitration proceedings that the expression "residential allocation", contained in the text of the norm then in force, referred to "use" for habitation, that is, to urban properties that had actual use for residential purposes (cf., notably, proceedings 42/2013-T, 48/2013-T, 49/2013-T, 53/2013-T, 75/2013-T, 144/2013-T and 158/2013-T).

Law No. 55-A/2012, of 29 October, introduced a series of amendments to the codifying statutes of three taxes – Personal Income Tax, Corporate Income Tax and Stamp Tax – as well as to the General Tax Law, among which the norm contained in Item 28.1 of the TGIS, all guided toward obtaining supplementary tax revenue and, generally, toward countering the budgetary imbalance then experienced extremely acutely by the country. Measures were introduced to strengthen the fight against tax fraud and evasion, and, under the Stamp Tax, taxation of legal situations was created (an expression added to subsection 1 of Article 1 of the Stamp Tax Code), which was understood to be demonstrative of the capacity of their respective holders to bear an increased fiscal burden, thereby distributing more equitably the sacrifice to achieve the budgetary consolidation required of taxpayers. This is what results from the explanatory memorandum of Bill No. 96/XII/2.ª, which was at the origin of the aforementioned Law No. 55-A/2012:

"The pursuit of the public interest, in light of the country's economic and financial situation, requires a consolidation effort that will require, in addition to ongoing activism in reducing public spending, the introduction of fiscal measures inserted into a broader set of measures to combat budgetary deficit.

These measures are fundamental to strengthening the principle of social equity in austerity, guaranteeing an effective distribution of the burdens necessary for compliance with the adjustment program. The Government is strongly committed to ensuring that the distribution of these burdens will be made by all and not just by those who live on labor income. In accordance with this objective, this statute broadens the taxation of capital income and real property, equitably encompassing a broad range of sectors of Portuguese society.

In these terms, the taxation of capital income and securities gains will be increased, with the respective rates changing from 25% to 26.5% under Personal Income Tax. The rates of taxation applicable to income obtained from or transferred to tax havens are also increased to 35%.

On the other hand, a rate is created under Stamp Tax applicable to urban properties with residential allocation whose tax asset value is equal to or greater than one million euros.

Finally, this statute introduces a measure to strengthen the fight against tax fraud and evasion, through strengthening of the regime applicable to demonstrations of wealth of passive subjects (Personal Income Tax) and transfers to and from tax havens. First, operationalization of Personal Income Tax assessment based on demonstrations of wealth is strengthened, reducing the differential from 50% to 30% between the demonstrations of wealth and income declared under Personal Income Tax. On the other hand, transfers to and from tax havens made between accounts of the passive subject, not declared in accordance with law, come to be considered a demonstration of wealth and, as such, subject to taxation under Personal Income Tax by indirect methods."

Simple extension of a norm of incidence to situations for which it was not originally contemplated carries the risk of subjecting to the same taxation regime situations that are in themselves distinct and that would deserve, therefore, differentiation in taxation. In the case of Item 28.1 of the TGIS, if the taxation of luxury properties with residential allocation could be considered constitutional precisely because, given actual use of the same by their respective owners, that situation reveals materially relevant behavior from the point of view of assessing the owner's wealth, the same cannot be said of the case of taxation of land for construction, in which, so long as there are no constructions capable of use for habitation and as such licensed by the competent authorities, the land itself is, objectively, prevented from having such allocation. Now, a thing completely different from the actual use of a property for habitation is the expectation, or potentiality, of an urban property being able to come to have a "residential allocation" – and it is precisely that expectation that characterizes land for construction. Indeed, land for construction, because it is not built, does not in itself satisfy any condition to be considered as property "with allocation" (whatever it may be). There is nothing more in them than the expectation, or potentiality, of a property being able, after its respective construction, to come to have an "allocation". Consequently, only when that "allocation" is concretized, which will never happen before its construction, can we consider that the land for construction comes to present some similarity with urban property, namely by permitting its holder to derive some benefit from it.

In the words of JOSÉ MARIA FERNANDES PIRES, "the value of land for construction corresponds, fundamentally, to a legal expectation, embodied in a right to construct thereon a property with certain characteristics and certain value." (cf. "Lectures on Property and Stamp Taxes", Almedina, 2010, p. 101). Land for construction, despite its classification as urban property for municipal property tax purposes, is characterized above all by its constructive viability, which does nothing more than give its owner the possibility of constructing thereon a property with the characteristics permitted by the applicable urban planning instruments.

Thus, if it is true that the holder of land for construction of value greater than €1,000,000.00 has in their legal sphere a property of high value, it is also true that their situation is different from that of the owner of property with residential allocation, who actually derives benefit from the property of which they are the holder. One could say, in this regard, that the fact that the owner of residential property could derive an income from the property while the owner of land for construction cannot is not relevant in this context because it is taxation of assets rather than income. However, that is not true, that it is irrelevant. On one hand, in the case of the owner of residential property who does not rent the property but directly enjoys it, the value of the assets of both is the same, but we still have two completely distinct situations: that of an owner enjoying a luxury residence, on one hand, and that of the owner of land for construction, who enjoys nothing. One could further say that the owner of land for construction can sell the property of which they are owner and realize income in that way and that it is that possibility that justifies taxation under stamp tax. It is true that they can. However, that income will already be taxed under Personal Income Tax or Corporate Income Tax, as the case may be. Furthermore, the owner of rural property of value equal to or greater than 1 million euros can also sell the property and that is not the reason it is taxed under Item 28.1 of the TGIS.

It is undeniable that what the legislator intended, when creating Item 28.1 of the TGIS, was to tax luxury residential properties; however, we believe that, in introducing land for construction within the scope of application of the norm, the initial regime was distorted, extending it to situations completely distinct from those the same initially targeted. The amendment introduced in Item 28.1 of the TGIS in 2014 has, moreover, the virtue of clarifying the distinction between the reality "residential property" and the reality "land for construction", demonstrating that one and the other are not the same.

The broadening of the norm of incidence to land for construction whose construction, authorized or planned, is for habitation, was not accompanied by a distinction relating to the value of the constructed building, which is the reason why, applying the general rules, even when the construction authorized or planned for the land is habitation in several units, it is the tax asset value of the land, the only one that exists before the construction is concretized and which is "used for the purpose of municipal property tax", that is relevant for determining the incidence of the tax.

This circumstance raises questions of constitutionality of the norm in question, which are here analyzed in a manner very close to that contained in the judgment handed down within the framework of proceedings 507/2015-T. Thus, in synthetic terms:

  • the tax asset value of land for construction is the sum of the value of the building footprint area to be constructed, which is that located within the perimeter of affixation of the building to the ground, measured by the external part, added to the value of the land adjacent to the footprint", with "the value of the footprint area varying between 15% and 45% of the value of authorized or planned constructions" (Article 45, subsections 1 and 2, of the CIMI).

  • regarding land for construction in respect of which only construction with individual residential units of value less than €1,000,000.00 is planned or authorized, the justification for the high contributory capacity revealed by possession of such assets does not hold, as the fact that the land has value equal to or greater than that amount does not permit identification of a passive subject with contributory capacity at the level of "highest standards of Portuguese society".

  • the holding of rights over land for construction of units susceptible to independent use even reveals less contributory capacity than that revealed by the holding of rights over already-constructed property, and therefore a rational justification cannot be found for taxing the holding of rights over land when it has value equal to or greater than €1,000,000.00 and not taxing the holding of rights by the same passive subject over already-constructed property, when all units have values less than that amount.

  • there is a lack of rational justification for taxation based on hypothetical high contributory capacity in situations where there is holding of rights over land for construction in which exclusively authorized or planned constructions are constituted by units of individual value less than €1,000,000.00 and not applying the same taxation to situations in which these constructions have already been built on the land, with an enormous increase in the tax asset value of the construction, since "the value of the footprint area varies between 15% and 45% of the value of authorized or planned constructions".

  • regarding land for construction intended for construction of autonomous residences of value equal to or greater than €1,000,000.00, the holding of rights over land with this purpose reveals, by itself, a situation of wealth, at the level of "highest standards of Portuguese society".

Item 28.1 of the TGIS, in the part relating to land for construction, makes no distinction based on the value of authorized or planned residences, and therefore it must be concluded that it makes its application dependent only on the tax asset value of the land itself. Being thus, it must be concluded that the norm of Item 28.1 of the TGIS, in the wording introduced by Law No. 83-C/2013, of 31 December, is materially unconstitutional, by offense to the principle of equality, enunciated generically in Article 13 of the Constitution, by applying to land for construction of tax asset value equal to or greater than €1,000,000.00 for which the authorized or planned construction does not include any unit susceptible to independent use with value equal to or greater than that amount.

Thus, consideration of the remaining questions invoked by the Claimant is rendered moot.

By virtue of the material unconstitutionality of which the norm contained in Item 28.1 of the TGIS, in the wording introduced by Law No. 83-C/2013, of 31 December, is affected, by violation of the constitutional principle of equality, the levy assessment that is the subject of the present proceedings is affected by a defect of violation of law, embodied in error as to the legal presuppositions, which justifies its annulment pursuant to Article 163, subsection 1 of the Code of Administrative Procedure, applicable by force of Article 2, paragraph (d) of the Tax Procedure Code and, pursuant to Article 24, subsection 1, paragraph (b) of the RJAT and Article 100 of the General Tax Law, the restitution of the tax unduly paid.

As for the request for compensatory interest, made by the Claimant pursuant to Article 43 of the General Tax Law, we understand the Respondent's position to be correct insofar as the ground for annulment relates to the unconstitutionality of the norm on which the levy is based and not to error attributable to the Respondent – which could not disapply the norm on its own initiative since what was not at issue was violation of rights, freedoms and constitutional guarantees[3].

VI. DECISION

In accordance with the foregoing, it is decided:

  1. To find the petition for arbitral pronouncement meritorious and, in consequence, to declare the consequential unconstitutionality of the stamp tax levy assessment challenged, with the consequent annulment of that same levy assessment;

  2. To find the request for payment of compensatory interest unmeritorious pursuant to Article 43 of the General Tax Law.

Value: In accordance with the provisions of subsection 2 of Article 315 of the Code of Civil Procedure, combined with paragraph (a) of subsection 1 of Article 97-A of the Tax Procedure Code and subsection 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €15,224.94.

Costs: Pursuant to the provisions of Article 22, subsection 4, of the RJAT and in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €918.00, to be borne by the Respondent pursuant to Articles 12, subsection 2, and 22, subsection 4, both of the RJAT, and Article 4, subsection 4, of the aforementioned Regulation.

Let it be recorded and notified.

Lisbon, 22 October 2016

The Arbitrator,

Raquel Franco

[1] The Constitutional Court pronounced itself through a summary decision given the simplicity of the legal question under analysis, particularly in light of the prior issuance, on 04/07/2018, of Judgment No. 378/2018, of the Plenary.

[2] In the presentation and discussion of the Bill in the Parliament, the Secretary of State for Tax Affairs clarifies that the Government proposes "the creation of a special rate on urban residential properties of higher value. (...) This rate will be (...) 1% in 2013, and will apply to properties of value equal to or greater than €1,000,000."

[3] In this sense, cf. the Judgment of the Superior Administrative Court of 26.02.2014, case no. 0481/13.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28.1 TGIS applicable to construction land intended for housing with a taxable value of €1,000,000 or more?
Yes, Stamp Tax under Verba 28.1 TGIS is applicable to construction land intended for housing (habitation) with a taxable asset value equal to or greater than €1,000,000. This annual tax applies to the ownership of such land where construction is authorized or planned for residential purposes, as confirmed by the Constitutional Court's 2018 ruling in this case.
Did the Constitutional Court rule the taxation of construction land under Verba 28.1 TGIS as constitutional?
Yes, the Portuguese Constitutional Court ruled on August 9, 2018, that the taxation of construction land under Verba 28.1 TGIS is constitutional. The Court rejected claims that this provision violated the principle of tax equality by imposing annual taxation on ownership of construction land for housing valued at €1,000,000 or more, thereby upholding the Tax Authority's position.
What happens to a CAAD arbitral decision after a successful appeal to the Portuguese Constitutional Court?
When the Constitutional Court successfully overturns a CAAD arbitral decision on appeal, the original arbitrator must reform (amend) the decision to comply with the Constitutional Court's ruling. In Process 195/2016-T, after the Constitutional Court ruled Item 28.1 TGIS constitutional, arbitrator Raquel Franco amended the October 22, 2016 decision accordingly, effectively reversing the outcome favorable to the taxpayer.
How does the reform procedure work when the Constitutional Court overturns a CAAD tax arbitration decision?
The reform procedure following a Constitutional Court reversal requires the original CAAD arbitrator to issue an amended decision consistent with the Constitutional Court's judgment. The arbitrator maintains jurisdiction over the case file, which is reopened after the Constitutional Court's ruling is notified. The arbitrator then drafts a reformed decision that aligns with the constitutional interpretation established by the higher court, replacing the original decision while maintaining the procedural history.
What was the outcome of CAAD Process 195/2016-T regarding annual Stamp Tax on high-value construction land?
The outcome of CAAD Process 195/2016-T, following Constitutional Court review, was unfavorable to the taxpayer. After the Constitutional Court ruled Item 28.1 TGIS constitutional, the reformed arbitral decision upheld the validity of the annual Stamp Tax assessment totaling €15,224.94 on construction land valued at €1,522,493.70. The claimant's arguments regarding unconstitutionality, double taxation, and partial residential designation were ultimately rejected, confirming the Tax Authority's right to levy annual Stamp Tax on high-value construction land intended for housing.